1.4.3 Organisational Design

Cards (21)

  • Organisational Design
    Creates a formal hierarchy that establishes the lines of authority and layers in the business
  • Hierarchy
    A system of ranking employees in a firm based on authority salaries increase and working conditions improve at the top
  • Chain of Command
    The flow of information, power and authority in a firm those at the top i.e. managers delegate tasks to subordinates
  • Span of Control

    A number representing the subordinates a superior manages and can delegate tasks to
  • Decentralisation
    A firm moving decision making from the head office and to managers and subordinates further down the chain eg. different regions
  • Centralisation
    Decision-making is concentrated at senior managerial roles or in the head office eg. CEO, Board of Directors
  • Benefits of Centralisation
    -quicker decisions as there is less delegation
    -more consistency = EoS, good customer service and appeal to shareholders as actions represent the firm's aims
    -increased motivation and productivity as roles are clear
    -increased financial control so less spending outside of budget
  • Limitations of Centralisation
    -Rigid decision making
    -Lack of motivation for managers due to less authority potentially less innovation
    However, if a firm wants compliance and status quo this is viable
  • Benefits of Decentralisation
    -Increased motivation as workers have more responsibility thus become more productive
    -Flexible decision-making and can react at a local level (branches) faster as they do not need to check with top
    -Internal recruitment as they take more responsibility so they can replace other managers = lower recruitment costs
  • Limitation of Decentralisation
    -Less consistency as managers have different ideas and agendas and branches may use lower quality materials
    -It depends on the skills and experience of the subordinates (poor skills = poor quality and low motivation)
  • Features of an Organisational Chart
    -Departments
    -Job roles
    -Responsibilities
    -Lines of authority
    -Lines of communication
    -Chains of command
  • Tall Structure

    A hierarchical structure with many layers of management
  • Benefits of a Tall Structure
    -Small spans of control to efficiently delegate and manage
    -More opportunities for promotion so high motivation and productivity
    -Clear hierarchy clarifies who makes decisions
  • Limitations of a Tall Structure

    -Longer lines of communication
    -Higher operating costs may harm competitiveness
    -Slower decision-making so less responsive to the market so it is inflexible
  • Flat Structure
    Few layers of management in a hierarchy
  • Benefits of Flat Structure
    -Quicker decision-making as there is a shorter chain of command so increased flexibility
    -Improved employee collaboration and communication increased innovation
    -More cost-effective as there are less managers
  • Limitation of Flat Structure
    -Lots of delegation may stress employees so less motivation, productivity and retention
    -Less opportunities for promotion so less motivation
    -Lack of defined roles may lead to a power struggle or confusion about who is responsible for a project
  • Matrix Structure

    Employees report to their department manager and a project manager used by technology firms and large corporations
  • Benefits of Matrix Structure
    -Higher efficiency by allocating skills and increasing productivity
    -Flexibility of organisation
    -Increased collaboration as projects have a holistic view
  • Limitations of Matrix Structure
    -Employees are unclear about what to prioritise
    -A power struggle between project and department work
    -Scope of control increases
    -Employees can become stressed and burnt out leading to lower productivity
  • Evaluation of Motivation and Efficiency
    Matrix: highly efficient, staff are involved in many unique projects so have higher motivation
    Tall: Inefficient due to delegation, staff can be promoted so are very motivated
    Flat: Very efficient as employees can write their rota and more responsibilities motivate staff