1.4.3 Organisational Design

• 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