1.4.3 Organisational design

• Organisational Structures

  • The traditional business structure is a series of levels, where each level has responsibility and authority over the levels below - this is called a hierarchy.
  • It shows who employees are accountable to (directly above them) and who employees are responsible for (directly below them)
  • The chart shows how the organisation is divided up e.g. this could be by department, by product or by location.
• Common levels of authority

  • Board of directors - Gives direction to the business E.g - Managing Director / Finance Director / Marketing Director / Production Director
  • Managers - Make sure targets are met E.g - Sales Managers / Finance Managers / HR Managers
  • Team Leaders - Responsible for a a team of supervisors and shop floor workers
  • Supervisors - Oversee things on a day to day basis
  • Shop floor workers - Do the actual work E.g. - Sales Reps / Market Researchers / Factory workers
• Level/Layers of hierarchy

  The number of layers of authority within an organisation
• Subordinate

  A person under the authority or control of another within an organisation.
• Span of control

  The number of subordinates directly responsible to a manager. Can be wide or narrow.
• Chain of command

  The line of communication and authority existing in a business
• Tall structures

  • Lots of layers of hierarchy
  • Long chains of command
  • Narrow spans of control
• Advantages of Tall structures

  • More layers means more opportunities for promotion which can be motivating
  • Tighter control over subordinates because of the narrow spans of control
  • Easier to communicate horizontally (less people on each layer)
• Disadvantages of Tall structures

  • More likely to have mistakes with vertical communication due to many layers
  • Slower decision making and more paperwork
  • Employees can feel micromanaged and demotivated if span of control is too narrow
• Flat structures

  • Few layers of hierarchy
  • Short chains of command
  • Wide spans of control
• Advantages of Flat structures

  • Employees are given more responsibility and freedom which can be motivating
  • Quicker decision making and less paperwork as less layers
  • Less opportunity for miscommunication as short chains of commands
• Disadvanatges of Flat structures

  • Managers may feel overwhelmed as they have many employees answering to them
  • Horizontal communication may be slow due to wide spans of control
  • Less chances for promotion may demotivate staff
• Delayering

  Removing one or more levels of hierarchy from the organisational structures
• Why might a business want to delayer?

  • Could result in managers feeling stressed/overworked
  • Creates a flatter structure with wider spans of control
  • Helps to lowers costs in the long term as save money in salaries
  • Gives junior employees more responsibility
  • Can cost money in the short term as staff need to be retrained
  • Can improve efficiency and communication as less layers
  • Can cost money in the short term as may need to give redundancy pay
• Centralised structures

  Organisations where decisions are made by senior managers at the top of the business.
• Advantages of Centralised structures

  • Senior managers have lots of experience
  • Managers get an overview of the whole business so decisions are consistent
  • Senior managers aren’t biased towards certain departments so can make better quality decisions
  • Senior managers can make big decisions quickly as they don’t need to check with anyone.
• Disadvantages of Centralised structures

  • Not many people are experts in all fields 
  • Excluding members of staff could be demotivating
  • Slower reaction to change as decision making has to go through more people meaning competitors get ahead
  • Senior managers may not know consumer trends as quickly as employees on the shop floor
• Decentralised structures

  Organisations where authority is shared out to more junior employees e.g. branch managers
• Advantages Decentralised structures

   

  • Employees can use expert knowledge from their own department/sector
  • Day to day decisions can be made quickly without having to consult senior managers
• Advantages of Decentralised structures

   


  • Junior employees may not have enough experience to make decisions
  • Junior employees may not be able to see the big overall situation of the organisation
• Whether a business uses a centralised or decentralised approach will depend on factors such as:

  • Size
  • Nature
  • Objectives
  • Culture
• Businesses may centralise to save money in a competitive market. 

  This will result....

  a flat and wide structure as middle management aren’t needed.
• Business may decentralise if they are expanding or operating from different locations. 

  This will result...

  in a tall structure as more levels of authority are created.
• Matrix structure

  Staff are organised by two different criteria - normally used if operations are project based
• Advantages of the Matrix structure

  The matrix structure encourages departments to build relationships and allows staff to follow clearly defined objectives. Leading to increased efficiency and motivation. 
• Disadvantages of the Matrix structure

  However there may be conflict between the project managers and the department managers…
• AUTHORITY:

  The right or power assigned to a particular role in an organisation in order to achieve organisational objectives
• DELEGATION: 

  The process of passing authority down the hierarchy from a manager to a subordinate