2.2 Organisational structure

Organizational structure

The formal interrelationships + hierarchical arrangements of HR in a business

What does the organizational structures arrange employees to show?

1. Job titles

2. Accountability

3. Responsibility

Accountability

Extent to which person is held responsible for a specific job

• Its success / failure

• Allows senior managers to have better control over the running of their organisations

Responsibility

Who is in charge of whom + in what role + capacity

Organisation chart

• Diagram

• Shows firm’s formal structure of HR

Delegation

• Pass on control + decision-making authority to subordinates

• But retain responsibility for the task

Pros of delegation

1. Motivates employees (lower in OS). Feel trusted

2. Manager = less tasks = saves time. More time for strategic, core work.

Cons of delegation

1. Training costs- train employees for new responsibilities

2. Risk of error if inexperienced employees make mistakes

3. Manager hesitate to delegate- fears loss od control

SMARTER delegation

1. Specific- clearly define tasks

2. Measurable- quantifiable results to measure success

3. Agreed- to avoid misunderstandings, eg deadlines

4. Realistic

5. Time-bouind

6. Ethical- delegate boring work = demotivating

7. Recorded- can credit staff for accomplishments

Span of control

No. of subordinates overseen by a manager,

• Directly accountable to the manager

• Greater seniority of manager =

  greater SOC

Wide SOC

• More subordinates per manager

• Encourages autonomy but may overwhelm managers

Pro of wide SOC

• Fewer layers needed in the OS = fewer managers = cost control

Narrow SOC

• Fewer subordinates per manager

• Allows for close supervision but higher management costs

Pros of narrow SOC

1. Easier to communicate + control

2. Small teams = more productive, better team spirit, less conflict

Factors affecting the degree of control given to managers (MOST)

1. Manager

   • More skilled + experienced = wider SOC

2. Organisational culture

   • Democratic culture, tend to delegate more = wider SOC

3. Subordinates

   • High skilled staff work in smaller teams = wider SOC

4. Task

   • Complex, urgent task = narrow SOC (communication is imp)

   • Mass produced products, less supervision, simple tasks = wider SOC

Hierarchy

Organizational structure based on a ranking system

• Each level = diff rank w diff degree of authority + responsibility

• Most skilled / senior employees at the top

Levels of hierarchy

The no. of layers of formal authority in an organization

• No. of levels shown in organization chart

Line managers

The person directly above an employee in the organizational structure

Manager

Responsible for the day-to-day running of the business / department within the organization

Pros of using hierarchal structures

1. Shows clear lines of authority in the firm → improves coordination + productivity of workers

2. Establishes teams → sense of belonging in workplace → motivating

Cons of using hierarchal structures

1. Departments → works isolated from official teams

2. Inflexible. Issue when changes in external environment need flexible structural changes in firm

Chain of command

The formal line of authority, thru which formal communications + orders are passed down

• Shown on OC

Short vs long chain of command

• Short = firm w few levels of hierarchy

• Long = firm w many levels of hierarchy

Bureaucracy

Execution of tasks that are governed by official administrative + formal rules. Govern business activity

• Includes: prescribed rules + policies, standardized procedures, formal hierarchical structures.

Why can bureaucracy be a source of inefficiency + frustration?

Due to:

1. Must fill out excessive paperwork often

2. Long official chains of command

3. Managers w duplicate roles + responsibilities

4. Staff working in multiple departments → need to report to several managers

SO SLOWS DOWN DECISION MAKING + LESS CREATIVITY

Why can bureaucracy be a source of efficency?

Div of labour for administrative tasks

Characteristics of a bureaucratic organisation (complete, pg 115)

1. Continuity- follows official rules, n

2. Rules

3. Hierarchal structure

4. Accountibility

Centralisation

When the majority of decision making is done by a v small no of people who hold decision-making authority + responsibility

• Usually the senior leadership team

• Don’t consult others

Pros of centralisation

1. Rapid decision-making

2. Better control

3. Better sense of direction

4. Efficiency

Cons of centralisation

1. Added stress for senior staff

2. Inflexibility

3. Possible delays in decision making

4. Demotivating

Decentralisation

When decision-making authority + responsibility are shared w a large no. of ppl in the organisation

Pros of decentralisation

1. Input from the workforce

2. Quicker decision-making

3. Improved morale

4. Improved accountability

5. Teamwork

Cons of decentralisation

1. Expensive

2. Inefficiencies

3. Greater chances of mistakes

4. Loss of control

5. Communication issues

Factors affecting if a firm should be centralised or decentralised

1. Size of organisation

2. Importance of decision

3. Risk level

4. Corporate culture

5. Management attitudes + competences

6. ICT usage

Factors affecting if a firm should be centralised or decentralised: Size of organisation

Larger firm = decentralised

Factors affecting if a firm should be centralised or decentralised: Importance of decision / risk level

Imp / high-cost decisions / high risk = centralised

Delayering

• Process of removing levels in the hierarchy to flatten the organizational structure

• → Widens the span of control in the hierarchy

Purpose of delayering

1. Widen the SOC at each level

2. Shorten the chain of command

Pros of delayering

1. Reduces costs

2. Improves communication speed

3. Encourages delegation + empowerment

Cons of delayering

1. Creates anxiety

2. Increases workloads

3. Slower decision-making

Matrix structure

• Employees from diff departments temporarily work tog on a specific project

• Flexible organisational structure

Which 2 managers is each member of the matrix organisation held accountable to?

1. Department / line manager

2. Project manager (from the matrix)

Pros of the matrix structure

1. Improved communications

2. Maximises skills set of the workforce

3. Cost-effective

Cons of the matrix structure

1. Added workloads

2. Difficult to coordinate

3. Time consuming

Organization charts

• Shows firm's formal structure of human resources on a diagram

5 types of organisation charts

1. Flat/horizontal

2. Tall/vertical

3. By product

4. By function

5. By region

5 features organizational charts show

1. Functional department

2. Chain of command

3. Span of control\

4. Channels of communication

5. Levels of hierarchy

Flat / horizontal organisational structure

• Only a few layers in the formal hierarchy

• → managers have a wide SOC

Pros of flat / horizontal organizational structures

1. Delegation is imp → more opportunities for career development for subordinates

2. Improved communication bc fewer layers

3. Cheaper to operate bc fewer managers

4. Reduces power distance betw

   senior + junior staff.

What type of work cultures would flat organizational structures be in?

• Creative

• Innovation

Tall / vertical organization structure

• Many layers in the hierarchy

• → managers have a narrow SOC

Pros of tall / vertical organizational structures

1. Smaller teams → quicker communication

2. Smaller teams → easier to control

3. Greater div of labour → increase efficency + productivity.

   • Managers spend less time monitoring their teams

4. More opportunities for promotion → motivating

   • Bc more levels in hierarchy

Pros of tall structures = cons of horizontal

Pros of horizontal = cons of vertical

Organization by product

Structuring a workforce based on g/s produced or sold.

• Each department focuses on a diff product within the organization's overall product portfolio.

Organization by function

Structuring a workforce based on business functions

• Eg roles / tasks

• Marketing / finance

Organization by region

Structuring a workforce based on diff geographical areas

• Based on where the firm's operations are

Organization restructuring

Reorganizing of human resources of a firm into a new organizational structure

General reason for organization restructuring

Need for change to remain competitive in a changing business external environment

• Flexible structure → adapt to changes in internal + external business environment

Reasons for restructuring a firm

1. Incorporate new job roles + eliminate

   redundant roles

2. Reduce costs/debt

3. Concentrate on key business activities

4. Incorporate new technology

5. Ensure skills + expertise of employees are used effectively

6. Sell a part of the firm’s business activities

7. Merge with another company

Project based organization

Arranges HR around particular projects, each led by a project manager

Purpose of the project based organization structure

Increased flexibility to:

• Adjust quickly to market changes

• Adopt rapid innovations

Examples of industries that use PBO organization structure

1. Construction

2. Software engineering

3. Entertainment

4. Aerospace

5. Oil exploration

Pros of PBO

1. Flexibility

2. Productivity

3. Efficiency

4. Motivational

Cons of PBO

1. Discontinuity

2. Isolation

3. Inefficiencies

4. Conflicting interest + priorities

Shamrock Organization

• Handy's model:

• Organizations are increasingly made up of core staff who are supported by peripheral + outsourced workers

(consisting of consultants and contractors)

How did Handy propose human resources should be organized?

(3 groups of workers in the Shamrock Organization)

1. Core staff

2. Peripheral workers

3. Outsourced workers

Core workers / professional core

• Full-time specialists (professionals) who are vital for the organization's operations + survival

Purpose of core works

• Contributes to firms operation, growth survival

• Handle daily operations of

  the business

Peripheral workers

• Contingent workers

• Includes part-time + temporary staff hired by the organization to provide greater flexibility

Purpose of peripheral workers

Provide greater flexibility to the firm → to adapt to changes in the external environment

• Employed when needed (short time periods) → reduces overall labour costs

Contract / outsourced workers

Individuals / organizations hired on a contract basis to carry out specific but non-core roles

Purpose of hiring contract workers

So firm can focus on their core activities

Pros of Shamrock Organisation

1. Core workers = imp → well-paid, remunerated → job security → motivated + productive

2. Peripheral workers provide flexibility

Cons of Shamrock Organisation

1. Peripheral workers → lack of job security → harms morale

2. Outsourced workers = experts = expensive