: Organisational Design

Organizational Structure

Definition: Shows how employees and management are organized within a business. Importance: Determines authority, job roles, accountability, and communication routes. Visualization: Often shown through an organization chart.

Hierarchy

Definition: Refers to the levels within an organization, often with a top-down structure. Traditional Organization: Tall with many layers and often authoritarian. Example: Managing Director at the top, assistants/team members at the bottom.

Span of Control

Definition: The number of subordinates a manager is directly responsible for. Wide Span: More independence for subordinates. Narrow Span: Closer supervision required. Ideal Span: Depends on the manager’s experience, business nature, and employee skills.

Chain of Command

Definition: Describes lines of authority within a business. Example: A manager is responsible for employees below them, such as Sam managing Eve, Chris, and Brenda.

Tall Structure

Key Features: Many layers of hierarchy and narrow spans of control. Advantages: Tight control, promotion opportunities. Disadvantages: Slower communication, higher costs due to more staff.

Flat Structure

Key Features: Few layers of hierarchy and wide spans of control. Advantages: More delegation, better vertical communication, lower costs. Disadvantages: Less control, fewer promotion opportunities.

Delegation

Definition: Assigning authority to others for specific tasks or decisions. Advantages: Reduces manager stress, empowers employees, improves decision-making. Disadvantages: Requires capable subordinates, may increase workload for some.

Job Empowerment

Definition: Giving employees authority to make decisions related to their tasks. Examples: Allowing front-line staff like receptionists to make decisions, encouraging feedback, and showing trust.

Job Design

Definition: The tasks and responsibilities grouped into a job role. Influence on Motivation: Boring, repetitive jobs decrease motivation, affecting productivity.

Changing Organizational Structure

Reasons for Change: Growth, cost reduction, improving motivation, and quality. Challenges: Resistance to change, potential demotivation, costs, and impacts on customer service.

Delayering

Definition: The process of removing layers of management to reduce hierarchy. Goal: Improve efficiency, lower costs, and increase employee empowerment.

Job Design

Job design is all about the tasks and responsibilities that are grouped into a specific job. It can have a significant influence on labour productivity through the link with motivation. Boring, repetitive jobs can often lead to poor quality and low productivity.

Changing the Organisational Structure

Organisational structures are dynamic and can change. A business that doesn't regularly assess its structure may find itself becoming uncompetitive. Reasons for change: Growth, reduce costs and complexity, boost employee motivation, and improve customer service/quality.

Reasons for Changing Structure

Growth of the business means a more formal structure is appropriate. Reducing costs and complexity is a key reason. Employee motivation needs boosting. Customer service and quality improvements.

Challenges of Changing Structure

Manager and employee resistance, disruption and de-motivation, potential problems with staff retention, redundancy costs, and negative impact on customer service or quality.

Delayering

Delayering involves removing layers of management from the hierarchy of the organisation. Benefits include lower management costs, faster decision-making, and shorter communication paths. Drawbacks include wider spans of control and potential loss of management expertise.

Benefits of Delayering

Lower management costs, faster decision-making, shorter communication paths, stimulating employee innovation.

Drawbacks of Delayering

Wider spans of control (possibly too wide), potential loss of management expertise.

Authority and Organisational Design – Who Makes the Decisions?

Decision-making in an organisation is about authority. A key question is whether authority should rest with senior management (centralised) or whether it should be delegated further down (decentralised).

Centralised Decision-Making

In a centralised structure, decision-making is kept at the top of the hierarchy, amongst the most senior management. Benefits include easier implementation of policies, strong leadership, and economies of scale. Drawbacks include bureaucracy, lack of flexibility, and reduced manager motivation.

Advantages of Centralisation

Easier to implement common policies and practices for the whole business, prevents parts of the business from becoming too independent, easier to co-ordinate and control, economies of scale.

Disadvantages of Centralisation

More bureaucratic, less flexibility in decision-making, lack of authority down the hierarchy may reduce manager motivation, slower customer response.

Decentralised Decision-Making

In a decentralised structure, decision-making is spread out to include more junior managers and business units. Benefits include better responsiveness to local circumstances, improved customer service, and stronger leadership at lower levels. Drawbacks include difficulties ensuring consistent practices and risk of diseconomies of scale.

Advantages of Decentralisation

Decisions are made closer to the customer, better able to respond to local circumstances, improved level of customer service, better training for junior management, improves staff motivation.

Disadvantages of Decentralisation

Decision-making may not be strategic, harder to ensure consistent policies, diseconomies of scale, harder to maintain financial control, weaker leadership in crises.

Key Terms

Definition

Hierarchy

The structure and number of layers of management and supervision in an organisation.

Span of Control

The number of employees directly supervised by a manager.

Delegation

Where responsibility for carrying out a task or role is passed to someone else in the business.

Empowerment

Delegating power to employees so that they can make their own decisions.

Delayering

The process of removing one or more layers from the organisational structure.

Centralisation

An organisational structure where authority rests with senior management at the centre of the business.

Decentralisation

An organisational structure where authority is delegated further down the hierarchy, away from the centre.