Business 2.2

importance of organizational structure

-helps a business to function more efficiently

-determines accountability

-shows responsibility and chain of command

organizational chart

shows 4 important features of a business

-functional departments (how many departments)

-chain of command (who’s responsible for who)

-span of control (# of people who someone is responsible for)

-official channels of communication

Organizational Structure

There are many ways to structure an organization

-By function (by departments) MOST COMMON

-By Product (by what you sell)

-By region (by geographic area)

Delegation

Passes on authority and control to other people (allowing people below you to make more decisions)

-line manager must entrust and empower staff to complete a task or project, but also hold them accountable for their actions

-line manager remains responsible even though work not carried out by him/her

ADVANTAGES

-frees up tasks for senior managers

-trust

-more hands-on experiences

DISADVANTAGES

-lose control

Span of Control

Refers to the number of subordinates that are controlled by the manager

-the number of people that are directly accountable to the manager

-the higher up a person is in hierarchy, the wider their span of control

EXAMPLE

-CEO: directly in charge of board of directors; indirectly in charge of all workers in organization

Optimal Span of Control

Core group of decision makers who tell others what to do with little delegation

-no consensus on the optimal span of control

Depends on several factors

-experience, competence, traits of manager

-the nature of management styles

-the skills and dynamics of subordinates

-the nature of the work

-the type of production system used

span of control vs optimal span of control

Span of control is the number of direct reports a manager oversees, while optimal span of control is the number that best fits a manager’s role, the organization’s context, and the needs of the team — balancing supervision quality with efficiency.

Centralized Structures

Decisions are made through a small number of people/executives

-little to no communication to other members of the organization

ADVANTAGES

-quick decision making

-better control / less wastage

-better sense of direction

-consistency

DISADVANTAGES

-increased pressure for senior management (time, possible delays)

-inflexibility

-de-motivating

-good ideas from employees are overlooked

-employees’ skills are NOT fully utilized

Decentralized Structures

decision-making authority is distributed among various levels of the organization rather than being concentrated at the top. (DELEGATION)

ADVANTAGES

-worker input

-higher morale

-improved accountability

-encourages teamwork

DISADVANTAGES

-loss of control

-greater chances of mistakes

-communication errors

-conflict

Tall Organizations

-many layers within the organizational hierarchy

-narrower span of control per manager

ADVANTAGES

-quicker communication among members of smaller teams (but not bottom to top)

-smaller teams easier to control and manage

-greater specialization and division of labor = can increase efficiency and productivity

-greater promotional opportunities = motivation

Flat Organizations

-fewer levels of hierarchy

-wider span of control per manager

ADVANTAGES

-delegation to subordinates to take extra responsibility

-improved communication between layers (less levels)

-cheaper (fewer managers)

-smaller psychological distance between those on top and those at bottom (organizational culture)

Delayering

The process of removing one or more levels in the hierarchy in order to flatten the structure

-will reduce the number of managers and widen the span of control

-associated with downsizing

-main purpose is to reduce costs

DRAWBACKS

-create anxiety and a sense of insecurity = employee motivation issues and productivity (MASLOW)

-can overstretch employees as their workload increases (ADAMS EQUITY)

Matrix Structure

Employees from different departments temporarily come together to work on a specific project

-functional departments still exist; the project team works with colleagues from other departments

-team members usually have to report to 2 managers

ADVANTAGES

-culture of teamwork and collaboration (synergy with different views and ideas)

-experts brought together (enhance the project)

-reduces pressures on senior management

-variety should increase motivation

DISADVANTAGES

-conflict of interest

-certain department roles may be ignored

-disagreements