Business Paper 1 - Organisational Design (130)

Organisational Design

process of aligning the structure of an organisation with its objectives, with the ultimate aim of improving efficiency and effectiveness

Authority + Responsibiltiy

authority is the power to make decisions and take action, while

responsibility is the obligation of the subordinate regarding a specific duty

or task assigned by the superior

Chain of Command

the chain of command describes the lines of authority (reporting system) in

the business/communication path - orders / instructions are passed

down / feedback is passed up

Span of Control

the number of workers a manager is responsible for. It could be wide

(manager is responsible for many employees) or narrow (manager is

responsible for smaller number of employees)

Hiearchy

• shows the levels of management from the top to the bottom.

• indicates who is responsible to whom – the way authority is organised.

• shows the chain of command – tall hierarchies have long chains of command and flat hierarchies have shorter chains of command

Delegation

where manager passes authority onto employees for particular functions,

tasks, and decisions - delegation can allow subordinates to gain more

autonomy and become empowered

Centralisation (Advantages + Disadvantages)

a centralised structure is where business decisions are made at the top of

the hierarchy or in a head office and distributed down the chain of

command

Advantages:

• lead to a greater uniformity within the organisation

Disadvantages:

• often less responsive to localised external pressures

• lead to demotivated staff who are not being given the opportunity to be involved in the decision-making process

Decentralisation (Advantages + Disadvantages)

a decentralised approach is where a business allows decisions to be made

by managers and subordinates further down the chain. This structure

provides staff with more decision-making responsibilities

Advantages:

• delegate authority down the chain of command therefore reducing the speed of decision-making

• employees are more motivated as they are given the opportunity to make decisions + be creative

Disadvantages:

• overall control is delegated to departmental managers - lead to poor decisions as they are not as experienced compared to managers in head office

Delayering

delayering is the process of removing one or more layers in a hierarchy/

organisational structure - delayering can result in a flatter organisational

structure and a wider span of control

Hierarchical Structure

a hierarchical structure has many layers of management, and businesses

with this structure often use a ‘top-down’ approach with a long chain of

command - in a hierarchical structure, managers will have a narrow span of

control and a relatively small number of subordinates

Flat Structure (Advantages + Disadvantages)

a flatter organisational structure has a hierarchy with relatively few (or no)

management layers - it can be achieved through a process of delayering - in a

flat structure, managers have a wide span of control with more

subordinates, and there is usually a short chain of command

Advantages:

• increased motivation as a result of delegation of authority

• communication is quicker and suffers less distortion

Disadvantages:

• workers may not like the extra responsibility - pressured? stressed? - leads to demotivation

• workers may not have the ability/skills to make decisions

Tall Structure (Advantages + Disadvantages)

has many layers of management - long chain of command - managers have a narrow span of control - relatively small number of subordinates

Advantages:

• senior management controls decisions - experienced

• communication and responsibility is clearly defined

Disadvantages:

• vertical communication is difficult - very long chains of command means once instructions are passes down, they could be out of date

• communication is hampered by the lack of direct contact between departments

Matrix Structure (Advantages + Disadvantages)

matrix structure is often used when cross-functional teams are created to

run a project - team members may come from different disciplines - the

team will disband when the project is complete

Advantages:

• allows individuals with different skills to contribute to a number of different projects

• breaks down communication barriers + ensure projects can be better coordinated

Disadvantages:

• team coordination issues - hard to manage teams from different departments with different ways of working

• high costs - needs extra support like IT + admin staff