Management Structure & Organisation

Management Structure & Design

Why Have a Structure?

• A clear structure makes it easier to see which part of the business does what
• An organisational structure is the way in which a business is arranged to carry out its activities
• The choice of structure impacts the organisations culture – their ethos and beliefs
• If businesses are looking to change their direction they often look at restructuring

Key terms

• Levels of hierarchy: the number of different supervisory and management levels between the shop-floor and the chief executive within an organisation
• Subordinate – a worker
• Chain of command – the line of communication and authority from the top to the bottom of the hierarchy
• Organisational structure: the relationship between different people and functions in an organisation - both vertically, from shop-floor workers through supervisors and managers to directors, and horizontally, between different functions and people at the same level.
• Organisation chart: a diagram showing the lines of authority and layers of hierarchy in an organisation.
• Organisational hierarchy: the vertical division of authority and accountability in an organisation.
• Span of control: the number of subordinates a manager is required to supervise directly.
  
  • If a manager has many subordinates answerable to him or her, the span of control is said to be wide.
  • If a manager has relatively few subordinates answerable to him or her, the span of control is said to be narrow.
  • Normally, the greater the degree of similarity in what a group of workers do, the wider the span of control can be.
  • Traditionally, organisations tended to have very tall hierarchical structures, i.e. many layers of management, each with a narrow span of control.
  • More recently, hierarchies have become flatter, meaning that the number of layers of management has been reduced and each manager has a wider span of control

Organisational Design

Organisational Structure includes:

• The routes through which communication pass through the business
• Who has authority and power and responsibility within the business
• The roles and titles of people within the business
• The people whom individual employees are accountable for and those for whom they are responsible

Flat Structures

• A Flat structure has few layers in the hierarchy, a wide bottom and a gentle slope to the top
• Lots of small companies have a flat structure
• Traditionally an American structure
• Span of control is wider
• Less hierarchy – easier to make decisions
• More employee empowerment
• Can be cheaper as don’t have to pay expensive management salaries

Tall Structures

• A tall structure has many layers in the hierarchy
• As there are many layers the chain of command is longer
• Managers have smaller spans of control and there is less delegation
• Traditional structure of European companies
• Clear hierarchy
• Smaller chains of command
• More control
• Clear communication

Tall to Flat

• In the 1990s many people felt that traditional tall structures were not cost effective so delayering occurred
• Delayering is the process of removing layers ion the hierarchy
• Businesses saw delayering as a way of cutting costs and increasing efficiency

Matrix Structure

• Matrix structure is where the business is organised by task
• Combines a vertical chain of command with project / product teams
• The focus is on the task
• Is a more flexible structure and allows the business to be more responsive to customer needs
• However it can cause conflict and employees may have divided responsibilities
• Extra costs may be generated by duplication of support staff

Entrepreneurial Structure

• An Entrepreneurial structure is often found where businesses operate in competitive markets and especially where rapid decisions are needed
• Have a few core workers at the centre of the organisation and peripheral workers surrounding them
• Depends on how good the core workers are at managing and making decisions
• Can be difficult for larger organisations

Additional ways to structure

• By function
• By product / activity
• By area
• By customer
• By process

Management By Objectives

• Need to agree objectives for each worker
• This can increase communication
• Can increase motivation as subordinates know what they need to achieve
• Can help to identify training needs
• If workers meet goals can allow them to achieve self actualisation needs (Maslow)
• It can also cause problems
• Some workers may be threatened by the target setting experience – managers can set targets which can be perceived as unachievable
• Needs commitment from everyone in the organisation
• Objectives may become outdated due to changes in the business environment

Druckers theory of management

Identified that managers should:

• Identify and agree targets for achievement with employees
• Agree on the level of support needed to achieve the targets
• Evaluate how well the objectives were met

Centralisation & Decentralisation

• Centralised organisations are where most decisions are taken by senior managers at the top of the hierarchy.
• This leads to rapid decisions but low levels of consultation
• Decentralised businesses gives more authority to workers lower down the hierarchy by delegating decisions

Delegation

• Delegation is the process of passing authority down the hierarchy from a manager to a subordinate.
• Delegation is where managers give a portion of their work to their subordinates
• Delegation can allow subordinates to gain more autonomy and become empowered leading to an increase in performance
• This is a technique used by democratic managers
• Subordinates must be appropriately skilled, trained and informed about the particular task they will be responsible for.
• Interesting and challenging tasks should be delegated as well as the more routine.
• Responsibility and authority must be delegated.
• The limitations of the subordinate's authority should be made clear too.
• Managers must relinquish control to ensure that subordinates feel they are trusted and that the manager has confidence in them.
• Delegation must be based on mutual trust between manager and subordinate.

Advantages of Delegation

• It frees up time for managers to concentrate on strategic tasks.
• It empowers and motivates workers.
• Subordinates might have a better knowledge of local conditions and therefore might make more informed decisions.
• Delegation may allow greater flexibility and a quicker response to changes.

Disadvantages of Delegation

• In some small firms, managers delegate very little.
• Customer expectations.
• Attitudes and approach of management.
• Quality of staff.
• Crisis situations.
• Confidentiality.

Consultation

• This is where managers ask for and take into account subordinates views
• Consultation allows a manager to keep more control of the situation
• This is a technique used by paternalistic managers

Communication

Communication is the process of exchanging information or ideas between two or more individuals or groups.

Internal communication: exchange of information that takes place within an organisation (e.g. at departmental meetings, in team briefing sessions and in memos to staff).

External communication: exchange of information that takes place with individuals, groups and organisations outside the business (e.g. via advertising material, telephone calls to suppliers and letters to customers).

Two-way communication ensures that any communication has been fully understood and is therefore more effective than one-way communication. Effective two-way communication is a vital element of democratic management, effective delegation, empowerment and teamwork.