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.

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