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.
