Improving Organisational Structures

What this topic is all about The alternative organisational structures Hierarchies, spans of control, workloads, job allocations and delegation Organisational structures and business performance

Understanding the organisation structure Simplest way to show how a business is organised is to look at an organisation chart Shows the management hierarchy in a business Works from top to bottom Also illustrates: Span of Control Line management Chain of command

Example Organisational Structure Managing Director Marketing Director Marketing Managers Sales Teams Finance Director Finance Supervisors Accounts Assistants Operations Director Production Team Leaders Production Team Members HRM Director Personnel Manager

Span of Control The span of control is the number of employees for whom a manager is responsible

Wide Span of Control Span of control = 7 Manager Assist 1 Assist 2

Narrow Span of Control Span of control = 3 Director Manager 1

Narrow or Wide Span of Control? Allows for closer supervision of employees Gives subordinates the chance for more independence More layers in the hierarchy may be required More appropriate if labour costs are significant – reduce number of managers Helps more effective communication

Span of Control depends on Personality & skill / experience of the manager Size and complexity of the business Whether the business is centralised or decentralised The extent of use of clear objectives throughout a business

Chains of Command The chain of command describes the lines of authority within a business

Chain of Command - Example Sam Brown Eve Silver Chris Gold Brenda White Sharon Black Dawn Grey The organisation chart opposite shows that Sam is responsible for Eve, Chris and Brenda Further down the chain, Brenda is responsible for Sharon and Dawn

Levels of Hierarchy The number of layers of management or supervision in the organisation structure

Hierarchical structures Traditional form of organisational structure in business Layers of hierarchy reflect levels of seniority Tall or flat? Depends on number of layers Associated with formal or bureaucratic management

Example – Tall Hierarchy CEO Marketing Mgrs Team Sup Team Ldrs Staff Finance Ops HRM This hierarchy has six levels = very tall

Example – Flat Hierarchy CEO Marketing Team Leaders Team Members Finance Ops HRM Members This hierarchy has four levels = flatter

Common Types of Organisational Structure Tall structure Sometimes called a traditional, tall or mechanistic structure Many layers in hierarchy & narrow spans of control Flat structure Sometimes called “organistic” Flat hierarchy, wide spans of control Delegation encouraged

Tall Structure Layers of Management or Supervision Senior Management Shop-floor employees

Comments on Tall Structures Key features – many layers of hierarchy + narrow spans of control Allows tighter control (less delegation) More opportunities for promotion Takes longer for communication to pass through the layers More layers = more staff = higher costs

Flat Structure Senior Management Shop-floor employees Layers of Management or Supervision Shop-floor employees

Comments on Flat Structures Key features – few layers of hierarchy + wide spans of control Less direct control + more delegation Fewer opportunities for promotion, but staff given greater responsibility Vertical communication is improved Fewer layers = less staff = lower costs

Removing layers of management from the hierarchy of the organisation What is Delayering? Removing layers of management from the hierarchy of the organisation

Delayering + / - Reducing number of layers in hierarchy Main benefit is lower labour costs Other perceived benefits Faster decision making Shorter communication paths Stimulating employee innovation Also associated with Widening spans of control Greater emphasis on teamworking and empowerment

Delegation The assignment to others of the authority for particular functions, tasks, and decisions

Key Issues with Delegation Advantages Reduces management stress and workload Allows senior management to focus on key tasks Subordinates are empowered and motivated Better decisions or use of resources (potentially) Good method of on-the-job training Disadvantages Cannot / should not delegate responsibility Depends on quality / experience of subordinates Harder in a smaller firm May increase workload and stress of subordinates

Giving employees the power to do their job Employee Empowerment Giving employees the power to do their job

Empowerment Concept closely linked to motivation and customer service Employees need to feel that their actions count Empowerment is a catch-all term that covers: Giving authority to make decisions to front-line staff (e.g. hotel receptionist, call centre assistant) Encouraging employee feedback Showing more trust in employees

Changing the Organisational Structure Why change the structure? Growth of the business means a more formal structure is appropriate Reduce costs and complexity (key) Employee motivation needs boosting Customer service and/or quality improvements Challenges Manager and employee resistance Disruption and demotivation = potential problems with staff retention Costs (e.g. redundancies) Negative impact on customer service or quality

Focusing on the Workforce Workforce Roles Managerial and supervisory roles within the hierarchy Work Loads The tasks an individual employee has to complete within a period Job Allocations The way in which tasks are allocated to certain jobs

Common Workforce Roles Directors Managers Team Leaders Supervisors

Roles - Directors In overall charge of business Appointed by shareholders Responsibility for key business functions Marketing Finance Operations HRM Close day-to-day involvement in small/medium sized businesses Directors

Roles - Managers Report to Directors Responsible for specific departments / activities Oversee budgetary control Have responsibility for their functional areas & budgets May delegate tasks to subordinates Managerial styles will vary Managers

Roles – Team Leaders Tasked with ensuring that teams of employees work well together Associated with a matrix organisational structure Team leader: Allocates workload & jobs between the team members Manages team resources Focuses on quality & team motivation Team Leaders

Roles – Supervisors Common role in a tall hierarchy Responsible for allocating jobs to subordinates (at different levels of the hierarchy) Traditional activities: Checking quality (quality control) Organising staff Maintaining discipline Supervisors

Communication In Business

Communication - Defined The process by which a message or information is exchanged from a sender to a receiver

Communication Two-way communication Communication can be… When feedback on message is given back from receiver to sender Communication can be… Internal: between people in the same business External: with people outside the business

Internal Communication When communications occur between employees of a business Internal communication links together all the different activities involved in a business Ensures all employees are working towards the same goal and know exactly what they should be doing and by when Example: A production manager (sender) sends a message to a sales manager (receiver) asking for sales forecasts for the next 6 months so they can plan production levels. The sales manager replies (feedback) to the production manager with the appropriate figures.

External Communication Where a business communicates with people & organisations outside of the business Closely linked with the idea of “stakeholders” – i.e. those who have an interest in the activities and results of the business Examples of external communication Press releases Marketing materials (e.g. adverts, brochures, direct mailings) Published financial information (e.g. accounts) Letters, emails and telephone conversations with customers and suppliers Reports to government and other agencies (e.g. tax returns)

Need for Effective Communication Motivates employees – helps them feel part of business Easier to control and coordinate business activity – prevents different parts of business going in opposite directions Makes successful decision making easier – decisions are based on more complete and accurate information Better communication with customers will increase sales Improve relationships with suppliers Improves chances of obtaining finance – e.g. keeping bank up-to-date about how business is doing

Communication and Motivation Good communication is an important part of motivating employees Motivational theorists recognise this: Mayo emphasised importance of communication in meeting employees’ social needs Maslow and Herzberg stressed importance of recognising employee’s achievements and self-esteem needs Other reasons: Ensures that everyone is working towards same company goals Enables employees to be involved in decision-making Employees can offer feedback and give suggestions People are motivated by having clear targets set for them Recognise employee achievements

Methods of Obtaining Feedback Face to face Telephone E-mail Meetings Video-conferencing

Factors Determining Method of Communication Content of message (e.g. is it confidential or lengthy) Speed required Amount of feedback wanted Type of feedback required – e.g. is a decision required? Cost

Barriers to Communication Too many intermediaries (e.g. too many layers in hierarchy through which message has to be passed) Geographical distance between a firm’s offices, production plants or outlets Communication overload – too much information can cause problems e.g. slow down decision making

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Improving Organisational Structures