Relationships, Delayering, Outsourcing etc…

Formal Relationships Line relationships Relationships between a superior and a subordinate, eg, DHT and PT Functional Where a manager has authority over another by virtue of their position/knowledge, eg finance manager Staff Relationships Relationship between staff and individuals who provide support for the whole organisation, eg company lawyers or ICT specialists

Informal Structures An organisation chart shows the formal structure of a business based on official roles Informal structures exist in most business based on relationship that develop between staff Business should recognise the existence of these informal structures and use them to pass information or solve problems

Corporate Culture An organisation’s established pattern of working The values, norms and behaviour accepted and shared by all in the organisation The culture of an organisation must match the environment in which it operates The culture develops over time as a result of the –Attitude of staff –Pattern of behaviour –Established rules Individuals are more likely to conform than rebel against the culture

Elements of Corporate Culture Edgar Schein believes there are 3 main elements which instil an identity in individuals within an organisation ( eg McDonalds franchise) –Artefacts (shop layout/colour schemes/uniform) –Values (staff attitudes to customers) –Underlying assumptions (food – availability, quality, portion size)

Benefits of Corporate Culture Provides a sense of identity Helps team building Increases commitment – may prevent high turnover of staff/industrial relations problems Motivated worker = higher productivity Helps communication Reinforces values of senior management Acts as control device for management

Questions 1.Explain the term “Corporate Culture” (2marks) 2. Describe the benefits of having a strong corporate culture. (4marks)

Recent trends in internal structure UK based organisations have undergone structural change due to –de-industrialisation –competition from ‘tiger’ economies This has led to –changes in traditional structure and methods of management –Delayering –Downsizing –Outsourcing

Downsizing Reducing costs by Reducing scale of operations to meet decreased market demand eg, closure of factories Stripping out excess capacity Consolidating complementary departments under one function eg sales and marketing Reducing resources eg workforce

Delayering Cutting out levels of management and ‘flattening’ out structure Some levels of management can be unnecessary Staff are empowered to make own decisions Removing levels of management can result in –Improved communications –Faster decision making –More responsive to change –Adapt more quickly to changing situations

2008 Question 2c(i) Section 2 Distinguish between Delayering and downsizing (3 marks)

Answer Delayering involves removing a whole level of management to flatten an organisation’s structure, whereas downsizing is closing specific areas of the organisation. Delayering improves communication within the organisation due to the reduction levels of senior management, whereas downsizing completely removes functions therefore making communication more difficult. The purpose of downsizing is to reduce costs by reducing the scale of operations whereas the purpose of Delayering is to cut out the levels of management to make the organisation flatter.

Outsourcing Contracting another organisation to carry out some tasks/functions. Can be very basic, eg cleaning or catering. Can be more complex; eg recruitment, accounts

Outsourcing Reasons for: Frees up staff and time Reduces costs Allows experts to carry out the tasks May not have a full-time need for a section or person Allows greater flexibility

Disadvantages of Outsourcing Loss of control Specialist firm may let the organisation down in terms of delivery and quality Confidentiality may be compromised Communication between the two organisations needs to be very good

Role of Management Management are responsible for: Choosing the best structure for the organisation Ensuring all staff are aware of the structure Recognising the existence of any informal structure Organise and promote the organisational culture Ensuring the formal structure is consistent with the culture Changing the structure where necessary

Factors affecting internal structure SIZE As a business grows (perhaps by merger) its structure may change, eg entrepreneurial structure may become more decentralised TECHNOLOGY The introduction of new technology may alter structure, eg reduced need for administration, therefore tall structure becomes flatter MARKET As market expands or declines the structure may change to reflect this PRODUCT/SERVICE New products may be introduced leading to new structure