Competitive Organisational Structures A2 Business Studies

Aims and Objectives Aim: Understand methods of increasing competitiveness of organisational structures Objectives: Define centralisation and decentralisation. Explain how to delayer a business. Analyse the effects of centralisation, decentralisation and delayering. Evaluate each competitiveness method.

Starter Explain the different types of organisational structure. Are some better suited to soft HRM rather than hard HRM?

Organisational Structures in Larger Businesses In the modern day, organisational structures will change on a regular basis as it adapts to changes in the market. It is quite likely more than one structure will appear in a business.

Organisational Structures in Larger Businesses e.g. A hierarchical structure may be appropriate in finance for handling of sensitive data. A matrix structure may be appropriate in marketing for running projects. An informal structure may be used R&D where creativity is important.

Judging Effectiveness of Structures Question to be asked of the case study: How quickly are strategic decisions made? Does the business operate at minimum efficient cost? How effective are the channels of communication within the organisation? Who is involved in the decision making process and are they the most appropriate people.

Adapting to Improve Competitiveness Centralisation Decentralisation Where the decision making authority is concentrated amongst a small number of senior managers at the top of the organisational structure. E.g. McDonalds, Pizza Hut Where the authority for decision-making is delegated to subordinates in the organisational structure. E.g. Tesco, Morrisons

AN: Centralisation & Decentralisation In groups sort the factors into advantages and disadvantages of centralisation and decentralisation.

AN: Centralisation Benefits Disadvantages Tighter control over day-to-day running of business, especially budgets. Easier to achieve economies of scale. Greater use of specialisation. Quicker decision making. Easier to implement common policies and practices. More bureaucratic – often too many layers in hierarchy. Lack of authority down the hierarchy may reduce manager motivation. Customer service can suffer from flexibility and speed in local decision making.

AN: Decentralisation Benefits Disadvantages Decisions are made closer to the customer. Improved level of customer service. Consistent with aiming for a flatter hierarchy. Should improve staff motivation. Delegation increases flexibility allowing the business to adapt to market conditions better. Decision making is not necessarily strategic. More difficult to ensure consistent practices and policies. Who provides strong leadership in a crisis? Harder to achieve tighter financial control & EOS

EV: Centralisation & Decentralisation What does the success of either depend on? The type of business! Large franchises – centralisation for the need to keep tight control over franchisees. Large LTDs and PLCs – decentralisation to ensure a motivated and empowered workforce. Skills of managers and decision makers. Competitors structures and actions.

Delayering Removing levels in the organisational structure to create a leaner and more efficient organisation.

Case Study: Aviva “Aviva is basically removing the regional layer between the individual countries and the group level top management. It is a positive in our view because it should lead to some cost saves and should also mean a simpler management structure.”

AN: Delayering Independently, note down: In pairs, share your ideas. Advantages of delayering Disadvantages of delayering Issues with delayering In pairs, share your ideas. As a group share your ideas.

AN: Delayering Benefits Disadvantages Indirect costs are reduced. The motivation of workers may increase as they have more responsibility and power is delegated. Those at the bottom of the structure may have good ideas on how to improve the business. Business may be better able to respond to market and consumer changes. Valuable skills, and knowledge may be lost. Loss of job security may affect motivation negatively. Harder to implement with legislation – discrimination act. Workload of mangers likely to increase increasing stress and possibly absenteeism and costs. Training costs may be greater!

EV: Delayering What does the success of delayering depend on? Relationship with trade unions Laws and legislations Effects on motivation How large the costs of training are The effectiveness and ability to cope with extra workload of managers