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2.2 Organisational Structure (Traditional hierarchical structure (Shows…
2.2 Organisational Structure
Organisational structure is the internal, formal framework of a business that shows the way in which management is organised and linked together and how authority is passed through the organisation
Traditional hierarchical structure
Shows how accountability and authority are passed down the organisation
Indicates the number of subordinates reporting to each more senior manager
Shows the formal relationships between people and departments
Shows formal channels of communication both vertical and horizontal
Indicates who has overall responsibility for decision making
Indicates the identity of the supervisor or manager to whom each worker is answerable and should report
Key Principles of Organisational Structure
Spans of control
The number of subordinates reporting directly to a manager
Chain of command
The route through which authority is passed down an organisation - from the chief executive and the board of directors
Levels of hierarchy
Tall/Vertical structure
Flat/Horizontal structure
A stage of the organisational structure at which the personnel on it have equal status and authority
Each level in the hierarchy represents a rank or grade of staff
Delegation;
Passing authority down the organisational hierarchy
Advantages
Shows trust in subordinates
Gives senior manager more times to focus on important roles
Limitations
Become unsuccessful if insufficient authority is given
Managers only delegate the boring jobs
Delayering;
Removal of one or more of the levels of hierarchy from an organisational structure
Advantages
Reduces business cost
Improve communication through the organisation
Limitations
Increase workloads
Redundancy payments
Bureaucracy; An organisational system with standardized procedures and rules
Centralisation and Decentralisation
Centralisation is keeping all of the important decision making powers within the head office or the centre of the organisation
Advantages
Has consistent policies
Allow greater economies of scale
Decentralisation is decision making powers are passed down the organisation to empower subordinates and regional/product managers
Advantages
Junior managers can develop skills
Positive impacts on motivation
Hierarchical structure
By product
Advantages
Product divisions can work well because focus on a single product/service
Having a senior executive
Limitations
Product division compete among each other
Division results in compartmentalisation; lack or coordination
By function
Advantages
Grouping employees by functional skills
Employees can capitalise on their specialised skills
Limitations
The structure suggest one way communication
Inflexible and often leads to change resistance
By region
Advantages
Communication between representatives can be very direct and personal
Able to recruit local management
Limitations
Duplication of personnel between head office and regional office
Conflict and unhealthy competition between different areas
Factors influencing organisational structure
Style of leadership
Corporate Objective
Size of the business
New technologies
Retrenchment
Changes
Handy's Shamrock Organisation
Core works
Flexible workers
Outsourced work
Matrix structure
Advantages
Less chance of people focusing on just what is good
Allows total communication between all members
Limitations
Less direct control from the top as the teams may be empowered
Conflict of interests
Communication
Appropriate medium
Receiver
Clear message
Feedback
Sender
Importance;
Speed of decision making
Reduce the risk of errors
Employee motivation and labour productivity
Innovation in communication
Limitations
Reduce social contact
Security issues with technology
Require staff to be trained