2.2 Organisational structure (Factors influencing organisational structure…
2.2 Organisational structure
Centralisation and Decentralisation
- keeping all of the important decision-making powers within head office or the centre of the organisation
A fixed set of rules & procedures in all areas of the firm should lead to rapid decision-making - there is little scope for discussion
The busines has consistent policies throughout the organisation. This prevents any conflicts between the divisions & avoids conffusion in the minds of consumers.
Senior managers take decisions in the interest of the whole business - not just one division of it.
Central buying should allow for greater economies of scale.
Senior managers at head office will be experienced decision-makers
- decision-making powers are passed down the organisation to empower subordinates and regional/product managers
More local decisions can be made which reflect different conditions - the managers who take the decisions will have local knowledge & are likely to have closer contact with consumers
More junior managers can develop skills & this prepares them for more challenging roles.
Delegation & empowerment are made easier & these will have poitive effects on motivation.
Decision-making in response to changes, e.g. in local market conditions, should be quicker & more flexible as head office will not have to be involved every time.
Different types of organisational structure
The hierarchial structure
a structure in which power & responsibility are clearly specified and allocated to individuals according to their standing or position in the hierarchy
Consists of several parallel teams focusin on a single product or service line.
This traditional form of organisational structure
Multinational businesses are often structured using regional divisions. large nusinesses that only operate in one country might also divide the structure into different regions in a single country
Factors influencing organisational structure
The size of the business and the number of employees
The style of leadership and culture of managemenet. If senior managers adopted an autocratic style taking all key decisions themselves, then narrow spans of control would be adopted in a hierarchil structure. A democratic leader would tend to adopt very few levels of hierarchy and delegate extensively.
Retrenchment caused by economic recession or increased competition might lead to delayering to reduce overhead costs - this would reduce levels of hierarchy and shorten the chain of command
Corporate objectives - for example, if one of the long-term objectives of the business is to expand in other countries, then the organisational structure must be adapted to allow for some decentralisation.
New technologies - especilly IT - can lead to a reduced need for certain employee types, e.g. managers sending messages by email rather than by letters typed by secretaries. In addition, central control might be made easier by the flow of info through IT & this could make middle management layers less important
Changes in organisational structures
- an organisational structure that creates project teams that cut across traditional functional departments
Horizontally linked structure
primarily found in the IT and high-tech sectors.
Employees are grouped by function into three areas - planning, building and running.
This structure allow the company to respond quickly to changing market conditions & technological advances but may not work as well for companies that produce products with a longer lifespan, or for service industries.
Handy's Shamrock organisation
Core managerial and technical staff, who must be offered full-time, permanent contracts with competitive salaries & benefits. These workers are central to the survival & growth of the organisation. In returns for high rewards they are expected to be loyal & work long hours when needed. As core workers are expensive, their numbers are being reduced in most organisation.
Outsourced functions by independent providers, who may once have been employed by the company. Also known as the "contractual fringe", these wrorkers provide specific services that do not have to be kept within the core. These may include payroll services, transsport, catering and IT.
Flexible workers on temporary & part-time contracts, who are called on when the situation demands their labour. As the organisation demonstrates little concern or loyalty towards these workers, they often respond in kind. These workers are most likely to lose their jobs in an economic downturn.
The flexible future
More busineses are moving away from traditional "command" structure to one centred on team-based problem solving.
This involves removing horizontal boundaries between departments altogether & reducing middle management layers to the absolute minimum.
Future success will depend greatly on being able to respond rapidly to the changing business environment & this almost certainly means that the days of the traditional pyramid hierarchy are numbered.