Management Structure and Organisation

Management Structure and Organisation

Content • Management structure and design • Organisational design • Tall • Flat • Matrix • Entrepreneurial • Management by objectives • Centralisation and decentralisation • Delegation and consultation

Why Have a Structure? • A clear structure makes it easier to see which part of the business does what • An organisational structure is the way in which a business is arranged to carry out its activities

Management Structure and Design • The choice of structure impacts the organisations culture – their ethos and beliefs • If businesses are looking to change their direction they often look at restructuring

Organisational structure • Includes: • The routes through which communication pass through the business • Who has authority and power and responsibility within the business • The roles and titles of people within the business • The people whom individual employees are accountable for and those for whom they are responsible

Key terms • Hierarchy – the number of layers of levels within an organisation • Subordinate – a worker • Span of control – the number of subordinates who directly report into a manager • Chain of command – the line of communication and authority from the top to the bottom of the hierarchy

Flat or Tall Structure? • A Flat structure has few layers in the hierarchy, a wide bottom and a gentle slope to the top • Lots of small companies have a flat structure

Flat Structures – Advantages and Disadvantages • Traditionally an American structure • Span of control is wider • Less hierarchy – easier to make decisions • More employee empowerment • Can be cheaper as don’t have to pay expensive management salaries

Tall structures • A tall structure has many layers in the hierarchy • As there are many layers the chain of command is longer • Managers have smaller spans of control and there is less delegation

Tall structures – Advantages and Disadvantages • Traditional structure of European companies • Clear hierarchy • Smaller chains of command • More control • Clear communication

Tall to flat • In the 1990s many people felt that traditional tall structures were not cost effective so delayering occurred • Delayering is the process of removing layers ion the hierarchy • Businesses saw delayering as a way of cutting costs and increasing efficiency

Matrix structure • Matrix – this is where the business is organised by task • Combines a vertical chain of command with project / product teams • The focus is on the task • Is a more flexible structure and allows the business to be more responsive to customer needs • However it can cause conflict and employees may have divided responsibilities • Extra costs may be generated by duplication of support staff

Entrepreneurial Structure • Often found where businesses operate in competitive markets and especially where rapid decisions are needed • Have a few core workers at the centre of the organisation and peripheral workers surrounding them • Depends on how good the core workers are at managing and making decisions • Can be difficult for larger organisations

Additional ways to structure 2 • By function • By product / activity • By area • By customer • By process

Management By Objectives • Druckers theory of management: • Identified that managers should: • Identify and agree targets for achievement with employees • Agree on the level of support needed to achieve the targets • Evaluate how well the objectives were met

Management By Objectives • Need to agree objectives for each worker • This can increase communication • Can increase motivation as subordinates know what they need to achieve • Can help to identify training needs • If workers meet goals can allow them to achieve self actualisation needs (Maslow)

Management By Objectives • It can also cause problems • Some workers may be threatened by the target setting experience – managers can set targets which can be perceived as unachievable • Needs commitment from everyone in the organisation • Objectives may become outdated due to changes in the business environment

Centralisation and Decentralisation • Centralised organisations are where most decisions are taken by senior managers at the top of the hierarchy. • This leads to rapid decisions but low levels of consultation • Decentralised businesses gives more authority to workers lower down the hierarchy by delegating decisions

Delegation • Delegation is where managers give a portion of their work to their subordinates • Delegation can allow subordinates to gain more autonomy and become empowered leading to an increase in performance • This is a technique used by democratic managers

Consultation • This is where managers ask for and take into account subordinates views • Consultation allows a manager to keep more control of the situation • This is a technique used by paternalistic managers

Summary • Organisational design describes how a business is organised • Tall or traditional structures have many levels in the hierarchy • Flat structures have few levels in the hierarchy • Matrix structures are organised by product / project • Entrepreneurial structures have core workers at the centre and peripheral workers at the edges • Management by objectives – is the idea that you set targets for all workers to increase performance • Centralised organisations are where senior managers make key decisions • Decentralised organisations are where workers have more authority to make decisions • Delegation is where managers give employees some of their work increasing their responsibility • Consultation where managers ask employees their opinions

Management Structure and Organisation