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