2.2 Organisational Structure

Delegation - Passing on of control and authority to others. As operations grow in scale and managers are tasks with greater roles and responsibilities, they have to begin relinquishing non-essential tasks to maximise productivity in the essential operations. 

Advantages of Delegation

Manager saves time and effort, which can be expended on more essential tasks and responsibilities.

Delegation can motivate and develop employees, and boosts the morale of those that feel trusted and that their talents have been recognised.

Disadvantages of Delegation

Poor delegation to staff who are not competent will cause confusion and a feeling of inadequacy.

Span of Control - Refers to the number of people who are directly accountable to a manager.

• Wide Spans of Control - Few layers in the hierarchy, hence less middle management and lower costs. A flat structure also means that communications between different levels of the hierarchy is more efficient.
• Narrow Spans of Control - Managers are responsible for fewer subordinates, thereby making it easier to control smaller teams working on specific tasks. 

Hierarchy - An organisational structure based on a ranking system of authority and responsibility. A person directly above an employee on the following hierarchical level is known as a line manager. A hierarchical structure delineates clear lines of communication and chains of command within the organisation, and provides a clear path for career development that could motivate employees.

Chain of Command - The formal line of authority through which orders are passed down in an organisation. The more layers there are in an organisation’s structure, the longer the chain of command.

Bureaucracy - The execution of tasks governed by official administrative and formal rules of an organisation. It is a means of administratively organising large numbers of employees, tasks, and objectives.

Delayering - the process of removing one or more levels in the hierarchy to flatten or restructure the organisational structure.

Advantages

Cost Reduction - The purpose of delayering is to remove middle-management, leaving the business with fewer employees while maintaining productivity.

Communication - A shorter chain of command with a flatter structure will improve the speed of communication through layers of the organisation, and coordination between layers.

Motivation - A flatter structure encourages delegation and empowerment as wider spans of control and more tasks for line managers will encourage delegation to subordinates.

Disadvantages

Job Security - Decrease in job security increases anxiety and reduces staff morale and productivity.

Increase in Workload - An increase in workload with greater roles and responsibilities will decrease morale if staff are not adequately compensated.

Centralised Structure - Decision-making power is concentrated within higher management, who hold onto greatest authority and responsibility.

Advantages of Centralised Structures

Decision-making - Faster decision-making as there are less people to consult.

Control - Greater control and coordination by upper-management to steer the direction of the organisation’s growth.

Disadvantages of Centralised Structures

Incontinuity - The organisation becomes over-reliant on the upper-management for decision-making and direction, which leaves the business vulnerable if the upper-management are unable to fulfil their tasks.

Demotivating - A lack of delegation and opportunities for employees to have decision-making authority will make them feel under-valued and unappreciated.

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Decentralised Structure - Decision-making authority and responsibility is shared among layers of management.

Advantages of Decentralised Structures

Improved Morale - This structure encourages delegation and empowerment, which motivates employees who feel trusted and that their talents are recognised by the organisation.

Improved Collaboration - Collaboration across teams and departments are common among decentralised organisations, who can synergise to generate innovative ideas.

Disadvantages of Decentralised Structures

Chance of Mistakes - Trusting employees with roles and responsibilities related to operations is a risk that must be monitored closely to avoid mistakes that may delay production.

Purpose of an Organisational Structure

Accountability - Shows who is held responsible for each particular job or task.

Responsibility - Shows who oversees who, and in what role or capacity.

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Organisational Chart - A diagrammatic representation of an organisation’s formal structure. It delineates the different functional departments within a business, the levels of hierarchy, the chain of command, and the span of control for line managers.

Tall organisational chart - Many levels in organisational hierarchy with a narrow span of control. Tall organisational charts will have more effective coordination and collaboration within its small teams, and motivates employees with a clear path for career development.

Flat organisational chart - Fewer levels in organisational hierarchy with wide spans of control. Flat organisational charts will have faster communication through the chain of command for decision-making, encourages delegation to subordinates, and is cheaper to operate with fewer middle management roles.

Organisation by Product - Large organisations commonly divide workforce by their responsibilities within the product portfolio of the business.

Organisation by Function - Most organisations are divided into the separate functions, such as human resources, marketing, operations and finance.

Organisation by Region - Multinational companies may divide itself by geographical region, with different head offices in different regions.

Project-based Organisation - Organisation divided around particular projects, with each project led by a project manager supported by a team of workers. It is common in firms that use projects as the dominant form of business, such as engineering and construction firms.

Handy’s Shamrock Organisation - Believes that employees are the most valuable resource of any organisation, and that their needs must be met through methods such as job enrichment and flexible working practices. It also emphasises a dynamic organisational structure that changes according to the fluctuating operational scale of the business.

There are three groups of workers within a Shamrock Organisation:

• Core Staff - full-time professional workers, usually upper and middle management, that oversee the daily operations of the business and are crucial to its survival and growth.
• Peripheral Workers - part-time, temporary and portfolio workers who are employed as and when they are needed. This group forms the flexible workforce for the organisation, allowing it to adapt to changing market demands.
• Outsourced Workers - Non-essential or specialised operations of the organisations are outsourced to external subcontractors, reducing the workforce of the organisation.