Organisa(onal  Design  

3.6  Decision  Making  to  Improve  Human  Resource  Performance  

What you need to know

• Organisa(onal  structure  – Hierarchy  – Spans  of  Control  – Delega(on  &  authority  

•  Job  design  and  organisa(onal  design  – Job  enlargement  &  job  rota(on  – Job  enrichment  – Empowerment  

Organisa(onal  Design  Links  Closely  With  

Organisa(onal  Design  

Leadership  &  management  

Decision  making  

Mo(va(on   Business  Objec(ves  

Labour  Produc(vity  

Organisa(onal  Culture  

What  is  an  Organisa(onal  Structure?  

Shows  how  people  and  management  are  organised  in  business  

The  Organisa(onal  Structure  Determines  

•  Authority  and  responsibility  –  who  is  responsible  for  whom  and  who  is  in  charge?  

•  Individual  job  roles  and  (tles  •  The  people  to  whom  others  are  accountable  

•  The  formal  routes  through  which  communica(on  flows  in  the  business  

Factors  that  Influence  Organisa(onal  Structure  

Factor   Explana(on  Size  of  the  business   Small  businesses  will  tend  to  have  informal  or  flat  hierarchical  

structures.    Larger  businesses  have  more  complicated  structures  involving  more  layers  of  hierarchy,  departments  and  func(ons  

Type  of  business   Does  the  business  operate  from  just  one  or  several  loca(ons?  Is  the  business  in  the  service  or  manufacturing  sector?  Does  it  have  overseas  opera(ons  or  outsource  any  significant  business  ac(vi(es?  Is  the  workforce  mainly  unskilled,  semi-‐skilled,  highly  skilled?  

Management  and  leadership  style  

OOen  over-‐looked,  but  very  important.  An  autocra(c  leadership  style  will  oOen  result  in  a  very  different  structure  compared  with  one  designed  by  a  leader  who  prefers  to  delegate  responsibility  

The  compe((ve  environment  

Organisa(on  structures  are  oOen  influenced  and  changed  by  developments  in  the  market  –  for  example  changes  in  the  use  of  distribu(on  channels,  suppliers,  compe(tor  ac(ons  

Understanding  the  Organisa(on  Structure  

•  Simplest  way  to  show  how  a  business  is  organised  is  to  look  at  an  organisa(on  chart  

•  Shows  the  management  hierarchy  in  a  business  

•  Works  from  top  to  boSom  •  Also  illustrates:  

– Span of Control – Line management – Chain of command

Example  Organisa(onal  Structure  

CEO  

Marke(ng  Director  

Marke(ng  Managers  

Sales  Teams  

Finance  Director  

Finance  Supervisors  

Accounts  Assistants  

Opera(ons  Director  

Produc(on  Team  Leaders  

Produc(on  Team  Members  

HRM  Director  

Personnel  Manager  

Span  of  Control  

The  span  of  control  is  the  number  of  

employees  for  whom  a  manager  is  responsible  

Wide  Span  of  Control  

Manager  

Assist  1   Assist  2   Assist  3   Assist  4   Assist  5   Assist  6   Assist  7  

Span of control = 7

Narrow  Span  of  Control  

Director  

Manager  1  

Manager  2  

Manager  3  

Span of control = 3

Narrow  or  Wide  Span  of  Control?  

Narrow   Wide  

Allows  for  closer  supervision  of  employees  

Gives  subordinates  the  chance  for  more  independence  

More  layers  in  the  hierarchy  may  be  required  

More  appropriate  if  labour  costs  are  significant  –  reduce  number  of  managers  

Helps  more  effec(ve  communica(on  

Span  of  Control  depends  on  

•  Personality  &  skill  /  experience  of  the  manager  

•  Size  and  complexity  of  the  business  • Whether  the  business  is  centralised  or  decentralised  

•  The  extent  of  use  of  clear  objec(ves  throughout  a  business  

Chains  of  Command  

The  chain  of  command  describes  the  lines  of  authority  within  a  

business  

Chain  of  Command  -‐  Example  

Sam  Brown  

Eve  Silver   Chris  Gold  Brenda  White  

Sharon  Black  

Dawn  Grey  

The organisation chart opposite shows that Sam is responsible for Eve, Chris and Brenda Further down the chain, Brenda is responsible for Sharon and Dawn

Levels  of  Hierarchy  

The  number  of  layers  of  management  or  supervision  in  the  

organisa(on  structure  

Hierarchical  structures  

•  Tradi(onal  form  of  organisa(onal  structure  in  business  

•  Layers  of  hierarchy  reflect  levels  of  seniority  

•  Tall  or  flat?    Depends  on  number  of  layers  

•  Associated  with  formal  or  bureaucra(c  management  

Example  –  Tall  Hierarchy  

CEO  

Marke(ng  

Mgrs  

Team  Sup  

Team  Ldrs  

Staff  

Finance  

Mgrs  

Team  Sup  

Team  Ldrs  

Staff  

Ops  

Mgrs  

Team  Sup  

Team  Ldrs  

Staff  

HRM  

Mgrs  

Team  Sup  

Team  Ldrs  

Staff  

This hierarchy

has six levels

= very tall

Example  –  Flat  Hierarchy  

CEO  

Marke(ng  

Team  Leaders  

Team  Members  

Finance  

Team  Leaders  

Team  Members  

Ops  

Team  Leaders  

Team  Members  

HRM  

Team  Leaders  

Members  

This hierarchy has four levels =

flatter

Common  Types  of  Organisa(onal  Structure  

•  Tall  structure  – Some(mes  called  a  tradi(onal,  tall  or  mechanis(c  structure  

– Many  layers  in  hierarchy  &  narrow  spans  of  control  

•  Flat  structure  – Some(mes  called  “organis(c”  – Flat  hierarchy,  wide  spans  of  control  – Delega(on  encouraged  

Tall  Structure  

           

Senior Management

Shop-floor employees

Layers of Management or Supervision

Comments  on  Tall  Structures  

•  Key  features  –  many  layers  of  hierarchy  +  narrow  spans  of  control  

•  Allows  (ghter  control  (less  delega(on)  • More  opportuni(es  for  promo(on  •  Takes  longer  for  communica(on  to  pass  through  the  layers  

• More  layers  =  more  staff  =  higher  costs  

Flat  Structure  

       

Senior Management

Shop-floor employees

Layers of Management or Supervision

Comments  on  Flat  Structures  

•  Key  features  –  few  layers  of  hierarchy  +  wide  spans  of  control  

•  Less  direct  control  +  more  delega(on  •  Fewer  opportuni(es  for  promo(on,  but  staff  given  greater  responsibility  

•  Ver(cal  communica(on  is  improved  •  Fewer  layers  =  less  staff  =  lower  costs  

What  is  Delayering?  

Removing  layers  of  management  from  the  

hierarchy  of  the  organisa(on  

Benefits  and  Drawbacks  of  Delayering  

•  Reducing  number  of  layers  in  hierarchy  •  Main  benefit  is  lower  labour  costs  •  Other  perceived  benefits  

– Faster decision making – Shorter communication paths – Stimulating employee innovation

•  Also  associated  with  – Widening spans of control – Greater emphasis on teamworking and

empowerment

Delega(on  

The  assignment  to  others  of  the  authority  for  par(cular  func(ons,  tasks,  and  decisions  

Key  Issues  with  Delega(on  

•  Advantages  – Reduces management stress and workload –  Allows senior management to focus on key tasks –  Subordinates are empowered and motivated –  Better decisions or use of resources (potentially) – Good method of on-the-job training

•  Disadvantages  – Cannot / should not delegate responsibility – Depends on quality / experience of subordinates – Harder in a smaller firm – May increase workload and stress of subordinates

Employee  Empowerment  

Giving  employees  the  power  to  do  

their  job  

Empowerment  

•  Concept  closely  linked  to  mo(va(on  and  customer  service  

•  Employees  need  to  feel  that  their  ac(ons  count  •  Empowerment  is  a  catch-‐all  term  that  covers:  

– Giving authority to make decisions to front-line staff (e.g. hotel receptionist, call centre assistant)

–  Encouraging employee feedback –  Showing more trust in employees

Changing  the  Organisa(onal  Structure  

•  Why  change  the  structure?  – Growth of the business means a more formal

structure is appropriate – Reduce costs and complexity (key) –  Employee motivation needs boosting – Customer service and/or quality improvements

•  Challenges  – Manager and employee resistance – Disruption and de-motivation = potential problems

with staff retention – Costs (e.g. redundancies) – Negative impact on customer service or quality

Authority  &  Organisa(onal  Design:  Who  Makes  the  Decisions?  

Decision-‐making  is  about  authority.  A  key  ques(on  is  whether  authority  

should  rest  with  senior  management  at  the  centre  of  a  business  (centralised),  or  whether  it  should  be  delegated  

further  down  the  hierarchy,  away  from  the  centre  (decentralised)  

Centralised  Decision-‐Making  

Businesses  with  a  centralised  structure  keep  decision-‐making  firmly  at  the  top  of  the  hierarchy  

(amongst  the  most  senior  management)  

Centralised  Example  

Fast-‐food  businesses  like  Burger  King,  Pizza  Hut  and  McDonalds  use  a  predominantly  centralised  structure  to  ensure  that  control  is  maintained  over  their  thousands  of  outlets.      

The  need  to  ensure  consistency  of  customer  experience  and  quality  at  every  loca(on,  together  with  a  desire  to  exploit  economies  of  scale,  are  the  main  reasons  for  this  choice.  

Benefits  and  Drawbacks  -‐  Centralisa(on  

Advantages   Disadvantages  

Easier  to  implement  common  policies  and  prac(ces  for  the  whole  business  

More  bureaucra(c  –  oOen  extra  layers  in  the  hierarchy  

Prevents  other  parts  of  the  business  from  becoming  too  independent  

Local  or  junior  managers  are  likely  to  much  closer  to  customer  needs  

Easier  to  co-‐ordinate  and  control  from  the  centre  –  e.g.  with  budgets  

Lack  of  authority  down  the  hierarchy  may  reduce  manager  mo(va(on  

Economies  of  scale  and  overhead  savings  easier  to  achieve  

Customer  service  does  misses  flexibility  and  speed  of  local  decision-‐making  

Quicker  decision-‐making  (usually)  –  easier  to  show  strong  leadership  

Decentralised  Decision-‐Making  

In  a  decentralised  structure,  decision-‐making  is  spread  out  to  include  more  junior  managers  in  the  hierarchy,  as  well  as  individual  business  units  or  trading  loca(ons  

Decentralised  Example  

Hotel  chains  are  par(cularly  keen  on  using  decentralised  structures  so  that  local  hotel  managers  are  empowered  to  make  on-‐the-‐spot  decisions  to  handle  customer  problems  or  complaints  

Benefits  /  Drawbacks  of  Decentralised  

Advantages   Disadvantages  

Decisions  are  made  closer  to  the  customer  

Decision-‐making  is  not  necessarily  “strategic”  

BeSer  able  to  respond  to  local  circumstances  

Harder  to  ensure  consistent  prac(ces  and  policies  at  each  loca(on  

Improved  level  of  customer  service   May  be  some  diseconomies  of  scale  –  e.g.  duplica(on  of  roles  

Consistent  with  aiming  for  a  flaSer  hierarchy  

Who  provides  strong  leadership  when  needed  (e.g.  in  a  crisis)?  

Good  way  of  training  and  developing  junior  management  

Harder  to  achieve  (ght  financial  control  –  risk  of  cost-‐overruns  

Should  improve  staff  mo(va(on  

Job  Design  

•  Job  design  is  all  about  the  tasks  and  responsibili(es  that  are  grouped  into  a  specific  job  

•  Job  design  can  have  a  significant  influence  on  labour  produc(vity  –  through  the  link  with  mo(va(on  

•  Boring,  repe((ve  jobs  can  oOen  lead  to  poor  quality  and  low  produc(vity  

Job  Enrichment  and  Job  Enlargement  

•  Job  enrichment  – Giving workers more interesting and

challenging tasks – Seen as more motivating as it gives workers

chance to further themselves – Herzberg in particular recommended this

approach •  Job  enlargement  

– Giving workers more tasks to do of a similar nature or complexity

– Job rotation is a part of this

Key  Influences  on  Job  Design  

Influence   Overview  Maintaining  quality  

Perhaps  the  most  important  factor.  Jobs  should  be  designed  so  they  support  the  required  level  of  quality  –  par(cularly  for  customer  service  

Opera(onal  efficiency  

Job  design  should  be  closely  integrated  with  opera(onal  requirements  –  e.g.  to  ensure  that  employees  have  the  resources  required  to  be  produc(ve  

Labour  reten(on   Poor  job  design  is  a  common  cause  of  high  staff  turnover  and  low  employee  reten(on  

Skills  of  the  workforce  

Employees  can  only  undertake  jobs  effec(vely  if  they  have  the  skills  required