FLEXIBLE ORGANISATIONS

3.10 Managing Strategic Change

Concept links

Decision- Change
making management

Organisational
Communication culture

Leadership
Org Vision &
Structure values
What is an Organisational Structure?

Shows how
people and
management
are organised
in business
The Organisational Structure Determines

• Authority and responsibility – who is responsible

for whom and who is in charge?
• Individual job roles and titles
• The people to whom others are accountable
• The formal routes through which communication
flows in the business
Factors that Influence Organisational Structure
Factor Explanation
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 functions

Type of business Does the business operate from just one or several locations?
Is the business in the service or manufacturing sector?
Does it have overseas operations or outsource any significant
business activities?
Is the workforce mainly unskilled, semi-skilled, highly skilled?

Management and Often over-looked, but very important. An autocratic leadership

leadership style style will often result in a very different structure compared with
one designed by a leader who prefers to delegate responsibility

The competitive Organisation structures are often influenced and changed by

environment developments in the market – for example changes in the use of
distribution channels, suppliers, competitor actions
 Understanding the Organisation Structure
• Simplest way to show how a business is organised is to
look at an organisation chart
• Shows the management hierarchy in a business
• Works from top to bottom
• Also illustrates:
• Span of Control
• Line management
• Chain of command
Example Organisational Structure

CEO

Marketing Finance Operations

HRM Director
Director Director Director

Marketing Finance Production Personnel

Managers Supervisors Team Leaders Manager

Accounts Production
Sales Teams
Assistants Team Members
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 Manager Manager

1 2 3

Span of control = 3
Narrow or Wide Span of Control?

Narrow Wide
Allows for closer supervision Gives subordinates the
of employees chance for more
independence
More layers in the hierarchy More appropriate if labour
may be required costs are significant – reduce
number of managers
Helps more effective
communication
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 objectives
throughout a business
Chains of Command

The chain of command

describes the lines of
authority within a
business
Chain of Command - Example
The organisation
Sam chart opposite shows
Brown that Sam is
responsible for Eve,
Eve Chris Brenda Chris and Brenda
Silver Gold White Further down the
chain, Brenda is
Sharon Dawn
responsible for
Black Grey Sharon and Dawn
Levels of Hierarchy

The number of layers of

management or
supervision in the
organisation structure
Hierarchical structures
• Traditional form of organisational structure in
business
• Layers of hierarchy reflect levels of seniority
• Tall or flat? Depends on number of layers
• Associated with formal or bureaucratic
management
Example – Tall Hierarchy

CEO

Marketing Finance Ops HRM

This
Mgrs Mgrs Mgrs Mgrs hierarchy
has six
Team Sup Team Sup Team Sup Team Sup levels
= very tall
Team Ldrs Team Ldrs Team Ldrs Team Ldrs

Staff Staff Staff Staff

 Example – Flat Hierarchy

CEO

This
Marketing Finance Ops HRM hierarchy
has four
Team Team Team Team levels =
Leaders Leaders Leaders Leaders
flatter
Team Team Team
Members
Members Members Members
Common Types of Organisational Structure

• Tall structure
• Sometimes called a traditional, tall or
mechanistic structure
• Many layers in hierarchy & narrow spans of
control
• Flat structure
• Sometimes called “organistic”
• Flat hierarchy, wide spans of control
• Delegation encouraged
Tall Structure
Senior Management

Layers
of
Management or
Supervision

Shop-floor employees
Comments on Tall Structures
• Key features – many layers of hierarchy +
narrow spans of control
• Allows tighter control (less delegation)
• More opportunities for promotion
• Takes longer for communication to pass
through the layers
• More layers = more staff = higher costs
Flat Structure

Senior Management

Layers
of
Management
or
Supervision

Shop-floor employees
Comments on Flat Structures
• Key features – few layers of hierarchy + wide spans of
control
• Less direct control + more delegation
• Fewer opportunities for promotion, but staff given
greater responsibility
• Vertical communication is improved
• Fewer layers = less staff = lower costs
Matrix Structures

In a matrix structure,
individuals work across teams
and projects as well as within
their own department or
function.
Matrix structure - example
Matrix Structures
For example, a team established to
develop a new product might include
engineers and design specialists as well as
those with marketing, financial, personnel
and production skills.
These teams can be temporary or
permanent depending on the tasks they
are asked to complete. Each team
member can find himself/herself with two
managers - their normal functional
manager as well as the team leader of the
project.
Benefits and Drawbacks of Matrix Structures
Advantages
Help to breaks down traditional
department barriers, improving
communication
Individuals get to use their skills within a
variety of contexts
Likely to result in greater motivation
amongst the team members
Encourages sharing of good practice and
ideas across departments
A good way of sharing resources across
departments
Disadvantages
Members of project teams may have
divided loyalties as they report to two
line managers
May not be a clear line of accountability
for project teams
Difficult to co-ordinate
Team members may neglect their
functional responsibilities
It takes time for matrix team members to
get used to working in this kind of
structure
Changing the Organisational 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 demotivation = potential problems with staff retention
• Costs (e.g. redundancies)
• Negative impact on customer service or quality
What is Delayering?

Removing layers of
management from the
hierarchy of the
organisation
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
Delegation

The assignment to
others of the authority
for particular
functions, tasks, and
decisions
 Key Issues with Delegation
• 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 motivation and customer
service
• Employees need to feel that their actions 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 Organisational 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 & Organisational Design:
Who Makes the Decisions?
Decision-making is about authority. A
key question 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 location, together with a desire to
exploit economies of scale, are the main
reasons for this choice.
Benefits and Drawbacks - Centralisation
Advantages Disadvantages
Easier to implement common More bureaucratic – often extra
policies and practices for the whole layers in the hierarchy
business

Prevents other parts of the business Local or junior managers are likely to
from becoming too independent much closer to customer needs
Easier to co-ordinate and control Lack of authority down the hierarchy
from the centre – e.g. with budgets may reduce manager motivation
Economies of scale and overhead Customer service does misses
savings easier to achieve 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 locations
Decentralised Example
Hotel chains are particularly 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
Decisions are made closer to the
customer
Better able to respond to local
circumstances
Improved level of customer service
Consistent with aiming for a flatter
hierarchy
Good way of training and developing
junior management
Should improve staff motivation
Disadvantages
Decision-making is not necessarily
“strategic”
Harder to ensure consistent practices and
policies at each location
May be some diseconomies of scale – e.g.
duplication of roles
Who provides strong leadership when
needed (e.g. in a crisis)?
Harder to achieve tight financial control –
risk of cost-overruns
What you need to know
• The value of a flexible organisation
• restructuring
• delayering
• flexible employment contracts
• organic structures v mechanistic
• knowledge and information management
Concept links

Competitive Organisational
advantage Structure

External
Leadership environm
ent

Change
Flexible Decision-
Managemen Organisation making
t
What is a Flexible Organisation?
A flexible organisation is one
that is able to adapt and
respond relatively quickly to
changes in its external
environment in order to gain
advantage and sustain its
competitive position
Benefits of Being a Flexible Organisation

• More likely to be efficient & productive (impact on unit

costs)
• More likely to respond to and meet changing customer
needs and wants
• Improved decision-making (better informed and quicker)
• The organisation can concentrate on its core competencies
rather than trying to undertake every business activity
• A more attractive place to work for the best people
• Essentially – more likely to identify and respond to the
need for change – before it is too late to change
Restructuring
• Involves changing the organisational structure,
both in terms of the type of structure and layers
• This might also mean how business units (e.g.
divisions) are organised
• Restructuring also involves decisions about:
• Activities are undertaken directly by a business
• Activities that are outsourced to external
suppliers
Restructuring: What is Delayering?

Removing layers of
management from the
hierarchy of the
organisation
Reminder:
What is an Organisational Structure?
Shows how
people and
management
are organised
in business
Understanding the Organisation Structure

• Shows the management hierarchy in a business

• Works from top to bottom
• Also illustrates:
• Span of Control
• Line management
• Chain of command
Levels of Hierarchy

The number of layers of

management or
supervision in the
organisation structure
Example – Tall Hierarchy

CEO

Marketing Finance Ops HRM

This
Mgrs Mgrs Mgrs Mgrs hierarchy
has six
Team Sup Team Sup Team Sup Team Sup levels
= very tall
Team Ldrs Team Ldrs Team Ldrs Team Ldrs

Staff Staff Staff Staff

 Example – Flat Hierarchy

CEO

This
Marketing Finance Ops HRM hierarchy
has four
Team Team Team Team levels =
Leaders Leaders Leaders Leaders
flatter
Team Team Team
Members
Members Members Members
Delayering Aims to Reduce the Height of Tall
Organisational Structures

• Key features – many layers of hierarchy +

narrow spans of control
• Allows tighter control (less delegation)
• Takes longer for communication to pass
through the layers
• More layers = more staff = higher costs
Delayering: From Tall to Flat
Senior Management

Shop-floor employees
Benefits of Delayering
• Main benefit is lower labour costs
• Other potential benefits
• Faster decision-making
• Shorter communication paths
• Stimulating employee innovation
• Also associated with
• Widening spans of control
• Greater emphasis on teamworking and empowerment
Potential Drawbacks of Delayering
• Often significant one-off costs of making managers redundant
• Increased workloads for managers who remain
• Impact of redundancies on organisational morale (who is next?)
• Loss of expertise
Flexible Employment Contracts
Flexible working involves
arrangements where there are a
variety of options offered to
employees in terms of working
time, working location and the
pattern of working
Examples of Flexible Working Options
Part-time working Term-time working Working from home
Flexitime Career breaks Job sharing
Annual hours Mobile working Shift swapping
contracts

Of the options listed above, by far the most

popular in the UK is part-time working. Job
sharing, flexitime and working from home are
also increasingly popular
Benefits of a Flexible Workforce (1)
• Most importantly, savings on costs. A business can make
substantial savings on overheads if it does not have to
provide office and other accommodation for so many
employees or if staff can work from home
• As a way of helping with recruitment and staff retention.
There is lots of evidence that flexible working results in
better job satisfaction and higher staff morale
• To reflect the changing profile of the UK workforce. There
are more women in the labour market and an ageing
population – as a result, it is increasingly common for
staff to have caring responsibilities outside work
Benefits of a Flexible Workforce (2)
• To take advantage of developments in technology – it is
now simple and cost-effective for employees to be able
to access their employers online and other networked
systems, and to communicate digitally with colleagues
• An increasing need for businesses to be able to deliver
services to customers on a 24/7 basis. Flexible working
makes it easier for businesses to offer extended opening
hours, for example
• To meet employment legislation – increasingly the law
allows certain groups of employees the legal right to
request flexible working
Drawbacks of Flexible working
• Administrative work and “red-tape” involved in
setting up and running flexible working
• Potential loss of customers if key employees
reduce their working hours
• Lower employee productivity (potentially)
• Inability to substitute for certain skills if certain
employees are absent (a common concern of
smaller businesses)
• Managers can find it difficult to manage or
administer the flexibility
Zero-hours Contracts
• Zero-hours contracts allow employers to hire staff with no guarantee of work
• Employees work only when they are needed by employers, often at short notice.
Employee pay depends on how many hours they work.
• Some zero-hours contracts require employees to take the shifts they are offered,
while others do not
Zero-Hours Contracts are Highly Controversial
Examples of Flexible Employment Contracts
Organic v Mechanistic
Organisational Structures
Organic
Structures
• Informal
• Flexible and fluid (easy to
change)
• Favours verbal communication
• Associated with decentralised
decision-making &
empowerment
• Find change easier to handle
Mechanistic
Structures
• More formal & bureaucratic
• Associated with centralised
decision-making & supervision
• Formal communication
methods
• Favours standardised policies
and procedures
• Little perceived need to change