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    2.2 and 2.3

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    rizam ali

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    2.2 Organizational structure 45 2.2 Organizational structure Terminology to facilitate understanding of different types of organizational structures (401) © Stnall business are often characterized by informal orgonizational structures ‘while lager businesses need to adopt mote formal structures due t the larger numbers of aff involved. 1 Asa business grows, it needs to onanize staff into formal organizational structures to ensure effective communications, increased efficiency, and clear ‘expectations of accountability and responsi. 1 The allowing terms help to facilitate understanding of diferent types of ‘organizational structures: delegation, span of control, levels of hierarchy, chain ‘of command, bureaucracy, centralization, decentralisation, and de-ayering lm Delegation f= Asa business grows, it becomes inevitable that managers need to lings i some of their roles and responsibilities. This is known as delezation. Keyword definition ee hokding the subordinate accountable for his or her actions. The overall Histon pactaaeoaa fy responsibilty still remains withthe line managet. complete task project or job rte 1 Delogavion makes people accountable for thee actions. Accountability sche ‘extent to which a particular individual is eld responsible forthe successor fallte of job role oe activity. 1 Decision making can he delegated but respomsiility rains with the ‘executive directors as they are ultimatsly esponstble fr the organization's strategy 2 Itcan be: metivational tool for employees ast recogies their talent, ability ‘na porencial. Staff who are empowered may fel insped to perform well Ther fel sense of achievement an pie in thei work Morale ishigh 2s they fel crusted and valued by management. ‘Whilst delegation empowers a ‘warker with decision-making rights and authority, responsibilty cannot = Delegition can, but does not always, come with extra financial rewards, eg. pay rises, be delegated — the line manager 1 Sacceisfil delegation frees up manager to attend to other impertant tasks remains responsible fr the work or such as strategic decision making. tasks delegated to others. l= Span of control = The span of control i inversely proportional to the numberof hierarchical > layers in an cnanteation. Keyword definition The span of contr describes the numberof subordinates who are directly accountable t a manager f= Hovinga narrow span of contol can improve communication and control of the team. = A wide span of control means a managet is responsible for many subordinates, ‘while a narrow span of contol indicates fewer workers who directly report to the line manages, '= The wider the span of contro, the greater the need for strong leadership anki lear lines of communication. = A wider span of control makes dhe organization facet. = Organizations with wider spans of control require fewer managers, which lowers thei cont 46 Unit 2_Human resource management 1m Levels of hierarchy = Hierarchical structures show where each person within an organization fits: ‘and hence his o her os and responsibilities. Keyword definition f2Hicrarchicalstricruroscan be all witha narow span of control ut many _| Levels of erarcy eer to the levelsin the hierarchy management strscture of an conganization hased on the number 1 Alternatively, organizations can be flat, with widerspans ofcantol bur with | Of layers of formal authority, fewer levels in the hierarchical structure tually presented ina diagram or chact. B® Chain of command = The chain of command in an organizational structure is usually shown asa 7 ‘etc line of authony indicating how delions and teponsbiltyaepased | Keyword definition ddown the hierarchical layers ‘Tho chain of command i the s= Instructions and commands flow downward along the chain of command formal line of authority through whist accounaby fla upward in the orgeisitonal aructure, shore an eons are passed down fem senice Th cee cnn of oman heures the decison making | Samet sop 0 stobe operational workers at the hottom 1 Aclearand established chain of command improves the efficiency of ofthe hierarchy. ‘communications in the workplace. 1 Businesses with fewer levels i the hierarchy (Nat stractures) have shorter chain of command l= Bureaucracy 2 Bureaucratic orginizational structures haves numberof layersof management, [— - ‘vith decisions passed dow from senior exectves to regional managers Keyword definition ddspartmental manager supervisors and operative worse. Bureaucracy refers to the 1 Inureaueratic organizations, authority ane decision makingare generally gdinhoaive pmemzci a Fasines sch as the set of rales and alized, Hence, strategic decisions can be made faster as fewer people are Sarlved in ceren makings ser Prot pncedareyand feral hiermehical seructures in an organization = Bureaucracy often leads to excessive administration, paperwork and other formalities. f= Ir encourages a culture focused on rules and standards, where daily operations ‘are rigidly controlled with close supervision and accountability 1 Rigicity means that bureaucratic onganisitions ote often slow to react to changes fn the exteenal environment, [cals discourages creativity and innovation, 1 This reduces flexibility and discournges progtess in the organization, and this leads to inefficiencies and slower decison making. @ Centralization f= Incentralied organisations, the importance of subordinates is reduced whilst ‘the importance of senior executives is increased. © Centralized structures were favoured by manayement theorists such as FAW. Taylor and H. Fayol due to faster decision making and better contro = It is associated with « paternalistic or autocratic style of leadership (ee Unit 2.3), = Rapid decision making ean result in ewer conflicts due to consistent policies ‘coming fom the top few highly experienced| managers. = Costsare als reduced as there is less ofa need for hiring mone specialists or departmencal managers. 1 However, contalizd structures are highly inflexible, put added pressure on senior managets and can be demotivating for employees. ‘Centralization refers to organizational structures where ‘the majority of decision making is in the hands of a very small ‘number of people at the top of the hierarchical structure. 2.2 Organizational structure 47 ® Decentralization = Decentralization involves passing respensiility and authority away from the Board of Directors and senior executives to individual departments. f= Indacentralized structures there isshared decision-making authority and responsibilities Keyword definition Decentralization refers to organizational structures which {include the delegation af decision- 1 Decentralization i astocited with fever tors (latter seuctares) ian smaking authority throughout an ‘otganizational ssucture and wider spans of control congunisation, away from a entra 1 Unlike cenralized structures which havea ‘Top-down’ approach to authority imanagement and decision making, decentralized structures se wen ns “bottomasp' and democratic = The larger the busines, the more decentralized its organizational structure tends tobe. Em = Decentralized structures are often found in organizations with an informal aeFaaraeaTereRGoT corporate culture demonstrate ‘thinking’ skis. Make sure '= Delegation and empomerment, vital aspeets of decentralization, can result in you apply your understanding tb the better motivation for employees. corto! hebunessnauston eg. reaucracy snot suitable for creative ‘ek also results in quicker and mote flexible decision making. Ieslesics at eda AS By 1 However, decentralized structures can result in poor decison making due co Contant the emergency serves ie, pole and atalance series) wou ‘eat centaked stucire ond tic. The decision to have a more centralized or decentralized organizational chains of command to ensure that -xtacture is influenced by several factor such asthe corporate culture, the sae thesenices ae cared out propery of the organization, and the nature of the decisions to be made (whether they without endangering the safety of the the lack of experience und expertise of less senior scaft fare stage or routine dein). general pub ® De-layering 1 Deayerng resus in flatter seractures and manager having wider spans - ‘of control. Keyword definition De-layering is the process of removing one or more ayers in the organizational hierarchy to make the structure flatter. 1 Reasons for de layering include improving communications inthe ‘organization, having shorter chains of command, ad eating cost as there are fever levels of management 1 The biggest ivadvantage of de-layering isthe potndal wes and anslety cof sihordinates due tothe added workload 1 Firms may choose to downsize or dedayer because ic improves ce speeds tip communication and is chesper de to fewer layers of management = The move towards flexible working practices (see Unit 2.1) means les of «need for radiional hierarchical structures. Types of organization charts (Ao2, A04) '® Flat/horizontal 1 A flat (or horizontal) organization has few layers of marnagernent (Gee gure 2.3. = Line managers have a wide span of control in flat hierarchical structures. This gives the manager lor of authority over decision raking but also places aciled presse on his or her level of| responsbility. = Organisations with flac serccues ave suitable when employees are rmul-skilled and ean organize their own work effectively. Figure 2.3 A flat organizational chart 48 Unit 2_Human resource management fe Flatter sructures have shorter chains of command, which improves ‘communication in the organization, f= The culture of relationships in flat structures often open and informal. This is pertly because there is minimal contol over individ employees, which allows, employees to take responsibilty for their own work: = With a large and wide span of control in horizontal structures it can prove dlifficul terhave tight control and close supervision of workers. Tiss because ‘managers in a flat organizational structure with a wide span of control directly supervise a large number of people § Tall/vertical 1 There are many layers in a tll (or vertical) hierarchical organizational structure Gee Figure 24). Roles, responsibilities and departments tend to be Inghly specialized, © Generally tlle hierarchical structures are charateried by a narrow span of 2 ‘control, with each manager being responsible for fewer subordinates. q f 1 Vertical structures are hierarchical, with clear chains of command. Rules, ot Policies and procedures ae written and formalized. This reduces the chances ‘of making mistakes, im Sach ceckunsa tan be wictivaticmal pace sa ee thea pppoe - w = whdieiomeirichnnctthece ‘#7? Premera enn ee making can be slow due to formal, inflexible and bureaucratic structures. structure @ Hierarchical 1 Hierarchical structures are tall with many levels of responsibilty. Such structures plce people within sn organization in terms thie rank. 1 They aresuitable when job ols ae seaightforvard and eoutine as out ean be ceily menaued and chee a boca there are cle lines of accountability. 1 The person directly above an employee on the next hierarchical level is ‘known asthe line manager The line manager supervises and manages che suboedinats on a day basis 12 Hierarchical structures re rigid an bureaucratic so responding to changes ‘the internal or external business enviconment (ee Unit L5) can be slow. 1 The tend tobe overly administrative and bureaucratic so employees fel rather distanced ce tothe impenonal nature ofthe hirarchical structs. © Organization by product f2Onginntion by prac uta lage eines that havea bod product ine of goods or services a this requltesspectaled expertise in Keyword definition marketing and operations. ‘Organization by product occurs ‘hen an organization groups its human resources based on the dint goods or services sll 12 Each proct group has its cnn internal structure related pecially to that particular product line (ie Figure 2 1 Forexample, the Volkswagen Group woukd have different executives responsible ‘or dffrent dvisicas ofits proce ange, eg Volkswagen, Aut, Rosche and Bugatti Each executive wouk! e nsponstle forall prcts under that division. 1 The main advantage of this type of rpanizatonal structures that procs ‘created using completly diferent and separate proceses are beter managed snd controled 2.2 Organizational structure 49 Food Maker PLC a © Drinks === Figure 2.5 Example of a product organizational chart for Food Maker PLC | Organization by function 2 Functional organisational sructres arrange divas by specific functions performed, e.g, human resources, finance, operations management and marketing Gee Figure 26) 2 eisthe most commen form of ganiationa structure © Managers of different functional areas report to the respective director or vice present who holds overall responsibility fe the department or division, eg tnarketng managers must epet tothe marketing discon. 2 The advange ofthis type ofstructure is that functions are separated by experts br the challenges come when differen functional areas tun into Silos that facur only on thei ares of esponsibility aed do uppext the function of other departments. Figure 2.6 Organization by function = Organization by region ‘= Organization by region issuable for businesses that are located in several «different geographic regions within a country or around the work (see Figure 2.7), = Typically, operations are managed and overseen by a regional director. 1 There are efficiency gains and operational benefits of organising people by different regions, eg. to better support and meet the needs of customers in different locations. = Ic can support logistical demands and differences in diferent geographical locations, Keyword definition (Organization by function involves cstablishing the organisational structure according to business functions such as marketing, production, and finance. Keyword definition Organization by region refers to establishing the organizational seructure according to diferent geographical areas 50 Unit 2_Human resource management ' tO — usa Asis tent vale ls (eee = or Hs 1245] goods | Figure 2.7 Organization by region Changes in organizational structures (Ao2) In ealty, organizational structures are not statie. Changes in the internal and ‘external business environments mean that organizational suctares need to be smote flexible and adaptable, Examples include: project-based organization and the Shamrock organization. ® Project-based organization 1 Using fleible project reams involves the temporary use of the most sirable : cxnployees fom diferent departments for aparticlae project. Keyword definition 2 Ofien refered to asa matrix structure, sich a flexible organizational structure | Project-based organisation refers is conducive toa democratic lexlership sty (See Unit 73) as it encourages the | ‘© the organizaon of human ‘generation of new and creative ideas from team members. sero around specie proyect: thar need robe completa, 1 Matrix eructares re a popular way of rganzing highly killed and ‘experienced staff. They help to utilize the synergies created from interactions amongst satin the mac 2 Projcchasedengnizaion can crete problems for the tasiness because sft may have some uncertainties about prioritizing tasks when they have more than one line manager 1 Similan, chee can be dfclies in contig team members rom various departments in the project who have conflicting interests and prices fs Projcchasedonpanizational structures create opportunities fr job crlagemene aa johenechment ee Unit 24) ths boost moral ad motivation. However, they can cause some staff to hecome demealized de to the added workload and prsttes of working on deren peojeces. Additional sources and finance will be needed o face the running of the project. = Handy’s Shamrock Organization ssh scholar Charles Handy’s Shamrock Onqnzation theory (1991) suggests chat organizations face continual change 90 need to adap acontingly = The changing organization comprises of three ‘leafs (types) of workers: cove workers, peripheral workers and outsourced workers (see Figure 2.8). C1 The professional core consists of full-time, experienced and essential staff needed for the onunzation’ operations and survival Wich iprovernents im technology and the trend fr downsizing nnd dolayring, heres les of ned foro many core afin an onpnizaen 2.2 Organizational structure 51 3 The contingent workforce refi to peripheral worker, Le the teaporary ortilio an flesstime workers empleyed hy organizations on ashore terra bass, However, his often causes job insecurity and low staff morale, 2 Outsourced vendors are individu or businesses hired on a contact basis todo secfc tasks such as an advertising campaign. They are specialists in thei field so can be expensive to employ Figure 2.8 The Shamrock Organization 1 The model emphasises the geowing peactice of eusourcing non-essential ‘sctvitin x well asthe ecognitca of lene working practices (ave Unit 2), The model presents cost savings an greater flexiility for onganizations, eg labour cost ane cheaper because nly the core tf receive fll employment perks (benefit), whereas peripheral and outsourced workers donot. = Hanays academic work on organizational stuctureshas shaped te thinking Ishin present day nganizational structures in many husines originations around the world. How cultural differences and innovation in communications technologies may impact on communication in an organization (A03) = Communication isthe transfer of information from one party to another. = Managers spend a significant proportion of theie time communicating ‘with internal and external stakeholders. Effective communications enable managers and workers to have a better understanding and control of what they da. = Cultural differences can have a large impact on communications in an ‘orgenization, Cultural ignorance can cause offence co others and can cause marketing messages to he misinterpreted or misunderstood by the wider ‘community. = Rormultinational companies, an understanding of local cultures and traditions isa major competitive advantage when communicating with their target markets. "= Innovations in communications technologies also impact on ‘communications in organizations, eg. internet technologies have reduced the costs of internal and external communication, both domestically and internationally, = Social networks and social mesia have become popular means of ‘communication for many businesses around the globe. '= However, innovations in mobile technologies have led to information overload from the overexposure of online marketing. Whilst this section ofthe syllabus looks atthe formal organizational structures itis important for managers to be aware of and ‘understand the informal structures that are likely to exist. Informal structures can help to promote a sense of belonging in the workplace. Knowledge and skils are unevenly spread out in an organization so Informal networks can help to Identity and explot different sources ‘of knowledge and sls. Ear Investigate how change and culture have impacted on the ‘organizational structure for an ‘organization of your choice 52 Unit 2_Human resource management 2.3 Leadership and management SS, DD The key functions of management (A02) 1 According co French engineer and management theoretican, Hens Fayol, ‘management is about: planning, organizing, commanding, coordinating and controlling, These management activities are task-oriented, rather than peoplecriented = Acconngto rsh management guru, Profesor Charles Handy, managements about aditessing and solving problems in the same way asa general practioner (octor) would do. Manages identify the problems (ymptoms), investigate the ‘causes, decide on a course of ation and then implement the plan. 1 Acconling to American management consultant and author, Peter F Drucker, management is about setting static objectives in onder ro manage the ‘organization and its people to establish che future direction ofthe busines. 1 Other functions of management include developing and motivating emplanees, measuring and evaluating performance against organisational objectives, ‘establishing perional contacts nd surturing profesional networks. 1 sonal the functions of management concern the effective and efficient use of an organization’ resources. Management versus leadership (Ao2) ez Table 2.4 Management versus leadership ‘Management Leadership © Follow the culture ofthe organization (© Sette ctr of the organization © Manage others spire others Planting, organizing, controling, commanding, coordinating, Cope with nd promete change, with a more erational dimension and sering objectives to Inspire and align people © Work within the parameters of organizational poles and «Focus on the ute procedures © Instigator of change, setting the strategic direction ofthe Focus onthe present organization © Focus on operational objectives © Focus on vison and mission statements Mainly concerned with processes ‘© Mainty concerned with people Tactical deision making ‘© Strategic dedson making Deal with individual neds of tft ‘© Focus on common needs © Policy makes and decsion makers © Riktokers and deson makers More volved with administrative aspects of he erganzaton © Areoptmiti, imavathe, ingiations, entepreneual and cestive + _Confirmaive capacity Jeaming to do) Adoptive capacity learing to leam) Leadership styles (A03) Leadership syle refers to che way in which managers and leaders provide direction, implement organizational plans, and mosivate people. 1 Autocratic ‘Although distinctions are made 1 Autocratic leaders are authoricatve, ie. there are formal systems of command Se iain and control, ‘in reality, the terms are often used 12 They avoid dacusions as employees are not involved in decison maki interehangeablyané a dttnctons a nel al ‘somewhat unimportant as there are 2 Deletion and consultation ae non-eiset clea overlaps. A good leader has ‘the capaci ta manage and a good ‘= Communication is top-down and one way; ie. managers order and instruct their subordinates, manages has the capacity to lead, 2.3 Leadership and management 53 = It is most likey to be used when employees are unskilled, inexperienced, lack itlative andor cannot be trusted. = Anautocratic approach may aso be suitahle cr necessary when critical decisions must be made, eg, the emergency services (police, fre and ambulance services) or in the military and navy. "= The success ofthe organization very much relies on the ability ofthe leader. Table 2.5 Advantages and dlsadvantages of autocratic leadership ‘Advantages of autocratic leadership Disadvantages of autocratic leadership © Ensures theres conizl and dose oversight withinthe «Stiles intiave and creativity 2s employees are not involved in cexganization decision making Quick decision making takes place © Demotvetes workers as theirideas are not valued © Enployees have a clear sense af ection © Does not nurture future leaders among employees so can damage ‘© Eective when deadlines are imminent or major decisions __campetitvenes in the longterm need tobe made _Sibordinates are usually ineffective ifthe leaders absent from work § Paternalistic = Pacemnalistic leaders see the workforce as an extension of the family so make decisions that they perceive tobe inthe interest oftheir empleyes. f= It is often effective in familyrun businesses 1 It is used in organizations where the leader is highly experienced and. ‘genuinely values the workers. = There is close supervision of employees and their work (comparable to a ‘parent’ trditicnal control over their children, ‘Table 2.6 Advantages and disaclvantages of paternalistic leadership ‘Advantages of paternalistic leadership Disadvantages of paternalistic leadership ‘© Asofter form of autocratic leadership vtch often resus In» Employees can become dssaied as thelr viewpoints are often Improved sta mothvtion and lover staff turnover ‘ignored decisions are made by top management s0 it doesnot «© Feedbacks invited, so this can improve relationships at workas help to develop their careers employees’ cacil needs ae emphasized “© Communication mostly downward ‘© Theteis often commitment and loyalty to leaders who workers Patemalstic leaders can become oo dictatorial and make poor perceive wil take care of tel well-being Aecisions (does the parent or leader always know what s best?) @ Democratic = Democratic leaders involve workers in the decision-making process, Le, ‘consultation and collaboration are considered to be important to the ‘organization, 1 Leaders encoumge discussion and employee participation, although they have the final say. = Leaders delegate authority and empower their staf. = It is likely tobe effective when used with skilled, experienced and creative employees Table 2.7 Advantages and disadvantages of democratic leadership ‘Advantages of democratic leadership Disadvantages of democratic leadership © Cane motional as workers feather opinions «Deon making ower x employees have eater invaherent a andinput are valued, tus creating a greater sense of the process bslnging and staff lyalty Reaching a consensus over decison canbe tne consuming and cost © Thecolabortveenvionmentoftenresutsinbetter 5 The possilty of dsagreement among intemal stakeholders during the Informed solutions o challenges and problems

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