Competitive Organisational Structures

A2 Business Studies

Aims and Objectives

Aim:• Understand methods of increasing competitiveness

of organisational structures

Objectives:• Define centralisation and decentralisation.• Explain how to delayer a business.• Analyse the effects of centralisation, decentralisation

and delayering.• Evaluate each competitiveness method.

Starter

• Explain the different types of organisational structure.

• Are some better suited to soft HRM rather than hard HRM?

Organisational Structures in Larger Businesses

In the modern day, organisational structures will change on a regular basis as it adapts to

changes in the market. It is quite likely more than one structure

will appear in a business.

Organisational Structures in Larger Businesses

e.g. • A hierarchical structure may be appropriate in

finance for handling of sensitive data.

• A matrix structure may be appropriate in marketing for running projects.

• An informal structure may be used R&D where creativity is important.

Judging Effectiveness of Structures

Question to be asked of the case study:

• How quickly are strategic decisions made?

• Does the business operate at minimum efficient cost?

• How effective are the channels of communication within the organisation?

• Who is involved in the decision making process and are they the most appropriate people.

Adapting to Improve Competitiveness

Centralisation• Where the decision

making authority is concentrated amongst a small number of senior managers at the top of the organisational structure.

• E.g. McDonalds, Pizza Hut

Decentralisation• Where the authority

for decision-making is delegated to subordinates in the organisational structure.

• E.g. Tesco, Morrisons

AN: Centralisation & Decentralisation

In groups sort the factors into advantages and

disadvantages of centralisation and decentralisation.

AN: Centralisation

Benefits• Tighter control over day-to-day

running of business, especially budgets.

• Easier to achieve economies of scale.

• Greater use of specialisation.• Quicker decision making.• Easier to implement common

policies and practices.

Disadvantages• More bureaucratic – often

too many layers in hierarchy.

• Lack of authority down the hierarchy may reduce manager motivation.

• Customer service can suffer from flexibility and speed in local decision making.

AN: Decentralisation

Benefits• Decisions are made closer to the

customer.• Improved level of customer

service.• Consistent with aiming for a

flatter hierarchy.• Should improve staff motivation.• Delegation increases flexibility

allowing the business to adapt to market conditions better.

Disadvantages• Decision making is not

necessarily strategic.• More difficult to ensure

consistent practices and policies.

• Who provides strong leadership in a crisis?

• Harder to achieve tighter financial control & EOS

EV: Centralisation & Decentralisation

• What does the success of either depend on?

• The type of business!• Large franchises – centralisation for the need to

keep tight control over franchisees.• Large LTDs and PLCs – decentralisation to ensure a

motivated and empowered workforce.• Skills of managers and decision makers.• Competitors structures and actions.

Delayering

Removing levels in the organisational structure to create a leaner and more

efficient organisation.

Case Study: Aviva

“Aviva is basically removing the regional layer between the individual countries and the group level top management. It is a positive in our view because it should lead to some cost saves and should also mean a simpler management structure.”

AN: Delayering

• Independently, note down:– Advantages of delayering– Disadvantages of delayering– Issues with delayering

• In pairs, share your ideas.

• As a group share your ideas.

AN: Delayering

Benefits• Indirect costs are reduced.• The motivation of workers may

increase as they have more responsibility and power is delegated.

• Those at the bottom of the structure may have good ideas on how to improve the business. Business may be better able to respond to market and consumer changes.

Disadvantages• Valuable skills, and knowledge

may be lost.• Loss of job security may affect

motivation negatively.• Harder to implement with

legislation – discrimination act.• Workload of mangers likely to

increase increasing stress and possibly absenteeism and costs.

• Training costs may be greater!

EV: Delayering

• What does the success of delayering depend on?

• Relationship with trade unions• Laws and legislations• Effects on motivation• How large the costs of training are• The effectiveness and ability to cope with extra

workload of managers