Relationships, Delayering, Outsourcing etc…

Learning Intentions

• Be able to describe the different types of relationships in an organisation

• Know the importance of Corporate Culture and how it is developed

• Be able to describe the current trends in structure ie delayering, downsizing and outsourcing

• Know what is meant by Empowerment

Formal Relationships

• Line relationshipsRelationships between a superior and a subordinate, eg, DHT and PT

• Lateral relationshipsBetween staff on the same level within an organisation

• FunctionalWhere a manager has authority over another by virtue of their position/knowledge, eg finance manager

• Staff RelationshipsRelationship between staff and individuals who provide support for the whole organisation, eg company lawyers or ICT specialists

Informal Structures

• An organisation chart shows the formal structure of a business based on official roles

• Informal structures exist in most business based on relationship that develop between staff

• Business should recognise the existence of these informal structures and use them to pass information or solve problems

Corporate Culture

• An organisation’s established pattern of working

• The values, norms and behaviour accepted and shared by all in the organisation

• The culture of an organisation must match the environment in which it operates

• The culture develops over time as a result of the– Attitude of staff– Pattern of behaviour– Established rules

• Individuals are more likely to conform than rebel against the culture

Elements of Corporate Culture

• Edgar Schein believes there are 3 main elements which instil an identity in individuals within an organisation

• (eg McDonalds franchise)– Artefacts (shop layout/colour

schemes/uniform)– Values (staff attitudes to customers)– Underlying assumptions (food –

availability, quality, portion size)

Benefits of Corporate Culture

• Provides a sense of identity• Helps team building• Increases commitment – may prevent

high turnover of staff/industrial relations problems

• Motivated worker = higher productivity• Helps communication• Reinforces values of senior

management• Acts as control device for management

Questions

1. Explain the term “Corporate Culture”

(2marks)2. Describe the benefits of having a

strong corporate culture.

(4marks)

Recent trends in internal structure

• UK based organisations have undergone structural change due to– de-industrialisation– competition from ‘tiger’ economies

• This has led to– changes in traditional structure and methods of

management– Delayering– Downsizing– Outsourcing

Downsizing

Reducing costs by• Reducing scale of operations to meet

decreased market demand eg, closure of factories

• Stripping out excess capacity• Consolidating complementary

departments under one function eg sales and marketing

• Reducing resources eg workforce

Delayering

• Cutting out levels of management and ‘flattening’ out structure

• Some levels of management can be unnecessary

• Staff are empowered to make own decisions• Removing levels of management can result in

– Improved communications– Faster decision making– More responsive to change– Adapt more quickly to changing situations

2008 Question 2c(i) Section 2

• Distinguish between Delayering and downsizing

(3 marks)

Answer

• Delayering involves removing a whole level of management to flatten an organisation’s structure, whereas downsizing is closing specific areas of the organisation.

• Delayering improves communication within the organisation due to the reduction levels of senior management, whereas downsizing completely removes functions therefore making communication more difficult.

• The purpose of downsizing is to reduce costs by reducing the scale of operations whereas the purpose of Delayering is to cut out the levels of management to make the organisation flatter.

Outsourcing

• Contracting another organisation to carry out some tasks/functions.

• Can be very basic, eg cleaning or catering.

• Can be more complex; eg recruitment, accounts

Outsourcing

Reasons for:• Frees up staff and time• Reduces costs • Allows experts to carry out the tasks • May not have a full-time need for a

section or person • Allows greater flexibility

Disadvantages of Outsourcing

• Loss of control • Specialist firm may let the

organisation down in terms of delivery and quality

• Confidentiality may be compromised• Communication between the two

organisations needs to be very good

Empowerment• This means giving staff more responsibility

for their own work and decision making. This often occurs when an organisation delayers or downsizes.

– Employees will be more motivated and productive

– Increased pay and training– Enhanced promotion prospects– Decision making is quicker – made by people

doing the job– Staff develop skills

EmpowermentPros

• Good decisions taken quickly

• More flexible and motivated staff

• Improved productivity• Improved

competitiveness• More ideas• Improved

communication – fewer managers

Cons

• Not all staff want to be decision-makers

• Managers may be unwilling to give up powers

• Staff may not trust the organisation as they have usually had a situation of delayering or downsizing

• Costly to train staff to make decisions

Role of Management

Management are responsible for:• Choosing the best structure for the

organisation• Ensuring all staff are aware of the structure• Recognising the existence of any informal

structure• Organise and promote the organisational

culture• Ensuring the formal structure is consistent

with the culture• Changing the structure where necessary

Factors affecting internal structure • SIZE – larger organisations need more structure and

controlbusiness grows (perhaps by merger) its structurchange, eg entrepreneurial structure may become more decentralised

• TECHNOLOGY – technologies can change the structure eg downsizing if technology results in fewer staff being required. Or depts may need to be created eg e-commerce dept

• MARKET – national organisations may need to be more structured and therefore hierarchical• As market expands or declines the structure may change to

reflect this

• PRODUCT/SERVICE – organisation producing a large range of products may need more departments therefore a more formal structure

• STAFF – highly skilled staff may work independently therefore organisation can be flat and decentralised

Questions

• Describe the terms product grouping and place grouping

• What are the advantages and disadvantages of customer grouping?

• What is the purpose of an organisation chart?

• What are the disadvantages of a wide span of control?

• Describe the factors which will affect the formal structure of an organisation

• When would a matrix structure be used by an organisation?

• Describe 3 relationships that can exist in an organisation

• Why might an organisation delayer?• Why might an organisation empower

staff?