- The ‘new look’ organisation:
In the post-millennium business world, organisations are radically different from the old-fashioned, top-down organisations of the past. Today, many organisations that directly provide services for customers (cafés, restaurants, banks, building societies, insurance companies, supermarket, etc.) including McDonalds put the customer First.
Recently, McDonalds have started drawing their organisational structure charts with the customers at the top. If you cannot satisfy your customers, you do not have a business. Perhaps next most important in the organisation are the front-line workers who deal directly with the customers - the lecturers and teachers in educational institutions, the people answering the telephones in banks and behind the front-line workers are the backup people, such as information and communications technology specialists, warehouse supply staff, etc. Further back the managers who are responsible for creating the systems and procedures that make the organisation run smoothly.
- The changing organizational context:
A business concept that has been growing in importance has been that of the ‘flexible firm’. In the past, many large organisations had a large core of full-time workers who expected a job for life. Throughout the country, after leaving school people would start working with an employer like Boots or McDonalds. Brothers, sisters, parents, grandparents, uncles and aunts might all work for the same employer.
Today, the pool of core workers in an organisation has been severely slimmed down. Instead, organisations rely more and more on peripheral and external workers to carry out work tasks.
Core workers tend to be multiskilled, full time, and enjoying good pay conditions and benefits. Peripheral workers are those who are not employees of the firm (agency temps, workers in contracted-out services and the self-employed).
The flexible firm sets out to cut its labour costs to a minimum by limiting core workers relative to peripheral and external workers.
Increasingly, therefore organisations have slimmed down through a process known as downsizing’ or delayering’ (as layers are stripped out of the organisation). Hardest hit have been the core workers whose numbers have been heavily reduced
While the number of core workers has been cut back, organisations have been able to cut their costs by taking on cheaper forms of employees. Part-time and temporary workers, therefore, are the fastest-growing part of the employment scene. This growth is represented in recent figures for Leicester, which can be regarded as representative of what is happening in a great many urban areas in this country.
In a new competitive world in which information and communication technology has made it possible for organisations to contract out many of their functions, and in which competition has forced many organisations to seek new ways of reducing their costs, organisations have sought new structures. Big companies have realised that, in order to stay ‘big’ in a dynamic world, they have had to act as if they are small. Hence the emphasis on contracting out non-core activities.
The need to be liked and the urge to survive sometimes clash, as when, in order to survive, a company finds it necessary to shed staff. In such circumstances, the need to be liked may encourage the company to treat the employees it proposes to discard with even greater consideration.
The person company is better placed. Even in prosperity, the person company will tend to do better than the machine company. People are people, they are not machines. They will generally prefer to work in a person company.
The person company will have different structures, systems and a different culture from the machine company. In structural terms, the person company will be far less hierarchical than the machine company, allowing decision-making by individuals within the organisation at all levels. In terms of systems, the person company will create the systems that allow flexibility at all levels, thus supporting individual decision-making. The culture of the machine organisation will be concerned with getting products out, with little thought for the needs of the people who make the product. In contrast, the people company will place a great deal of emphasis on supporting the personal development of individuals within the organisation - it is likely to have a democratic culture.
Organisational charts are charts (pictures) that show the structure of an enterprise and the relationships between the various members of the organisation and what their key responsibilities are.
A clear chart will show:
- How the organisation is structured.
- The level of responsibility of each organisational member and to whom each reports.
- Possible lines of promotion.
- Flat and tall structures:
The term ‘scalar chain’ is a rather old-fashioned one and stems from the days when large organisations were bureaucratic, with lots of layers between the top and bottom. Scalar chain refers to the number of levels within the structure or hierarchy of an organisation. The scalar chain set out the authority, responsibility and the framework that determined superior and subordinate relationships.
The idea of setting out everyone’s role and position is to make it clear who is responsible for what, and that there is a clear line of authority because an individual’s position was clearly marked on an organisation chart or diagram, it was easy to see where responsibility lay. This is still important in such organisations as the army, where there has to be a clear chain of command. It is less important in a creative advertising agency, where you have a great many creative people generating individual ideas.
The term ‘span of control’ refers to the number of employees who are directly supervised by one person. The manager who tries to supervise too many people may be so overworked that his or her staff are unable to perform their duties effectively. On the other hand, if a manager has too few people to supervise, his or her time may be wasted.
The traditional scalar chain and the span of control help to create a pyramid shape of the organisation’s structure. The extent of the chain, and the nature of the span of control, will determine whether the organisation has a ‘flat’ or ‘tall’ structure. Where the spans of control are broader and there are fewer levels of authority, an organisation will have a flat structure.
In contrast, where there are narrow spans control and more layers of authority,
There is no single ideal combination of span of control and scalar chain for any one organisation. It is, however, argued that fewer levels tend to improve decision-making, communications and morale. On the other hand, by ‘delayering’ and reducing the number of levels in the chain, this may reduce the opportunities for promotion and positions with high status. This, in turn, will limit the opportunities for the development of future managers. But due to McDonalds opening atleast 100 new restaurants every year there is always opportunities for someone else to become a manager.
Hierarchy is the traditional way of developing an organisation that was so popular for much of the twentieth century. It was popular because the century saw the growth of very large organisations that, in the days prior to the widespread use and application of information and communications technology, were thought to be appropriate because they could ensure command and control of an organisation. Hierarchical organisations were managed by detailed systems and procedures, and systems thinking dominated much of the thinking about how the organisation should be run.
The hierarchy in a business is the order or levels of management, from the lowest to the highest rank. It shows the chain of command within the organisation (i.e. the way authority is organised). McDonalds pass the orders down the levels and information passes It is generally held that, the greater the number of levels in the hierarchy, the less effective the communication process is. McDonalds hold a hierarchical structure in which they delegate the responsibility to each branch manager who reports to the country manager.
- Line and staff relationships:
When working for an organisation, you will frequently hear reference to ‘reporting to your line manager’ (i.e. the person to whom you are directly responsible). For example, in a school a classroom teacher may report to a head of department, who then reports to a head of faculty, who might then report to the deputy head teacher in charge of curriculum and then the head teacher, etc.
Someone working in McDonalds might report directly to a supervisor or junior manager.
Line organisation is the typical structure of a hierarchy. There are direct communication links between superiors and subordinates. Each member of the organisation has a clear understanding of the chain of command and to whom he or she is responsible. This type of structure can be very effective because of its clarity. There are set rules and procedures that can be referred to. McDonalds uses this technique.
The idea is to open up the flow of communications and to try to involve more people in decision-making.
Staff organisation primarily serves the various line departments. Typical staff areas in an organisation include human resources, data processing and office administration.
Nowadays, many organisations employ matrix structures, particularly where there is an emphasis on project management. A project team is responsible for managing a particular project. For example, companies that make and sell goods employ project managers who pilot particular products from the initial development stage through to final production and sales. The project manager is there to plan, co-ordinate, initiate, persuade and hurry things up.
Project management is highly dynamic. The project manager uses a range of statistical and other tools to plan out how a project will take place (often these statistical tools can be set out using pre-prepared computer programs). Once the plan has been created, the project manager will work with a team to carry the project out. Of course, on a day-to-day basis unforeseen events and incidents will occur that interfere with the original project plan. The project planners must therefore use a great many creative problem-solving skills to keep putting the plan back on track.
The project manager seeks to synchronise and maximise efforts across the various departments and groups involved with putting the plan into action. An organisation that operates purely on functional lines can soon run into bottlenecks and confusion between the various departments, but a project manager can ensure there is co-ordinated planning to bring resources and people together correctly. The project manager is there solely to co-ordinate the activities.
The project manager brings people together from across the various functional areas, drawing on their expertise. It is the project manager who has the responsibility for ensuring the project is seen through by his or her team. Of course, particular individuals can work on more than one project at the same time.
In recent years there has been a strong emphasis in business on the idea of business a matrix structure for project process re-engineering (BPR).
What this means is identifying what the key processes are for the organisation to meet customer requirements. Having identified these processes it is possible to organise them in the best possible way to help the organisation meet these customer requirements.
McDonalds don’t use this structure.
- Centralised and decentralised structures:
These terms are closely linked to the idea of authority and the amount of delegation taking place. Centralisation refers to the amount of control exercised from the headquarters (or centre) compared to the amount of control left in the hands of the branches or departments of the business. Thus if a company such as a large retail chain, issues very strict and specific instructions to its shop managers about staffing, stock control or fixtures and fittings, it will be considered to have a high degree of centralisation. Alternatively, if the business allows its managers the freedom to make independent decisions without reference to the central office, then it will be thought to have a large degree of decentralisation or autonomy. Where there is a lot of delegation in a firm, decisions are made at various levels of the firm, which is said to be decentralised. Firms which do not practise much delegation have authority centralised, with the higher levels of management keeping control of the decision making.
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‘Centralisation’ means keeping major responsibilities within sections or units of the central headquarters or at the heart of the organisatlon. ‘Decentralisation’ describes a situation in which many specific responsibilities have been delegated to branches or away from the centre.
- Delegation is the process of handing down responsibility, and decentralisation is the end result.
- Organisations may choose to centralise certain key functions, such as accounts and purchasing in a large retailing organisation like Mcdonalds. Other functions (such as the recruitment of new staff) may be decentralised (i.e. left in the hands of branches or departments).
- Vertical decentralisation means handing decision-making down the hierarchy of an organisation so that people lower down an organisation chart have much more of a say.
- Horizontal decentralisation involves pushing responsibility across the organisation (i.e. by giving more responsibility to staff -e.g. when information and communications technology specialists are given major responsibility for handling the implementation of introducing new ICT systems in a company).
- The advantages of having a centralised structure in Mcdonalds are as follows:
- Senior managers have more control over the organisation.
- The organisation can create sets of standardised procedures so there is a set way of doing things (which will cut costs).
- Senior managers may take decisions from the point of view of the business as a whole. If you have lots of people lower down making decisions they may not work with this overview - they may do things just to help their own department, which may harm the organisation.
- It is likely senior managers will have had more experience of making decisions -they may be able to make ‘better decisions
- In times of uncertainty, the organisation may need strong leadership, which is often best given from above.
- The advantages of having a decentralised structure in McDonalds are as follows:
- Senior managers have less to cover themselves - they can focus on the most important decisions.
- By empowering people lower down the organisation, they will become more motivated and work harder for the organisation.
- People lower down the organisation have a first-hand understanding of the business, its processes and often of customer requirements. They may have more specific knowledge and skills, enabling them to make better decisions about some issues than senior managers can.
- In the modern world, organisations have to be very flexible to respond to changes and challenges. Empowerment enables the organisation to make much faster responses.
If people at McDonalds are used to making decisions, they will quickly be able to take on more responsibility.
- The impact of the market on organizational structures:
Some organisations have very flat structures, consisting of a number of entrepreneurial individuals working together. For example, some advertising studios have no interior walls. They just comprise groups of individuals working for a range of clients at the same time. There may be no hierarchy at all. Individuals working in such an organisation need to be dynamic and be able to get on with each other, to share ideas, to collaborate or to work individually on set tasks.
These advertising agencies operate in a very dynamic market, which is often highly competitive. Clients want good ideas, and they often want them quickly. They also want fresh ideas that represent the latest state-of-the-art’ development in the field because the members of the advertising agency are interacting all the time, they are able to come up with new ideas and to share these ideas.
In other organisations (although this is rarely the case these days), the organisation is operating in a more static marketplace. Customers basically want the same products year after year (e.g. catalogue clothing for elderly people). In such a static market, it is possible to create a highly structured organisation, with clear systems and procedures that have been in place for a long time.
During the 1970s and the first part of the 1980s many large UK companies operated as if they were in static markets. Large firms such as the oil companies, the confectionery manufacturers, the soft drinks manufacturers, etc., had often dominated their national markets and they produced on a large scale in top-down organisations.
The 1990s changed all that as the world economy increasingly created an unprecedented amount of global competition. In this new global economy, big firms had to start operating flexibly -they had to start acting as if they had a number of small companies in a large company. So the marketplace changed the organisation of the organisation.
In preparation for the post-millennium business world, many companies delayered, they down-sized and they decentralised many of their operations and, increasingly, they empowered teams and individuals to make decisions for themselves.
A person’s management style is the typical pattern of behaviour he or she shows in carrying out a management role over a period of time.
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The Autocratic management style:
The Autocratic management style is one where the manager is used to giving instructions - telling people what to do rather than asking them for their opinions. The manager is the only person contributing to the decision-making process. This style of management is more typical of although you are sure to find it today. A number of managers who have been brought up with this approach find it difficult or impossible to change their ways.
They are used to holding on to power, and do not understand how the process of empowerment’ might work.
This has to be done at McDonalds because of the way it operates.
Consultative managers are ones who seek to consult other people before making a decision. Alternatively, they will seek to consult people before implementing a decision. This type of manager wants to draw on more sources of opinion than just him or herself. The consultative manager will have listening skills and also the ability to create the right sorts of channels to consult other people. In an organisation with a culture of consultation, there will be a series of mechanisms (e.g. newsletters, team briefings, suggestion boxes, etc.) that makes it possible to get the feel of the concerns of other people involved in the decision-making process, as well as to draw on their expertise.
This is only applied to McDonalds to explain errors occurred at the end of the year.
- Democratic management style:
This involves empowerment. Individuals and teams are given the responsibility to make decisions, usually within a given framework. The team is then held accountable (responsible) for the decisions that it chooses to make.
A manager with this style will feel comfortable allowing others to make decisions. The democratic manager will need to have a good overall understanding of the decisions that are being made, and will want regular feedback on results. However, they will be confident that empowered individuals and teams will use the responsibility given to them wisely.
McDonalds also use this policy with those managers that feel they could operate that way better in that area of which the restaurant is at.
- The relationship between culture and structure:
There is a clear relationship between the structure and the culture of many organizations:
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Tall organisations tend to have a culture based on a ‘them and us’ attitude, which depends on where individuals stand in the hierarchy. There is likely to be an authoritarian culture.
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Flat organisations tend to be more democratic. With multidirectional flows of communication between organisational members, there is more likely to be a team approach.
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Matrix structures tend to be more democratic than tall organisations. In the matrix, people will mix with people from more than one functional area, so there is less likely to be a situation in which departments become very defensive about their territories. Where the matrix involves process teams, this can create a bonding between members of these teams and a cross-fertilisation of ideas.
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Hierarchical organisations are based on a top-down approach with an emphasis on communication down the line.
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Centralised organisations are likely to lead to a power-based authoritarian structure. Key decisions are likely to stem from head office or the centre of the organisation. Distrust, as well as considerable antagonism, may arise between the centre and the parts of the organisation. Units away from the centre may at times be almost at war with HR, perhaps ‘failing to understand’ instructions and carrying out other sabotaging activities.
- Decentralised organisations are most likely to be based on democratic structures! teamwork/empowerment, etc.
Different businesses have different types of organisational structure which vary according to their size, what they do and what the management feels is most appropriate to that particular business. A large manufacturing firm may well have a very different structure from that of a chain of supermarkets.
Because they employ fewer people, small firms cannot easily be organised into separate units or departments. Consequently, the workers in the small firm tend to be less specialised and need to have a broader knowledge of the way that the firm is organised, and a wider range of skills to offer. This is because in the small firm the employee is required to undertake a wider variety of tasks, whereas in a larger organisation each task might be carried out by a single worker specialising in that activity. The variety of work involved can make work in a small firm more interesting and satisfying.
Large organisations are generally private or public Limited companies. This type of organisation is owned by shareholders and governed by a board of directors elected by the shareholders. The board appoints a managing director to oversee the day-to-day running of the business and to ensure that policies formulated by the board are carried out effectively. A company secretary is also appointed to deal with legal matters.
One of the advantages enjoyed by large firms is that because of their size they are able to divide their organisations into separate specialist departments. This is called functional organisation. The number and type of departments vary depending on the type of firm, but the following are typical examples of the type of departments frequently included with the large organisation.
This department records all payments in and out of the firm. The accounts department is particularly concerned with incoming and outgoing invoices, and maintaining the firm’s money flow. Payment of wages is often included in the responsibilities of this department. The modem accounts department has an extensive data processing system backed up by computers.
Many firms have a general office concerned with co-ordinating the activities of the various departments of the firm. The administration department may include back-up facilities such as centralised filing, typing room, mail room, reprographics and data processing. The administration department is frequently closely related to the managing director.
The transport department may operate the company’s own fleet of vehicles, or alternatively it organises other forms of transport using agencies outside the firm. The function of this department is to arrange for delivery of goods to customers on time, in good condition, at home or overseas, and by the most economical method and route applicable.
- The Organisational Chart:
The function of an organisation chart is to show the internal structure of a firm. It will show the status of each manager and the communication lines within the company.
The Board of Directors and the Managing Director are at the top of this ‘tree’ and the different functions - each of which has its own internal structures - are then listed under the titles of the individual directors and managers.
There are a number of terms used when a company’s organisation is analysed. The important terms are as follows -
The number of workers directly controlled by one person measures a ‘span of control’.
The span of control of an individual depends upon a number of factors. The nature of the employee’s work is the amount of supervision he or she requires is a major factor. Highly skilled work will need quite intensive supervision and so the supervisor’s span of control is likely to be limited to a few workers. If a person’s span of control is too wide, supervision and control become inefficient and this is likely to be reflected in the quality of the output. If the span is too small, then the organisation will be hampered by incomplete and insufficient delegation. Managers will over-control their juniors, interfering with their day-to-day work.
A firm’s chain of command derives from its hierarchical structure. The chain runs typically from the Board to the Managing Director, then to the directors of the different departments, through managers to the section heads and supervisors and finally down to the shop floor and office staff. The chain of command highlights the status of the various employees indicating who takes decisions and to whom these decisions are passed. It is an indication of the formal communication structure of the firm.
- Delegation and Authority:
The Board and Managing Director will not take all the decisions required by the firm. Their role is to make the more long-term, strategic policy decisions. They will delegate pass on the responsibility of making the day-to-day decisions to the various managers and supervisors of the firm. In turn, these managers will delegate certain tasks to their own staff eg the Purchasing Director may ask the Warehouse Manager to examine alternative layouts for the warehouse or the Chief Accountant might ask the Wages Office Manager to carry out an analysis of wages costs.
The delegation of duties must be accompanied by the appropriate authority to do those duties.
If managers do not delegate properly, this can mean that they carry out routine tasks which their subordinates could easily do and the time of the managers is therefore less efficiently used than it should be.
Delegation is the movement of responsibility of a person of authority to an employee lower down the chan1e of command. Responsibility can be delegated but accountability remains with the person in authority.
This is power backed by an institution. It is impossible to delegate responsibility without delegating authority. This is because the delegee must have the authority as well in order to carry out the task. Responsibility without authority cannot be achieved.
This is when a manager can delegate responsibility and authority but cannot delegate accountability. Accountability is the overall responsibility for assuring that things are achieved.
As accountability remains with the manager a good manager when delegating makes sure of certain factors.
- They are sure that the delegee can do the job required off them and by ensuring they have had sufficient training and ability to do the job.
- That the subordinate has the means to do the job (i.e. the correct equipment, facilities and sufficient authority).
- That there is a means of monitoring and appraising those to whom the task has been delegated to.
- Line and Staff Organisation:
The traditional organisational chart shows the chains of command as a series of lines. Line authority is found within the various departments, with the line of command linking the Managing Director to the departmental managers and finally to the shop floor and office workers.
The ‘line managers may be supported by various specialists who are not directly in this line of command. For instance, the Warehouse Manager may be advised by a specialist in factory layout or the Purchasing Manager may be helped by a member of the Personnel Department in drawing up a job description for a new post in the Purchasing Department. These staff roles advise line management and whole departments - such as Personnel - may work on a staff basis.
department is to arrange for delivery of goods to customers on time, in good condition, at home or overseas, and by the most economical method and route applicable.
