Table 1
3)i) Two examples of companies/organisations with a centralised organisational structure:
- Military
- National Health Service
Two examples of companies with a decentralised organisational structure:
ii) Military:
Within the Military, it is very important that the structure is kept centralised for a number of reasons. Firstly, it is vital that different areas i.e. the Royal Air Force, Navy, Army etc work together to complete their goals. This means that ultimately, their orders all come from the same source. If it was left up to each department to decide how to perform a military operation their own way, it would not be as organised and as effective. Also, many factors such as dress code, discipline, salary etc need to be kept the same across the board so that they can be recognised as one organisation.
Another important factor is security. Security is generally more effective in a centralised organisation as sensitive information does not need to spread out across as much and is kept to only people who need to know. This is essential within the military as if secret information is leaked the effects could be potentially devastating. Effective communication is another factor which is vital within the military, which is a strong characteristic of a centralised structure. In uncertain times the organisation will need strong leadership and pull in the same direction. It is believed that strong leadership is often best given from centralisation.
National Health Service:
The NHS is one of the largest centralised organisations within the UK. Although it is vital for all hospitals to be given a certain amount of authority, they will ultimately all work to the same standards. This is important for areas such as codes of practice, dress code, health and safety etc. It allows employees to move easily between jobs within the organisation and it also sets a standard across the country so that the general public know what they are entitled to and generally what to expect. The use of standardised procedures can also result in cost saving.
Perhaps one of the main reasons that the NHS is centralised is due to money. The government is responsible for funding the NHS. This means that any payments made by the general public is not paid to the hospital or to the practice where they are being treated, but to one source. This is essential in order for the NHS to continue and grow. Employees will also be paid in this way. If the NHS was not centralised and funded by the government, many people would be not be able to afford the healthcare they need although decentralisation of healthcare is an ongoing debate with arguments for both sides. Centralisation of the NHS also allows hospitals to work together seamlessly. For example, if a patient needs surgery that is not available in his/her area, they will be referred to a hospital that is able to provide the surgery that they need.
Tesco:
For Tesco, being a large supermarket chain and now expanding into other areas, it is vital to have a decentralised organisational structure. Each Tesco store will have its own store manager, who makes decisions concerning their store and no one else’s. It is then the store managers’ responsibility to report to the regional manager. This is important, as aspects such as demand for certain products and population etc will differ across the country. Being decentralised, this allows each regional or store manager to produce targets etc which are achievable to their store.
Allowing empowerment to other employees down the organisational structure allows senior managers to concentrate on the most important decisions. Tesco not only provide a supermarket chain, but also many types of insurance, credit cards, loans, breakdown, savings, internet, phones etc. It is important that senior managers spread themselves across all aspects of the business, which decentralisation allows. Empowerment also enables departments and their employees to respond faster to changes and new challenges, whereas it may take senior managers longer to appreciate that business needs have changed.
Orange:
Orange is also a company that is expanding into other areas. Primarily, Orange are a mobile phone network provider, although are now integrating into broadband and looking into TV. For these reasons it is best for the organisation to adopt a decentralised structure. Problems and faults can happen very fast within Orange, which can dramatically effect revenue. It would be impossible for senior managers to deal with all of these, and so empowerment is passed down the line. Empowerment can also increase motivation and increase staff output, which is essential in such a competitive marketplace such as mobile networks.
There are many departments within Orange, which are very different to each other, i.e. retail, customer services, technical, marketing etc. Being decentralised allows each department to have a hierarchical structure so that managers can report in turn to their manager within that department. It allows targets to be realistic, as they are set by employees who have a greater understanding of the environment they work in. It also allows targets and figures to be filtered to what is of the highest importance for the senior managers, which gives them a good overview of the whole of the business.
4)i) Table 2 below shows some examples of the types of information that would flow around a manufacturing organisation:
Table 2
- One of the main purposes of vertical information flow is to communicate between departments and their mangers and upwards. It is vital that management are able to communicate downwards, for example specifications, design ideas, profit margins etc. Because costs and other reports are communicated upwards to management, they are in the best position to make specifications, thus hopefully enabling the business to make as much profit as possible. If costs were not communicated up to management level, the business would suffer as there might be more outgoings than profit etc. Another example of information that could be communicated upwards is any constraints on the business. Again, it is vital that this is accurate and reliable, as if it wasn’t, management would not have a strong grip on where the business is failing.
It is just as important for downwards information to be reliable and accurate. If specifications are wrong, the final product could end up as faulty, inefficient or wrong for the market. This could be potentially devastating for the business profits and will portray a bad image for the business. Sales forecasts are also very important as, if unreliable, the business will again drop profits due to too much product being manufactured for the market.
Sideways information is also very important. This allows departments to work with each other in order to keep the business running as smoothly as possible. If this information was communicated badly, the business would not work as efficiently. This can include all different types of information, including sales orders, requests, invoices etc. This kind of information is perhaps more closely related to the customers i.e. invoices. If this was unreliable it would not be good for customer perception and would again portray and bad and unorganised view of the business. Payment information also needs to be reliable, as this is where profits come from. If this was wrong, the business would not know how much profit, if any, it is making. Factors such as data protection must also be considered by the business, as this would cause huge financial and image problems if breached. This is all at the utmost importance to the business.
- Passing information between areas of the business contributes hugely to an organisation’s business objectives. Every organisation should have high, but achievable objectives in order to make a profit. As mentioned earlier, one of the most important factors includes reliability, although quality is also essential. For example, management can report information such as specifications, profit margins etc back to the business but, if it is not accurate, the business objectives and goals will be much harder to reach. If an objective for the business was to market a particular product, it would be essential that the product development department provide accurate information on the specifications of the product and when it would be ready to retail. This also coincides with timeliness of information, which is mentioned later.
Not only the quality of the information is important, but also the quality of how it is transported. This is vital for a business, especially in a competitive market with high value data. High value data would cause problems if lost, or even used by a competitor as this would mean that business objectives might have to be raised to ensure the organisation is still one step ahead. Other problems could arise if vertically upwards data such as costs etc were damaged or corrupted as this would make objectives difficult to make in the first place, thus making them inaccurate. For these reasons, businesses might put security measures into place. Vertically downwards information such as specifications are just as important for meeting business objectives and need to be transported securely.
Timeliness is another large factor organisations need to take into consideration in order to achieve business objectives. Within a manufacturing organisation, the marketplace can change rapidly and so it is essential for important types of information to be passed on quickly. This can start at the bottom of the organisation i.e. processing customer orders quickly will increase customer satisfaction, which is usually one of the main objectives for an organisation. Another important example is marketing, which would need all relevant information as soon as possible in order to provide an efficient marketing plan. Marketing is very important in order to raise public awareness of a product and would come highly in an organisations business objectives.
