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
Decentralisation
• Where the decision
• Where the authority
making authority is
for decision-making
concentrated amongst
is delegated to
a small number of
senior managers at
subordinates in the
the top of the
organisational
organisational
structure.
structure.
• E.g. McDonalds, Pizza • E.g. Tesco, Morrisons
Hut
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
Disadvantages
• 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.
• 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