AQA GCE Business Studies
A2 UNIT 3
HUMAN RESOURCE STRATEGIES
COMPETITIVE
ORGANISATIONAL STRUCTURES
Adapting Organisational Structures to
Improve Competitiveness
© APT Initiatives Limited, 2009
Introduction
Organisational structure can affect:
 Motivation of staff
 Efficiency, costs, profitability
 Speed of response to changes
In increasingly competitive market place
one way to improve competitiveness is to
adapt the organisational structure
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Centralisation & Decentralisation
Extent to which authority and responsibility for
decisions is passed down (delegated) to
divisions, departments, sections
Highly centralised
Power in upper levels of MGT
Decentralised
Lower levels of MGT responsible for
many important decisions
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Centralisation & Decentralisation
Appropriateness depends upon:
 Nature of business and activities
 Size and geographical spread
 Environment in which it operates
 Ability of employees
 Risk eg greater - centralisation likely
A standardised approach (ie cent or decent)
may not be appropriate for all MGT functions,
depends on… cost, efficiency
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Centralisation
Potential advantages:
 Greater control
 Uniformity of decision making
 Economies of scale
 Economies of staffing
 Economies of specialisation
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Centralisation
Potential disadvantages:
 Decisions might be too general
 Overload / pressure on senior MGRs
 Too much power to senior MGRs
 Slower decision making
 Poor motivation of lower level staff
 Loss of initiative of lower level staff
© APT Initiatives Limited, 2009
Decentralisation
Potential advantages:
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Reduced workload/stress of senior MGRs
Power dispersed
Better quality decisions, MGRs
Faster decision making / response
Improved morale and motivation of lower
level MGRs
 Increased respect from staff
 Lower supervision costs
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Decentralisation
Potential disadvantages:
 Loss of direction and control
 Lack of uniformity and consistency
 Loss of economies
 Inter-unit conflict – narrow view
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Decentralisation
Requirements:
 MGRs to be capable of doing more
 High degree of trust
 MGRs to feel confident in own ability
Potential problems:
Unwillingness to accept responsibility due to:
 Feel extra responsibility without extra pay
 Lack confidence
 Concern over greater accountability
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Decentralisation
Overcoming barriers / changing attitudes:
Shorter-term:
 Training
 Financial rewards
Longer-term:
 Adapt recruitment and selection – recruit individuals
happy with empowered culture
NB Feedback to centre still a necessary feature
– to maintain effective control - assess if delegated
authority being used effectively
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Delayering
The removal of one or more supervisory /
managerial layers
Problems with tall structures:
 Poor and / or slow communication
 Slower decision-making
 Slower response to change
The flatter, leaner the organisation, the fitter, more able
to cope with rapidly changing EVT
Often used when business faces difficult times, needs
to cut costs to survive
© APT Initiatives Limited, 2009
Delayering
Can…
 speed up communication, decisions
 enable more rapid response
Widens span of control of lower level
managers, which can…
 improve motivation, morale
 lower supervision costs
But, if too wide – can…
 over-burden MGRs - lead to inefficiency
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Delayering
Potential problems:
 Often leads to redundancies if staff
cannot be redeployed, which…
 …increases costs - redundancy pay
 …cause ill feeling, lower morale
Minimising the problems:
 Explain reasons behind the decision
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Flexible Workforces
Examples - overview:
 Part-time (under 40hrs) instead of full-time
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eg am, pm, weekends, term time
Temporary (under 1 yr) not permanent
Flexitime, self-rostering, compressed
working week
Annualised hours contracts
Zero hours contracts
Home working (teleworking)
Outsourcing
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Flexible Workforces
Potential benefits for employee:
 Alleviate stress in balancing home life
and work
For employer:
 Increase productivity, efficiency – not
paying for labour not fully utilised
 Help to recruit staff more easily
 Lower labour turnover & associated costs
© APT Initiatives Limited, 2009
Core and Peripheral Workers
Core - permanent, full-time
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Important roles
More trained, skilled
Provide skills for competitive advantage
Provide functional flexibility
Peripheral - temporary, part-time…
 May not be as skilled or well trained, or
 Skilled workers for specific purpose
 Provide numerical flexibility
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Peripheral Workers
Use of part-time and temporary can…
 increase flexibility to meet fluctuations in
demand, maximise capacity utilisation
However, may be…
 more costly than other methods eg overtime
- extra recruitment (unless agency staff),
induction/training & admin
In addition…
 such staff may be less motivated and
committed than permanent, full time staff
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Annual Hours & Zero Hours Contracts
Annualised Hours
Employees required to work certain no. of hours
each year. Hours worked each week vary
according to the needs of the business
Zero Hours
Employees expected to be available for work as
and when required - no set hours or times
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Home Working
Arisen from developments in ITC
Common to: sales and marketing,
accounting, proof-reading and editing
Benefits – can reduce…
 fixed costs eg rent, rates
 travel expenses
 need to invest in social facilities
© APT Initiatives Limited, 2009
Home Working
May have positive effect on motivation…
 Employees feel trusted - self esteem
 Alleviates stress - commuting rush hour
May be more productive as…
 fewer interruptions
 more time working, less travelling
Can also cut down on air pollution!
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Home Working
However…
 Cost involved to provide the technology
 Difficult to monitor working hours
 Worker isolation - out of touch with business
goals
 Lack of social interaction - social needs negatively affect motivation
Obviously not possible on full-time basis if the
job requires direct contact with customers
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Outsourcing
Employing outside contractors to
perform tasks which, although are not
core activities of the organisation,
were previously performed in-house
Moving internal activities and
decision making responsibilities to
outside providers
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Outsourcing
Eg Outsourcing manufacture - may be used:
 when not able to produce efficiently
 when not have specialist knowledge or eqt
 when already at maximum capacity
 to cope with seasonal demand
 to cope with ‘one-off’ peaks in demand
© APT Initiatives Limited, 2009
Outsourcing
Potential advantages:
 Cost reduction (particularly labour)
 Improved efficiency
 Specialist expertise
 Enhanced flexibility
 Minimise inventory, materials handling
 Allows focus on critical / core activities
© APT Initiatives Limited, 2009
Outsourcing
Potential problems / disadvantages:
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Depends on availability of lower cost firm
Quality of product, reliability of supply
Danger in being tied to outside supplier
Protection of intellectual property
Involves great deal of trust
Danger of information leaks
Less flexibility re: unexpected orders
Possible loss of control
Effect on workforce - redundancies
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Steps in Outsourcing Decisions
1. Distinguish between core (competitive
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advantage) and non-core activities
Be prepared to outsource non-core (not
core) activities
Identify possible providers
Compare the cost with the in-house costs
and non quantifiable factors eg quality
If external firm can provide at lower price,
same in-house quality, then proceed
If no suitable provider - keep activity inhouse but continue the search!
© APT Initiatives Limited, 2009
Closing Comments
Implementing changes to the workplace
is a sensitive issue. If not managed well,
can create conflicts with staff and
negatively affect performance. Businesses
should ensure that any changes:
 are fully discussed and agreed with
employees and their representatives
 comply with UK/EU legislation eg Working
Time Directive, Sunday Trading Act 1994
© APT Initiatives Limited, 2009