Organisation structure is related to HRM and is considered as an HRM issue because, it is all about the way people are arranged or grouped, and the way their work is co-ordinated and controlled in an organisation. It influences the motivation of employees through the way they feel about the control over their own job, their sense of direction and the opportunity they have to interact and participate effectively at the work place. Organisation structure has also got other HR implications like promotion, career ladder, and personal development. Therefore it is very important that the organisation structure fits the company strategy to ensure organisation's efficiency. Thus organisation structure, company strategy and HRM are linked to achieve organisational success.
Bureaucratic forms of organisation are based on rules, hierarchy and impersonality and it has been the dominant form of organisation in the past century. Over the last two decades its suffering from serious problems like low employee motivation, producer focused etc. Post bureaucracy is nothing but the breakdown of traditional model of managerial authority to allow sharing of powers and authority in the workplace which results in higher levels of responsible autonomy. This has resulted due to higher levels of pressures associated with globalisation and technological advancements. There is a widespread finding that during the last decade organisations have underwent a lot of changes in their structure and operating principles. There was a series of transnational surveys done, which confirms that over time there is a tendency for organisations to make use of mechanisms to promote sharing of power and authority to the lower level in order to fit into wide range of national context (Phil Johnson el al 2009). But there has also problems associated to decentralisation of power and authority like loose of control, risk etc but it has been adopted by many organisations due to various reasons which are discussed below.
Many enterprises in the recent years are making changes in the organisation design and management design and practices to fit into their strategy. Initially lot of American firms in the late twentieth century started developing new models of organisations to manage their increasing diversity in business. Formerly most of the companies had centralised bureaucratic forms of organisation where there is single line of authority to control and make decisions. This form of organisation was working well when the business was vertically integrated and when they operated in a single country but when the business became more diversified and when they had a step into many countries strategic issues got crowded out by the operational ones. Though many of the firms had a strong organisational culture which will fit all nationalities, but still each sub units had to evolve its structure to fit different market conditions and cultural values according to the nation in which it is present and this was possible through decentralisation for example Apple computers have a strong culture where its top management comprises of people from different nationalities but still each of its sub units are independent in certain aspects and has a distinct identity from the other. Thus increasing complexities in the firms resulted in these corporations developing much looser multidivisional form of organisations. Thus large companies with diversified business started moving from a centralised bureaucratic form to decentralised form, where responsibilities where pushed down to lower level business units and profit centres headed by general managers who had the authority to control and make decisions.
Thus decentralisation simply means spreading the power from the centre to lower level branches of the organisation. There are a number of reasons why firms started making changes in the organisation structure in recent years, partly due to increased diversity and partly to reduce cost and these two have raised due to increased competitive pressure which all firms these days are facing. Even now some simpler businesses are managed in much centralised ways. The more diversified and complex the business becomes there is a increased pressure for decentralisation. For example Barclaycard and Pilkington tended to manage their operations in much centralised ways until the 1980's later when their business started to diversify during the 1980's they began to replace the bureaucratic form by decentralised form of organisation. Through diversified business and cost reduction were the main reasons for decentralisation, there is a fascination towards decentralisation in the past decade due to various other reasons which are discussed below.
Earlier organisation structure was designed in such a way that they were able to extract the best from the employees which will increase the productivity, but now the focus had changed and they started to relate organisation structure to personnel attitudes and behaviour and consider that these are shaped by the same. This structural approach to HRM is a contrast to the psychological approach in HRM which considers that only internal and individual factors determine the human behaviour in an organisation. In bureaucratic forms of organisation the objectives were to increase efficiency, predictability and control, where there were routine repetitive tasks performed by a number of people as per the directions from the top management. There was very less delegation and the senior mangers spent most of the time is decision making where as the junior level staffs were feeling powerless and de-motivated. Decentralisation of power and authority has overcome this, here the lower level decisions were made easily and the lower level problems were solved immediately, lower level managers had the opportunity to improve their decision making skills and prepare themselves for higher positions in the organisation, the workload was spread through out the organisation where the senior managers got more time for strategic planning. Thus there was no control and the term control was replaced by trust. To say someone is trustworthy, it means that they are relatively predictable in what they do and this expectation is trust. Thus by replacing control by trust the employers considered that it will motivate the employees a lot since added responsibilities increase job satisfaction in turn considered that the productivity will also increase. Thus as Powell (1990) argues that the employer's interest in trust than control has resulted in unstitching of bureaucratic forms of organisation and Sydow (1998:31) comments that "……. in the world of increasing uncertainty and complexity, flat hierarchies, more participative management styles and increasing professionalism, trust is thought to be a more appropriate mechanism for controlling organisational life….."
The second important reason for the fascination towards decentralisation is to attain flexibility. Historically the strategic success criteria of a firm depended upon consistency, regularity and stability but in recent years the strategic success of the companies depends upon flexibility, creativity and responsiveness. In recent years there is a need for faster response to market conditions, technological change and global competition in the prevailing knowledge based economies. Earlier organisations were in closed systems where what ever an organisation intends to do will take place without much of interruptions or disturbances from the external events. But these days' organisations are deeply influenced by their environment. They are now in a complex open system where their intended actions are disrupted by external events and the internal culture and politics. Firms these days had a need to respond to changes that are even unexpected. Therefore flexibility was not just about a firm's capacity to respond to intentional changes but also continuously respond to unexpected consequences which might arise due to the predicted changes. These firms required employees who are versatile and had the capacity to switch between assignments. They started recruiting personnel who are flexible for example they recruit a person who is A class in his field and who can also be a B or C class player in other fields (Homa Bharami 1992) because this has an huge impact on the firms flexibility. In addition to this, in recent years the product life cycles has fallen down and there is a need to introduce new products in the market for quick succession. Early success is no guarantee for long time survival (Homa Bharami 1992). Moreover as Shakle an economist terms is there is a 'Kaleidoscopic' change these days, which means where a small change has a capability of altering the entire context dramatically. Earlier there were series of levers in the economy and organisation which was predictable and the response of a particular change was always known. For example if you cut down on staff numbers the profitability will go up or if you increase the interest rates the value of currency will rise. But these days there is a lot of actions whose cause and effect are totally unexpected. These are due to the technological breakthrough, sudden shift in the market conditions which has raised the need for managing the kaleidoscopic change in day to day life of the business and has become the essential thing for survival in the market. Therefore such tensions which are faced by almost all the firms these days and especially the high technology initiated the need for flexibility in the organisation structure, where they ended up creating more agile organisations which could respond to these types of changes and unexpected circumstances in a much quicker manner.
The third comes the need for reduction of hierarchy in the firms. The term hierarchy refers to the traditional structural arrangement of people in an organisation which had various forms which were highly mechanistic in nature. These hierarchy levels in an organisation started to increase when there was acquisitions, mergers and takeovers started happening in the market. This triggered the need for reducing the barriers between the top management and the departments down. This was due to the need to reduce the time lag between strategic decision making and implementation in changing market conditions. Earlier the organisations operating environment was so stable that the managers had time to understand the scenario and develop strategies which will be relevant even when it is implemented. But if the same system is followed even today, the environment is changing so fast that the managers have no time to analyse what is happening and then come up with strategies and moreover by the time the strategies are into place passing through all the hierarchies in the organisations the scenario will be changed and the strategies that are to be implemented becomes irrelevant for the situation. This had an impact on how information and communication and decisions can be taken in much faster way. This administrative impact led to the need for decentralisation. This reduced the hierarchies in the firms by the usage of electronic mail, shared data base, voice mail to transmit information more quickly which reduced the need for middle management who's role was basically to supervise and collect, analyse and transmit information. Thus traditional hierarchy system was reduced and much decentralised approach is been introduced to match the needs. Instead of this traditional hierarchy system team based approach is prevailing these days where these teams are self managed and decisions were made by the teams for quick response. The key advantages of this are that these teams can be formed, reformed and dissolved as per the requirements. Therefore there is a shift from the bureaucratic employer employee relationship to peer to peer relationship in the organisation. For example Apple computers the top management and the employees had peer to peer relationship with one another and centre though they have various units which are carrying in size, scope and style. Members of different units actively participate in worldwide meetings held twice a year where they form a team to discuss the challenges collectively, form strategy and implement them in their respective units.
In order to reduce cost, increase flexibility and to reduce hierarchies in the organisations many forms of inter organisational relationships started to emerge. Various forms of inter organisational relationships were subcontracting, outsourcing, strategic alliances, unilateral arrangements etc. these inter organisational relationship is where two or more firms share resources and risks to pursue a common goal. Among these forms outsourcing and subcontracting was a very common form of decentralisation done by most of the organisations with a aim to be very cost effective during the last decade and the recent WERS study demonstrates that subcontracting remains a significant feature of the UK industry (Robert Mackenzie 2000). These were also termed as unilateral agreements between two firms. This is where a company delegates some of its in house operations/ process to a third party or where one firm agrees to provide another with service on a agreed process in exchange for money. The only major difference between subcontracting and outsourcing was that in contracting the ownership and control of the process that is delegated is with the parent company, whereas in outsourcing when a company delegates one or more of its operations to the third party, from then on the third party will have the full control over that operation or process. For example a company may outsource its information technology management to a third party because it is cheaper that having a in house IT management team. Similarly various other activities like customer care, telemarketing, finance and accounting etc are outsourced. Outsourcing and subcontracting was mostly done to reduce cost and represent a significant development in organisations flexibility and performance by reallocating the firms activities to these contractors and also to reduce vertically bureaucratic structures in the organisation. These led to many firms to deregulate their employment which was a key feature in the 1990's. that is many firms started to outsource and subcontract their HR partly (routine activities) or completely to an external third party. This was to bridge the gap between the inflexible internal labour market and flexible external labour market. The rate of outsourcing HR activities peaked in 1990's which led to increased number of employment agencies and temporary work agencies in the market. Decentralising the HR responsibilities from a corporate central department to business unit level department had a lot of advantages like, this allowed the managers to concentrate on the core business activities, this would also raise their competitive advantage because these service providers had the expertise in the area of service provided, they could cover the fluctuating demand for labour and thereby increase productivity and flexibility. Using of temporary subcontractors also reduced direct cost over a period of time because reduced headcount under rolls saves recruitment and training cost, absenteeism cost and also avoided a lot of IR problems. Thus the firms saw a shift of burden of risk and uncertainty associated with the business to someone else through decentralisation. But this gave rise to various questions like what functions should be outsourced? What kind of effect will outsourcing have on the internal functions? And what are the expected pitfalls of subcontracting and outsourcing? Though there were perceived advantages about sub contracting and outsourcing there are many researchers who have given significant contributions about the pitfalls of the same which was faced by many companies during the late 1990's which are discussed below.
There were significant levels of skill loss in these companies, quality of production and service has fallen, the agencies were not able to keep up their promises. For example BT restructured its employment through sub contracting during the 1990's with contractors who guaranteed regulation of supply of sufficient quality of skilled labour for a long term period. The major problems that the firm faced during this contract was lack of regulation in labour supply and skill reproduction (Robert Makenzie 2000). Another example is the case of Telebureaux (Purcell et all 2004) where the agency claimed that it would reduce recruitment overheads by supplying labour who are trained but they failed to supply the required labour overtime and the training provided was also inadequate and made it hard for the team leaders to meet the service standards, and this also led to serious consequences of them loosing important contract with their clients as it was a customer service provider. Thus these inter organisational relationships with regard to decentralising the HR functions had various pitfalls. There are cases of some companies who have been able to overcome this by clearly differentiating between the core and the non core activities. The core activities are those which had direct impact on the performance of the business and the non core or the periphery activities are those which had lower impact on the performance of the organisation. Therefore only the non core activities were outsourced which did not affect the quality of the business. For example payroll, compensation, employee relations and benefits were usually outsourced where as activities like staffing and training were kept in house. For example Dell computers CEO Michael Dell defined Dell's core competency as its maximised utilisation of resources through outsourcing but Dell has divided its HR function into 'operational functions' which has been outsourced to India and taken care by Sutherland Global Services and 'management functions' which is kept internally to help the business.
There are various other concerns and critics about decentralisation even when it is within the firm discussed by various authors, like the lower level managers who are making decisions in a decentralised firm are prone to make decisions without understanding the business or the full picture of the company. Though they have better know how about the local operations they might not have proper knowledge about the company and its strategy. There might be a lack of co-ordination among these autonomous lower level managers. The lower level managers might have different objectives which is totally irrelevant to the company's objectives, therefore might fail to make the right decision which are best interest to the organisation. For example managers might compete with each other in having a increased size of department rather than concentrating on increasing the profitability and productivity. Decentralisation can be extremely expensive because the company has to train the lower level managers and has to incur potential cost for poor decisions and has to develop a sophisticated planning and reporting system for this purpose. In highly decentralised firm it becomes difficult to spread innovative ideas because ideas generated in one part of the organisation might not be agreed or accepted in other parts of the organisation. Thus these ideas will not be accepted and adopted until there is a centralised direction. Therefore decentralised activities are to be co-ordinated properly through centralised direction.
Thus to overcome the concerns with high decentralisation the firms had to strike a balance between centralisation and decentralisation. Where on one hand the firm remains loose decentralised in order to attain flexibility, innovation and motivation of the employees. Whereas on the other hand centralised direction was needed to maintain these interdependencies and have a control over the strategic vision. Thus firms develop a strong leadership which did not imply that leaders impose decisions from the top, but there was enough room for initiatives and great deal of autonomy, the firms were basically doing whatever that could get the job done from the employees. Thus these firms were critically showing the strategic direction from the top and were decentralised in the front line that were flexible. This was also possible through formation of temporary teams and multifunctional groups whose members were drawn from various operating units to deal with the new imperatives as they arise but still these were well defined on basis of strategy and culture. Therefore this enabled the formal bedrock structure (ie) the top management which underwent transformation only very rarely, it remained relatively inflexible. Thus the dual system of centralisation and decentralisation strikes the balance between stability on one hand and flexibility on the other hand. In most of the companies this tension between centralisation and decentralisation is prevailing. For example the TSB group over the last decade had gone through successive phrases of centralisation and decentralisation. Another case with ROLM Corporation, a pioneering telecommunication player had various phrases where its bedrock structures were altered, it happened only when there was major metamorphic events happened like after 1981 when they had created hybrid structure, only in 1984 they again reorganised the bedrock structure when IBM acquired them. In between there were a wide range of activities like product development, strategic assessment etc done by a wide range of temporary teams who were formed as and when the changes in the market initiated. Thus they created a relative stable environment where they were able to flexibly deploy the resources which overcame the widely felt tension of centralisation and decentralisation.
Thus to conclude there is a fascination towards decentralised post bureaucratic forms of organisation in recent years due to various emerging needs in the business due to changing market conditions and global competition which makes it necessary for the firms to be flexible, innovative and responsive. This leading to various inter organisational relationships like sub contracting, outsourcing etc. There were various advantages and disadvantages related to these advancements. To overcome the drawbacks the firms had to introduce structures which could strike a balance between centralisation and decentralisation. Thus there are such new forms of organisations emerging these days which are very different from the classical form of organisations which are termed as the post bureaucratic form of organisation. The exact shape of these organisations is not clear but they will be very friendly, indirect-internalised controls that will exist and the organisation structure will be certainly linked to the strategy of the business. These forms of organisations are possible through improving technology and media which will certainly lead to the emergence of virtual organisations throughout the world. Therefore entering the office, meeting the set priorities, meeting and discussing with the colleagues in person will all be things of past. The place of work is likely to become where you are and communication will take place through laptops and cell phones. Thus through dispersing a company's operations with the help of information technology will enable a firm to increase quality, improve management employee relationships, speed up product development process and engender links between suppliers, producers and customers. Thus these virtual organisations for managers would reduce office overheads and to the employees it will be a life of flexible working. The concerns of the same will be less or no control for the managers on the employees work and for the employees they will not have real social relationship or contact with their colleagues.