Factors for Developing an Organisational Structure

6125 words (25 pages) Essay in Organisations

18/05/20 Organisations Reference this

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1.1 An organisational structure is a diagram displaying the hierarchical arrangement of lines of authority, roles and duties within an organisation and how they relate to one another. A structure is dependent upon the objectives and strategy of which the organisation is focussed on.

There are three main legal types of organisations:

  • Sole Trader
  • Partnership
  • Company

A Sole Trader is one person who is the exclusive owner of a business without limited liability, and is therefore responsible for any debts incurred. They will also keep all profits made after tax has been deducted. A Partnership is an arrangement between two or more parties for the operation of a business and how profits will be shared. This can either be in the form of a General Partnership where partners have an equal share in both liabilities and profits, or a Limited Partnership where one party is not involved in the day to day operations and is an investor only. A Company exists separate in law than its owners and is a legal body in its own right. The Company is operated by a Director, but shareholders are the owners.

A business will opt for an organisation structure which is best suited to them and the way they would like to be working, and the chart they create will reflect this.

A flat organisation is one that has eliminated most or all of middle management, therefore putting top line management in direct contact with frontline staff and customers. This structure is much more likely to be used by small companies or those who have recently started up, as it wouldn’t work as well for a business with many employees and service areas. The benefits of this particular way of working are that decisions affecting the business can be made quickly, as there aren’t several layers of hierarchy to work through. This increased and more effective communication will produce a higher job satisfaction for employees, as they can be more involved in the decision making process and be given more responsibility. This will also produce a faster response time to change in working conditions and customer preferences to increase overall satisfaction with the company. An increase in job satisfaction will reduce staff turnover, retaining the skilled and experienced members of staff. By eliminating the need for more layers of management, the structure could also save a business the costs relating to this and will see profits increase. A potential disadvantage of this structure is that the top line management rely on the knowledge and expertise of the frontline staff for the important decisions. If a member of staff is not trained or skilled enough in their area, they may make poor recommendations which affect the business poorly. The structure lacks in close supervision, which could lead to staff members being less productive possibly deliberately or simply because they need more help and support. Another negative is that a flat structure is restrictive in terms of promotional opportunities for staff, and they may feel like they want to find work elsewhere if there are no advancement routes.

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For larger organisations, the hierarchical structure is most commonly used and means that there will be a clear supervisor for a group of employees. This could be broken down based on factors such as staff location and job role. This structure provides a clear line of authority and there is no confusion about boundaries set between departments. Supervisors within the structure have a specific management level, and can therefore allocate resources and give commands to fit this. This also enables a clear line of communication, where employees know that they have an allocated manager to report to, who is then the spokesperson for top line management. Staff are managed more closely which can increase productivity and ensures they have a strong support system they can use should they need it. The team groupings by job category ensure that the business is using their resources in the most efficient way possible for cost saving, and allows staff a strong support network for those who are doing a similar role to them or working on a combined project. However, although this helps create a stronger connection between those within each team, it could mean that other departments become isolated from each other and do not communicate as effectively as they should. This could lead to departments developing their own agendas and not working towards the company’s overall aims and objectives as they should. Another disadvantage is that because the hierarchy is extended, the decision making process and actions are slowed down, due to communication travelling up and then back down the chain of command. This will impact customers as well and could reduce their satisfaction based on the experiences they have with the company.

Within a matrix organisational structure, a traditional hierarchy is not used and is instead displayed as a grid to show reporting relationships. Staff with the required skills could be grouped by which project they are working on, and will therefore have more than one manager to report to. For instance, they will still have the same supervisor for their team area, but will also have a project manager to work with around that particular piece of work. This means that some of the management for an individual staff member will be fluid and will change based on which projects are being worked on at that time. This style provides a company with an efficient use of staff skill and resources, and gives minimal organisation disruption when the project ends and the staff return to their teams fully. It will also help to improve interdepartmental communication and staff will build stronger relationships with those who are in other teams. Staff will be given the opportunity to strengthen their existing skills and learn different areas by working on certain projects, which will continue to enhance the organisation as a whole and provide customers with a better service. However, this structure can become complicated due to the nature of the dual management style. An employee might be unsure who they should report to if both managers are giving conflicting opinions, and could cause division amongst managers and staff. Miscommunication can then lead to dissatisfaction in the workplace and ineffective management. This organisation style can be costly to maintain because of the dual management, and can also slow down actions required by management because of the need for staff to seek a decision from more than one person in authority.

There are six basic elements of an organisational structure:

  • Specialisation
  • Departmentalisation
  • Chain of Command
  • Span of control
  • Centralisation and Decentralisation
  • Formalisation

Work specialisation gives employees specific duties and roles they are expected to perform within the company, factoring in their qualifications and skills. Having descriptions of duties for staff members helps the organisation to fully meet the workforce needs and to ensure there are no unnecessary duplications within roles.

Departmentalisation refers to how the organisation breaks down the functions and teams needed to run the company and carry out the essential tasks. Departments are usually made up of staff members who perform similar tasks in the same work area, but could also be grouped by project, location, or however the organisation sees fit to ensure increased productivity.

The main purpose of an organisational chart is to illustrate chain of command, and ensures that each employee has a clear directive of who they should be reporting to within the company. The manager responsible for a particular employee will assign them tasks, provide deadlines and motivation, and communicate important messages. If their staff member has an issue, the manager can take this higher up the chain of command for more support if necessary and to provide a resolution. A clear chain of command ensures messages are being communicated effectively between the relevant staff members.

The span of control is how many employees each manager is given to oversee, and limits to their capacity is set by the organisation. It ensures the efficiency of a company isn’t compromised, as a manager will become less effective at their job if they have too many staff members to supervise and the amount of time they spend focussing on each person will significantly reduce. Managers who are positioned higher up in the chain of command will typically oversee less staff members, as they will be directly responsible for middle managers and supervisors.

Centralisation within a business means that middle management does not have a significant input to company decisions, and these are left to top level management only. This is typical of a larger organisation. Decentralisation allows all level of management to share their input on the goals and visions of the wider company, which will then help to improve their individual teams.

Organisational structures implement a degree of formalisation, and determines the procedures and rules of a company, as determined by management. A smaller organisation might have less formal standards because staff undertake multiples roles and duties, but a larger organisation would need to set more defined elements to enable clarity for staff.

The type of organisation structure, whether formal or informal, is based on the needs and usually the size of the company. A formal organisation has clearly defined roles and responsibilities for staff, and accountability is fixed within the structure. An informal structure has less set guidelines and restrictions, and is reliant upon the interactions that staff members have with each other. A formal structure has been deliberately created by top line management, but an informal structure would be spontaneous created by staff. This could lead to chaos and confusion if the team grows in numbers, as there may not be a clearly defined hierarchy or procedures to follow to ensure the company keeps working effectively. An informal structure does however allow for flexibility within the organisation, as there aren’t rules in place which could slow down operations.

1.2 The Competing Values Framework (Quinn and Rohrbaugh 1983) is a theory which was developed from research conducted on the major indicators of effective organisations, which introduces the four types of organisational culture as Clan, Adhocracy, Market and Hierarchy.

Those organisations which adopt a Clan culture are the most collaborative and least competitive of the models, and promote an environment similar to a large supportive family network. There is a strong emphasis on mentoring and supportive colleagues, who are bonded together by shared goals and values. Employees operating under this style are more likely to feel like they are able to express their opinions freely and comfortably to their peers. Feedback is welcomed and encouraged to ensure everyone has a voice to improve the working environment. This type of company will also communicate more often, and will feel supportive to staff at all levels of the structure. When a business focusses its attention to the people who make up the company, there will be an increase in employee positivity and wellbeing. This particular culture could lead to over-collaboration where employees might struggle to independently come up with ideas and suggestions, if they have been relying on others for a long period of time. Whilst it is important for senior management to build a rapport with staff and be approachable, this type of culture may make it difficult to set boundaries within the team and be authoritative when required. Employees might also feel like they cannot single themselves out and challenge a wrongly held group assumption, therefore never expressing how they truly feel. Another disadvantage of this culture is that a relaxed office environment could lead to less productivity and inappropriate behaviour if staff feel they can get away with it.

An Adhocracy culture shows a strong ability to adapt quickly to a change in conditions. Employees who work this way are flexible, reactive, welcoming to change and are encouraged to take risks. Working groups are formed based on project need, and dissolved again depending on the kind of expertise and demand required at the time. This is an optimal use of knowledge, skills and resources available to an organisation, which will therefore run more efficiently as a result. The overall feeling of an organisation operating in this way would be co-responsibility and mutual understanding across the departments. Within individual staff members, creativity and open-mindedness is promoted and are strong skills to have when moving the company forward towards a new vision. Unlike a hierarchy, there is no clearly defined leadership, which could lead to a chaotic environment where roles and responsibilities are somewhat neglected and important tasks could be left incomplete. It could also mean that solving routine problems could be more difficult than it needs to be because there is a lack of formalised procedures, leading to inconsistency across staff members. Working in this way could lead to difficulties in planning and allocating resources to where they need to be and keeping to project deadlines.

A Market culture has an emphasis on competitiveness against other organisations and also between employees, who are encouraged to set difficult goals to complete. The performance of staff is closely monitored, which leads to direct punishment or reward depending on the outcome. Under this culture, it is thought that because the focus is on individual performance, it will lead to greater achievement both for them and for the organisation. An advantage to this is that if employees are motivated to achieve bigger results, they are more likely to generate more income. The nature of this culture also means a strong dedication to market research, therefore being aware of trends and staying ahead of the competitors. The Market culture encourages employees to be incredibly results-driven with a hard working attitude, otherwise their results and achievements will slip. They will be keen to build upon their current skills and learn more knowledge to be the best they can. However, the constant emphasis on good results can lead to presenteeism and staff suffering poor health when under prolonged periods of stress. The working environment might be a very poor atmosphere and a feeling that staff are only looking out for themselves, which can harm team morale and relationships, therefore making partnership working difficult in the future.

A Hierarchy culture is a model which has clearly defined levels within the structure and procedures are in place to determine workplace activities. There are levels of management within this to monitor staff and ensure operations are running efficiently. The line of authority is obvious to staff, therefore they know who they need to liaise with if they have an issue or a query. Departments containing similar staff members working towards shared goals are likely to see strong bonds form, increasing efficiency as a team. Another advantage is that employees who are working within one particular area and solely focussing on their own work, will become experts in that field which is highly valuable to an organisation. Unfortunately this culture is inflexible and is not always understanding towards the personal lives of its employees, potentially leading to demotivation or even causing a high turnover of staff. The company may also face higher output costs because of the use of middle management within the structure.

1.3 Charles Handy, a leading authority on organisational culture, popularised a model of culture in 1999 including four major types of classification; power, role, task and person.

Within a power culture, the power and decision making is left to a small number of individuals whose influence then spreads throughout the organisation. The system is that those in power decide and dictate what happens, with those beneath them having no say in the matter. This gives employees a restrictive environment in which they cannot express their opinions and suggest ideas. The power culture does allow for quick decision making, even though these may not be in the best interests of the organisation as a whole.

Organisations who adopt a role culture are based on highly controlled rules, thus everyone in the organisation understands what their specific roles and responsibilities are. It is most likely to be built on hierarchical organisational structures with a long chain of command. The power within this culture is actually determined by the job role held by an individual within the company structure. Unlike the power culture, decision making could actually be a very slow process as the correct procedures must be followed and there are different levels of management to consult with.

When organisations assemble teams to focus on specific projects, a task culture is formed. Individual staff members will be brought together based on their knowledge and skills to work jointly to produce an overall outcome. The power within the team will shift at different points, depending on what stage the project is at. There is a risk that team members may develop their own objectives, especially with the absence of management in the task force.

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Within a person culture, individual staff members see themselves as unique and possibly even superior to the organisation, making unusual as it is not commonly found. The idea is that the company exists only to serve the individuals working within it, and that the staff are more important than anything else. A specialist within an organisation might hold the power and could be difficult to manage if they believe no one is in a position to exert power over them, and of course alternative would be easy to obtain. The organisation would ultimately suffer as the individual would never truly support the objectives.

Professor Geert Hofstede conducted one of the most comprehensive studies of how values in the workplace are influenced by culture, with the results being published towards the end of the 1970’s after a decade of research. The Hofstede model consists of six dimensions; power distance index, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance, long term orientation versus short term normative orientation, and indulgence versus restraint.

The power distance index (PDI) is a measure of the power and distribution of wealth between individuals in a business, and provides evidence to illustrate the extent of which individuals are willing to follow an authoritative figure. The findings were that the PDI is actually lower in societies where authority figures are working closely with their subordinates, and is higher where there is a strong hierarchy of management in place.

Hofstede also examined individualism versus collectivism. An organisation that adopts individualistic values recognises employees for their particular skills and efforts, and not on the group as a whole. The culture in the workplace promotes creativity and innovation, and leads to employees feeling proud of their personal achievements which contributed to the improvement of a company, as they know they will be appreciated. Alternatively, collectivism is the opposite approach where it is teams who are treated as one entity, and the achievements of individuals are not rewarded. The employees share equal rights and responsibilities, as well as make collective decisions to benefit the wider organisation.

The masculinity versus femininity dimension looks at the extent to which roles in society are determined by a masculine or feminine culture. The masculine side of the dimensions represents traits which include strength, dominance, assertiveness, and egotism. The feminine side includes traits such as being supportive, caring, and being relationship oriented. This was used to show which values are considered more important within a society, where if a business it to run effectively, there should be a good balance of all traits and perhaps similar minded people working together within a team.

The uncertainty avoidance dimension demonstrates the degree to which a society feels uncomfortable when confronted with uncertainty. An organisation operating this culture would try to minimise the possibility of such situations by putting policies and procedures in place with formal guidelines. A low uncertainty avoidance index would produce a more relaxed attitude and possibly a more informal structure.

The long term orientation versus short term normative orientation dimension takes into account the way a society maintains its links with the past, whilst also dealing with the challenges and changes in the present moment and in the future. Those who scored low on this particular category viewed societal change with suspicion and were more unwilling to adopt different practices. However, those who scored highly are future oriented and prepare positively for the future.

The indulgence versus restraint dimension is relatively new to the model, and is defined as the extent to which people control their desires and impulses. Within business, a person who shows high indulgence would be optimistic and focus on personal happiness. They would place an emphasis on flexible working and a strong work-life balance, and encourage others to share their ideas in meetings and group decision making. An individual with high restraint would be very much the opposite; a pessimistic attitude and would also display more rigid behaviour.

1.4. An organisational culture is something that naturally occurs, but can be guided by strongly held and a widely shared set of beliefs that are supported by the strategy and structure of the workplace. One of the most significant factors which affects the way an organisation feels is leadership style and the way they choose to run the company, whilst also ensuring the objectives they set can be met. They must think about the rules they put in place, processes employees are expected to follow and the way they act around them, being mindful that everything they do has a massive impact on the culture overall. The size and stage of the company also plays a part in this, and will feel different whether they are a start-up or well established with several sites etc. Leadership also need to think about using a more human approach so that their staff actually feel cared for and respected. The rest of the team also play a large role in this; considering the substantial amount of time they spend together in the workplace, as the way they interact and behave around each other can change the atmosphere of the office. It is important that colleagues get to know each other on a more personal level so that they can fully appreciate each other’s strengths, beliefs and areas for improvement. This can be difficult however if there is frequent remote working. Another factor is the work the employees do and how fulfilled they feel within their roles. For instance, offering additional training and other opportunities to improve skills will make the team feel valued and more content. Offering work bonuses and team rewards can also help to change the way individuals carry out their tasks. The work environment can also impact the culture of the workplace, and it is important that the setting is as suitable for purpose as possible. This could include adding secluded desk space in an open office for example, and providing enough meeting spaces for collaborative working. The customers who the business is targeted towards also help to define it, as a company will want to shift to adopt some of the traits to appear more appealing.

1.5 Individual staff members bring varying levels of ability, knowledge, education and personal beliefs to the team which helps to shape the culture of the working environment. Those who have stronger abilities around a specific task would behave more confidently than others. Within a team, there will also be varying attitudes which creates differences in behaviours and the way individuals respond in a specific scenario. Religion and beliefs also create differences among the employees. In larger organisations there may be employees from several religious backgrounds, which will impact on their behaviours and attitudes. The personality of individuals within the organisation affects the culture and feel of the workplace, and it might be that some staff members find it harder to get along with others or struggle to adapt to change in the organisation. The perception and opinions about the same matter differs from individual to individual, and it is important that teams do work well together in being able to bring forward everyone’s point of view and using each skillset at the best time.

2.1 & 2.2 Businesses can adopt an approach which focusses on their ethical behaviour, and makes them mindful of their social responsibility towards other organisations as well as individuals. Corporate social responsibility is a practice which allows an organisation to assess the ethical impact they have on society, and the policies they can put in place to support individuals, the wider community and the environment. It is something that can be attributed to many areas of business such as waste reduction, using fair trade supplies, improving working conditions, contributing to educational programmes, and allowing employees to volunteer in the community to strengthen relations. All stakeholders will feel a positive impact from a more ethical approach; customers will appreciate the fair and open business practices and it will help to build trust amongst them. Suppliers will also benefit, as the organisation will be looking at the level of labour involved as well as the health and safety for the workers, and ensuring no one involved is being taken advantage of. It is important for a business to focus on the community they are working within and the role they can play in helping to create positive change. This could be sponsoring local events or offering an opportunity for employees to volunteer their time. Employees will also feel more looked after and cared about, as a business focussing on social responsibility is going to support them further than simply what is needed to comply with law.

Business ethics are the guidelines a company has in place to follow when interacting with internal and external sources, with the purpose being to impact the way in which they do business. It also means that all professionals will be held to the same standard, as it’s something the organisation’s core values and principles are based on. It is beneficial to ensure that everyone involved are treated with respect, and to create a working environment that’s as positive as possible. By having a code of ethics, a business is presenting themselves as having a unified attitude and would be seen as behaving with integrity.

Businesses adopting a code of ethics will create a stronger environment of trust and integrity within the workplace. It is helpful when all employees, including management, are following the same rules and behaving in a certain way because it means most conflicts will be removed from the workplace, therefore allowing productivity to increase. With this kind of work environment, individual employees will feel more able to share their opinions and contribute fully to the wider team. Employees will also feel less confused, as they will be following clear practices and confidence will grow as a result. Employees will be of a more caring nature and will promote constructive social change because of the positive way they behave at  work, which will continue to benefit the community they are part of. If all employees are treated with a high level of respect, potential employees will feel it is an attractive workplace and confident they won’t face discrimination, intimidation, bullying, or harassment. This means when a job is advertised at the company, there will be many applicants to select from, so the new chosen employee will be of a high standard. The reputation of a company is important to customers, and it will be more appealing if they feel one is trustworthy with a strong code of ethics. This will also enhance the relationship with external partners and suppliers, as they will be more comfortable working with a business with a great reputation because it reduces the risk that something might go wrong.

A code of ethics can first be developed with management thinking about the personal values they hold, and the way in which they treat others and like to be treated themselves. It could be useful for a group of employees to also do this, whilst considering what the company values are. They could think about problems which have occurred in the past, and the way in which they were dealt with to evaluate how they’d like to treat people. It is also important to determine the areas that the code needs to include to be most useful and relevant to that particular organisation. It would be helpful to view examples of codes of practice from a few other companies, particularly similar ones, to get an idea of the content and language used. The code can then be written based on the collective ideas, which also needs to include any penalties for violations. Employees can then sign to confirm they agree to it and this can be made available as part of the employment contact. The code should be reviewed at regular intervals to ensure it is still relevant and is being the most beneficial that it can be.

2.3 & 2.4. A code of ethics is not able to prevent unethical behaviour by employees, but it will impact the decisions they make. They will be aware that if they take a particular course of action when carrying out their work, it will lead to a violation which carries a punishment. It is then up to them to decide whether they still want to proceed or not. In many situations, it would be unlikely that an employee would risk being reprimanded, so having a code of ethics in place acts as a deterrent. Based on this, it can positively influence behaviour and make the employee behave in a way which is compliant to the rules of the company. Following ethics means that everyone within the company knows what they should be doing within their roles for the work they are carrying out, and the processes they must follow at all levels of the business.

In terms of the impact ethical codes have on professional practice, employees who are ethical are trustworthy, respectful and take responsibility for their actions in their working practice. A company could assess the ethics of potential new staff members by asking behavioural based questions in the interview, which would give interviewers more of an idea of their character. Not only will professional practice benefit from having a set of ethics in place, but employees will act as ambassadors for the company outside of work and in the local area. They will also keep confidential information private and will protect the company as much as possible. A team of staff who have a strong code of ethics will help to build a stronger, more productive team, and the workplace will be happier overall.

Ethical codes can only be effective if they are visible enough within the company for employees to have them mind in their day to day work. Training should also be provided to ensure everybody knows the procedures they must follow, and to also help with understanding the seriousness of ethics to help them become engrained in the culture of the business. To give ethical codes meaning, a company must be willing to enforce it and therefore reprimand staff who breach it.

2.5 Business activity has a significant impact on the natural environment through various factors. It is important for employers to minimise the impact as best as they can, and become more eco-friendly with the way they use energy, bring in products and remove waste. A lot of business buildings are not designed with energy efficiency in mind, particularly if they are older, and can therefore contribute to greenhouse gas emissions through their heating and cooling system. This also uses up large amounts of electricity, as well as lights and electronic equipment being left on most of the day. Many buildings are not made from renewable sources which also negatively impacts the environment, and is not a sustainable way of working. Even though recycling is encouraged and the use of paper has declined, many offices will still produce a substantial amount of waste. This can also be related to IT equipment, as companies will want to upgrade as often as possible to have the best technology available. If these are left in landfill, they might even release harmful chemicals into the ground. Rush hour traffic around the beginning and end of a typical working day cause congestion on roads and contributes to air pollution.

Businesses can positively impact the way in which a society operates. Internally, the skills of employees can be increased and maintained through training programmes, and the local community will have the opportunity to apply for jobs to improve their livelihood. The social impact would also include diversity when hiring new employees, the working environment, important staff benefits, wages, breaks and safety when carrying out the work.

Using different suppliers and working with external suppliers is also supporting others in employment, therefore helping poverty reduction, empowerment and improving health and wellbeing. A sustainable business would not only treat its employees responsibly, but would engage with suppliers who share similar views. Therefore they would want anyone within the supply chain to have good working conditions and ensure that wages are fair.

Business activity also impacts stakeholders and the investment they have within the company. If the business is performing well and having a positive presence, stakeholders will be much more satisfied. However if that’s not the case, stakeholders might want to change business practices or withdraw their involvement with the company if the situation doesn’t improve.

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