Management and Hierarchal Structure (7.2)

Chapter 7 - Organization and Management

Learning Objectives: To understand how businesses are organized

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Now that we know that there are three main types of leadership (democratic, autocratic, and leissez-faire) as well as understand the different functions of management (planning, organizing, commanding, coordinating, and controlling) we should focus on the roles, responsibilities, and inter-relationships between management positions:

There are 3 main levels of management position:

1. Directors: responsible for long-term business plans (strategy) and the allocation of resources towards meeting objectives;

• They are also the ones who review the performance of managers and provide leadership towards objectives;

• Their duty is to protect the interests of shareholders and other stakeholders.

A CEO is a director and is responsible for the roll out of decisions through the organization.

2. Managers: responsible for the day-to-day running of departments. They:

• Delegate tasks to other department members;

• Make decisions to reach department objectives;

• Motivate workers;

• Deal with daily challenges within departments.

3. Supervisors: lower level managers responsible for delegating and checking the quality of work from other workers that are not part of the management.

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3 Paragraphs Essay: What is the role/importance of Directors, Managers, and Supervisors?

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It is clear now that organizations have what's called organizational structures - in other words, how functional departments are organized within a business so that workers' responsibilities are clear and the business more efficient.

The most common organizational structure we have is called hierarchical structure.

Let's look at some of its characteristics:

1. Hierarchy are the different levels of the structure - people within the same level have the same status and there are usually more people at the bottom;

2. Chain of Command: the route which authority is passed down from top to bottom;

• It's about giving orders to people below you on the organizational structure;

• Executives can't be responsible for a large amount of workers and therefore lower managers fill the gap.

3. Span of Control: the number of subordinates a manager is responsible for;

• The span of control is the actual number of subordinates under a certain manager;

• Span of Control can be narrow or wide.

Example:

Which leads us to:

4. Organizational Structure Height (Tall or Flat):

- Tall Organizations have a narrow span of control due to the various levels of managers in between;

- Slow communication and decision-making;

- Long chain of command.

- Flat Organizations have fewer levels of hierarchy and wide span of control;

- The chain of command is short and therefore communication and decision-making is faster.

There are many factors that impact on the decision of the size of the span of control:

• Difficulty of tasks: simple tasks require less supervision (narrow ) whereas complex tasks require more supervision (wide span);

• Workers Experience/Skills: more skilled and experienced workers require less control (wide ) whereas unexperienced ones require more control (narrow span);

• Business Size: larger businesses can afford more middle managers (wide span);

• Levels in the Hierarchy: more levels (narrow span) and less levels (wide span).

  
  

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Some organizations go through a process of delayering:

• Reducing the number of levels in an organization;

• Cutting costs;

• Cut middle-level managers/supervisors;

• Makes decision-making more effective;

• Increases opportunity for delegation (motivation).

On the other hand, delayering disadvantages are:

• Increases the workload for the ones staying;

• It may decrease quality;

• Tasks may take longer to complete;

• It reduces job security (fear of redundancy);

• Creates a wider span of control which can reduce management efficiency.

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Speaking of who makes the decision within an organization a company can either be centralized or decentralized:

• All the important decisions-making is held at the Head Office - top of the organization;

• Quick decision-making;

• Decision-making by an expert with objectives in mind;

• Slower communication making it hard to respond quickly to market changes;

• May reduce workers' motivation.

• Decision-making power is passed down the organization to lower levels - outside of the Head Office;

• Decisions can be better - localized;

• Lower level managers practice decision-making;

• Delegation improves workers' motivation;

• Decisions may be too localized and not on the interest of the whole business;

• No expert decision-maker (lower managers) can lead to bad decisions.

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To-Do-List:

• Exam Practice Question #1 (p. 105)

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Chapter 7 - Organization and Management