The Value of Changing Organisational Design
Delayering: This involves removing middle management levels. It is applied when a business needs to reduce overhead costs and shorten the communication path between the CEO and the frontline staff.
Centralization vs. Decentralization: Management must decide where decision-making authority lies. Centralization is chosen for consistency and economies of scale, while Decentralization is used to increase employee motivation and local market responsiveness.
Matrix Structures: This method overlays a project-based structure onto a functional one. It is used when a business needs to coordinate complex projects across different departments, such as R&D, Marketing, and Finance simultaneously.
| Feature | Tall Structure | Flat Structure |
|---|---|---|
| Span of Control | Narrow (few subordinates per manager) | Wide (many subordinates per manager) |
| Chain of Command | Long (many levels) | Short (few levels) |
| Decision Making | Often Centralized | Often Decentralized |
| Communication | Slower, potential for distortion | Faster, more direct |
| Cost | Higher management salary costs | Lower management overhead |
Contextual Analysis: When evaluating a change in design, always consider the business's specific context, such as its size, the stability of its environment, and the skills of its workforce.
The 'Double-Edged Sword' of Delayering: Always mention that while delayering cuts costs, it can lead to a loss of experienced middle managers and increased stress for those remaining with wider spans of control.
Verify Logic: If a question asks about improving innovation, look for decentralized or matrix structures as the answer, as these promote cross-functional collaboration and autonomy.
Common Mistake: Do not assume a flat structure is always 'better'. In highly regulated or high-risk industries, the control and oversight of a tall, centralized structure may be essential for safety and compliance.
Ignoring Culture: A common pitfall is changing the formal structure without addressing the informal culture; employees used to being told what to do may struggle in a newly decentralized, empowered environment.
Over-widening Spans: Managers often underestimate the difficulty of managing a wide span of control. If a span becomes too wide, the manager may become a bottleneck, delaying decisions and reducing team performance.
Temporary Productivity Dips: Redesigning an organization is disruptive. Students often forget to mention that productivity usually drops in the short term as people adjust to new roles and reporting lines.