Organisation structure and communication

In this section we start to have a look at the ways in which firms organise their
human resources. Who manages whom? For how many people is each manager
responsible? Is the firm split into a number of departments or does it have a
number of project-based teams? We look at all these issues and consider the
effect that different organisational structures have on the performance of the firm.

Formal and informal organisation

When new people join a firm, they are often given an ORGANISATION CHART -
this is a diagram showing the functions and departments of a firm and the people
within them. Organisation charts are normally shaped like a triangle - this is
called a hierarchy as it has a clear top, middle and bottom. This is shown in
figure 1 below.

Figure 1 Organisation chart

The position of employees within this hierarchy indicates their status and
authority. Those at the top are the most important and are paid a larger salary
as they have more responsibility. Each layer of authority is called a level of
authority (or command). In a hierarchy, the vertical chain of command can be
seen. For instance, the accounts clerk reports to the accounts supervisor, who in
turn reports to the accounts manager. Information is communicated up the
hierarchy through the layers and orders are communicated downwards along the
same channels.

This structure can be shown formally on an organisation chart and an example of

an organisation chart is given in figure 2 below.
Figure 2 Organisation chart

Organisation structures do not show the levels of formality or informality in an

organisation. It may be acceptable in some firms to talk more informally and
sometimes by-pass the official channels of communication. There are dangers in
this as vital information may not reach he appropriate decision maker and they
feel marginalised as a result with their authority diminished. In other forms the
structure may be surrounded by rigid rules and procedures and activities are
guided by strict rules and procedures laid down in staff manuals. This type of
organisation is referred to as a bureaucracy. Precedent is important in making
decisions and any situation out of the ordinary will be passed up the hierarchy.
Individuals are given little personal initiative. Great regard is paid to a person's
position in the hierarchy and their official role.

Flat and tall organisational structure

When an organisation has many levels of authority or hierarchy it is called a tall

organisation. When there are few levels it is called a flat organisation. This can
be seen in figure 2 below.

Figure 2 Tall and flat hierarchies

One way of cutting costs is to reduce the numbers of staff. This can be achieved
by removing a layer of authority or management in an organisation. In a school
for instance, this might entail removing heads of faculties and delegating their
responsibilities to heads of departments. This process is referred to as
delayering. This is, of course, just another term for getting rid of people!

Most people in an organisation have some authority over others. For instance a
head of department is in charge of a team. The number of people referring
directly to one manager is called the manager's span of control.

Span of control

The span of control refers to the number of people that each manager controls. A
large span of control means that a manager has a large number of staff under
their direct control, while a small span of control means that each manager looks
after a small group of staff. This is an important topic as it is normally agreed that
the wider the span of control the fewer levels of hierarchy the business needs.
We can see this in figures 3 and 4.

Figure 3 A flat hierarchy - span of control

Figure 4 A tall hierarchy - span of control

A flat hierarchy, as in figure 3, will have a high span of control, whereas a tall
hierarchy, as in figure 4, will have a much lower span of control.

So why do some support wider spans of control?

 Delegation can be a more important part of how the organisation is

managed.
  Those at the top of the hierarchy have less obvious control over
subordinates.
 The distance between layers of management is less and those applying
the decisions feel closer to those who originally made them.
 The need to be writing/communicating information is reduced as those
lower down the hierarchy have the authority to carry out responsibilities.
 Costs can be reduced, as certain management functions are no longer
needed. De-layering can take place.
 The subordinates may be very experienced and require less supervision

However, some argue against this trend pointing to the following as factors that
need to be considered when considering a narrow span of control:

 There is less opportunity for delegation and the ultimate empowerment of

employees.
 Those at the top can keep a tight control over employees.
 A distance can become apparent between those at the top and bottom of
the organisation.
 However, a narrow span might encourage greater communication
between layers of the management structure and clearer lines of
communication.
 Training opportunities and personnel development can be more easily
managed and attached to promotional opportunities

Whichever style is adopted, and probably most organisations develop some form
of combination, the success of a span of control will rest largely on whether the
management has the ability to actually manage the situations that arise, if they
can motivate and direct employees to do of their best on all occasions and
whether the task lends itself to either close or a more relaxed form of supervision.
For example, a small span of control is more likely to be needed in a production
situation where close scrutiny of work is required to maintain quality.
Organisation of human resources
Functional organisation

In many businesses jobs are grouped together into functions. Sometimes these
are the same as the departmental structure of the organisation. So, the firm will
have a marketing department and finance department etc. This style of
organisational structure allows the business to have clearly defined channels of
communication and a recognised hierarchy. Roles and responsibilities are known
and all employees know who is in charge of what. The decision-making can be
focused on a few 'at the top' and is therefore known as centralised.

This 'functional organisation' is a form of organisation adopted by many firms and

it does have a number of advantages:

 Accountability - each department will have managers who are

responsible for the work of that department and will be responsible for the
work of the department - perhaps to the Board of Directors or director
responsible.
 Clarity - functional organisation has the advantage that it is clear to all
employees who is responsible for each area of activity.
 Specialisation - each department can have specialist staff. This will help
raise the level of productivity of the firm.

However, there are disadvantages to this form of organisation as well:

 Bureaucracy / lack of flexibility - this form of organisation can be very

inflexible as departments have to communicate closely with each other
and they may not be willing to take on new roles and responsibilities.
 Communication problems - departments may not communicate well with
each other, particularly if the firm's communication is essentially top-down
in form.
 Inertia - as with lack of flexibility, departments may be resistant to change,
preferring to continue with their existing methods.

Other forms of organisational structure

Other possibilities for the organisation of firms are:

 Organisation by product - large firms will often have an extensive

product range and so they may choose to organise themselves by product
or type of product. Each product may even be organised as a separate
company all owned by the main holding company. Within each product,
the firm may still be organised by function.
  Organisation by area - firms may decide to organise themselves by
region or geographical area. This may help them to be more responsive to
local needs and improve their communication within the region.
 Organisation by customer - where firms have large customers, they may
(as with organisation by product) choose to organise themselves by
customer. They may still have certain elements of functional organisation
(accounts department etc.), but organise themselves as project teams for
each customer.

Line and staff conflict

A 'line and staff' organisation structure is a combination of functionally based

line managers with specialist support staff who have an advisory capacity. An
example of a functional line manager would be the sales manager. Without sales
the firm cannot operate, as products and services would not be sold. A specialist
staff function is human relations management. Individual line managers could
carry out the function of recruitment. However, HRM staff are specialists in
recruitment and the function of recruitment may be delegated completely to them
or their advice may be requested as necessary.

There is frequent conflict between line managers and staff advisors, who may
have different interests. The line manager will be focused on the needs of the
department or function, whereas the staff advisor may have a wider
organisational viewpoint. It is common for the background of these two sets of
personnel to be different. Traditional line managers may have worked their way
up through the organisation and possess considerable experience and detailed
practical knowledge. Staff specialists may be younger and less experienced,
having achieved their position through degrees and other professional academic
qualifications.
Organisational structure - self-test

1 Functional organisation

Which of the following is NOT an advantage of a functional organisation?

a) Accountability
b) Clarity
c) Specialisation
d) Consistency

2 Matrix organization

What characteristic listed below is a major advantage of the matrix system of

organisation?

a) Flexibility
b) Respect
c) Individualism
d) Understanding

3 Delayering

Of the possible advantages of a narrow span of control listed below which one
is likely to lead to greater delayering?

a) Delegation can be better managed

b) Those at the top of the organisation have less obvious control over
subordinates
c) Costs can be reduced as certain management functions are no longer
needed
d) The need for written communication is reduced
4 Centralisation

One of the main advantages of a more 'centralised' system of management is

said to be more control over decision-making. Which of the following is used to
support such a claim?

a) Greater accuracy in decision-making

b) It aids consistency and predictability within the organization
c) The company has a more focused approach to decision-making
d) Employees tend to be more satisfied with their levels of responsibility

5 Effective delegation

There are several factors that need to be in place so that delegation can be
effective. Which of the following needs to be 'active' to promote effective
delegation?

a) Good communications
b) A pleasant working environment
c) Adequate support
d) Access to IT
D,A,C,B,C
 Communication
Communication means the
exchange of information or ideas
between two or more parties. Good
communication is vital for a firm if it
is to be as productive as possible
and ensure the optimum use of the
resources they have.

Communication cycle

Communication can be looked at as

a scientific process. It is made up of parts, or stages, in a closed loop, or cycle.
You have to send a message, know that it is received and understood, and then
you must be supplied with the desired result, an answer or a conformation of
receipt. Any failure in this loop will lead to ineffective communication. So, the
important parts of this communication loop:

 The sender. All communication starts here, with the sender. The sender
must know exactly the message that is to be sent. If this stage is unclear,
the rest of the stages can only get worse.
 The message. This must be in the correct form and language for the
recipient. It is no good if the sender understands it, but the language is too
complicated for the receiver. The message must be designed with the
receiver in mind.
 The recipient. A message has to go somewhere. This is the person or
place where the message is targeted. The sender must be clear where
this is.
 The reaction. Messages are sent for a reason. The recipient has to
respond to the message correctly. The sender needs to know this, so
there must be a response.
 The feedback. The response must be confirmed, the sender must be sent
a reply. This will confirm the receipt of the message, and confirm the
response to it.

This is illustrated in the diagram below.

Look at the process below. This shows all the stages and decisions that a
message may go through. The sender has a lot of thinking and decision making
to do. Do we do it, or do we just send and hope?

We start where there is a need to send a message, so:

When communication is successful we:

  Encourage easier change
 Develop commitment amongst staff (and therefore enhance motivation)
 Enable co-ordination within the organisation to be more effective
(therefore ensuring that the implementation of pans and strategies is more
effective and efficient)

If we are NOT successful then we might note:

 Problems not getting spotted or addressed

 Leadership becoming isolated and following events not shaping them
 The size of the organisation has grown too large to work effectively.

Indeed, good communication is effective communication. Usually, big

organisations do show some signs of inadequate communication (diseconomies
of scale) and to address these they might consider:

 Developing flatter structures of management

 Developing more empowerment amongst workers
 Offering better employee training
 Controlling the volume of communication
 for different cultural and linguistic attitudes
 Making certain that all who need to know are included and know the
objectives aimed for

Whatever improvements are made to communication systems, one needs to be

aware of:

 Firms growing in size via mergers and takeover - this may disrupt existing
channels and methods of communication.
 The problems of global enterprises - the scale of communication required
and the problems will be much more significant than for a national
business.

Types of communication

Communication can be categorised in

various ways. For example, it may be:

 Internal - the exchange of

information within the
organisation.
 External - the exchange of
information with external
individuals and firms - this may
include many or all of the
stakeholders of the firm.
Within each of these types of communication, there may be many methods used.
Internal communication may be either:

 Formal - this may be through email, memos, company reports, team

meetings, company letters, strategy documents, annual meeting and so
on.
 Informal - this may be either verbal or non-verbal. It may be
communicated through social / group gatherings, or perhaps, simply
through the company 'gossip' or the company 'grapevine', lunchtime
discussion.

Communication has also changed with technological developments and so you

will need to think about how these affect business. So, consider for a moment:

 Fax
 Email
 The Internet
 Intranets
 Video conferencing
 Telephone conferencing
 Mobile phones

Each affects business and how and where it is conducted. How effective will
each of these methods be? What are the advantages and disadvantages of each
form of communication? Have a think about the advantages and disadvantages
of technology in communication and then follow the link below to compare your
answer with ours.

Advantages and disadvantages of technology

The communication process

Have a go at the games below to see how well you can classify different types of
communication.

Formal vs. Informal

Written vs. Verbal vs. Visual

Written – memo, email, text message, letter, fax

Verbal – Announcement, presentation, meeting

Visual – poster, signs

Barriers to effective communication
Barriers to effective communication
are important to establish as they will
reduce productivity within the firm
and, if serious, are a likely cause of
diseconomies of scale in a firm.
Barriers to communication are often
referred to as 'noise'. This could be
caused by physical factors, but may
also be the result of attitudes and
cultural misunderstandings. Barriers
can arise in a variety of ways. They
include the problems that:

 The givers of information may use a language or jargon that is not

understood by those receiving the information.
 Too much information may be transmitted in one load and the receivers
cannot cope with the complexity of the volume
 The wrong channel or medium of communication may have been
selected, so reducing its effectiveness
 The corporate culture of an organisation may not promote the sharing of
communication flows
 Cultures, time zones, languages and access to technology might reduce
the impact of a certain from of communication
 Information may be incomplete and so reduce its usefulness
 Good news is OK to pass, but what of bad news?
 Distractions may make understanding difficult.

Information and, therefore, effective communication is important as it:

 Can be a major factor in influencing employee motivation. It improves the

self worth of individuals. Hence the use of quality circles and the move
towards empowerment.
 Can aid understanding and skill development
 Can assist in the development of greater awareness amongst employees -
this is a wider topic than one may think and cultural differences are now
being explained within some Staff Manuals
 Can improve the way individual employees come across to the public.
Indeed, customer facing employees are now given considerable training in
how to communicate as pleasantly and effectively as they can
 Can improve the external image of the company - incoming telephone
calls, answers to emails etc are all received by those who might stop their
contact with us if they are not dealt with in the way they feel is appropriate
Communication difficulties for large organisations

Large organisations are complex and require sophisticated methods and systems
for communication if they are to avoid possible problems. This is a good time just
to re-visit some of our earlier work together. Let's think how large organisations
try to avoid ineffective communications.

They might:

 Use a matrix system of management, which is felt to help breakdown

some of the conventional barriers that exist within an organisation and
reduce communication flows
 Design flatter hierarchies, so reducing the distances between the giver
and receiver of information.
 They might encourage de-layering and so remove some of the layers
through which communication has to pass.
 They might use management by objectives, so encouraging more
communication between those directly involved in getting the task done

1 Group characteristics

Which of the following would NOT be a characteristic of an effective group?

a) Free and open discussion between members

b) Idea sharing
c) Clear understanding of the group's work
d) Shared office space

2 Wheel communication system

Which of the following describes a 'wheel' communications system?

a) One person at the centre who communicates with all other group
members
b) Information is passed from one individual to the next before it reaches
the last person in the group
c) Communication is circular
 d) Every member within the group can communicate directly with other
members

3 Effective consultation

Which of the following would NOT be an advantage of effective consultation?

a) The avoidance of damaging industrial disputes

b) The greater awareness of the local community of the firm's efforts for
charity
c) Better motivated employees
d) The development of more input from employees

D,A,B