Organisational Structures

Watch this to explore organisational structures for Higher Business (and to learn how to sneak things into the trolley)

I used to love going to the supermarket with my Mum when I was a wee boy. It was a golden opportunity for me to corrupt her into buying sweets, chocolate and crisps. Sometimes she’d let me, but other times it’d be a solid ‘no chance’. In which case, I’d revert to stealth tactics and try to slip things in the trolley in the hope she wouldn’t notice until we got to the checkout and then hopefully would be too embarrassed to tell me to put it back.

Since then, supermarkets have got bigger and bigger, with huge megastores that stock an incredible array of products. To make these operations workable from a customer perspective, plenty of staff are needed to help find the items you’re looking for or to return a lost child to their owner.

Sometimes in the world of business, however, organisations will take steps to reduce the number of employees they have. This is mainly a cost-cutting exercise and often focuses on managerial level staff. This can have big implications that we need to understand for Higher business.

So let’s hit the shops and talk about delayering.
This is thinkfour.

Imagine you’re in a big 24-hour Asda superstore. Grocery items are abundant but there are other products on offer too from clothing in the George section, to homewares, an optician, kids toys, and video games. These various departments will have managers who are responsible for running these sections. In turn, these department managers will have shop floor staff to man these parts of the store; stacking shelves and dealing with customer queries.

If Asda was in a position where it needed to cut costs in the business, it may engage in a process called delayering. This means removing layers, or levels of staff, by making them redundant. The layers removed are often management level employees as this will create the best cost saving.

The delayering process is often referred to in the context of organisational structures, for example when a tall structure delayers to become a more flat structure. Exam questions often focus on the impact of this delayering process, and to construct a strong answer, you also need to have a grasp of specific terminology from the Understanding Business unit.

So what advantages might Asda gain by removing a layer of managers? A big plus would be saving the cost of those management salaries which are higher than other employees.

To unlock further benefits, this is where the specific terminology comes in. You should be familiar with the terms [Chain of Command] and [Span of Control] and use these to frame your answer.

Removing layers of staff shortens the chain of command. This means that both communication and decision making can happen more quickly between levels of staff. Asda can also be more reactive to changes in external factors.

This move will also mean that lower level staff on the shop floor will now report to a more senior person, like a store general manager for example. For that store manager, their span of control becomes wider meaning they now have more staff reporting directly to them. To help manage their workload, the store manager may have to delegate more responsibility and operational decision making to employees. The advantage here is that it builds trust and creates a sense of empowerment for lower level staff.

To tackle a discussion question, you’ll also need to consider the downsides of delayering. Let’s go straight back to that wider span of control. With more people to oversee, If the store manager doesn’t delegate effectively they’re at greater risk of being overworked and becoming stressed. There may also be a deterioration in relationships as the store manager has less time at their disposal to deal with more people.

From the employees’ perspective, delayering may also represent fewer promotion prospects which could be demotivating.

Practically, another factor is that removing managers will involve redundancies. And redundancies involve compensation payments. Although Asda would save money on salaries in the long run, they would have to initially bear the cost of the redundancy payments which can be high depending on the employee’s position and length of time with the company.

Delayering an organisational structure is a delicate process.

Take away too much and customer service may be affected to the extent that customers go elsewhere. Leave too much in place and salary costs stay high with profit margins low, allowing competitors to invest greater sums to get ahead in the game. Finding that balance and sweet spot is the key!

Talking of sweet spots, I don’t suppose the eight-year old version of me would have cared much about delayering, as long as I could sneak the goods into the trolley without mum noticing.

This was thinkfour; thanks for watching.