Productivity is the amount of work produced in a given period of time.

Labour productivity is the ratio of the quantity & quantity of units produced to the
labour per unit of time.

How productivity gains have been achieved? Number of ways are:
a) Better, quicker & more reliable machinery.
b) Better training workers.
c) Improve motivation levels.
d) More effective management.

An increase in productivity, other things being unchanged, will reduce unit costs.

3 additional points about productivity:
a) Increasing productivity is only effective if quality is maintained.
b) Productivity is difficult to measure for many service tasks.
c) Productivity is not the same as total production.

Motivation is the desire that people have to work well.
Motivators is a who motivates other people.

Motivated workers will be trying to reach their own personal goals.
Unmotivated workers will be reluctant to perform effectively & quickly & will offer
nothing.
Highly motivated staff will be keen to stay with the firm, reducing the costs of
labour turnover.
Motivated staff will be more likely to offer useful suggestion & they will often
actively seek promotion & responsibility.

Gains resulting from motivated staff/Benefits to a business:
a) Low labour turnover.
b) Low absenteeism.
c) High productivity rate.
d) Make suggestions for improvements.
e) Prepared to accept responsibility.



Indicators of poor staff motivation
a) Absenteeism
b) Lateness
c) Poor performance
d) Accidents
e) Labour turnover
f) Grievances - Might be more union disputes
g) Poor response rate

How Can Staff Be Motivated To Work Well?
4 Best-Known Theories Theorists
A) F.W. Taylor - Taylors Scientific Management
Taylor made the first attempt to analyse worker motivation in order to advise
management on the best ways to increase worker performance.

The technique he used:
a) an hypotheses
b) studying
c) recording performance
d) altering working methods
e) re-recording performance

This approach has become known as Scientific Management.

How To Improve Productivity - Taylors Scientific Approach
a) Select workers to perform a task.
b) Observe them & note the key elements of it.
c) Record the time taken.
d) Identify the quickest method recorded.
e) Train all workers & do not allow them to make any changes in it.
f) Supervise workers.
g) Pay workers - based on the theory of economic man.

Economic man is a person who have the ability to make judgements toward their
subjectively defined ends.
The view was that man was motivated by money & the only factor that could


stimulate further effort was the chance of earning extra money.
He always maintained that workers should be paid fair days pay for a fair days
work & that the amount should be directly linked through a system known as
piece rate

Piece rate is the calculation of wages based on the quantity of output produced over a
given time period.

Results Of Taylors Work:
The emphasis on increasing efficiency & productivity was greeted.
Workers leaders believed that it would lead to more work but no more pay or
benefits.

Taylors approach:
a) Economic man.
b) Select the right people for each job.
c) Observe & record the performance of staff.
d) Establish the best method of doing a job.
e) Piece work payment systems.

Elton Mayo & the Human Relations Theories
It also known as Hawthorne Effect.
As lightning & other conditions were changed, both improved & worsened so
productivity rose in all groups.

This forced Mayo to accept that:
a) working conditions in themselves were not that important in determining
productivity levels.
b) other motivational factors needed to be investigated before conclusions could be
drawn.

Subsequent experiments were carried out with a group of assembly line workers.
Changes to rest periods, payment systems, assembly bench layout & canteen food
were made at 12 weeks intervals.
At the end of the experiments the working conditions & hours of work were
returned before the start of the trial.


Result: Output rose far above the original level.

The conclusions of Mayos work/The Hawthorne Effect:
Changes in working conditions & financial rewards have little or no effect on
productivity.
When management consult with workers & take an interest in their work then
motivation is improved.
Working in teams & developing a team spirit can improve productivity.
Groups can establish their own targets & these can be greatly influenced by the
informal leaders of the group.

Maslow & The Hierarchy Of Human Needs - Maslows Hierarchy Of Needs
His research was based on people in the work environment & his findings have
significance for students of psychology & sociology.
He was concerned with trying to identify & classifying the needs that human have.





Self-Actualisation
This will give sense of achievement. Opportunities to develop & apply new skills will
increase potentials.

Esteem Needs
Status, advancement & responsibility will gain the respect of others.



Social Needs
Trust, Friendship, Acceptance, Social facilities. Working in teams & ensuring good
communication to make workers feel involved.

Safety Needs
Offering a contract of employment with some job security.

Physical Needs
Income from employment. Food/Shelter/Water

Limitation of Maslows approach/Criticisms of Maslows hierarchy
a) Not everyone has the same needs.
b) Money is necessary to satisfy physical needs & also other needs.
c) Self-actualisation is never permanently achieved.
d) It can be very difficult to identify the degree to which each need has been met.

E.g.: Money needs to be used to purchase essentials such as food but it can also
be seen as a status symbol or an indicator of personal worth.

Herzberg & the 2 Factor Theory
His research was based around questionnaires & interviews with employees.
those factors that led to them having very good feeling about their jobs.
those factors that led to them having very negative feelings about their jobs.

1st factor: Motivators
Job satisfaction resulted from 5 main factors:
a) achievement
b) recognition for achievement (chance of promotion)
c) the work itself
d) responsibility
e) advancement

2nd factor: Hygiene Factor
Job dissatisfaction resulted from 5 different factors:
a) Company policy & administration.


b) Supervision
c) Salary (Pay)
d) Relationship with others.
e) Working conditions.

He termed these hygiene factor.
These were the factors that surround the job itself (extrinsic factors) rather than the
work itself (intrinsic factors)

The consequences of Herzbergs 2 factor theory:
a) Pay & working conditions can be improved. He called this movement. Motivation
are also required. Motivation to do the job & to do it well would only exist if the
motivators exist.
b) Motivators could be provided by adopting the principles of job enrichment.

3 main features of job enrichment:
Complete units of work should be assigned to workers instead of assemble one
small part of the finished product.
Feedback on performance.
A range of tasks.

c) Offer higher pay, improved working conditions would all help to remove
dissatisfaction but they would all be quickly taken for granted.

Evaluation Of Mayos Research
Giving more of a role in business decision making or participation.
The idea of involving workers, taking an interest in the welfare & finding out their
individual goals has opened up new fields of research for psychologists.

Evaluation Of Herzbergs work:
Researchers who have used Herzbergs methods have failed.
There is little doubt that the results he drew from his work have had a significant
impact on business practices.
Team working is more widespread with whole units of work.

Motivational theories - How useful are they?


They provide us with a starting point & a framework for analysing & discussing the
main motivational issues.
Basic ideas are still evaluated many years after the initial finding.

(*) In examination terms, it is important to identify the most appropriate theory to the
question set & to explain the relevance of it to business decision makers.

It is the application of motivational theorist ideas & potential difficulties in
applying them to certain situations.

Pay is necessary to encourage work effort.

Payment Systems - (Financial Rewards)
a) Time wage rate
b) Piece rate
c) Salary
d) Commission
e) Performance-related pay (PRP)
f) Profit sharing

Time or hourly wage rate is the calculation of wages based on the amount of time
they spend at work.

Advantages Of Hourly Wage Rate:
a) Workers will not rush their work & this could lead to high quality.
b) Gives workers some security of payment if there are unavoidable production hold
ups.
c) Wage rates can be adjusted easily.
d) Most suitable when the output of individual workers cannot be identified.
e) Fairer than piece rates.

Disadvantages Of Hourly Wage Rate:
a) Too much time taken to do a job. To prevent this, additional supervision of workers
may be required.
b) Higher overtime rates are paid.
c) Wages will still have to be paid even if production is halted.



Piece rate is the calculation of wages based entirely on the quantity of output
produced over a given time period.

Advantages Of Piece Rate:
a) Encourages greater effort & faster working.
b) The labour cost is determine in advance & this helps to set a price for the product.


Disadvantages Of The Piece Rate:
a) Required output to be measurable & standardised.
b) May lead to falling & safety levels as workers rush to complete units.
c) Workers may settle for a certain pay level & will not be motivated to produce more
than a certain level.
d) Provides little security over pay level. Production breakdown.
e) Discourages workers from accepting change at work.

Salary is an annual sum that is usually paid on a monthly basis.

Advantages Of Salary:
a) Gives security of incomes.
b) Gives status compared to time rate or piece rate systems.
c) Suitable for jobs where output is not measurable.
d) Suitable for management positions where staff are expected to put in extra time to
complete a task.

Disadvantages Of Salary:
a) Income are not related to effort levels or productivity.
b) Lead to complacency of the salary earner.
c) Regular appraisal needed to assess whether an individual should move up a salary
band.

Commission is a payment system where employees are paid a percentage of the value
of each good or service that is sold. It has the same advantages & disadvantages as
piece rate.



Performance-Related Pay (PRP) is a payment system to reward staff for above-
average work performance. It requires procedure:
a) establishing specific objectives for the individual.
b) annual appraisal of the workers performance against the pre-set targets.
c) paying each worker a bonus according to the degree.

Advantages Of PRP:
a) Motivates staff to improve performance.
b) Target setting can help to give purpose to the work of an individual.
c) Annual appraisal offers the opportunity for feedback on the performance of an
workers.

Disadvantages Of PRP:
a) Can fail to motivates staff if no additional financial rewards.
b) Team spirit can be damaged by the rivalry generated.
c) Claims of manager favouritism can harm manager relationship.
d) May lead to increase control over staff by managers.

Profit sharing is scheme shares some of the company profits with shareholders & with
workers too.

Advantages Of Profit Sharing:
a) Reduces potential conflict.
b) Lead to higher worker effort levels.
c) Attract better recruits.
d) Bonuses are paid does not add to business costs.
e) Successful in increasing motivation & this could lead to an increase in overall
business profitability.

Disadvantages Of The Profit Sharing:
a) The reward is affected for everyone so why should one worker put in greater effort.
b) Costly to set up & operate.
c) Small profit shares paid at the end of the year unlikely to promote motivation
throughout the year.
d) Reduce profits to owners & to be reinvested in the business.
e) Increase the total number of shares issued & dilute the value of existing shares.



Non-Financial Motivator
Non-Financial Motivator is a non-monetary forms of rewards. E.g.: Herzberg-hygiene
factors-training, promotion, fringe benefit.

Fringe benefits is an amount paid by an employer.
It is used by business in addition to normal payment system.

Non-Financial Methods Of Motivation
a) Job Rotation
b) Job Enlargement
c) Team Working
d) Quality Circles
e) Target Setting
f) Delegation & Empowerment

Job rotation encourage a worker to do more than one task by switching from one job
to another. E.g.: A move to a different part of the production line to carry out a
different task.

Benefits:
a) Employees boredom reduced & enable a variety of skills & experience to be
gained.
b) Employer might benefit from a widely trained workforce.
c) It may motivate worker.

Drawbacks:
a) Once an employee move to another job, they may leave the old tasks & carrying
out new tasks.
b) Productivity may be fall due to movement from old tasks to new tasks.

Job enlargement increase the scope of a job by broadening the tasks undertaken. E.g.:
Instead of an employee putting wheels onto a bicycle he could be allowed to put the
entire product together.
Giving an employee more work to do of a similar nature.



Benefits:
a) Reduce boredom & encourages satisfaction in work.
b) It is more efficient if workers are organized in groups.
c) Work could be finished more quickly than give it to the next person to fix one by
one.

Drawback:
a) Productivity may be fall due to carrying many tasks at once.

Job enrichment is a principle of organising work so that employees are encouraged &
allowed to use their full abilities. / An attempt to give employees greater
responsibility & recognition so that employees are allowed to use their full abilities.
The idea of job enrichment came from Herzbergs two factor theory.

An employee may be given responsibility for:
a) planning a task.
b) quality control
c) work supervision
d) ordering materials
e) maintenance.

Advantages:
a) Job enrichment gives employees a challenge which will develop their unused
skills & encourage them to be more productive.
b) The aim is to make workers feel they have been rewarded for their contribution to
the company.

Disadvantage:
a) Workers who feel that they are unable to carry out the extra work or who
consider that they are forced into it, may not respond to incentives.

3 features - Not always easy to apply in practice.
a) Complete units of work so that the contribution of worker can be identified.
b) Direct feedback.
c) Challenging tasks offered.



Team working is the work places each member of staff into a small team of
employees.

More challenging & interesting work as allowed by team working will lead to:
a) lower labour turnover
b) more & better ideas from the workforce
c) higher quality when Total Quality Management (TQM) is incorporated.

Effective teamwork often involves quality circles.
Usually leads to workers learning several skills.

Quality circles is a group of employees which meets regularly to resolve problems &
improve working methods.
They are voluntary groups of workers.
Informal workers are encouraged to contribute to discussions.
Results of the quality circle meetings are presented to management & really
successful ideas are often implemented.
Workers are usually paid for most successful circles & may be rewarded with a team
price.
Quality circles are a successful method.

Target setting - Intend to move towards a certain goals or objectives.

To enable direct feedback to workers on how their performance compares with
agreed objectives.
Working towards a goal that they helped to establish & identify.

Delegation & Empowerment is assignment of authority & responsibility to another
person. (Check for more info.)

Evaluation Of Payment Systems & Non-Financial Methods
Pay is the only motivating factor for people to work efficiently & to be satisfied.
Managers need to be flexible & adapt the methods & approaches that are available
to motivate staff.

Factors that influence the different degrees of emphasis on pay & non-pay factors


include the leadership style of management & the culture of the organisation.

If the culture is to view workers as partners then production will be organized to
give workers a chance to accept responsibility & to participate.

Manager is an individual who controls resources & expenditures & the authority to
carry manage the work of subordinates including planning, control, delegating, etc.

The role of management:
a) Setting objectives & planning.
b) Organising resources to meet the objectives.
c) Communicating with & motivating staff.
d) Coordinating activities.
e) Measuring & controlling performance against targets.

Number of personal characteristics have been identified as being common amongst
effective leaders:
a) Desire to succeed & self-confidence that they will succeed.
b) An ability to think beyond the obvious.
c) Multi-talented.
d) An incisive mind that enables the heart of an issue to be identified.

Important leadership position in business:
a) DIRECTOR
Head of a major functional department such as marketing.
Responsible for delegating within their department, assisting in the recruitment of
senior staff, meeting the objectives for the department.

b) MANAGERS
c) SUPERVISORS
Appointed by management to watch over the works of others.
Responsible for leading a team of people in working towards goal.
Workers representatives - Elected by workers either as trade union officials in
order to discuss areas to common with managers.

Leadership OR Management Style


Management style is the way in which managers take decisions & deal with their staff.

4 distinct management styles:
a) Autocratic
b) Democratic
c) Paternalistic
d) Laissez-faire

Autocratic leader is a leadership style where the leader take decisions on their on the
own with no discussion. E.g.: Armed forces & police may need to be issued quickly
with immediate response. Oil tanker disaster, leaders may issue orders to reduce more
unfortunate consequences of the incident.

Advantages of autocratic leader:
a) It has proved to be very efficient & effective during certain situations.
b) It allows employees to have one task which could mean that the employees master
their tasks & become proficient enough to help grow the company.

Disadvantages of autocratic leader:
a) The communication style of an autocratic leader is usually one way. No feedback.
b) Low motivation levels so supervision of staff are essential.
c) Issues such as absenteeism or theft may arise because of lack of workplace
satisfaction.

Democratic leader is a leadership style where the leader engage in discussion with
workers before taking decisions. E.g.: Creative groups (Advertising), education (group
discussion)

Advantages of democratic leader:
a) The participation of staff can result in high motivation levels.
b) The ideas & experiences can be shared & used in the decision making. This also
speed up decision making.
c) Two way communication is used which allows feedback from staff.

Disadvantages of democratic leader:
a) This approach can be very time-consuming for the leader because of the use of the


two way communication.
b) Staff are not able to involved in all aspects of the business.
c) Participation may be viewed as a sign of inefficiency on part of a leader.
Subordinates may view leader as incompetent to handle the job responsibilities.

Paternalistic leader is a leadership style where the leader makes decisions but takes
into account the welfare of employees.

Advantage of paternalistic leader:
a) Manager involves employees in decision making. Manager choose the best for the
workers. Final decisions are taken by the managers.

Laissez-faire is a leadership style where employees are encouraged to make their own
decisions within limits. Applications: When managers are too busy or lazy to
intervene. It is also appropriate in research institutions.

Advantages of laissez-faire:
a) Managers delegates all authority & decision-making power. This increase the
motivation level of the worker. The relationship between manager & worker increased
too.
b) This style reduces the workload of the manager.

Disadvantages of laissez-faire:
a) It proves poor management & makes the employees lose their sense of direction &
focus. The disinterest of the management & leadership causes the employees to
become less interested in their job & their dissatisfaction increases.
b) Lack of feedback & this usually lead to de-motivating.
c) Lack of direction in their work. This could lead to a loss of security.

Factor affecting the leadership styles & approaches:
a) The task.
b) The tradition of the organisation.
c) Type of labour force.
d) Group size.
e) The leaders personality.
f) Group personality.


g) Time.

McGregors Theory X & Theory Y
One of the most important determinants is the attitude of managers towards the
workers.
Theory X view their workers as lazy, disliking work & will avoid responsibility,
needing to be controlled made to work & are not creative. The only way to get people
to work is by using Strict control.
McGregor believed that Theory Y managers views believed that workers did enjoy
work, prepared to accept responsibility, are very creative & active in contributing
ideas & solutions.
He suggests that the attitudes of management to workers could be described by
these two theories.

The best management styles - Factors
a) The training & experience of the workforce & the degree of responsibility.
b) The amount of time available for consultation & participation.
c) Management culture will be influenced by the personality of the managers.
d) If there is a great risk to the business if a poor decision is taken, then it is likely that
management will make the choice in an autocratic way.

Theory X
Workers are motivated by money.
Workers are lazy & disliking work.
Workers are selfish, ignore the needs of organisation, avoid responsibility & lack
ambition.
Workers need to be controlled & directed by management.

Theory Y
Workers have many different needs which motivate them.
Workers can going work.
If motivated, workers can organizes themselves & take responsibility.
Management should create a situation where workers can show creativity & apply
their job knowledge.

Organisational structure is the framework for identifying & organizing the tasks to be


performed within an organisation.

Structures can be illustrated by means of an organisational chart.





This chart displays a number of important points about the internal organisation of
this business. It shows:
a) who has overall responsibility for decision making.
b) individual workers can identify their position.
c) chain of command
d) span of control
e) the identity of the supervisor to whom each worker should report to is made clear.
f) formal channels of communication both vertical & horizontal. This aid the
investigation of communication problems.

Different types of organisational structure:
A) The hierarchical structure - The order of levels of management of a business from
the lowest to the highest.


Advantages of hierarchical structure:
a) Decision-making starts at the top but may be passed to lower levels.
b) The role of each individual will be clear & well-defined.
c) Vertical divisions could based on region or country or any category. E.g.: Consumer
goods & industrial goods.
d) If staff know where they are in the organisation & what opportunities exist for
promotion. This can be motivating to some employees who are ambitious as they can
see the jobs they could do in the future.



Disadvantages of hierarchical structure:
a) Few horizontal links & this can lead to lack of coordination between them.
b) It is very inflexible & often leads to change resistance because all managers tend to
be defending their own position.

B) Matrix Structure

The matrix structure is an structure that puts managers into project teams that cuts
across the departmental lines & creates project team from all divisions. It enables
workers from different functions to work together without constant need to refer up
the hierarchy, so faster decision making.


This structure cuts across the departmental lines & creates project team from all
divisions.



This method of organizing a business is task or project focused.
This emphasizes getting people with particular specialist skills together into project
teams.
Manager often argue that this is the BEST way of organizing people because it is
based on the expertise & skills of employees & gives scope for people lower down the
organisation to use their talents effectively.

Advantages of matrix structure:
a) It allows total communication between all members.
b) Less chance of people focusing on just what is good for their department.
c) Create more successful solution when ideas are shared between each other.
d) This system is designed to respond to changing markets of technological
conditions.
e) It enables workers from different functions to work together with constant need.


They need to refer up the hierarchy so faster decision making.

Disadvantages of matrix structure:
a) Less direct from the top as teams may be empowered to complete a project.
b) It could be difficult for some managers when passing down of authority to more
junior staff.
c) Conflict of interests - Two leaders if the business retains levels of hierarchy for
departments but allow cross-departmental teams to be created.

Key Principles Of Organisational Structure
1) Levels Of Hierarchy
Each level represents a rank of staff.
Lower ranks are subordinates to superiors of a higher rank.
The greater the number of levels, the greater the number of different rank.
Tall organisational structure has a large number of levels of hierarchy.
This creates 3 main problems:
a) Slow comm. or becoming distorted.
b) Narrow span of control.
c) Greater sense of remoteness, amongst those on lower levels from the decision-
making power at the top.

A) Levels of hierarchy is the order of levels of management of a business from
the lowest to the highest.

Authority is the right to command a situation, a task or an activity.

B) Chain of command is the route which authority is passed down an
organisational./The way authority & power are passed down in business.

LONG Chain Of Command & NARROW span of control





SHORT chain of command & BROAD span of control




Disadvantages of Short CoC & Broad SoC:
a) Increase the risk of wrong decision being made as subordinates may be less well
trained or lack experience.
b) It is very difficult for the manager to supervise subordinates & ensure they are
working towards some common goal.
c) Fewer promotional opportunities so can be de-motivating.

C) Span of control is the number of subordinates reporting directly to a manager.
Span of control can be either wide or narrow.

Wide span of control - Manager directly responsible for many subordinates.



Narrow span of control - Manager has direct responsibility for a few subordinates.





Advantages of narrow span of control:
Why manager want to control a business with narrow spans of controls?
a) A firm can easily control & supervise closely. This allows better co-ordination of
subordinates activities.
b) It gives managers time to think & plan without having to be burdened with too
many day to day problems.
c) It also to ensures better communication with subordinates.
d) Feedback of ideas from the workers will be more effective.

Advantages of wide/broad span of control:
Why some people prefer to work for a business with wide spans of controls?
a) It offers greater decision making authority for subordinates & this may improve job
satisfaction.
b) Lower costs involved in supervision because a business does not need to employ as
many manager.
c) Every staff can made or shared their decision & thus increased motivation.

D) Delegation is passing down of authority to perform tasks & take decisions from
higher to lower levels in the organisation.

It is essential that the manager assign some DUTIES to subordinates so they are able
to CONCENTRATE on these tasks. At the same time, the assignment of tasks trains &
develops the skills of the next generation of managers.

3 important aspects to delegation:
a) RESPONSIBILITY - In accepting the task. For delegation to be effective,
responsibilities should be clearly defined.
b) AUTHORITY - The subordinates must have the authority to carry out these duties
which include spending money, using other organisational resources, hiring & firing
personnel.
c) ACCOUNTABILITY - Manager are accountable for the duties that have been
assigned to them & they are accountable for the actions of the subordinates.

Advantages of delegation:
a) Releases managers to undertake a more strategic role.
b) Show trust in subordinates & this motivates staff.


c) Trains staff for more senior positions.
d) Quicker decisions & resultant cost savings.
e) Improved executive morale & efficiency.

Disadvantages of delegation:
a) Unsuccessful if the task is not made clear, if training is not provided & if sufficient
authority is not transferred.
b) Managers may delegate boring jobs to worker. This will not prove to be
motivating.

Improving delegation:
6 principles that are useful for improving delegation.
a) Establish objectives & standards - Subordinates should participate in developing
objectives & they should agree to the standards that will be used to measure their
performance.
b) Define authority & responsibility - Subordinates should clearly understand the
work delegated to them, recognize the scope of their authority, & accept their
accountability for results.
c) Involve subordinates - Managers can motivate subordinates by involve them in
decision making, by keeping them informed & by helping them improve their skills &
abilities.
d) Require completed work - The manager has to provide guidance, help &
information.
e) Provide training
f) Establish adequate controls - Managers should provide timely, accurate reports that
enable subordinates to compare their performance to agreed on standards & to
correct their deficiencies.

Barriers To Delegation:
a) Managers often fail to delegate authority because of psychological &
organisational barriers.
Psychological barrier is FEAR. Manager may be afraid that if subordinates dont do
the job properly, the managers own reputation will suffer.
Unwillingness to trust subordinates, to use broad controls, to give chance to other
people in decision making.



CENTRALISATION & DECENTRALISATION
Both two principles are linked to delegation.
Centralisation is keeping all of the important decision-making powers with head
office. There will be minimum delegation to managers. Subordinates would not have
no authority to take decision. A centralised organisation would insist on all sections of
the business following the same procedure & gives the business a feeling of
uniformity.

Decentralisation is passing decision making power to managers in other areas,
departments or division. This must involve delegation. Subordinates would have all
the authority to take decision. Decentralised organisations will allow staff to be
empowered.

Advantages of centralisation:
a) A fixed set of rules should lead to rapid decision making.
b) The business has consistent policies which can prevent only conflict between the
divisions & avoid confusion. (Consumer)
c) Senior managers take decision in the interest of the whole business. Greater
control.
d) Central buying should allow for greater economies of scale.
e) Senior managers at central office will be experienced decision makers.
f) Senior management will have more control of business. E.g.: Budgets.

Disadvantages of centralisation:
a) Lack of promotion opportunities.
b) Delays in decision making.
c) Excessively bureaucratic.
d) Rigidity.
e) Loss of initiative.
f) Stifles personal development.

Advantages of decentralisation:
a) Allows more local decision to be made. Managers may have closer contact with
consumers.
b) Prepares junior managers for more challenging roles.
c) Allows delegation & empowerment & these will have positive effects on


motivation.(To worker)
d) Decision making in response to changes.
e) It reduces the stress or burdens of senior management.
f) It provides subordinates with greater job satisfaction.
g) Delegation should allow greater flexibility & a quicker response to changes.

Disadvantages of decentralisation:
a) Loss of control.
b) Loss of some economies of scale.
c) Development of narrow department view.
d) Duplication of effort.
e) Less of corporate identity.

This type of arrangement is unlikely to work well.



This is called an entrepreneurial structure & would only be suitable for small firms.
It could place too much pressure in the owner.
If the business grow, another manager or supervisor might be required. Time
consuming. It might be necessary to cut across these divisions if new project
were proposed. Project team could establish using the matrix system.


Factor that could determine the internal structure of a business:
a) The style of management / The culture of the managers

Managers adopted a Theory X approach then small spans of control would be


adopted in a hierarchical structure.
A Theory Y manager would adopt very few levels of hierarchy & prefer a matrix
team-based structure.

b) Retrenchment caused by economic recession or increased competition might lead
to delayering to reduce costs. This reduces levels of hierarchy & shorten the chain of
command.

c) Adopting new technologies can lead to a reduced need for employee.

ORGANISATIONAL PRINCIPLES
The principles are closely linked together. Realise the following relationship:
Serious consequences for:
a) communication efficiency
b) spans of control are smaller in tall organisation.
c) delegation - Narrow SoC, managers able to control a few people.
d) motivation levels of junior staff
e) business costs.

Tall organisational structures have forced many firms to reconsider the role &
importance of middle managers. It has been assisted by improvements in IT which
enable managers to communicate & monitor the performance of staff.

Delayering remove whole layers of management to create shorter structures.

Advantages of delayering:
a) Reduce business costs.
b) Shorten the chain of command.
c) Increase span of control & opportunities for delegation.
d) Increase workforce motivation.

Disadvantages of delayering:
a) Increase workloads for managers might lead to overwork or stress.
b) Reduce the sense of security. Fear that redundancies might be used to cut costs.
c) Making managers redundant. E.g.: Redundancy payments.



Empowerment is to give official authority to employees to make decisions & control
their own activities.

Factors Influencing Organisational Structure:
a) Size - As a business grows, it is like to move away from an entrepreneurial structure
towards one where authority is passed to other employees.
b) Views of the owner/leadership style - If owners wish to retain control in the
business, they will want a narrow SoC.
c) Business objective - SoC gets wider if business decides to expand rapidly.