Organisations are often regarded as having three levels:
Strategic, Tactical and Operational
The top level is the strategic level. This is basically the very top managers and the board of directors. They should be looking after the strategy of the organisation, and whenever you hear the word “strategy,” you should be thinking of something like a five-year plan for the whole organisation. What will the organisation be doing in five years? In what countries will it be operating? Will it still be manufacturing or will it have switched to predominantly service provision?
Right at the bottom of the organisation is the operational level. This is the level where the day-to-day activities are carried out. The time horizons are very short, often things are dealt within a day, and planning is often not much longer than a week or two. These people are predominantly dealing with or recording transactions which are either happening or have already occurred: processing invoices, sending out orders, dealing with customer queries, these are all at the operational level.
In between there is the tactical level, think of the tactical level as being the level of a manager of a department. Typically this person will have a time horizon of about a year because this person will often be concerned with meeting the year’s budget. Of course they have to deal from time-to-time with day-to-day activities, but their particular priority will be to make sure that they organise their department to meet this year’s budgets and expectations.
Organisations are often described as being tall-narrow or wide-flat.
In the tall narrow organisation each manager or supervisor looks after relatively few people.
Here the diagram has been drawn so that each supervisor directly looks after two people. That will be described as having a span of control of two.
In the wide flat organisation the span of control is much wider. In this diagram we’ve shown a span of control of seven, meaning that each supervisor or manager has seven people reporting directly to him or her.
You will see in a tall narrow structure there are many layers and because each manager looks after only a few people, there can be very close supervision. Indeed it might not be supervision; it might be closer to re-performance or interference.
The tall narrow structure is sometimes described as very bureaucratic, very formal, strict job descriptions, great importance placed on exactly what one’s grade is, and the sort of pay and benefits and conditions that would go with that grade. The wide flat organisation is much more egalitarian; there is much less distance between top and bottom in the organisation and communication between top and bottom will be much faster. Because it is more egalitarian, there tends to be less emphasis on strict job descriptions and a greater emphasis on how can we get the job done, a greater emphasis on all being a part of a team, rather than being a part of a hierarchy.
In the 1990s there tended to be deliberate moves from tall narrow to wide flat by many organisations. They called this ‘delayering’ or ‘flattening’ the shape of the organisation. There were two motives for doing this.
First of all in the ‘90s there began to be very great cost pressure from Far Eastern manufacturers where manufacturing was relatively cheap. In response to this, Western businesses had to be somewhat ruthless. They had to ask, “Is any value being added by these people in the middle, or are they just managers, managing supervisors, managing assistant supervisors?” It was decided that often these people were not adding value and that they could safely be removed from the organisation.
Secondly in the 1990s, things began to move quickly. Technology changed very rapidly; there were huge changes in world markets, and operations based in China or India or Malaysia became very skilled and very adept at designing and launching new competing products. Western organisations to change and respond quickly and the tall narrow organisation was very slow to change. Many layers had to agree to the change, and many people were protecting their own particular grade. Therefore to get faster and more flexible responses to change, the wide flat organisation was often adopted.