Delayering is when a business removes a layer of management from its organisational hierarchy — it becomes flatter.
Redundancy is when a business eliminates a certain job role.
Reorganisation is when a company changes its internal structure.
Human resources can be one of the biggest costs to a business, a business may decide to restructure to save costs on wages or salaries. The two methods of restructuring are delayering or redundancies.
Remember for the exam:
Delayering
Advantages
+ Shorter Chain of command
+ Improve communication
+ Give remaining workers more authority and responsibilities
+ Reduced management costs
Disadvantages
– Wider span of control (becomes flatter and wider)
– Experienced and skilled managers may be lost
– Can be very expensive and difficult to administer
Redundancies
Advantages
+ Cut the costs of wages and salaries (long term)
+ Improve organisational efficiency by removing redundant roles
Disadvantages
– High redundancy payments (short term)
– Poor employee morale
– Risk losing good employees
Delayering and redundancies are not the same things! When an organisation is delayered, the employees from that layer aren’t necessarily laid off, for example, they might be offered a job lower down in the organisational hierarchy instead.
When a business makes someone redundant they have to legally make payments to employees who have been there for 2+ years. The rate gets more the older the employee is, therefore newer and younger workers are more likely to be made redundant as it costs the business less. Check the current redundancy rate here. This is a short-term disadvantage of redundancy as the business has to make payments initially but saves on paying the wages/ salaries in the long term.
Being fired (dismissed) is different to being made redundant. Dismissal in the UK usually happens due to misconduct so does not count as redundancy, employees would not be entitled to redundancy pay.
Reorganisation
Businesses are usually organised by departments:
Departments may have an overlap of duties and responsibilities or may need new departments as the business grows. Therefore, reorganisation of the business may be required to make it more efficient. This involves adding or taking away departments.
Soletraders usually have no or very few employees, with one person acting as many departments for the business and completing many roles. If the business grows and hires new staff for different positions, the business will be constantly reorganising and adding new departments becomes necessary.
Not all companies are organised by business functions. For example, when Apple grew to become a multinational company, it decided to reorganise into geographical departments by continent, with different business functions for each region.
