A business with multiple layers of management has a bureaucratic, centralized organizational structure. A decentralized organizational structure, on the other hand, has fewer levels of management within the organization. Having multiple layers of management poses several disadvantages for a company especially in the current business climate where many organizations intentionally work toward decentralization.
A Disadvantage for Making Decisions
A highly bureaucratic business structure makes decision-making more difficult and complex, producing slower decisions. This form of organizational structure, to some extent, goes against the modern business practice of having an open door policy. Multiple layers of management create different levels between employees and upper management, resulting in ineffective and out-of-place communication. This can result in a certain amount of disconnection between different levels and different areas within the business and ultimately become a limiting factor for the business.
The Problem of Communication
The problem of communication within an organization with multiple layers of management is multifaceted. As an essential part of any functioning organization, these multiple layers can create multifaceted disadvantages. This organizational structure negatively affects communication by limiting the flow of information within the organization. When multiple channels and walls exist, workers can easily become discouraged from spreading information effectively and efficiently. An offshoot of this problem occurs when information does transfer, but is communicated incorrectly.
Difficulties Instituting Change
An additional disadvantage of this type of business structure results from changes that occur outside the organization. Because of the multiple levels of management, this outside information can have a difficult time penetrating the many layers of management inside the organization. This places the company at a disadvantage by making it more difficult for the organization to keep pace with developments and innovations in the market. This also relates to the slower pace of decision-making. As any change must pass through management approval, accepting the changes comes slowly, putting the company at a disadvantage.
Vertical organizational structures with many layers of management are also more costly to maintain than horizontal organizational structures. With more layers, there exist more levels of managers. Because managers typically make more money than other employees, multiple management layers cost businesses a considerable amount of money. Thus, a manager-heavy organization creates additional expenses for the organization. From a business standpoint, this can increase an organization’s costs without increasing output.
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