Organisational Design (Edexcel A Level Business)

Understanding Organisational Structure Terminology

• Organisational structure outlines the reporting relationships, roles, and responsibilities of employees in the organisation

• Businesses must determine what the best structure is for them to effectively implement their ideas and achieve their objectives

  • They should consider how the structure may affect the management and effectiveness of operations and communications

  • A well-designed organisational structure helps to promote clarity, efficiency, and accountability

Key terminology used in organisational design

1. Hierarchy

• A hierarchy refers to the levels of authority within an organisation

  • It describes the ranking of positions from top to bottom

  • The higher the position in the hierarchy, the more authority and power it holds

  • The hierarchy usually includes top-level management, middle-level management, and lower-level employees

2. Chain of command

• The chain of command is the formal line of authority that flows down from the top management to lower-level employees

  • It defines who reports to whom and who is responsible for making decisions

  • The chain of command helps establish a clear communication channel and helps to maintain accountability within the organisation

3. Span of control

• Span of control refers to the number of employees that a manager or supervisor can effectively manage

• It is based on the principle that a manager can only effectively manage a limited number of employees

  • A narrower span of control means that there are more layers of management

  • A wider span of control means that there are fewer layers of management

4. Centralised and decentralised structures

• In a centralised structure, decision-making authority is concentrated at the top of the organisation, with senior management making most of the decisions

• In a decentralised structure, decision-making authority is distributed throughout the organisation, with lower-level employees having more decision-making power

  • Decentralisation can promote flexibility and innovation, while centralisation can promote consistency and control

Different Types of Organisational Structure

• Businesses typically structure their organisation in one of three ways

  • Tall organisational structures

  • Flat organisational structure

  • Matrix organisational structure

Tall organisational structures

• Tall structures are characterised by multiple levels of management and a more centralised decision making process

• A long chain of command

• Common in large organisations with complex operations, e.g. government agencies and universities

Advantages and disadvantages of tall structures

Flat organisational structures

• Flat structures are characterised by fewer levels of management and a more decentralised decision-making process

• A short chain of command

• Common in small organisations or start-ups e.g. tech start-ups and small businesses

Advantages and disadvantages of flat structures

Matrix organisational structures

• Matrix structures are usually built around specific products or projects, e.g. KitKat has its team within Nestlé

• They combine the functional areas of a business (HR, finance, marketing, sales) with a specialist team that operates inside the business

Advantages and disadvantages of matrix structures