Organisational Design (DP IB Business Management)

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Key Terms for Organisational Structure

  • 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. Bureaucracy

  • A bureaucracy is an organisation with many levels of authority

    • This makes decision-making and communication somewhat time-consuming

3. 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

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

4. 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 clayers of management

Diagram: span of control and chain of command

the-chain-of-command-and-span-of-control-ibdp-business-management
The chain of command and span of control 

5. 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 delegated decision-making power

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

6. Matrix Structures

  • In this type of structure, employees are grouped based on both their functional expertise (finance, marketing etc) and the specific projects or products they are working on

  • Employees typically have two reporting lines: a functional manager and a project or product manager

    • The functional manager oversees their work in terms of their functional skills and expertise

    • The project manager is responsible for the specific project or product they are assigned to

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