Organisational Design (DP IB Business Management)
Revision Note
Written by: Lisa Eades
Reviewed by: Steve Vorster
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
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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