Key Principles of Organisational Structures (AQA GCSE Business)

An Introduction to Organisational Structures

• An organisational structure outlines the reporting relationships, roles, and responsibilities of employees 

• Businesses need to choose a suitable structure to enable them to effectively implement ideas and achieve their objectives

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

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

  • It can be visually represented using an organisation chart

Diagram: Organisational Chart Example

In a traditional hierarchy, workers are answerable to the supervisor or manager who has authority over them in the structure 

Key terminology

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

Chain of command

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

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

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

Span of control

• The span of control refers to the number of employees that a manager or supervisor directly manages

• 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

Types of Organisational Structures

• Organisational structures can be tall or flat

Tall organisational structure

• A long chain of command usually results in a narrow span of control

  • Tall structures have multiple levels of management 

  • Common in large organisations with complex operations

    • E.g. Government agencies and universities

Diagram: A tall Organisational Structure

Tall structures have a long chain of command and a narrow span of control

Flat organisational structure

• A short chain of command usually results in a wide span of control

  • Flat structures have few levels of management 

  • Common in small organisations or start-ups

    • E.g. tech start-ups and small businesses

Diagram: A flat Organisational Structure

Flat structures have a short chain of command and a wide span of control

Evaluation of tall and flat Structures

Delayering

• Delayering is the process of flattening tall organisational structures by removing one or more levels of hierarchy

  • It usually involves making middle management redundancies or choosing not to replace managers who leave

    • Benefits of delayering include:

      • Communication is likely to improve

      • Significant cost savings can be made as fewer management salaries need to be paid

    • However, some drawbacks include

      • Delayering can increase the workload of other employees

      • Remaining managers' spans of control widen, affecting coordination

Centralisation & Decentralisation

• A centralised organisational structure is where authority for decision-making rests with senior management at the centre of a business

• A decentralised structure is where authority for decision-making is delegated further down the hierarchy towards functional or middle managers

• In reality, few businesses are wholly centralised or decentralised

  • In most businesses, strategic decisions are made by senior leaders, whilst operational decisions are delegated to functional areas and middle managers

Evaluation of Centralised & Decentralised Organisational Structures

The main job Roles & Responsibilities in Business

• The organisational structure of a business determines the roles, responsibilities and relationships between individuals in an organisation 

Diagram: Business Roles

Larger firms are usually arranged into functions such as finance and marketing, which are led by directors who have final responsibility for the work of everyone in the department 

Type of role

Directors

• Larger businesses often have a board of directors who make key strategic business decisions such as:

  • Implementing new corporate policies

  • Investment of retained profit and share capital

  • Growth objectives

• The board normally consists of a senior employee from each department, officers (such as treasurer or secretary) and the owner or chief executive officer (CEO) of a business

Managers

• Managers have many responsibilities in the business and help it to operate effectively on a day-to-day basis

• Types of managers include senior and functional managers, line managers and supervisors

Roles & Responsibilities of Managers

Operational & Support Staff

• Operational staff complete tasks to which they are directed by their manager(s)

  • E.g. In a department store, operational staff include customer service representatives, sales assistants and security staff

• Support staff assist with the non-core operations of a business

  • E.g. In a bank, support staff may include cleaners, IT technicians and human resources assistants

Delegation

• Delegation is a process where responsibility for specific tasks is given to subordinates by managers 

  • Delegation usually involves transferring authority from manager to subordinate

  • E.g. the Human Resources Director of a large company delegates authority for recruitment and training to the Recruitment and Training Manager

• Delegation is particularly important in businesses with a flat organisational structure, where managers have wide spans of control

The Advantages of Delegation

• Despite its advantages, some managers are reluctant to delegate as they lose some control over decision-making

  • Managers may need support to be able to balance trust and control to delegate appropriate tasks effectively

  • Autocratic leaders may not be willing to give authority to others

  • Some managers may feel threatened by highly skilled subordinates seeking promotion