1-4-3-organisational-design

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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

Term	Definition	Explanation
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 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
Span of control	Span of control refers to the number of employees that a manager or supervisor effectively 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
Centralised structure	Decision-making authority is concentrated at the top of the organisation	Senior management make most of the key decisions Centralisation can promote consistency and control
Decentralised structure	Decision-making authority is distributed throughout the organisation	Lower-level employees have more decision-making power Decentralisation can promote flexibility and innovation

Businesses typically structure their organisation in one of three ways:
- Tall organisational structures
- Flat organisational structure
- Matrix organisational structure

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	Disadvantages
Provides a clear hierarchy of authority and defined roles and responsibilities Promotes specialisation and expertise within each department or function Offers opportunities for career advancement and promotion within the organisation All of the above increase efficiency and motivation	Can create communication barriers between the upper and lower levels of the hierarchy Decision-making can be slow as information must pass through multiple layers of management This can lead to bureaucracy and excessive levels of management All of the above reduce efficiency and motivation

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	Disadvantages
Promotes a culture of collaboration and open communication Decision-making can be faster and more efficient Encourages creativity and innovation as employees have more autonomy and flexibility All of the above increase efficiency and motivation	This can lead to role ambiguity and a lack of a clear hierarchy May not provide clear opportunities for career advancement or promotion This may require employees to take on multiple roles and responsibilities, leading to burnout and overwhelm All of the above reduce efficiency and motivation

Matrix structures are usually built around specific products or projects, e.g. KitKat has its own team within Nestlé
They combine the functional areas of a business (human resources, finance, marketing, sales) with a specialist team that operates inside the business

Advantages	Disadvantages
Promotes cross-functional collaboration and communication Allows for specialisation and expertise within each functional area Enables efficient allocation of resources and coordination of multiple projects All of the above increase efficiency and motivation	This can lead to conflicts over priorities and resources This can create confusion over roles and responsibilities, particularly when multiple managers are involved Requires a high degree of communication and coordination, which can be challenging All of the above reduce efficiency and motivation