Organisation structures
Organisation structures
Formal organisation
This is the internal structure of a business — the way in which
human resources are organised. It takes into account:
— the relationships between individuals
— who is in charge
— who has authority to make decisions
— who carries out decisions
— how information is communicate
Organisation structures
Span of control
• The number of people who directly report to one manager in a hierarchy.
• The more people under the control of one manager, the wider the span of
control.
• Less people means a narrower span of control.
• The example below would have a span of control of four people.
David Cameron
George Osborne
Theresa May
Michael Gove
Nicky Morgan
Organisation structures
Chain of command
Line in which orders and decisions are passed down from the top of
the hierarchy to the bottom e.g.
David Cameron
George Osborne
Junior Treasury
minister
Civil servant
Organisation structures
Flat structures (1)
These have a few layers and a wider span of control.
Advantages
 Vertical communication is often quicker.
 It costs less money to run a wider span of control because
a business does not need to employ as many managers on
higher salaries.
 Workers are more motivated as they benefit from job
enrichment.
Organisation structures
Flat structures (2)
Disadvantages
 Not much opportunity for promotion. Workers will receive
the skills required for these managerial positions but will
get frustrated with the promotional opportunities available,
which can lead to a high labour turnover.
 Difficult and time consuming for managers to control so
many workers.
Organisation structures
Tall structures (1)
Lots of layers and often a narrow span of control.
Advantages
 More opportunity for promotion, as more layers within the
business.
 Quicker horizontal communication.
 Closer supervision of workers and fewer mistakes.
Organisation structures
Tall structures (2)
Disadvantages
 Vertical communication can become difficult and lead to
poor motivation of subordinates.
 Costly, as there are lots of managers.
 Poor motivation, as little delegation occurs.
Organisation structures
Delegation
To give somebody the authority to perform a particular task.
It is important to note that it is the authority to do the task
that is delegated and not the final responsibility, i.e. if the
job is done badly the manager will still need to accept
responsibility.
Student question
How does delegation link to leadership styles?
Organisation structures
Business structures (1)
Centralisation
 Managers keep control.
 Simple to understand.
 Not much responsibility for staff but fewer mistakes.
 Costs can be cut by standardising purchasing etc.
 Strong leadership.
Organisation structures
Business structures (2)
Decentralisation
 Empowering and motivating.
 Freeing up senior managers’ time.
 Better knowledge of those closer to customers.
 Good staff development.
Organisation structures
Types of business structure
1.
2.
3.
4.
Entrepreneurial — decisions made centrally.
Pyramid/hierarchical — staff have a role; shared
decision making; specialisation is possible.
Matrix — staff with specific skills join project teams;
individuals have responsibility.
Independent — seen in professions where organisation
provides support systems and little else.
Organisation structures
Entrepreneurial
Key
worker
Decisions can be
made quickly in
this structure
Key
worker
Few decisions
made
collectively
Key
worker
Decision
maker
All decisions
made centrally
Great reliance on
key workers
supporting decision
makers
Key
worker
Organisation structures
Pyramid
Decisions pass
down from
managers to
staff
Information flows up
from staff to
management
Decision making is shared throughout
the business
This is the traditional structure — there is specialisation of tasks e.g.
finance, production, sales, marketing etc.
Organisation structures
Matrix
Emphasises getting people with specialist skills together into
project teams. Individuals within the team have their own
responsibilities. Supports Theory Y type managers.
Marketing
Production
Finance
Project
A
Project
B
Project teams
created
Staff with
specialist skills
Workers are organised based on their expertise
Organisation structures
Matrix vs pyramid
 Matrix is the best way of organising people, as it is based on skills
and expertise.
 Matrix gives more delegation.
 Matrix fits in with theory Y managers
 Pyramid is argued to be more theory X.
 Matrix needs expensive support systems. It is costly to run separate
project teams.
 Might be difficult to coordinate teams from different departments.
Evaluation: it often depends on the business e.g. matrix
structure complements a magazine business, might not be
ideal in a clothes factory.