Organisational Structure

Key Outcomes:

Analyse the main features of an organisational chart including levels of hierarchy, chain of command, span of control, flat and tall organisations

Organisational Structure

A sole trader with no employees needs no organisational structure. Even if this sole owner were to take on just one worker or partner, a sense of formal organisation structure would become necessary. Who is to do what job? Who is responsible to whom and for which decisions? If a business expanded further  with more workers, including supervisory staff, different departments or divisions, then the need for a structure would be even greater. This would allow the division of tasks and responsibilities to be made clear to all. 

Organisational structure: The internal  formal framework of a business that shows the way in which management is organised and linked together and how authority is passed through an organisation.

Chain of command: This is the route through which authority is passed down an organisation - from the chief executive and the board of directors.

Span of control: The number of subordinates reporting directly to a manager.

Level of hierarchy: A stage of the organisational structure at which the personnel on it have equal status and authority.

The formal structure

A typical business structure is one that is based  on functional department lines. Structures can be illustrated by means of an organisational chart.

Organisational chart : The diagrammatic representation of a firm's formal organisation structure.

The organisational chart shows: Who has overall responsibility for decision-making

The formal relationships between people and departments

The chain of command

The span of control

Formal channels of communication

Identity of the supervisor or manager to who each worker is answerable and should report to

Hierarchical organisational structure     

A hierarchical (bureaucratic) organisational structure is an organisational structure where there are fewer and fewer people on each higher level.

Why do we have a hierarchicies?

Advantages of hierarchical organisational structures:

A company that is structured with a hierarchically with a narrow span of control is likely to benefit from the following advantages:

There is quicker communication between smaller teams

Feedback from subordinates should be more effective

Clearer (but longer) lines of communication between the different layers of management

Smaller teams are easier to control and manage

Greater specialisation and division of labour can help increase efficiency and productivity

There are greater opportunities to earn promotion - more levels exist in the hierarchy

Flat structure - wide span of control

Tall structure - narrow span of control

Flat (less hierarchical) organisational structure

A relatively flat (less hierarchical) organisational structure has few levels of hierarchy and a wider span of control where managers will be responsible for many subordinates and many management functions will be delegated.

Advantages of less hierarchical organisational structures - wide span of control:

Delegation becomes a relatively important part of managing an organisation - extra responsibilities for subordinates and, therefore, faster career development.

Communication may be improved (it should be faster) overall since there are fewer layers in the hierarchy.

It is cheaper to operate a wider span of control because there are fewer levels of management (management functions will be eliminated or delegated).

Smaller 'psychological distance' between those at the top and those at the bottom of an organisation - perhaps reducing an 'us and them' culture where workers feel alienated from senior management.

ActivityA) As a bank manager create (Draw) two

organisational structures 1. Tall2. FlatB) Explain ‘span of control’ and how this differs

in the tall and flat structure.C) List the advantages and disadvantages of

each.D) Which would you choose and why?