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
- 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 layers of management
The chain of command and span of control
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
- 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