Organisational Charts (Edexcel IGCSE Business)

• 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: Example Organisation Chart

This organisation chart shows a traditional hierarchy where workers are answerable to the supervisor or manager who has authority over them in the structure
 

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. 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
    
    

3. 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

• The chain of command and span of control are closely linked
  • A long chain of command usually results in a narrow span of control
    • This is known as a hierarchical organisational structure
      
      
  • A short chain of command usually results in a wide span of control
    • This is known as a flat organisational structure
      
      

Characteristics of Hierarchical and Flat Structures

Hierarchical Organisational Structure	Flat Organisational Structure
Multiple levels of management  A long chain of command and narrow span of control Common in large organisations with complex operations E.g. government agencies and universities	Few levels of management  A short chain of command and wide span of control Common in small organisations or start-ups E.g. tech start-ups and small businesses
Advantages	Advantages
Provides a clear structure of authority and defined roles and responsibilities Promotes specialisation and expertise within each department or function	Promotes a culture of collaboration and open communication Decision-making can be faster and more efficient
Disadvantages	Disadvantages
Can create communication barriers between upper and lower levels of the hierarchy Decision-making can be slow as information must pass through multiple layers of management	Employee roles and management may not be clearly defined May require employees to take on multiple roles and responsibilities, leading to burnout and stress

• Some businesses may choose to remove layers from their hierarchy, which shortens the chain of command
  • This is known as delayering

• A centralised organisation 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

	Advantages	Disadvantages
Centralised structure	Effective co-ordination and control of business operations from the centre Fast and decisive decision-making can increase competitiveness Consistency across the whole organisation	Middle managers' lack of autonomy can impact their motivation  Highly bureaucratic, slowing communication of decisions Ignores insights of lower-level staff who are likely to be closer to customers
Decentralised structure	Better able to respond to local market conditions and meet customer needs Staff able to contribute to decision-making may be more fulfilled and loyal Prepares junior management for career development	Diseconomies of scale such as the duplication of staff roles may emerge May be difficult to tightly control budgets During times of crisis, leadership may not be clear