Organisational structure: the formal, internal, framework of a business that shows how it is managed

and organised.

Functional departments: the main activities of business. finance, marketing, operations, human
resources and research and development.

The main features of this organisational structure are:

❖ hierarchy

❖ chain of command

❖ delegation

❖ span of control.

Hierarchy: the number of levels in an organisational structure.

Hierarchy

This describes the different levels in an organisational structure.

Production workers are at the lowest level of the hierarchy and the Chief Executive is at the top level

In larger organisations as you move from the top to the bottom of the hierarchy there are more and
more people at each level.

This is because it is not possible for one person or a group of senior managers to control the work of all
employees.

Middle managers, and perhaps supervisors below them, are needed to control employees.

The tasks become simpler as you move down the hierarchy, so a wider span of control is possible at the
bottom than it is at the top.

People who are on the same level in the organisational structure have the same status
Chain of command: the route through which authority is passed down through an organisation.

In a typical business situation, instructions are passed down the chain of command, whereas
information about performance, for example monthly sales figures, are passed up the chain of
command.

Delegation: passing authority down through the organisational hierarchy to a subordinate.

Subordinate: an employee who is below another employee in the organisation's hierarchy.

Span of control: the number of subordinates reporting to each supervisor/manager.

There are a number of factors that affect the size of the span of control including:

The difficulty of tasks - if the work that subordinates do involves simple and repetitive tasks, then a
wide span of control can be used. The more complex the task subordinates do, the more likely that a
narrow span of control will be used.

The experience and skills of workers - highly skilled and experienced workers may require less control
than those who are less skilled and less experienced. The span of control will often be wider when
subordinates are more skilled and more experienced.

The size of the business - larger businesses are often able to afford to employ more managers than
smaller businesses. The span of control of individual managers in a large business is often narrower than
that for managers in small businesses.

Levels of hierarchy - managers in tall organisation structures will usually have narrower spans of control
than managers in flat organisation structures.
Management style - some businesses use a management style that has greater control over the
workforce than others. In this type of business, managers have a narrow span of control.

Tall or flat?

Organisational structures may be tall or flat, depending on the number of levels in the hierarchy.

Tall organisations have many levels of hierarchy. Each level in the hierarchy, except for the bottom level,
is a layer of management.

Because a tall organisational structure has several layers of management, and therefore more
managers, the span of control for each manager will be narrow.

The chain of command is long. Communication and decision-making are often slower because they
must pass through several layers.

Flat organisations have few levels of hierarchy, which means the chain of command is very short.

Communication and decision-making are much quicker in a flat structure because there are very few
levels for these to pass through.

There are fewer managers in a flat structure, so the span of control is wide.

Delayering: reducing the size of the hierarchy by removing one or more levels - most often middle
management.