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. Entrepreneurial — decisions made centrally.

2. Pyramid/hierarchical — staff have a role; shared
decision making; specialisation is possible.
3. Matrix — staff with specific skills join project teams;
individuals have responsibility.
4. Independent — seen in professions where organisation
provides support systems and little else.
 Organisation structures

Entrepreneurial
Few decisions
Key made Key
worker collectively worker

Decisions can be Decision All decisions

made quickly in maker made centrally
this structure

Great reliance on
Key key workers Key
worker supporting decision worker
makers
Organisation structures

Pyramid

Decisions pass
Information flows up
down from
from staff to
managers to
management
staff

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 teams Staff with
Project created specialist skills
B

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.