A2 Organisational Structure
Unit 7: Business Decision Making
The organisational structure of a business refers to how staff are organised in terms of teams, roles and responsibilities.
A span of control is the number of subordinates a manager directly supervises. A wide span of control means that a manager has a large number of subordinates to oversee and a narrow span of control means that a manager has fewer subordinates to oversee.
Flat Organisational Structures
Flat organisational structures have fewer levels of management with each manager having a wider span of control. Fewer managers means that decision making authority and responsibility is distributed to employees across the organisation giving more autonomy to individual workers. Characteristics include:
Few hierarchical levels
Wide spans of control
Decentralised decision-making
Collaboration and teamwork
Flexibility and adaptability
Employee empowerment
Benefits of flatter organisational structures
Decisions can be made faster as there are fewer levels of management to get approval from.
Communication and collaboration is improved with fewer hierarchical layers.
Fewer management positions means that employees are allowed to make more decisions which can be empowering.
Costs can be reduced by having fewer middle managers.
Drawbacks of flatter organisation structures
Wider spans of control can create stress for managers.
Less middle management positions means fewer promotional opportunities which can lead to higher staff turnover.
Lack of coordination in decision making can lead to a lack of consistency
Matrix Structures
Matrix organisational structures are combinations of different organisational structures that are flexible to changing business needs. Employees would usually report to a manager of their function such as marketing, finance or operations but would also be a member of different project teams. Projects teams consist of employees from different departments and would have their own project manager. Characteristics include:
Multiple reporting lines
Project-based teams
Flexibility and adaptability
Enhanced communication and collaboration
Balance of functional and project priorities
Benefits of Matrix Organisational Structures
Complex problems can be solved through expertise sharing across different departments.
Teams can quickly change to adapt to changing customer needs due to their flexible nature.
Employees develop new skills regularly through changing tasks and teams.
Communication is improved between different departments which brings in different viewpoints to decision making.
Drawbacks of Matrix Organisational Structures
Employees can become confused and stressed with competing priorities from different teams they work in.
Managers can struggle to make decision as they have to coordinate with managers in different departments.
Costs can increase due to the additional management required to coordinate more complex teams.
Conflict can occur due to the confusion of who is in charge in different projects which can lead to disrupted team performance.
Decision making can be slower due to the number of people involved.
Hierarchical (Tall) Organisational Structures
Hierarchical (tall) organisational structures are structures shaped like a pyramid with a single leader at the top with multiple levels of management and employees below. Managers have smaller spans of control and decisions are usually made at the top of the organisation. Characteristics include:
Multiple levels of authority
Vertical Communication
Centralised decision making
Clear reporting lines
Division of labour
Benefits of hierarchical structures
Clear lines of communication as employees know exactly who they report to.
Faster decision-making as they are made by a small group of managers at the top of the organisation.
Specialisation as employees develop expertise through clear roles and responsibilities in their departmental area.
There are lots of opportunities for promotion which can improve morale and reduce staff turnover.
Departmental targets and goals are clearer.
Drawbacks of hierarchical structures
Decision-making can be slower if communication is required up and down a tall hierarchy.
Departments can become isolated in working towards their own goals, reducing the benefits of collaboration.
People can become rigid to change which reduces the ability to respond to changing customer needs.
Discontentment can arise between employees and managers as they are left out of decision making