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Organisational structure refers to the relationship between different people and functions in an organisation - both vertically, from shop-floor workers through supervisors and managers to directors, and horizontally, between different functions and people at the same level.
Organisation chart: a diagram showing the lines of authority and layers of hierarchy in an organisation.
Organisational hierarchy: the vertical division of authority and accountability in an organisation.
Levels of hierarchy: the number of different supervisory and management levels between the shop-floor and the chief executive within an organisation
Span of control: the number of subordinates a manager is required to supervise directly.
If a manager has many subordinates answerable to him or her, the span of control is said to be wide.
If a manager has relatively few subordinates answerable to him or her, the span of control is said to be narrow.
Normally, the greater the degree of similarity in what a group of workers do, the wider the span of control can be.
Traditionally, organisations tended to have very tall hierarchical structures, i.e. many layers of management, each with a narrow span of control.
More recently, hierarchies have become flatter, meaning that the number of layers of management has been reduced and each manager has a wider span of control
Delegation is the process of passing authority down the hierarchy from a manager to a subordinate.
Delegation must be based on mutual trust between manager and subordinate.
Subordinates must be appropriately skilled, trained and informed about the particular task they will be responsible for.
Interesting and challenging tasks should be delegated as well as the more routine.
Responsibility and authority must be delegated.
The limitations of the subordinate's authority should be made clear too.
Managers must relinquish control to ensure that subordinates feel they are trusted and that the manager has confidence in them.
Advantages of Delegation:
It frees up time for managers to concentrate on strategic tasks.
It empowers and motivates workers.
Subordinates might have a better knowledge of local conditions and therefore might make more informed decisions.
Delegation may allow greater flexibility and a quicker response to changes.
Disadvantages of Delegation:
In some small firms, managers delegate very little, they may not trust the workforce.
Some staff may not be able to handle the responsibility.
In crisis situations it may not be appropriate.
Some staff may abuse the responsibility that they have been given.
More details on this topic here.
| Advantages | Disadvantages |
| Easier to implement common policies and practices for the business as a whole | More bureaucratic – often extra layers in the hierarchy |
| Prevents other parts of the business from becoming too independent | Local or junior managers are likely to much closer to customer needs |
| Easier to co-ordinate and control from the centre – e.g. with budgets | Lack of authority down the hierarchy may reduce manager motivation |
| Economies of scale and overhead savings easier to achieve | Customer service does not benefit from flexibility and speed in local decision-making |
| Greater use of specialisation | |
| Quicker decision-making (usually) – easier to show strong leadership |
2. Decentralisation
| Advantages | Disadvantages |
| Decisions are made closer to the customer | Decision-making is not necessarily “strategic” |
| Better able to respond to local circumstances | More difficult to ensure consistent practices and policies (customers might prefer consistency from location to location) |
| Improved level of customer service | May be some diseconomies of scale – e.g. duplication of roles |
| Consistent with aiming for a flatter hierarchy | Who provides strong leadership when needed (e.g. in a crisis)? |
| Good way of training and developing junior management | Harder to achieve tight financial control – risk of cost-overruns |
| Should improve staff motivation |
