Organisational Design (Edexcel A Level Business)

• Organisational structure outlines the reporting relationships, roles, and responsibilities of employees in the organisation
• Businesses must determine what the best structure is for them to effectively implement their ideas and achieve their objectives
  • They should consider how the structure may affect the management and effectiveness of operations and communications
  • A well-designed organisational structure helps to promote clarity, efficiency, and accountability
    
    

Key terminology used in organisational design

1. Hierarchy

• A hierarchy refers to the levels of authority within an organization
  • 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 down from the 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 organization
    
    

3. Span of control

• Span of control refers to the number of employees that a manager or supervisor can effectively manage
• 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
    
    

4. Centralised and decentralised structures

• In a centralised structure, decision-making authority is concentrated at the top of the organization with senior management making most of the decisions
• In a decentralised structure, decision-making authority is distributed throughout the organization, with lower-level employees having more decision-making power
  • Decentralisation can promote flexibility and innovation, while centralisation can promote consistency and control

• Businesses typically structure their organisation in one of three ways
  • Tall organisational structures
  • Flat organisational structure
  • Matrix organisational structure
     

The Different Structures & the Impact they have on Business Efficiency & Motivation

Tall Organisational Structure	Flat Organisational Structure	Matrix Organisational Structure
Characterised by multiple levels of management and a more centralised decision making process A long chain of command Common in large organisations with complex operations e.g. government agencies and universities	Characterised by fewer levels of management and a more decentralised decision-making process A short chain of command Common in small organisations or start-ups e.g. tech start-ups and small businesses	The structure is usually built around specific products or projects e.g. KitKat has its team within Nestlé It combines the functional areas of a business (HR, finance, marketing, sales) with a specialist team that operates inside the business
Advantages	Advantages	Advantages
Provides a clear hierarchy of authority and defined roles and responsibilities Promotes specialisation and expertise within each department or function Offers opportunities for career advancement and promotion within the organization All of the above increases efficiency and motivation	Promotes a culture of collaboration and open communication Decision-making can be faster and more efficient Encourages creativity and innovation, as employees have more autonomy and flexibility All of the above increases efficiency and motivation	Promotes cross-functional collaboration and communication Allows for specialisation and expertise within each functional area Enables efficient allocation of resources and coordination of multiple projects All of the above increases efficiency and motivation
Disadvantages	Disadvantages	Disadvantages
Can create communication barriers between the upper and lower levels of the hierarchy Decision-making can be slow as information must pass through multiple layers of management This can lead to bureaucracy and excessive levels of management All of the above reduce efficiency and motivation	This can lead to role ambiguity and a lack of a clear hierarchy May not provide clear opportunities for career advancement or promotion This may require employees to take on multiple roles and responsibilities leading to burnout and overwhelm All of the above reduce efficiency and motivation	This can lead to conflicts over priorities and resources This can create confusion over roles and responsibilities particularly when multiple managers are involved Requires a high degree of communication and coordination, which can be challenging All of the above reduce efficiency and motivation