An effective organisational structure ensures that everyone knows their responsibilities and whom they report to. Good management and leadership inspire employees to work towards the organisation’s objectives.
Organisational structures
An organisation’s structure shows levels of management and division of responsibilities. Key terms include:
- Hierarchy – the chain of command from the highest to the lowest level.
- Span of control – the number of subordinates reporting directly to a manager.
- Chain of command – the route through which instructions are passed from senior management down to employees.
- Line managers – managers with direct responsibility for people or processes.
Structures may be tall (many levels of hierarchy and narrow spans of control) or flat (few levels and wide spans of control). Each has advantages and disadvantages: tall structures allow close supervision but can hinder communication, while flat structures encourage autonomy but may overload managers.
Advantages of tall structures
- Managers can closely supervise subordinates and provide support.
- Clear lines of responsibility and defined promotion paths.
- Narrow spans of control mean managers have time to help each employee.
Disadvantages of tall structures
- Communication can be slow as messages pass through many layers.
- Decision making may be delayed.
- Higher management costs due to multiple layers of hierarchy.
Advantages of flat structures
- Shorter chain of command improves communication and flexibility.
- Employees have greater responsibility and autonomy, which can motivate them.
- Lower management costs with fewer supervisory levels.
Disadvantages of flat structures
- Managers have wide spans of control, which may be difficult to manage effectively.
- Fewer promotion opportunities may demotivate employees.
- Some employees may need more guidance than a flat structure can provide.
Example organisational structure
The organisational chart below illustrates how authority flows from the Chief Executive through directors, managers and staff in a large business. It shows the hierarchy and span of control across departments.
Delayering
Delayering is the process of reducing the number of levels in an organisation’s hierarchy to create a flatter structure. It shortens the chain of command and broadens managers’ spans of control.
Advantages of delayering
- Improves communication by reducing the number of layers through which messages pass.
- Increases flexibility and speeds up decision making.
- Lowers management costs because fewer managers are needed.
- Can empower employees by giving them more responsibility.
Disadvantages of delayering
- Managers’ spans of control become wider, which may overload them.
- Fewer promotion opportunities can demotivate employees.
- Loss of specialist managers may reduce supervision and support.
- Employees may need training to handle broader responsibilities.
Centralisation and decentralisation
When decision‑making authority is concentrated at the top of the hierarchy, the organisation is centralised. This can lead to consistent policies and tight control but may slow down decision making. Decentralisation delegates authority to lower levels, enabling quicker responses to local conditions and developing managerial skills, though it may lead to inconsistent decisions.
Advantages of centralisation
- Decisions are consistent throughout the organisation and align with overall objectives.
- Senior managers have a clear overview and can coordinate different parts of the business effectively.
- Economies of scale can be achieved in areas such as purchasing and marketing.
Disadvantages of centralisation
- Decision making can be slow because all major decisions must go through top management.
- Lower‑level managers and employees may feel demotivated due to lack of authority.
- Less responsive to local conditions and customer needs.
Advantages of decentralisation
- Quicker decision making at local levels allows the business to respond rapidly to changes.
- Encourages innovation and develops management skills among junior staff.
- May improve motivation because employees have more responsibility.
Disadvantages of decentralisation
- Decisions may be inconsistent between departments or locations.
- Senior management loses some control over operations.
- Duplication of functions across departments can reduce economies of scale.
Management functions
Henri Fayol and other theorists identified five key functions of management:
- Planning – setting objectives and deciding how to achieve them.
- Organising – assembling resources and allocating tasks.
- Commanding (leading) – directing and motivating employees.
- Coordinating – ensuring that the activities of different departments work together.
- Controlling – monitoring performance and taking corrective action where necessary.
Leadership styles
- Autocratic – leaders make decisions without consulting others. This style can be effective in emergencies but may demotivate staff.
- Democratic – leaders encourage participation and delegate authority. Employees feel valued but decision making may be slower.
- Laissez‑faire – leaders provide a vision but give employees freedom to carry out tasks. This can encourage creativity but may lead to lack of direction if employees are inexperienced.
Good managers adapt their leadership style to the situation and the needs of their team.
| Style | Main features | Suitable situations | Potential drawbacks |
|---|---|---|---|
| Autocratic | Leader makes decisions alone; clear direction. | Emergencies; inexperienced workforce requiring close supervision. | Demotivates employees; limits creativity. |
| Democratic | Employees involved in decision‑making. | Skilled, motivated teams; when innovation is important. | Time‑consuming; decisions may be delayed. |
| Laissez‑faire | Minimal direct supervision; high autonomy. | Creative industries; highly skilled and self‑motivated employees. | Lack of direction; may lead to poor coordination. |
Centralisation versus decentralisation
| Aspect | Centralised | Decentralised |
|---|---|---|
| Decision making | Concentrated at top levels; consistent policies. | Delegated to lower levels; quicker responses to local needs. |
| Communication | May be slower due to long chain of command. | Fewer layers improve communication. |
| Flexibility | Low – changes require approval from top. | High – local managers can adapt quickly. |
| Employee motivation | Lower – limited autonomy. | Higher – empowerment and responsibility. |
Delegation
Delegation involves giving subordinate staff the authority to perform tasks. It can improve motivation, develop skills and free up time for managers to focus on higher‑level issues. Effective delegation requires clear instructions and appropriate supervision.
Examples and applications
Different organisational structures suit different businesses. A small family‑run restaurant typically has a flat structure: the owner works alongside a handful of staff and makes decisions quickly. In contrast, a large multinational like a car manufacturer has a tall structure with many layers of management overseeing thousands of workers in different departments and countries. The same contrast applies to leadership styles: in the restaurant the owner may use an autocratic approach when the kitchen is busy but involve staff in menu planning (a more democratic style) when time allows.
Centralised and decentralised structures can also be illustrated by real businesses. Fast‑food chains often centralise decision making at head office to ensure that menus, branding and standards are consistent across all outlets. On the other hand, retail chains like IKEA give store managers a degree of decentralisation to adjust stock levels and displays based on local demand. Delegation is important: a school principal cannot teach every class, so they delegate to teachers; the teachers in turn delegate tasks to students for group projects.
