Business (9225) | Organisational structures

👋 Welcome to Organisational Structures!

Ready to dive into how businesses are put together? Think of a business like a human body: it needs a skeleton to give it shape, structure, and direction. This chapter explains that skeleton – the official arrangement of people and jobs!

Understanding Organisational Structures is vital for Human Resources (HR) because it determines how people communicate, who reports to whom, and ultimately, how efficiently the business runs. Let's make this simple!

Section 1: The Organisational Chart – The Business Map

Every successful business needs a map to show everyone their place. This map is called the Organisational Chart.

What is an Organisational Chart?

It is a diagram that visually shows the structure of a business. It displays the roles, responsibilities, and relationships between different people and departments.

Why Bother Having One?

• It makes the lines of authority clear (who is the boss?).
• It shows reporting relationships (who do I tell if there is a problem?).
• It helps new employees understand where they fit in.

Analogy: Think of the family tree diagram. The organisational chart is the business's family tree!

Section 2: The Three Key Building Blocks

When looking at the chart, three concepts define how authority flows:

1. Hierarchy (The Levels)

The Hierarchy describes the different layers of management and supervision in the business. It’s usually shown as a pyramid, with the CEO or Owner at the very top and entry-level staff at the bottom.

• The higher you are in the hierarchy, the greater your status (importance) and authority (power to make decisions).
• Each layer is known as a level of hierarchy.

Example: In school, the hierarchy might be: Head Teacher (Top) -> Deputy Heads -> Subject Leaders -> Teachers -> Students (Bottom).

2. Chain of Command (The Path)

The Chain of Command is the official route through which authority, instructions, and communication pass from the top down to the bottom.

If you have a problem, you must follow the chain of command: you report to your supervisor, who reports to their manager, and so on.

🔑 Memory Aid:
Chain of Command = The Connected line of communication. It ensures nobody is skipped!

3. Span of Control (How Many People?)

The Span of Control is the number of subordinates (people working below them) that a manager is directly responsible for.

This is a crucial concept, as it defines how busy and stressed a manager will be!

a) Narrow Span of Control:

• The manager controls only a few people (e.g., 3-5).
• Advantage: Manager can supervise very closely and offer detailed support.
• Disadvantage: More expensive (you need lots of managers!) and staff might feel constantly watched.

b) Wide Span of Control:

• The manager controls many people (e.g., 10-20).
• Advantage: Fewer managers needed (cheaper); staff must take more initiative and feel more freedom.
• Disadvantage: Manager can become overloaded; staff might receive less guidance.

Analogy: A teacher with 5 students (Narrow Span) versus a teacher with 35 students (Wide Span). Which one can give more personal attention?

Section 3: Types of Structures – Tall vs. Flat

How many layers a company has defines whether its structure is tall or flat. This directly relates back to the concepts of hierarchy and span of control!

1. Tall (Hierarchical) Structures

These structures have:

• Many levels of hierarchy.
• A long chain of command.
• A narrow span of control.

Advantages of Tall Structures:

• Clear path for promotion (motivates staff).
• Managers have time to supervise closely, leading to high-quality work.

Disadvantages of Tall Structures:

• Communication is slow (takes time to pass up and down the long chain).
• High labour costs (lots of managers getting higher salaries).

2. Flat Structures (The Modern Trend)

These structures have:

• Few levels of hierarchy.
• A short chain of command.
• A wide span of control.

The move from a tall structure to a flat structure is often called Delayering (removing layers of management).

Advantages of Flat Structures:

• Communication is much faster.
• Lower labour costs (fewer middle managers).
• Staff feel more empowered and trusted (more freedom).

Disadvantages of Flat Structures:

• Managers can be easily overworked or stressed.
• Less supervision means mistakes might not be caught quickly.

Section 4: Centralisation vs. Decentralisation (Decision Making)

Who gets to make the important decisions in a business? The answer tells us if the structure is centralised or decentralised.

1. Centralisation

In a Centralised structure, most key decisions are made by the senior managers or the head office at the top of the hierarchy.

C is for Central = C is for Control. Top management keeps tight control.

When is Centralisation Good?

• When the business needs consistency (e.g., all branches must look and operate exactly the same, like McDonald's).
• When decisions involve large amounts of money or high risk.

2. Decentralisation

In a Decentralised structure, decision-making power is delegated (passed down) to managers at lower levels of the hierarchy, or even to staff on the shop floor.

D is for Decentralised = D is for Distributed (or Delegated). Power is spread out.

When is Decentralisation Good?

• When the business operates in many different locations or countries (local managers know what customers want better).
• It helps motivate junior staff because they feel trusted and empowered.
• It speeds up response time to local problems.

Example: A local clothing shop manager being allowed to choose which specific products to stock (Decentralised) vs. a global bank where only the Head Office can approve major loans (Centralised).

Great job! You now understand the framework that holds any successful business together. This knowledge is essential for understanding how HR manages teams and workflow!