Organisational Design (HL IB Business Management)

• An 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 organisation
  • 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. Bureaucracy

• A bureaucracy is an organisation with many levels of authority
  • This makes decision-making and communication somewhat time-consuming
     

3. 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
  • The chain of command helps to establish a clear communication channel and helps to maintain accountability within the organisation
    
    

4. 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

The chain of command and span of control
 

5. Centralised and decentralised structures

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

6. Matrix structures

• In this type of structure, employees are grouped based on both their functional expertise (finance, marketing etc) and the specific projects or products they are working on
• Employees typically have two reporting lines: a functional manager and a project or product manager
  • The functional manager oversees their work in terms of their functional skills and expertise
  • The project manager is responsible for the specific project or product they are assigned to