Organisational Design (DP IB Business Management)

Key Terms for Organisational Structure

• 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 clayers of management

Diagram: span of control and chain of command

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