Organizational Structure


Organizational structure: the internal, formal framework of a business that shows the way in which management is organized, linked together and how authority is passed through the organization

Organizational structure chart displays:

Level of hierarchy: a stage of the organisational structure at which the personnel on it have equal status and authority 

Tall (vertical) organizational structure: one with many levels of hierarchy and, usually, narrow spans of control, long chain of command


Span of control: number of subordinates reporting directly to a manager

Chain of command: route through which authority is passed down an organisation – from the CEO and the board of directors

Flat (horizontal) structure: one with few levels of hierarchy and wide spans of control; encourages delegation since one cannot supervise large number of employees, short chain of command

Delegation: pass down authority in the organizational structure




Gives managers more time to focus on other important issues

only boring tasks will be delegated which may not be motivating

Showing trust in one’s subordinates may motivate them

Delegation is unsuccessful if sufficient authority isn’t given along with it /the person is inadequately trained to do the job 

Self-actualization: draw fulfillment through their work


Encourages staff to be accountable for their work based activities


May train them for senior posts



Accountability: obligation of one to account for their activities and to disclose results in a transparent way.

Delayering: removal of one/ more of the levels of hierarchy from an organisational structure




Reduce business costs

One-off costs, eg: Redundancy payments for laid off managers

Wider span of control; more delegation

Remaining managers may dwell in workload

short chain of command; eases communication

Redundancy being used as a way of cutting costs may reduce workforce’s sense of security 

Less Sense of remoteness, helps motivation



Bureaucracy: organizational system with standardized procedures and rules.

Centralization: keeping all of the important decision making powers within the head office 

Decentralization: decision-making powers are passed down the organization to empower

subordinates and regional/ product managers

Advantages: Centralization


Rapid decision making since the whole organization follows the same rules

Quick decision making in response to changing business environment

Experienced decision makers

Manager would knows the regional needs and make decisions based on that

No conflict between divisions since only one body holds all decision making authority 

More delegation opportunities; more motivation

Decisions taken in the interest of the whole business not just one division

Prepares subordinates for senior, challenging posts

Organizational Structures

Hierarchical structure: a structure in which power and responsibility are clearly specified and allocated to individuals according to their standing or position in the hierarchy

Hierarchical structure can be divided based on product, region or function

By product: Eg: Microsoft’s software, general motors’ car brands



More autonomous than functional divisions in terms of recruitment, budgeting, advertising 

Encourages rivalries between different product division competing for financial resources; lacks cooperation

Allow a team to focus on only one single product

Duplication of developments, lacks coordination 

Better than multiple divisions managing the development of a product since one division means they could keep in track of development and build common culture/morale



By function: 



Grouping employees by their functional skills improves efficiency since people of common goals are clustered together promoting collaboration and professional expertise

Lacks horizontal links between departments; lacks coordination

Employees can capitalize on their specialized skills as means of moving up the ladder in a given department.

Managers develop tunnel vision; more focus on departmental objects rather overall corporate aims


Such structure is not immune to change since managers defend their position in the hierarchy and importance of their department


By region:



Recruitment of manager who are aware of the local business environment

Unhealthy competition between different regions

Attracts local customers since the business tends to the needs of the particular regions

Difficult to keep up the core company belief eg.ethical code of practice in different regions

Conversation tend to be more direct/personal in a geographical organizational structure

Poor coordination between different regions may lead to inconsistent strategies being adopted 

Tracking the performance of individual regional markets is simplified under this

structure, as measures such as revenues, profit margins, costs and performance

improvements can be tracked to specific regions.

Duplication of personnel between head and regional offices


Factors influencing organizational structure:


matrix structure: organizational structure that creates project teams that cut across all functional departments; horizontally linked structure, eg: IT businesses, not suitable for service/ business producing products with longer life span.



Encourages communication between everyone in a team since the traditional link that exists only department heads is now demolished

Less authority over projects/bureaucratic control may not be taken well by senior managers 

Specialist knowledge from all departments can leads to new ideas and successful problem solving

If business allows cross-departmental groups to be created despite having leaders this might lead to a conflict of interest between the leaders

Immune to dynamic business environment since teams are easy to create


Less chance of people focusing on departmental objectives rather than product/business aims



Handy’s Shamrock organization: a structure where workers are divided into core, outsourced and flexible workers.

- core workers: carry out the core processes and central to survival/growth of the business, given full-time permanent jobs, high salaries in return expected to be loyal, work long hours.

- outsourced: could be independent providers or "contractual fringe" eg.IT services, payroll, training etc. do not carry out jobs that are core to business processes

- flexible workers: temporary, part-time workers, called in whenever their labor is required, most likely to lose jobs during economic downturn

Business Communication

Effective communication: the exchange of information between people or groups, with feedback


Feedback: the response to a message by the receiver

Impact of Cultural differences on communication:

- High context Vs low Context culture

- sequential Vs synchronic culture

 Impact of technology on communication:

Intranet: internal computer networks built on internet technologies


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