IB Business Management SL - 2.2. Organizational structure

Levels of hierarchy

The level of responsibility in the business

Chain of command

The formal route that a decision in an organization must follow, usually from the top to the bottom

Span of control

The number of subordinates directly under the authority of a manager

Delegation

Giving the subordinate the authority to make a particular decision

Centralization

All major decisions in the business are made by a small group (managers) that works closely with the CEO

Decentralization

Daily operations and decisions are delegated to middle and lower-level managers

Bureaucracy

The relative importance of rules and procedures. More bureaucracy means more rules and paperwork.

De-layering

Removing a layer in the hierarchy of the business, intended to make the business less bureaucratic

Reasons for de-layering

Costs are reduced, communication speed is increased, delegation is fomented

Tall organizational structure

Many levels of hierarchy, narrow spans of control, long chains of command, centralized.

Flat organizational structure

Few levels of hierarchy, wider spans of control, shorter chains of command, decentralized

Organizational structure by hierarchy

Shows the chain of command in a particular business

Organizational structure by function

An organizational structure where employees are grouped by departments

Organizational structure by product

An organizational structure based on what a particular business produces

Organizational structure by region

Organizational structure present in businesses that carry out certain activities in different parts of the world.

Project-based organization

A market structure in which employees are organized around different projects that a firm carries out

Shamrock organization

A market structure in which a business trims its workforce to retain only multi-skilled core. All other non-central functions are outsourced.

Organizational roles

CEO, Director, Manager, Supervisor, Employee