1a. Understanding Organisational Structure Terminology

What does an organisational structure do?

It outlines the reporting relationships, roles, and responsibilities of employees in the organisation

Why is it important for businesses to determine the best organisational structure?

Businesses must determine the best structure to effectively implement their ideas and achieve objectives. The structure impacts management, operational efficiency, and communication. A well-designed organisational structure promotes clarity, efficiency, and accountability.

What is a hierarchy?

The levels of authority within an organization

• It describes the ranking of positions from top to bottom

• The higher the position in the hierarchy, the more authority and power it holds

• It usually includes top-level management, middle-level management, and lower-level employees

What is the chain of command?

The formal line of authority that flows downward from the top management to lower-level employees

• It defines who reports to whom and who is responsible for making decisions

• It helps to establish a clear communication channel and helps to maintain accountability within the organization

What is the span of control?

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

What is a centralised structure?

Decision-making authority is concentrated at the top of the organization with senior management making most of the decisions

What is a decentralised structure?

Decision-making authority is distributed throughout the organization, with lower-level employees having more decision-making power

• Can promote flexibility and innovation, while centralisation can promote consistency and control