Organisational Structures

An organisational structure defines how a business is arranged — who reports to whom, how decisions are made, and how communication flows. Getting the structure right is essential for efficiency, communication, and employee satisfaction.

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What Is an Organisational Structure?

An organisational structure is the way in which a business arranges its employees, management, and departments to achieve its objectives. It is usually shown as an organisation chart.

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Key Terms

Term	Definition
Hierarchy	The levels of authority within an organisation, from top management to shop floor
Span of control	The number of employees directly managed by one person
Chain of command	The line of authority from the top of the organisation to the bottom
Delegation	Giving authority to a subordinate to carry out a task
Centralisation	Decision-making is concentrated at the top of the organisation
Decentralisation	Decision-making is spread to lower levels or individual departments
Delayering	Removing levels of management to flatten the structure

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Tall (Hierarchical) Structures

A tall structure has many levels of hierarchy, a narrow span of control, and a long chain of command.

graph TD
    A[CEO] --> B[Director 1]
    A --> C[Director 2]
    B --> D[Manager 1]
    B --> E[Manager 2]
    C --> F[Manager 3]
    C --> G[Manager 4]
    D --> H[Supervisor]
    E --> I[Supervisor]
    H --> J[Workers]
    I --> K[Workers]

Advantages

1. Clear lines of authority — everyone knows who they report to.
2. Close supervision — narrow spans of control allow close monitoring.
3. More promotion opportunities — many levels to progress through.
4. Specialisation — managers can focus on specific areas.

Disadvantages

1. Slow communication — messages take longer to travel up and down the chain.
2. Slow decision-making — decisions must pass through many levels.
3. High costs — more managers means higher wage costs.
4. Bureaucratic — layers of management can create red tape.

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Flat Structures

A flat structure has few levels of hierarchy, a wide span of control, and a short chain of command.

Advantages

1. Faster communication — fewer levels for messages to pass through.
2. Faster decision-making — fewer approvals needed.
3. Lower costs — fewer managers to pay.
4. Greater employee empowerment — workers have more autonomy and responsibility.
5. Better teamwork — closer relationships between management and staff.

Disadvantages

1. Less supervision — managers may struggle to oversee many employees.
2. Fewer promotion opportunities — fewer levels to progress through.
3. Overwork for managers — wide spans of control can be overwhelming.
4. Less specialisation — managers may need to cover multiple areas.

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Matrix Structures

A matrix structure organises employees by both function (e.g. marketing, finance) and by project or product. Employees may report to two managers — a functional manager and a project manager.

Advantages

1. Flexibility — teams can be assembled for specific projects.
2. Better communication — breaks down barriers between departments.
3. Efficient use of specialists — expert employees can work across multiple projects.

Disadvantages

1. Confusion — employees may receive conflicting instructions from different managers.
2. Conflict — disputes over authority between functional and project managers.
3. Complex — more difficult to manage than simple hierarchical structures.

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Centralisation vs Decentralisation

Feature	Centralised	Decentralised
Decision-making	Made at the top by senior management	Delegated to lower levels or branch managers
Consistency	High — decisions are uniform across the business	Lower — different areas may make different decisions
Speed	Slower — decisions go through senior management	Faster — local managers can decide quickly
Employee empowerment	Lower — staff follow instructions from above	Higher — staff have more autonomy and responsibility
Example	McDonald's (strict global standards)	Tesco (store managers have some local decision-making power)

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Delayering

Delayering means removing layers of management from the organisational structure to make it flatter.

Advantages	Disadvantages
Reduces wage costs	Remaining managers have wider spans of control
Speeds up communication and decisions	May lead to redundancies and lower morale
Empowers remaining employees	Loss of experienced managers and their expertise
Reduces bureaucracy	Can cause disruption during the transition

Exam Tip: Organisational structure questions often ask you to evaluate whether a business should have a tall or flat structure. Consider factors such as the size of the business, the nature of the work, the need for supervision, and the importance of fast decision-making.

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Summary

• Organisational structure defines how a business arranges employees and management.
• Tall structures have many levels, clear authority, but slow communication.
• Flat structures have few levels, fast communication, but less supervision.
• Matrix structures organise by function and project — flexible but potentially confusing.
• Centralisation concentrates decisions at the top; decentralisation delegates to lower levels.
• Delayering removes management levels to reduce costs and speed up decisions.

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UK Case Study: Tesco's Decentralised Store Management

Tesco plc, the UK's largest supermarket with around 330,000 employees and 4,000+ UK stores, offers a textbook example of how organisational structure evolves as a business scales. Tesco's structure is a tall hierarchy at corporate level but partially decentralised at store level, a blend designed to balance consistency with local responsiveness.

Structure overview:

1. Board and executive team — Chief Executive, CFO, and functional directors (retail, property, technology, supply chain, people) sit at the top of the hierarchy, setting group strategy from Tesco's Welwyn Garden City head office.

2. Regional and area management — the UK is divided into regions, each with a regional director, then into areas managed by area managers overseeing around 15–25 stores.