Organisational Structure

Organisational Structure

An organisation chart shows the reporting structure and division of labour — job groupings (boxes), titles, reporting relationships (solid lines), and management levels (horizontal layers).

Differentiation and Integration

• Differentiation — distinguishing and separating jobs through division of labour and specialisation
• Integration — the degree to which differentiated units coordinate their efforts toward the organisation's mission

The Vertical Structure: Authority

Authority is the legitimate right to make decisions and tell others what to do. The hierarchy flows from Board of Directors → CEO → Top Management Team → Middle Managers → Frontline Managers.

Span of control refers to the number of subordinates who report directly to a supervisor:

• Narrow span = tall organisation with many levels
• Wide span = flat organisation with fewer levels

Delegation

Delegation involves assigning new or additional responsibilities to a subordinate. Effective delegation requires clarity of responsibility (the task), authority (the right to decide), and accountability (the expectation to perform and report). Steps: define the goal → select the person → ask for their views → give authority/time/resources → review progress.

Types of Organisational Structures

• Functional organisation — structured around specialised activities (production, marketing, HR). Promotes efficiency and expertise; can limit cross-functional coordination.
• Divisional organisation — groups units around products, customers, or geographic regions. Allows focus on customer needs; can lead to duplication.
• Matrix organisation — dual reporting relationships where employees report to both a functional manager and a product/project manager. Advantages: information sharing, responsiveness. Disadvantages: unclear responsibilities, conflict, stress.
• Network organisation — a collection of independent, mostly single-function firms that collaborate. Managed by brokers who assemble and coordinate participants.

Organisational Integration Mechanisms

• Standardisation — common routines and procedures for everyone
• Formalisation — rules and regulations governing interactions
• Coordination by plan — interdependent units meet shared deadlines and objectives
• Coordination by mutual adjustment — units interact flexibly to make accommodations