Welcome to Organisational Design!
Hi there! Have you ever wondered why some businesses feel like a giant, slow-moving machine while others feel like a fast-paced, creative team? It all comes down to Organisational Design. This is essentially the "blueprint" of a business—it shows how people are grouped, who talks to whom, and who has the power to make decisions. In this chapter, we are going to look at how businesses are built and how that structure affects how happy and hard-working the employees are. Let’s dive in!
1. The Building Blocks of a Structure
Before we look at the different types of "buildings" (structures), we need to understand the tools used to build them. Don’t worry if these terms seem a bit formal; they are quite simple once you see them in action.
A. Hierarchy
A Hierarchy is like a ladder. It shows the different levels of authority in a business. People at the top have the most power, and people at the bottom have the least.
• Example: In a school, the Headteacher is at the top, followed by Deputy Heads, then Department Heads, then Teachers.
B. Chain of Command
The Chain of Command is the path that orders and communication travel along. If the Big Boss wants something done, the message goes down the chain. If a worker has a problem, the report goes up the chain.
• Top Tip: A "long" chain of command means a message has to pass through many people, like a game of Chinese Whispers!
C. Span of Control
This is simply the number of employees who report directly to one specific manager.
• Narrow Span: A manager looks after only a few people (e.g., 2 or 3).
• Wide Span: A manager looks after many people (e.g., 10 or 15).
Analogy: Think of a narrow span like a tutor with only 2 students—they can give them lots of attention. A wide span is like a teacher with 30 students—it’s harder to supervise everyone closely.
D. Centralised and Decentralised
This is all about where the decisions are made.
• Centralised: All major decisions are made at the very top (Head Office). Local branch managers just follow orders.
• Decentralised: Decision-making power is shared with lower-level managers or different branches.
Did you know? Fast-food chains like McDonald's are often centralised so that a Big Mac tastes exactly the same whether you buy it in London or New York!
Quick Review:
• Hierarchy: The layers of authority.
• Chain of Command: The route for communication.
• Span of Control: How many people a boss manages.
• Centralisation: Power stays at the top.
2. Types of Organisational Structure
Businesses usually choose one of three main "shapes" for their organisation. Let's look at them one by one.
A. Tall Structure
A Tall Structure has many layers of hierarchy and a long chain of command. Because there are so many layers, managers usually have a narrow span of control.
Why choose it?
• Managers have more time to support each employee.
• There are clear paths for promotion (lots of "rungs" on the ladder).
The Downside:
• Communication can be very slow.
• It is expensive because you have to pay for many managers.
B. Flat Structure
A Flat Structure has only a few layers. This means the chain of command is short, and managers usually have a wide span of control.
Why choose it?
• Decisions are made quickly because there are fewer people to ask.
• It’s cheaper because there are fewer managers to pay.
• Employees often feel more trusted and motivated.
The Downside:
• Managers might feel overwhelmed (too many people to look after).
• There are fewer opportunities for employees to get promoted.
C. Matrix Structure
The Matrix Structure is a bit different. Instead of just working in one department (like Marketing), employees work in teams based on specific projects. This means an employee might have two bosses: their department manager and their project manager.
Example: An IT expert might report to the Head of IT but also work on a "New App Project" team led by a Project Manager.
Why choose it? It’s great for creativity and flexibility.
Common Mistake: Students often forget that a Matrix structure can be confusing for staff because they have "two bosses" giving them potentially different instructions!
Key Takeaway: Tall structures are about control and order; Flat structures are about speed and communication; Matrix structures are about projects and teamwork.
3. Impact on Efficiency and Motivation
Why does all this matter? Because the way a business is designed changes how people work (efficiency) and how they feel (motivation).
Impact on Efficiency
• Speed: Flat structures are usually more efficient at making quick changes because the "distance" between the boss and the customer is shorter.
• Accuracy: Tall structures might be more efficient at complex tasks because managers can monitor work very closely (narrow span of control).
Impact on Motivation
• Empowerment: In a Flat or Decentralised structure, employees are often given more responsibility. This makes them feel "empowered," which usually increases motivation (remember Herzberg or Maslow from earlier in the course!).
• Stress: If a span of control is too wide (Flat structure), employees might feel unsupported, which can lower motivation.
• Promotion: Tall structures give people a clear goal to work towards (the next promotion), which can keep them working hard.
Memory Trick: Think of F.L.A.T. for Flat structures: Fast decisions, Lower costs, Accountability for staff, Trust.
Quick Review Quiz - Test Yourself!
1. If a manager looks after 20 people, is that a narrow or wide span of control?
(Answer: Wide)
2. Which structure has many layers and a long chain of command?
(Answer: Tall structure)
3. What is the main risk of a Matrix structure?
(Answer: Confusion from having two bosses)
4. In a centralised business, where are the decisions made?
(Answer: At the top/Head Office)
Summary: Choosing the right organisational design is a balancing act. A business must decide if it wants the control of a tall, centralised structure or the speed and motivation of a flat, decentralised one. There is no "perfect" structure—it depends on the size of the business and what it is trying to achieve!