Principles of Organisational Design (AQA A Level Business): Revision Note

Organisational design

• Organisational design outlines the reporting relationships, roles, and responsibilities of employees in an organisation

• Businesses must determine what the best structure is for them to effectively implement their ideas and achieve their objectives

  • They should consider how the structure may affect the management and effectiveness of operations and communications

  • A well-designed organisational structure helps to promote clarity, efficiency, and accountability

Key terminology used in organisational design

1. Hierarchy

• A hierarchy refers to the levels of authority within an organisation

  • It describes the ranking of positions from top to bottom

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

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

2. Bureaucracy

• A bureaucracy is an organisation with many levels of authority

  • This makes decision-making and communication somewhat time-consuming

3. Chain of command

• The chain of command is the formal line of authority that flows down from the top management to lower-level employees

  • It defines who reports to whom

  • The chain of command helps to establish a clear communication channel and helps to maintain accountability within the organisation

4. Span of control

• Refers to 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

Span of control and chain of command

5. Centralised and decentralised structures

• In a centralised structure, decision-making authority is concentrated at the top of the organisation with senior management making most of the decisions

• In a decentralised structure, decision-making authority is distributed throughout the organisation, with lower-level employees having more delegated decision-making power

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

Tall and flat structures

• Businesses typically design their organisation in one of two ways

  • Tall organisational structures

  • Flat organisational structure

1. Tall organisational structures

• Tall or vertical structures have multiple levels of management, a more centralised decision making process and a long chain of command

• Spans of control are usually narrow and managers exert significant control

• Tall structures are common in large organisations with complex operations e.g. government agencies and universities

2. Flat organisational structures

• Flat or horizontal structures have fewer levels of management, a decentralised decision-making process and a short chain of command

• Spans of control are often wide and employees have some level of autonomy

• Flat structures are common in small organisations or start-ups

A comparison of tall and flat organisational design

Tall organisational structure	Flat organisational structure
Advantages	Advantages
Provides a clear hierarchy of authority and defined roles and responsibilities Promotes specialisation and expertise within each department or function Offers opportunities for career advancement and promotion within the organisation All of the above increases efficiency and motivation	Promotes a culture of collaboration and open communication Decision-making can be faster and more efficient Encourages creativity and innovation, as employees have more autonomy and flexibility All of the above increases efficiency and motivation
Disadvantages	Disadvantages
Can create communication barriers between the upper and lower levels of the hierarchy Decision-making can be slow as information must pass through multiple layers of management This can lead to bureaucracy and excessive levels of management All of the above reduce efficiency and motivation	This can lead to role ambiguity and a lack of a clear hierarchy May not provide clear opportunities for career advancement or promotion This may require employees to take on multiple roles and responsibilities leading to burnout and overwhelming of staff All of the above reduce efficiency and motivation