Organisational Structures Explained

Businesses use organizational structures to organize job roles and responsibilities. These structures will vary depending on an organizations size, vision and requirements. In this video We'll cover three types of organizational structure, the features of those structures along with some advantages and disadvantages.

An organisational structure is how a business organises its employees. It is most easily represented in the form of an organisational chart. The structure this organisation will adopt depends on its size and needs of the business There are a few key words that are important to understand before looking at an organisational chart these keywords are span of control This is the number of employees that the manager has responsibility for Chain of command.

The route by which instructions and communications flow from the top of the organisation to the bottom of the business. It shows who answers to who and finally Subordinates. This is basically members of staff that work for a manager they are under that managers span of control and are below them in the chain of command.

The first and probably the most common organisational structure is the hierarchical structure. As this chart shows This structure has many layers of management. The key features of this structure Is it has a long chain of command as communication has to go through many layers from the managing director through to the employees working under each manager at the bottom of the organisation.

Due to the nature of this structure managers tend to have a narrow span of control as there are many managers with a relatively small number of subordinates (employees that work for them) the higher up in the organisational structure. You are the greater responsibility you have. The positive of this organisational structure.

Is that by its nature, it can motivate employees through promotion as you can see there are many levels to progress through and more chances of promotion. whether this is upward in the organisation or by changing roles and learning new skills. another pro of this structure is that accountability and responsibility is clear.

It is obvious who manages who and what their roles are therefore targets can be set easily and clear accountability given for the achievement of those targets. One of the clear issues that can arise with this structure is communication through the business. A message or strategy has to be passed through many layers and can get interpreted or amended to a point where the original message is less effective.

Imagine this on the scale of a business such as coca-cola That have many departments all over the world. It's difficult for them to pass a message from one side of the organisation right to the other. Due to the many levels of management another negative can be higher costs as management salaries can be high and therefore the more managers in the organisation the higher the cost.

Flat organisational structures are commonly used by smaller businesses. They contain none or very few intermediate levels between upper management and staff depending on the size of the business. In a flat structure managers have a wide span of control with typically more subordinates than in a hierarchical structure.

This means that by its very nature there was a short chain of command. Some pros of this approach are faster communication, there are fewer levels to communicate to and often no need to follow lengthy approval processes to respect the hierarchy. This means that communication from the top to the bottom of the organisation can be much faster.

Engagement is also another positive of a flat structure. Employees are more involved with the day-to-day decisions as there are less, if any management in between themselves and the owners. Rather than taking orders from their managers, employees have more autonomy which in turn can improve engagement.

Another positive is it can save the organisation money. Unlike the hierarchical structure The flat structure has far fewer managers and therefore less management salaries to pay. Which saves the business money, however an obvious negative of this structure is that there is very little or no opportunity for progression, this can impact motivation but also by having no clear boss can cause power struggle as there is no clear hierarchy and therefore no clear accountability.

If you are a large business a clear negative of the flat structure is that is near enough impossible to implement due to the sheer volume of employees. It will be very hard to apply this structure across thousands of employees in a variety of different countries. The final structure we're going to look at is the matrix structure.

This structure has traditional departments that will be found in the hierarchical structure such as; finance, marketing, research and development and so on. However The matrix structure utilises these skills and creates project teams across the functions of the business to work on a particular project. These teams can be temporary or permanent depending on the task they have been asked to complete, for example project A may be to create a new product that the business will eventually sell.

A project team is formed with employees from across departments such as; production, finance marketing and research and development. Each with their own skill set but with the same objective of successfully getting a new product to market. Meanwhile, another team will be working on another project and so on.

Advantages of this structural approach is it utilises the skills within the organisation and brings together people from all departments to work towards the same objective. Rapid and effective communication within the team allows ideas to flow quickly and freely throughout the project team. Another positive is that due to having a shared objective and purpose it can create a strong team spirit and improve morale within the team.

A key disadvantage is that you are split across two managers a project manager and your functional area manager. This split can lead to each manager having their own priorities and then pushing these different objectives onto their subordinates. This can then mean that subordinates do not know which objective to prioritise resulting in neither objective being achieved.

Finally when the project team is first formed it can take time for them to gel as a team. If these project teams are changed or broken down often and new ones formed, this can be an ongoing issue for the organisation. Thanks for listening.

I hope you have a better understanding of organisational structures and if you would like to have a go at applying this knowledge, then download the task sheet in the description and don't forget to give the video a thumbs up and subscribe for more weekly Business Studies videos See you next time!