Hierarchy and organisational charts

A hierarchy is a traditional business structure made up of multiple levels, where each level holds responsibility for and authority over the levels beneath it.

Key features of hierarchies

• Employees report to those immediately above them and are responsible for those below.
• Organisations can be structured by department, product line, or geographical location.

An organisational chart visually represents this hierarchy, showing who has authority and responsibility for decisions.

Levels in a traditional hierarchy

• Board of directors - Provides overall direction and strategy for the business.
• Managers - Ensure that business targets and objectives are achieved.
• Team leaders - Oversee teams including supervisors and operational staff.
• Supervisors - Manage daily operations and monitor performance.
• Shop-floor workers - Carry out the core operational tasks.

Tall and flat structures

Organisational structures vary in the number of hierarchy levels, which affects communication, responsibility, and management efficiency.

Tall structures

Tall structures feature many levels of hierarchy, creating long chains of command for communication and authority.

Characteristics of tall structures:

• Communication can be slow as information must pass through multiple levels.
• They provide narrow spans of control, allowing detailed oversight.

Flat structures

Flat structures have fewer hierarchy levels, leading to shorter chains of command.

Characteristics of flat structures:

• Employees often have greater responsibility and autonomy.
• Managers may oversee more staff, which can lead to overload if not managed well.

Span of control and delayering

The span of control refers to the number of subordinates who report directly to a manager. It influences how effectively a manager can supervise their team.

Factors affecting span of control

• Wide spans - Managers oversee many employees, which can be efficient for routine tasks but challenging if too wide.
• Narrow spans - Allow closer supervision but may lead to micromanagement, reducing employee motivation.
• Work type impacts ideal span: complex or varied tasks suit narrower spans, while repetitive tasks can handle larger groups.

Delayering

Delayering involves removing hierarchy levels to flatten the structure.

Benefits of delayering:

• Reduces costs by cutting management salaries.
• Gives junior staff more responsibility, potentially improving motivation.
• Speeds up communication with fewer layers.

Drawbacks of delayering:

• Involves short-term expenses for staff retraining.
• Can overload remaining managers if too many layers are removed.

Delegation in organisations

Delegation means assigning decision-making responsibility to subordinates lower in the hierarchy. It relies on trust and matching tasks to individuals' skills.

Advantages of delegation

• Builds employee loyalty by making staff feel valued.
• Allows managers to focus on higher-level tasks.
• Encourages a mix of challenging and routine assignments to develop skills.

Organisations with high delegation may still need several authority levels to maintain oversight.

Types of organisational structures

Businesses adopt different structures based on their needs, such as expertise, products, locations, or projects. Each type has unique features and potential challenges.

Functional structures

These group staff by department, such as finance, marketing, operations, or human resources:

• Departments focus on their specialist areas, developing unique cultures.
• Requires strong inter-departmental communication to avoid silos.

Product-based structures

These organise around product lines, with each acting like a semi-independent unit:

• Enables tailored objectives for different products.
• Can lead to duplicated roles across units, reducing efficiency compared to centralised functions.

Regional structures

These are based on geographical areas, allowing adaptation to local markets:

• Divisions operate with some autonomy, often under continental or national oversight in global firms.
• Supports customisation to regional needs but may complicate global coordination.

Matrix structures

These combine two criteria, such as function and project, so staff report to multiple managers:

• Promotes clear goals and cross-team collaboration.
• Can cause conflicts from competing priorities and demands significant management effort.

Centralised and decentralised structures

Centralised structures concentrate decision-making at the top, while decentralised ones distribute authority more widely.

Advantages and disadvantages of centralised structures

Advantages and disadvantages of decentralised structures