Today we are going to talk about organisational structure. This simply means how a business arranges its people, authority, and communication so that everything runs smoothly and objectives are achieved. It shows who reports to whom, how tasks are divided, and how decisions are made. The structure a business chooses depends on its size, its goals, and how complex its operations are.
Let’s start with the functional structure. In this type, employees are grouped according to the jobs they do, such as marketing, finance, operations, or human resources. Each department is managed by a specialist who focuses on that area. The good thing about this structure is that it encourages specialisation, which improves efficiency and skills. It also provides clear career paths within departments. However, the downside is that departments may not communicate well with each other. This can make coordination difficult and slow down responses to market changes. For example, a manufacturing company might have separate departments for production, marketing, and finance, each focusing only on its own tasks.
Next, we have hierarchical structures, which are based on different levels of authority. There are two main types: tall and flat structures.
A tall structure has many layers of management. Each manager supervises only a few people, which means there is a narrow span of control. The advantage is that authority is very clear and there are more chances for promotion. But this structure can also make communication slow and create too much bureaucracy.
On the other hand, a flat structure has fewer layers of management and a wider span of control. This means managers supervise more people, so decisions can be made faster, and employees usually have more independence. However, managers might become overstretched, and lines of authority can sometimes be unclear. For example, a small start-up company may have a flat structure, while a large bank or government department is more likely to have a tall one.
Another important structure is the matrix structure. This combines both functional and project-based systems. Employees report to two managers: one from their department and one from the project they are working on. This structure helps people from different departments work together and share ideas. It improves flexibility and communication, but it can also be confusing because employees have two bosses. It also increases administrative costs. For example, in a technology company developing a new smartphone, staff from marketing, R&D, and finance may all work together under a project manager.
Now let’s discuss why businesses choose different structures. Some choose a functional structure because it works best for smaller or specialised businesses that focus on efficiency. Others structure by product, which suits companies with many product lines, like Unilever, which has separate teams for food, skincare, and cleaning products. Some large multinationals structure by geography so they can respond better to local markets, like McDonald’s, which has regional divisions for North America, Europe, and Asia.
Organisational structures can also change over time. As businesses grow, they might add new layers of management or departments. Some may go through delayering, which means removing levels of management to cut costs and speed up communication. Changes can also happen because of mergers or acquisitions, where two companies combine and need to merge their structures. Finally, many modern companies are shifting to flatter structures due to digital transformation, which allows for faster decision-making and better collaboration through technology.
Let’s quickly go over some key features of a formal structure. The levels of hierarchy show how many layers of management exist. The chain of command is the line of authority from top to bottom. The span of control means how many people report directly to a manager. Then we have responsibility and authority: responsibility means being in charge of a task, and authority is the power to make decisions about that task. Delegation is when managers give tasks to subordinates but still remain accountable. And accountability means being answerable for the results. Finally, we have centralisation and decentralisation. In a centralised business, decisions are made at the top, like at McDonald’s. In a decentralised one, decision-making is spread across different departments or locations, like at Amazon.
So, to sum up, the structure of a business is like its skeleton. It supports how people work, communicate, and make decisions. Whether a company uses a functional, hierarchical, or matrix structure depends on what it needs to achieve. As the business grows and changes, its structure must evolve too, to stay flexible, efficient, and innovative.
