Org Chart Resources

Here’s a quick guide on the theory behind organisational structures. The structure of an organisation is dependant on their objectives and culture, and will determine the manner in which it operates and it’s performance. Structure allows the responsibilities for each function and process to be clearly allocated to different department and employee.

Business success can be hindered by the wrong organisation structure which should aim to maximise the efficiency and success of the Organisation. An effective organisational structure will facilitate working relationships between various sections or departments of an organisation. It should retain order and command whilst promoting flexibility and creativity.

Factors such as size, product and skills of the workforce influence the organisational structure. As a business expands, the chain of command will lengthen and the spans of control will widen. The higher the level of skill each employee has, the more the business will make use of the matrix structure to maximise these skills across the organisation.

Span of Control

This term is used to describe the number of employees that each manager/supervisor is responsible for. The span of control is said to be wide if a superior is in charge of many employees and narrow if the superior is in charge of a few employees.

Common Organisation Structures

Hierarchical Organisation

The hierarchical organisation is the most common of all organisational structures. Employees are ranked at various levels within the organisation, each level is one above the other. At each level, one person has a number of workers directly under them, within their span of control. A traditional hierarchy, senior managers make up the board of directors and are responsible for establishing strategy and overall business direction, whilst middle managers have responsibility for a specific function such as finance or marketing. The structure can be visualised below in the org chart

Diagram: Hierarchical Org Chart

The structure clearly defines each employee’s role within the organisation and defines the nature of their relationship with other employees. Hierarchical organisations are often tall with narrow spans of control, which gets wider as we move down the structure. They are often centralised with the most important decisions being taken by senior management.

In the twentieth century as organisations grow bigger, hierarchical organisations were popular because they could ensure command and control of the organisation. However with the advent of globalisation and widespread use of technology, in the 1990’s tall hierarchical organisations began to downsize and reduce their workforce. Technology was able to carry out many of the functions previously carried out by humans.

Advantages	Disadvantages
Authority and responsibility and clearly defined Clearly defined promotion path There are specialists managers and the hierarchical environment encourages the effective use of specialist managers. Employees very loyal to their department within the organisation	The organisation can be bureaucratic and respond slowly to changing customer needs and the market within which the organisation operates. Communication across various sections can be poor especially horizontal communication Departments can make decisions which benefit them rather than the business as a whole especially if there is Inter-departmental rivalry

Flat Organisation Structures

A flat organisation structure has relatively few layers or just one layer of management. This means that the “Chain of Command” from top to bottom is short and the “span of control is wide (the number of employees”. Due to the small number of management layers, flat organisations are often small organisations.

Diagram: Flat Structure

Advantages	Disadvantages
More/Greater communication between management and workers. Better team sprit. Less bureaucracy and easier decision making. Fewer levels of management which includes benefits such as lower costs as managers are generally paid more than worker	Workers may have more than one manager/boss May limit/hinder the growth of the organisation Structure limited to small organisations such as partnerships, co-operatives and some private limited companies. Function of each department/person could be blurred and merge into the job roles of others.

Tall Organisation Structure

The simplest form a tall organization structure has many levels of management and supervision, with a “long chain of command” running from the top of the organisation from for example the Chief Executive, right down to the bottom of the organisation for example the shop floor worker. The organisation chart visulises the concept of a tall structure.

Diagram: Tall Structure

However, tall structures rarely exceed 8 levels of management. This is firstly because the number of layers (i.e. management levels) decreases the span of control. Secondly the disadvantages of the tall structure begin to outweigh the advantages of a tall structure.

Advantages	Disadvantages
Narrow span of control ie each manager has a small number of employees under their control. This means that employees can be closely supervised. There is a clear management structure. The function of each layer will be clear and distinct. There will be clear lines of responsibility and control. Clear progression and promotion ladder.	Freedom and responsibility of employees (subordinates) is restricted. Decision making could be slowed down as approval may be needed by each of the layers of authority Communication has to take place through many layers of management High management costs because managers are generally paid more than subordinates. Each layer will tend to pay it’s managers more money than the layer below it.

Centralised and Decentralised Organisation Structure

In a centralised organisation head office retain the major responsibilities and powers. Conversely decentralised organisations, responsibility is spread for specific decisions across various outlets and lower level managers, including branches or units located away from head office/head quarters. An example of a decentralised structure would be large retail chains, each store has a store manager who can make certain decisions concerning their store, who would report to a regional manager.

Organisations may also decide that a combination of centralisation and decentralisation is more effective. For example functions such as accounting and purchasing may be centralised to save costs. Whilst tasks such as recruitment may be decentralised as units away from head office may have staffing needs specific only to them.

Certain organisations implement vertical decentralisation which means that they have handed the power to make certain decisions, down the hierarchy of their organisation. Vertical decentralisation increases the input, people at the bottom of the organisation chart have in decision making.

Horizontal decentralisation spreads responsibility across the organisation. A good example of this is the implementation of new technology across the whole business. This implementation will be the sole responsibility of technology specialists

Advantages of Centralised

Advantage of decentralised

Senior managers enjoy greater control over the organisation The use of standardised procedures can results in cost savings. Decisions can be made to benefit the organisations as a whole. Whereas a decision made by a department manager may benefit their department, but disadvantage other departments The organisation can benefit from the decision making of experienced senior managers. In uncertain times the organisation will need strong leadership and pull in the same direction. It is believed that strong leadership is often best given from above.

Senior managers have time to concentrate on the most important decisions (as the other decisions can be undertaken by other people down the organisation structure. Decision making is a form of empowerment. Empowerment can increase motivation and therefore mean that staff output increases People lower down the chain have a greater understanding of the environment they work in and the people (customers and colleagues) that they interact with. This knowledge skills and experience may enable them to make more effective decisions than senior managers. Empowerment will enable departments and their employees to respond faster to changes and new challenges. Whereas it may take senior managers longer to appreciate that business needs have changed. Empowerment makes it easier for people to accept and make a success of more responsibility.

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