7.1 Organisational Structure

2026 Syllabus Objectives

By the end of this topic, you should be able to:

  1. Explain the purpose and attributes of an organisational structure (flexibility, meeting business needs, allowing growth, encouraging intrapreneurship)
  2. Evaluate the advantages and disadvantages of functional, hierarchical (flat and tall), and matrix structures
  3. Explain why some organisations structure themselves by product, function, or geographical area
  4. Explain the reasons why structures change (e.g. growth, delayering)
  5. Define the features of a formal structure: levels of hierarchy, chain of command, span of control, responsibility, authority, delegation, accountability, centralised, decentralised
  6. Explain the relationship between delegation and accountability
  7. Describe the processes of accountability in a business
  8. Analyse the impact of delegation on a business
  9. Explain the relationship between span of control and levels of hierarchy
  10. Distinguish between authority and responsibility
  11. Explain the conflicts between control and trust when delegating
  12. Analyse the impact of centralisation and decentralisation on a business
  13. Give examples of line and staff functions, distinguish between them, and explain the conflicts that arise

1. The Purpose and Attributes of Organisational Structure

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What is an organisational structure?

An organisational structure is the way a business organises its people, roles, and responsibilities. It shows who does what job, who is in charge of whom, and how information flows around the business. You can picture it as a map of the entire workforce.

Even if a business has just two people — an owner and one worker — there needs to be some agreement about who does which tasks and who makes decisions. As a business grows and takes on more staff, this becomes even more important.

Why does a business need a structure?

  • It makes clear what every employee's job is and what they are responsible for
  • It shows who each person reports to (their manager or boss)
  • It helps information flow up and down the business efficiently
  • It allows departments to work together towards shared goals
  • It helps the business make decisions quickly and correctly

Attributes of a good organisational structure

A well-designed structure should have the following qualities:

  • Flexibility — The structure should be able to adapt when things change, such as when new technology appears or when the market shifts. A rigid, inflexible structure will hold the business back.
  • Meets the needs of the business — The structure should suit the size, purpose, and goals of the business. A small local café needs a very different structure from a large multinational company.
  • Allows for growth and development — As the business expands, the structure should make it easy to add new departments, new roles, or new layers of management without everything falling apart.
  • Encourages intrapreneurship — Intrapreneurship means encouraging employees inside a large organisation to think creatively, take initiative, and come up with new ideas — almost like mini-entrepreneurs within the company. A good structure gives employees enough freedom and responsibility to do this, often through cross-departmental teams or task forces.

Linking structure to business objectives

A business should design its structure to help it achieve its goals. For example:

  • If the business wants to expand internationally, it might create regional departments for each country it operates in.
  • If the business wants to develop new products, it might set up a dedicated Research and Development (R&D) department.
  • If the business wants to encourage innovation, it might use a matrix or project-based structure where people from different departments work together.

The structure must be reviewed and updated whenever the business's objectives change.

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