Organizational Structure and Design

Table of Contents
1. What Is Organisational Structure?
2. The Building Blocks of Organisational Structure
3. Types of Organisational Structure
4. Factors Influencing Organisational Structure
5. Organisational Design: Putting It All Together
6. Coordination Mechanisms
7. Modern Trends in Organisational Structure
8. Key Terms Recap
9. Common Mistakes and Misconceptions
10. Summary
11. Practice Questions
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What Is Organisational Structure?

Imagine you're building a house. You wouldn't just throw bricks together randomly and hope for the best, right? You'd follow a blueprint that shows where each room goes, how they connect, and who's responsible for what. Organisational structure works the same way for businesses-it's the blueprint that shows how a company arranges its people, roles, and responsibilities to achieve its goals.

At its core, organisational structure defines three crucial things:

• Who reports to whom (the chain of command)
• How tasks and responsibilities are divided up
• How different parts of the organisation communicate and coordinate

Think of it like a family tree, but for a business. Just as a family tree shows relationships between grandparents, parents, and children, an organisational structure shows the relationships between senior managers, middle managers, team leaders, and frontline employees.

Why does this matter? Because without clear structure, chaos ensues. Imagine a restaurant where nobody knows whether they're supposed to cook, serve customers, or wash dishes. Orders would be missed, customers would leave angry, and the business would collapse. Structure brings clarity, efficiency, and accountability.

The Building Blocks of Organisational Structure

Hierarchy and Chain of Command

The hierarchy is the vertical arrangement of authority levels in an organisation. Picture a pyramid: at the top sits the chief executive or managing director, in the middle are the managers and supervisors, and at the base are the frontline workers actually producing goods or delivering services.

The chain of command is the line of authority that runs from top to bottom. It answers the question: "Who's my boss, and who's my boss's boss?" This chain determines who can give you instructions and to whom you're accountable.

Let's use a real example: At McDonald's, a crew member reports to a shift manager, who reports to the restaurant manager, who reports to an area supervisor, who reports to a regional director, and so on up to the CEO. Each level has authority over the one below it.

Span of Control

Here's where it gets interesting. Span of control (sometimes called "span of management") refers to the number of subordinates that one manager directly supervises.

A narrow span of control means a manager supervises only a few people-maybe 3 to 5 subordinates. This allows for close supervision, detailed guidance, and strong control. However, it also means you need more managers, which increases costs and creates more layers in the organisation (making it "taller").

A wide span of control means one manager supervises many people-perhaps 10, 15, or even 20 subordinates. This reduces the number of managers needed and creates a "flatter" organisation with fewer layers. But it also means each employee gets less individual attention and supervision.

Which is better? It depends on several factors:

• Task complexity: Simple, routine tasks (like assembly line work) can handle wide spans. Complex tasks (like heart surgery) need narrow spans with close supervision
• Employee capability: Highly skilled, experienced workers need less supervision (wider span works). New or less skilled workers need more guidance (narrow span better)
• Geographic spread: If employees are scattered across different locations, supervising many becomes harder
• Manager capability: Some managers are naturally better at juggling multiple responsibilities and can handle wider spans

Real-world example: A Google software development team might have one manager for every 7-8 highly skilled engineers (relatively wide span), because these engineers are experts who need minimal supervision. Contrast this with a construction site, where a foreman might closely supervise just 4-5 laborers to ensure safety and quality (narrow span).

Centralisation vs Decentralisation

Centralisation means decision-making authority is concentrated at the top of the organisation. Senior executives make the important decisions, and lower levels simply implement them. Think of it like a strict parent who makes all the household decisions without consulting the children.

Decentralisation means decision-making authority is pushed down to lower levels. Managers and employees throughout the organisation have the power to make decisions within their areas. This is like a household where children can decide their own bedtimes, meal choices, and weekend activities (within reasonable limits).

Neither approach is inherently "better"-each has advantages and disadvantages:

Advantages of Centralisation:

• Consistent decisions across the whole organisation-everyone follows the same policies
• Economies of scale (bulk purchasing, standardised processes)
• Senior management maintains tight control
• Useful in crisis situations requiring quick, unified response
• Prevents junior managers from making costly mistakes

Disadvantages of Centralisation:

• Slow decision-making-everything must go "up the chain"
• Demotivates lower-level managers who feel they have no real authority
• Senior managers can become overwhelmed with minor decisions
• Poor responsiveness to local conditions and customer needs
• Junior managers don't develop decision-making skills

Advantages of Decentralisation:

• Faster decision-making-no need to wait for head office approval
• Better responsiveness to local markets and customer preferences
• Motivates and develops junior managers by giving them real responsibility
• Relieves senior managers from day-to-day operational decisions
• Encourages entrepreneurial thinking throughout the organisation

Disadvantages of Decentralisation:

• Risk of inconsistency-different parts of the organisation doing things differently
• Potential loss of control-harder for senior management to monitor everything
• Duplication of resources and effort
• Junior managers might make poor decisions if inadequately trained
• Harder to achieve economies of scale

Real-world example: Apple under Steve Jobs was famously centralised-Jobs personally approved design details down to the shade of white used in stores. This ensured consistent quality and brand image. In contrast, Johnson & Johnson operates over 250 subsidiary companies with significant autonomy to respond to their specific markets, from baby products to medical devices.

Delegation and Authority

Delegation is the process by which a manager assigns tasks and authority to subordinates. It's essentially saying: "You're now responsible for this, and you have the power to make decisions about it."

Effective delegation involves three components:

1. Responsibility: The obligation to perform the assigned task
2. Authority: The power to make decisions, commit resources, and give instructions to achieve the task
3. Accountability: The requirement to answer for the results-you can't delegate this away; managers remain accountable even when they delegate

Here's a crucial point that trips up many beginners: when you delegate a task, you're not washing your hands of it completely. A manager who delegates remains accountable for the outcome. If your subordinate fails, you can't simply say "not my problem"-you're still answerable to your own boss.

Good delegation benefits everyone:

• Managers free up time for strategic thinking rather than drowning in operational details
• Subordinates develop new skills and feel trusted
• The organisation builds a deeper pool of capable people
• Decisions get made faster by people closer to the action

But delegation can go wrong if:

• You delegate the task but not the authority (subordinate has responsibility but no power-recipe for frustration)
• You don't provide adequate guidance or resources
• You micromanage after delegating, constantly checking and interfering
• You delegate only boring tasks and keep all the interesting work for yourself

Types of Organisational Structure

Now that we understand the building blocks, let's look at how organisations actually put these pieces together. There are several common structural patterns, each suited to different situations.

Functional Structure

The functional structure groups people according to their specialist function or expertise. All the marketing people sit together in a Marketing Department, all the finance people work in Finance, all the production people are in Production, and so on.

Picture it like this:

Managing Director sits at the top
↓
Below are separate departments: Marketing | Finance | Human Resources | Production | IT

Each department focuses on its specialty and reports to a functional head (Marketing Director, Finance Director, etc.), who then reports to the managing director.

Advantages of functional structure:

• Employees work with colleagues who share their expertise-engineers with engineers, accountants with accountants
• Clear career progression within your specialty
• Economies of scale-one specialist equipment pool, one training program per function
• Promotes development of specialist expertise and skills
• Works well for single-product businesses or stable environments

Disadvantages of functional structure:

• Poor coordination across functions-Marketing doesn't talk to Production, Finance doesn't understand Operations
• Narrow, silo thinking-people focus on their function, not the overall business
• Slow response to change-decisions require coordination across multiple departments
• Difficult to identify profit/loss responsibility for individual products
• Senior management becomes overwhelmed coordinating between functions

Real example: Most traditional manufacturing companies like automotive parts suppliers use functional structures. They have separate Engineering, Production, Quality Control, Sales, and Finance departments.

Divisional Structure

A divisional structure breaks the organisation into semi-autonomous divisions, each operating almost like a separate business. These divisions can be organised by:

• Product: Each division focuses on a different product line
• Geography: Each division serves a different geographic region
• Customer type: Each division targets a different customer segment

Within each division, you typically find all the functions needed to run that business-the division has its own marketing, finance, operations, etc.

Picture it like this:

CEO at top
↓
Consumer Products Division | Industrial Products Division | Healthcare Division
↓ (within each division)
Marketing | Finance | Operations | HR

Advantages of divisional structure:

• Clear accountability-each division is a profit centre with measurable performance
• Fast response to market changes in that division's area
• Better coordination within the division since all functions work together daily
• Develops general management skills-divisional heads must understand all business functions
• Facilitates growth-just add new divisions
• Focus on customer needs specific to that product/region/segment

Disadvantages of divisional structure:

• Duplication of resources-each division needs its own HR, Finance, etc. (expensive!)
• Inconsistency across divisions-different policies and practices
• Divisions may compete against each other instead of external competitors
• Difficult to achieve economies of scale
• Career paths limited within one division

Real example: Procter & Gamble uses a product divisional structure with separate divisions for Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care. Each division manages its own brands, manufacturing, and marketing. Meanwhile, HSBC Bank uses a geographic divisional structure with divisions for Europe, Asia-Pacific, Middle East & North Africa, and North America.

Matrix Structure

Here's where things get really interesting (and potentially complicated). A matrix structure combines functional and divisional structures by having employees report to two bosses simultaneously.

Typically, an employee reports to both a functional manager (who manages their specialist expertise) and a project or product manager (who manages a specific project or product line).

Picture a grid:

Across the top: Project A Manager | Project B Manager | Project C Manager
Down the side: Engineering Manager | Marketing Manager | Finance Manager

An engineer working on Project B reports to both the Engineering Manager (for technical expertise) and Project B Manager (for project deliverables).

Advantages of matrix structure:

• Flexible use of resources-specialists can work on multiple projects as needed
• Improved coordination between functions for specific projects/products
• Develops employees' skills more broadly through cross-functional work
• Better information flow across the organisation
• Maintains functional expertise while focusing on projects/products

Disadvantages of matrix structure:

• Violates the principle of "unity of command"-two bosses can give conflicting instructions
• Can create confusion over priorities and authority
• Potential for power struggles between functional and project managers
• Employees may feel stressed reporting to two people
• Time-consuming-requires extensive meetings and coordination
• Requires sophisticated management skills to work effectively

Real example: NASA famously used matrix structures for space missions. Engineers belonged to functional departments (propulsion, electronics, etc.) but were assigned to specific missions (Apollo 11, etc.), reporting to both their technical supervisor and the mission commander. Many consulting firms also use matrix structures-consultants belong to a practice area (Strategy, Operations, Technology) but are assigned to client projects, reporting to both a practice leader and project partner.

Team-Based and Network Structures

Modern organisations increasingly experiment with less hierarchical structures.

A team-based structure organises around teams rather than individuals or departments. Teams may be permanent or temporary, and they're often given significant autonomy to manage their own work. This works especially well in knowledge-intensive industries where collaboration and innovation matter more than efficiency and control.

Network structures (also called "virtual organisations") take this even further. The organisation keeps only core strategic functions in-house and outsources everything else to partner organisations. The central organisation coordinates a network of suppliers, manufacturers, distributors, and service providers.

Real example: Spotify organises its software developers into "squads" (small cross-functional teams), "tribes" (collections of related squads), "chapters" (people with similar skills across squads), and "guilds" (communities of interest). This structure prioritises agility and innovation over traditional hierarchy.

Nike represents a network structure-it designs and markets shoes but outsources almost all manufacturing to partner factories worldwide. Nike coordinates this network but doesn't own the factories.

Factors Influencing Organisational Structure

You can't just pick a structure off the shelf like choosing a shirt colour. The right structure depends on numerous factors specific to each organisation.

Size of the Organisation

Small organisations (say, under 50 people) can operate with informal, simple structures. Everyone knows everyone, communication is easy, and the owner/founder can personally supervise most activities.

As organisations grow, they need more formal structures. You can't personally know 5,000 employees. Layers of management emerge, departments form, and written policies replace personal instruction.

A corner bakery with 8 employees needs no elaborate structure-the owner manages everyone directly. But when Starbucks grew to over 300,000 employees worldwide, it required a sophisticated divisional structure with regional divisions, country managers, district managers, and store managers, plus centralised functions like supply chain, marketing, and product development.

Strategy and Goals

Structure should follow strategy, not the other way around. If your strategy is to be the low-cost provider through standardised products and efficient operations (like Ryanair or Walmart), you'll want a centralised functional structure that maximises efficiency and control.

If your strategy emphasises innovation, customisation, and rapid response to market changes (like Apple or Amazon), you might need more decentralisation, project teams, or divisional structures that can move quickly.

Technology and Task Characteristics

The nature of the work influences structure. Routine, predictable tasks (assembly line manufacturing, call centre operations) suit centralised, functional structures with clear procedures and close supervision.

Non-routine, complex, creative work (software development, consulting, research) requires more flexible structures with decentralised decision-making, wider spans of control, and cross-functional collaboration.

Environment and Uncertainty

Organisations operating in stable, predictable environments can use more rigid, centralised, formalised structures. When change is slow, you can afford detailed procedures and hierarchical decision-making.

Organisations facing rapid change, intense competition, and uncertainty need flexible, decentralised structures that can adapt quickly. You can't wait for head office approval when customer preferences shift weekly.

Compare a public utility company (stable, regulated environment) with a fashion retailer (trends change rapidly). The utility can operate with a traditional functional structure and centralised control. The fashion retailer needs decentralised buying decisions, empowered store managers, and rapid communication systems to respond to trend changes.

Culture and Leadership Philosophy

Some leaders believe in tight control and centralised authority. Others believe in empowering employees and delegating widely. These philosophies naturally lead to different structures.

Similarly, national and organisational culture matters. Some cultures accept steep hierarchies and centralised power more readily. Others value flat structures and consensus decision-making.

Organisational Design: Putting It All Together

While organisational structure describes the framework-who reports to whom, how functions are grouped-organisational design is the broader process of aligning that structure with strategy, systems, processes, and culture to achieve organisational goals.

Think of structure as the skeleton and design as the entire body-bones, muscles, nervous system, and circulatory system all working together.

Effective organisational design considers:

• Differentiation: How to divide work into separate tasks and specialties
• Integration: How to coordinate these separate parts to work together
• Formalisation: The extent of written rules, procedures, and job descriptions
• Standardisation: Whether work is performed the same way every time
• Communication flows: How information moves vertically and horizontally

Tall vs Flat Structures

A tall structure has many hierarchical levels between top management and frontline workers. It results from narrow spans of control-each manager supervises few people, so you need many management layers.

Imagine a ladder with many rungs closely spaced together.

Advantages:

• Close supervision and control
• Clear advancement opportunities-many promotion steps available
• Narrow spans mean managers aren't overwhelmed
• Clear lines of authority and responsibility

Disadvantages:

• Slow communication-messages must travel through many layers
• Expensive-many managers to pay
• Messages get distorted as they pass through layers (like "telephone" game)
• Encourages "passing the buck" rather than taking initiative
• Feels bureaucratic and frustrating to employees

A flat structure has few hierarchical levels, resulting from wide spans of control. Managers supervise many people directly, reducing the number of management layers needed.

Imagine a ladder with few rungs spaced far apart.

Advantages:

• Fast communication-fewer layers to pass through
• Lower costs-fewer managers
• Encourages employee autonomy and initiative
• Closer relationship between top management and frontline workers

Disadvantages:

• Managers may be overwhelmed supervising many people
• Less close supervision-quality may suffer
• Fewer promotion opportunities-big jumps between levels
• May not work if employees need significant guidance

Recent decades have seen "delayering"-organisations removing management layers to become flatter. This was driven by cost pressures, technology enabling better communication, and recognition that flat structures move faster.

Real example: Google famously experimented with extremely flat structures, at one point having one engineering executive with over 100 direct reports. They later adjusted toward slightly more layers when they realised managers couldn't provide adequate support to so many people. Traditional military organisations, by contrast, remain very tall with many ranks between private and general.

Formal vs Informal Structure

The formal structure is what appears on official organisation charts-the documented reporting relationships, official job descriptions, and written procedures.

But every organisation also has an informal structure-the network of relationships, communication patterns, and influence that develop naturally. This is who people actually turn to for advice (not necessarily their official boss), who has influence beyond their formal authority, and how information really flows.

Smart managers recognise both structures matter. The formal structure provides order and accountability. The informal structure often gets things done faster through personal relationships and shortcuts around bureaucracy.

For example, a junior employee might officially report to Department Manager A, but everyone knows that if you want something done quickly, you talk to long-serving Employee B who knows all the systems and has relationships throughout the organisation. Employee B has no formal authority but significant informal influence.

Coordination Mechanisms

Structure creates separate parts-departments, divisions, teams. But these parts must work together toward common goals. Coordination mechanisms are the tools organisations use to integrate these separate parts.

Direct Supervision

A manager directly oversees and coordinates the work of subordinates, giving instructions and checking progress. This works well for small groups doing relatively simple tasks but becomes impossible as the organisation grows.

Standardisation

Instead of direct supervision, you coordinate through standards:

• Standardisation of work processes: Specify exactly how work should be done (like assembly instructions or McDonald's burger preparation procedures)
• Standardisation of outputs: Specify what the end result should be, but let people figure out how to achieve it (e.g., "produce 1,000 units per shift meeting quality standard X")
• Standardisation of skills: Ensure everyone has the same training and qualifications, then trust them to work together (how hospitals coordinate-all surgeons went through similar training)
• Standardisation of norms: Share common values and beliefs so people naturally make compatible decisions (strong organisational culture achieves this)

Mutual Adjustment

People coordinate by communicating informally with each other-talking, emailing, meeting. This is essential for complex, unpredictable work where you can't specify everything in advance.

Modern project teams rely heavily on mutual adjustment-constant communication to coordinate activities.

Liaison Roles and Integrator Positions

Some organisations create special roles to coordinate between departments. A liaison works in one department but has responsibility to communicate and coordinate with another department.

An integrator (or "coordinator") sits between departments and has formal responsibility to ensure they work together, despite having no direct authority over either.

Teams and Task Forces

Bringing people from different departments together into cross-functional teams or task forces is a powerful coordination mechanism. Team members represent their departments but work together on shared projects.

Task forces are temporary-they disband when the project ends. Teams may be permanent.

Modern Trends in Organisational Structure

The Boundaryless Organisation

Traditional structures create boundaries-between departments, between hierarchical levels, between the organisation and external partners. The boundaryless organisation seeks to minimise or eliminate these barriers.

This involves:

• Reducing hierarchical levels
• Increasing cross-functional teams and collaboration
• Building stronger partnerships with suppliers and customers
• Using technology to improve communication across boundaries

General Electric under Jack Welch championed this concept, encouraging employees to ignore departmental boundaries and work with anyone who could help achieve goals.

Flexible and Agile Structures

Rapid environmental change pushes organisations toward flexibility. This means:

• More temporary structures-project teams that form and dissolve as needed
• Greater decentralisation-pushing authority down for faster decisions
• Increased use of contractors and temporary workers
• Looser job descriptions allowing people to work across boundaries

Remote and Hybrid Working

The COVID-19 pandemic accelerated trends toward remote work, fundamentally challenging traditional structures built around physical co-location. Organisations must now design structures that work when teams are geographically dispersed.

This requires:

• Greater emphasis on outcomes rather than process
• Investment in communication technology
• More explicit coordination mechanisms since informal coordination is harder remotely
• Reconsidering span of control-can managers effectively supervise remotely?

Key Terms Recap

• Organisational Structure - The formal framework that defines how tasks are divided, grouped, and coordinated within an organisation, including reporting relationships and authority levels
• Hierarchy - The vertical arrangement of authority levels from top management to frontline workers
• Chain of Command - The unbroken line of authority that extends from top to bottom of the organisation, defining who reports to whom
• Span of Control - The number of subordinates a manager directly supervises; narrow spans mean few subordinates, wide spans mean many
• Centralisation - Concentration of decision-making authority at the top levels of the organisation
• Decentralisation - Distribution of decision-making authority to lower organisational levels
• Delegation - The process of assigning tasks and authority to subordinates while retaining accountability
• Authority - The right to make decisions, give instructions, and commit organisational resources
• Responsibility - The obligation to perform assigned tasks
• Accountability - The requirement to answer for results and outcomes
• Functional Structure - Organisational design that groups people by their specialist expertise into departments like Marketing, Finance, Operations
• Divisional Structure - Organisational design that creates semi-autonomous divisions based on products, geography, or customer segments
• Matrix Structure - Organisational design where employees report to both a functional manager and a project/product manager simultaneously
• Tall Structure - Organisation with many hierarchical levels, resulting from narrow spans of control
• Flat Structure - Organisation with few hierarchical levels, resulting from wide spans of control
• Formal Structure - The official, documented organisational arrangements shown on organisation charts
• Informal Structure - The undocumented network of relationships and communication patterns that develop naturally
• Delayering - Process of removing hierarchical levels to create a flatter organisation
• Unity of Command - Principle that each person should report to only one boss
• Standardisation - Coordination achieved by specifying processes, outputs, skills, or norms in advance
• Organisational Design - The broader process of aligning structure, systems, processes, and culture to achieve organisational objectives

Common Mistakes and Misconceptions

• Mistake: Thinking there's one "best" organisational structure that works for everyone. Reality: The right structure depends on size, strategy, technology, environment, and culture. What works brilliantly for one organisation might be disastrous for another.
• Mistake: Believing that delegation means you're no longer responsible for the outcome. Reality: You can delegate authority and responsibility, but you remain accountable. If your subordinate fails at the task you delegated, you're still answerable to your boss.
• Mistake: Assuming centralisation is "bad" and decentralisation is "good" (or vice versa). Reality: Each approach has legitimate advantages and disadvantages. The key is matching the approach to your situation.
• Mistake: Confusing span of control with number of organisational levels. Reality: They're inversely related-wide spans create flat structures (fewer levels); narrow spans create tall structures (more levels).
• Mistake: Thinking organisational structure only appears on official charts. Reality: Informal structures are equally powerful and often determine how work actually gets done.
• Mistake: Believing matrix structures violate good management principles and should never be used. Reality: While matrix structures are complex and challenging, they're appropriate for certain situations requiring both functional expertise and project focus.
• Mistake: Assuming that changing the organisation chart will automatically change how people work. Reality: Structure is only one element. You also need appropriate systems, processes, skills, and culture to support the new structure.
• Mistake: Thinking flat structures are always faster and more efficient than tall structures. Reality: Very flat structures can overwhelm managers who supervise too many people, actually slowing things down. There's an optimal point between too flat and too tall.
• Mistake: Believing that divisional structures eliminate the need for coordination. Reality: While divisions operate semi-autonomously, they still need coordination to share best practices, avoid duplicating effort, and maintain overall strategic direction.
• Mistake: Assuming the formal structure shown on organisation charts accurately reflects how decisions are really made. Reality: Power, influence, and decision-making often flow through informal networks that don't appear on any chart.

Summary

1. Organisational structure defines how an organisation arranges roles, responsibilities, and reporting relationships to achieve its objectives. It determines who reports to whom, how work is divided, and how coordination happens.
2. Key structural elements include hierarchy (vertical authority levels), chain of command (who reports to whom), span of control (how many subordinates per manager), and the degree of centralisation vs decentralisation of decision-making authority.
3. The main structural types are functional (grouped by expertise), divisional (grouped by product/geography/customer), and matrix (dual reporting to both functional and project managers). Each has specific advantages and disadvantages suited to different situations.
4. Span of control directly affects organisational shape: narrow spans create tall structures with many management layers and close supervision; wide spans create flat structures with fewer layers and more employee autonomy.
5. Centralisation concentrates decision-making at the top, providing control and consistency but reducing flexibility. Decentralisation distributes decision-making downward, improving responsiveness and employee development but risking inconsistency and loss of control.
6. Delegation involves assigning both tasks (responsibility) and decision-making power (authority) to subordinates, while the delegating manager retains ultimate accountability for results.
7. Structure should be determined by contingency factors including organisational size, strategy, technology, environmental uncertainty, and culture-there is no universally "best" structure.
8. Organisations use various coordination mechanisms to integrate separate parts, including direct supervision, standardisation (of processes, outputs, skills, or norms), mutual adjustment, liaison roles, and cross-functional teams.
9. Modern trends favour flatter, more flexible structures with greater use of teams, reduced boundaries between functions and external partners, and adaptation to remote/hybrid working arrangements.
10. Both formal structure (official charts and documentation) and informal structure (actual relationships and influence patterns) matter for understanding how organisations really function and make decisions.

Practice Questions

Question 1 (Recall)

Define "span of control" and explain the difference between a narrow span and a wide span of control.

Question 2 (Application)

A software development company currently operates with a functional structure, with separate departments for Programming, Testing, Design, and Marketing. However, they're struggling because each department focuses on its own priorities, resulting in products that don't meet market needs and poor coordination between teams. Projects are frequently delayed because decisions require approval from multiple department heads.

Which structural change would you recommend, and why? What benefits would this new structure provide, and what new challenges might emerge?

Question 3 (Analysis)

A retail chain is deciding whether to centralise or decentralise purchasing decisions. Currently, each store manager decides what products to stock and orders from suppliers independently. Head office wants to centralise all purchasing to negotiate better prices with suppliers and ensure consistent product availability across stores.

Analyse this situation by identifying:

• Three potential benefits of the proposed centralisation
• Three potential drawbacks or risks
• Under what circumstances would centralisation be the better choice?

Question 4 (Application)

A hospital has an Engineering Manager who oversees all maintenance engineers. These engineers are frequently assigned to work on specific projects (like installing new medical equipment in the cardiology department). For the duration of these projects, they also report to the project leader.

What type of structure is the hospital using? Identify two potential problems this structure might create and suggest how the hospital could manage these problems.

Question 5 (Analytical)

Company A is a public utility providing electricity. It operates in a regulated environment with stable demand and well-established technologies. Company B is a fashion retail business facing rapidly changing consumer trends, intense competition, and seasonal demand fluctuations.

For each company:

• Would you recommend a tall or flat structure? Explain your reasoning.
• Would you recommend centralisation or decentralisation? Explain your reasoning.
• What type of structural pattern (functional, divisional, matrix) would be most appropriate? Explain why.

Question 6 (Recall and Understanding)

Explain why a manager cannot completely delegate accountability, even when they delegate both responsibility and authority to a subordinate. Use an example to illustrate your answer.