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Unlock This CourseWhen businesses grow large, they need clear ways to organise their employees and operations. Think of it like a football team - everyone needs to know their position and who they report to. Large businesses use organisational structures to show who's in charge, how decisions are made and how information flows through the company.
Large businesses typically have thousands of employees across multiple locations, making structure even more important than in small businesses. The wrong structure can lead to confusion, slow decision-making and poor communication.
Key Definitions:
Large businesses face unique challenges that make organisational structure crucial. With hundreds or thousands of employees, clear reporting lines prevent chaos. Good structure helps coordinate activities across different departments, ensures accountability and enables effective communication from boardroom to shop floor.
Large businesses typically use one of three main organisational structures, each with distinct characteristics that affect how the business operates and performs.
This is the traditional "pyramid" structure where authority flows from top to bottom through clearly defined levels. Most large businesses still use this structure because it provides clear accountability and control.
Many management levels, narrow span of control, clear chain of command, formal communication channels, centralised decision-making at the top.
Clear authority lines, good for control and coordination, employees know their role, suitable for large-scale operations, maintains quality standards.
Slow decision-making, expensive due to many managers, poor communication between levels, reduces employee motivation, inflexible to change.
McDonald's uses a strict hierarchical structure with clear levels from CEO down to crew members. Each restaurant has a manager, assistant managers, shift supervisors and crew. This ensures consistent service and food quality across 40,000+ locations worldwide, but can make local adaptation difficult.
Flat structures have fewer management levels, giving employees more responsibility and faster communication. Many modern large businesses are "flattening" their structures to become more agile.
Few management levels, wide span of control, decentralised decision-making, informal communication, employee empowerment.
Faster decision-making, lower management costs, better communication, higher employee motivation, more flexible and responsive.
Managers may be overloaded, less control over operations, role confusion possible, harder to coordinate large operations.
Google famously tried to eliminate middle management entirely, but found this created problems. They now use a relatively flat structure with fewer levels than traditional companies, allowing engineers to focus on innovation while still maintaining necessary coordination.
Matrix structures combine elements of both hierarchical and flat structures. Employees report to both a functional manager (like Marketing) and a project manager, creating a grid-like structure.
Dual reporting relationships, project-based teams, functional departments, shared resources, complex communication patterns.
Flexible resource use, good for complex projects, encourages cooperation, develops employee skills, responds well to change.
Confusing dual authority, potential conflicts between managers, expensive to operate, requires skilled managers, can slow decisions.
NASA uses matrix structure for space missions, combining functional expertise (engineering, science) with project teams (specific missions). This allows them to share specialist knowledge across multiple projects while maintaining project focus and deadlines.
Large businesses don't randomly choose their structure. Several key factors influence which structure works best for their specific situation and objectives.
Larger, more complex businesses often need hierarchical structures for control, while businesses with simpler operations might use flatter structures. The number of products, markets and locations all affect structural needs.
Businesses in fast-changing industries (like technology) often prefer flatter or matrix structures that can adapt quickly. Traditional industries with stable conditions may stick with hierarchical structures.
Several additional factors influence structural decisions in large businesses:
The choice of organisational structure significantly affects how well a large business performs across various measures including efficiency, innovation and employee satisfaction.
Structure directly affects how information flows and decisions are made. In hierarchical structures, information must pass through many levels, which can distort messages and slow responses. Flat structures enable faster communication but may lack coordination. Matrix structures can improve information sharing but may create confusion about authority.
Hierarchical structures have high management costs but provide good control over operations.
Flatter structures typically encourage more innovation as employees feel empowered to suggest improvements and take initiative.
For Paper 2 success, you need to analyse organisational structure scenarios and make justified recommendations. Here's how to approach these questions:
When analysing organisational structure questions, consider:
Typical Paper 2 questions involve businesses considering structural changes due to growth, merger, new technology, or performance problems. You'll need to evaluate options and recommend the most suitable structure with clear justification.
Strong answers will evaluate both sides of structural decisions: