Unit 2.2 — Organisational structure
Learning outcomes (from the 9587 syllabus). This note is complete when every bullet below is covered.
Learning outcomes
- Elements of organisational structure: hierarchy of authority; span of control; authority, responsibility and delegation; centralisation versus decentralisation
- Approaches to organisational structure: mechanistic versus organic approach
- Design of organisational structure: simple; functional; divisional (by product, customer, geographic location etc.); matrix (horizontal and vertical)
Running example: Swift Logistics is reorganising as it grows from 20 to 60 staff. How should it structure itself?
Big picture
In plain English: organisational structure is the skeleton of a business — it shows who reports to whom, who has authority, and how work is divided.
Analogy: a structure is like a building’s floor plan. Some buildings are tall with many floors (many levels, narrow spans); others are wide and open (few levels, wide spans). The layout affects how easily people communicate and how fast decisions move.
Core content
1. Elements of organisational structure
| Element | Meaning |
|---|---|
| Hierarchy of authority | The levels of management from top (boss) to bottom (workers); shows the chain of command |
| Span of control | How many subordinates report directly to one manager (wide = many, narrow = few) |
| Authority | The right to give orders and make decisions |
| Responsibility | The duty to carry out a task |
| Delegation | Passing authority down to a subordinate (while the manager stays accountable) |
| Centralisation vs decentralisation | Whether decisions are made at the top (centralised) or pushed down to lower levels (decentralised) |
At Swift Logistics, Mr Lim (top) has a hierarchy: Mr Lim → three depot managers → team leaders → couriers. Each depot manager has a span of control of about 10 couriers. Mr Lim has the authority to set routes, but he delegates daily route decisions to depot managers, who carry the responsibility. This is decentralisation — decisions are made nearer the couriers.
Wide vs narrow span of control: a wide span (manager supervises many) needs fewer managers and lower cost, but the manager has less time per person; a narrow span gives closer supervision but costs more and creates more levels.
Centralisation vs decentralisation trade-off: centralisation gives consistency and control; decentralisation gives faster, more local decisions and motivates staff.
2. Approaches: mechanistic vs organic
- Mechanistic approach: rigid, tall hierarchy, narrow spans, centralised, formal rules — suits a stable environment (e.g. a bank, a factory).
- Organic approach: flexible, flat structure, wide spans, decentralised, informal — suits a fast-changing environment (e.g. a tech start-up).
A traditional courier firm with fixed routes might use a mechanistic structure (clear rules, central control). But Swift Logistics, which must respond quickly to same-day delivery requests, leans organic — depot managers make quick decisions without waiting for head office.
3. Designs of organisational structure
| Design | How it is grouped | Notes |
|---|---|---|
| Simple | No formal departments; the owner controls everything | Small businesses |
| Functional | By business function: marketing, finance, operations, HR | Clear specialists; risk of “silos” |
| Divisional | By product, customer, or geographic location | Each division is semi-independent |
| Matrix | Dual reporting — by function and by project (horizontal + vertical) | Flexible but can cause confusion (two bosses) |
Swift Logistics could be functional (marketing, operations, finance, HR departments). As it expands, it might become divisional by location (East, West, Central depots), each division running its own deliveries. For a special project (e.g. a new same-day express service), it could use a matrix — a courier reports both to the operations manager (vertical) and the project leader (horizontal).
Analysis & evaluation points (AO3/AO4)
- Structure should follow strategy. The “right” structure depends on the business’s size, environment and objectives — there is no one best structure.
- Tall vs flat trade-off: tall (narrow spans) gives control but slow communication and high cost; flat (wide spans) is cheaper and faster but managers are overstretched.
- Delegation benefits and risks: it frees managers and motivates staff, but only if the subordinate is trained and trusted — otherwise errors occur.
- Matrix structures enable flexibility but cause conflict — staff with two bosses can receive conflicting orders.
- A structure must change as the business grows — a simple structure that worked at 20 staff fails at 200.
Language bank: however · on balance · it depends on · trade-off ·
Worked examples (PEEL)
PEEL = Point → Explain → Example → Link. Use this structure for every written answer.
Worked example 1 — “Explain” (6 marks)
Question: Explain one benefit and one drawback of a wide span of control.
- P (Point): A wide span of control lowers management costs.
- E (Explain): Because each manager supervises many workers, the business needs fewer managers, so wage costs fall and the hierarchy is flatter.
- E (Example): Swift Logistics with one depot manager over 20 couriers saves the salary of an extra manager.
- L (Link): This reduces costs and improves profit.
- P (Point): However, a wide span can reduce supervision quality.
- E (Explain): The manager has less time for each worker, so problems and training needs may be missed.
- E (Example): A manager supervising 20 couriers cannot coach each one on delivery skills, so service quality may fall.
- L (Link): Therefore, the best span of control depends on the complexity of the work.
Worked example 2 — “Evaluate” (10 marks)
Question: Evaluate whether a growing business should decentralise decision-making.
- P (Point): Decentralisation speeds up decision-making.
- E (Explain): Decisions are made by people close to the customers and operations, without waiting for top management approval.
- E (Example): Swift Logistics’ depot managers can approve a same-day delivery on the spot, which a centralised head office could not do quickly.
- L (Link): This improves customer service and flexibility.
- Evaluate (AO4): However, decentralisation can lead to inconsistent decisions and less control by top management, which matters where quality and standards are critical. On balance, a growing business should decentralise routine decisions but keep major strategic decisions centralised — a balance of the two.
Application bank (Singapore quick reference)
| Idea | Singapore example |
|---|---|
| Functional structure | DBS organised into consumer banking, wealth, treasury, technology |
| Divisional (geographic) | SIA Group split by airline businesses (SIA, Scoot) |
| Matrix | Tech firms and consultancies running cross-functional project teams |
| Centralisation | Government-linked bodies with strong central control (e.g. PUB standards) |
| Decentralisation | F&B chains letting outlet managers adjust local menus/promotions |
Exam technique
- How it appears: a case study describes a firm’s structure and asks you to evaluate a change (e.g. delayering, moving to divisional).
- Model skeleton: describe the current structure → explain its benefits and drawbacks in this context → evaluate the proposed change → judgement.
- Common pitfalls: confusing span of control with hierarchy; using “centralisation” and “mechanistic” interchangeably; drawing no conclusion.
Self-test checklist
Essay practice: “Evaluate the view that a business should adopt an organic rather than a mechanistic structure.” (25 marks)