Organisational Structures
Business: Edexcel GCSE, topic 2.5.1
Centralised Organisational Structures
Centralised organisational structures have a few people at the top of the hierarchy who make all the important decisions in a business.
Benefits
- Centralised organisational structures usually have consistent decisions and company policies across all the business’ different functions.
- The people at the top of the hierarchy usually have the most experience and expertise. They also have a complete view of the organisation and what its overall goals are, so they may be best-positioned to make the best decisions.
Drawbacks
- Decision making can be slow because all decisions are made by a few people at the top of the business. The people at the top will end up with a lot of decisions that will take time.
- Because the people at the top of the hierarchy are less involved in the day-to-day work (operations) in a business, they can become disconnected from reality. This can lead to bad decisions.
- Businesses often have lots of different functions, each needing different skills. The people at the top are unlikely to have specialist knowledge of all the different functions.
Decentralised Organisational Structures
In decentralised organisations, decision-making responsibilities are delegated by the top management to middle and lower level managers in the business.
Benefits
- Decisions can be made faster because communication has to travel through less layers before being implemented.
- Decisions are being made by people who have specialist knowledge and are closer to the day-to-day operations of the business.
Drawbacks
- Decentralised organisations may have inconsistent decisions made across different business functions.
- Some of these decisions may not be aligned with the overall aim or objectives of the business.
Tall vs Flat Organisational Structures
As well as being centralised or decentralised, organisational structures can also be classified as tall or flat.
Tall organisational structures
- A tall organisational structure is a hierarchy with a long chain of command (lots of layers) in the organisation.
- Usually, each manager has a smaller span of control (is responsible for a smaller number of employees), but lots of people are managers.
Flat organisational structures
- A flat organisational structure means the opposite. There are fewer layers in the organisational hierarchy.
- This means that managers have a larger span of control (manage or are responsible for more employees).
Test yourself on Organisational Structures
Who makes decisions in centralised organisational structures?
Which of these is not a characteristic of people at the top of an organisational hierarchy?
Compared to centralised organisational structures, in decentralised organisations...
Which of these is not a drawback of decision-making in decentralised organisations?