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IB Syllabus 2.2
IB Syllabus 2.2
The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:
The following terminology in relation to different types of organizational structures (AO2)
Delegation
Span of control
Levels of the hierarchy
Chain of command
Bureaucracy
Centralization
Decentralization
Delayering
Matrix structure
The following types of organization charts (AO2), (AO4)
Flat or horizontal
Tall or vertical
By product, by function or by region
Appropriateness of different organizational structures given a change in external factors (AO3)
Changes in organizational structures (for example, project-based organization, Charles Handy’s “Shamrock Organization”) (HL only) (AO3)
Inclass activities
Inclass activities
Day 1: What is Organizational Structure?
Day 1: What is Organizational Structure?
Go over 2.2 terms in Google Slides
Delegation
Span of control
Levels of the hierarchy
Chain of command
Bureaucracy
Centralization
Decentralization
Delayering
Day 2: Types of Organizational Structures
Day 2: Types of Organizational Structures
Look up an organization from the website below and comment on their organizational structure.
Can you tell anything about:
Levels of Hierarchy
Span of Control
Decision Process
Chain of Command
Delegation?
What are the benefits and limitations of them choosing this organizational structure?
Overview the following organiational structures:
Matrix structure
Flat or horizontal
Tall or vertical
By product, by function or by region
Day 3: Jigsaw - Organizational Structure Experts
Day 3: Jigsaw - Organizational Structure Experts
Jigsaw of different organizational Structures
Flat (Horizontal) Organizational Structure
Tall (Narrow) Organizational Structure
Shamrock Organization
Organizational Structure By Product
Organizational Structure By Function
Organizational Structure By Region
Matrix (Project) Structure
Jigsaw - Step 1: Specialization (15 min.)
You must become “specialized” in your assigned Organizational Structure.
What is the organizational structure and for what types of organizations is it suitable?
What are the advantages and disadvantages of this organizational structure?
Provide a real life example along with the advantages and disadvantages
Comment on when applicable:
Levels of Hierarchy
Span of Control
Decision Process
Chain of Command
Delegation
Communication
Employee Motivation
Cost
No one leaves the group until everyone understands your organizational structure.
Jigsaw - Step 2: Sharing of the Wise (20 min)
Form new groups that has at least 1 “specialized person” of each organizational structure (must have at least one person from group 1, 2, 3, 4, 5, 6, 7).
What is the organizational structure and for what types of organizations is it suitable?
What are the advantages and disadvantages of this organizational structure?
Provide a real life example along with the advantages and disadvantages
Comment on when applicable:
Levels of Hierarchy
Span of Control
Decision Process
Chain of Command
Delegation
Communication
Employee Motivation
Cost
4. No one leaves the group until everyone understands your organizational structure.
Choose 1 of the 3 Case Studies to Answer
5. Strande Financial Services (SFS)
6. Gustar Insurance Agency (GIA)
What you should know
By the end of this subtopic, you should be able to:
define the following terms: (AO1)
organisational structure
delegation
span of control
levels of hierarchy
chain of command
bureaucracy
centralisation
decentralisation
delayering
matrix structure
project-based organisational structure
flat organisation
tall organisation
hierarchical organisational structure
organisational structure by product
organisational structure by function
organisational structure by region
explain: (AO2)
delegation
span of control
levels of hierarchy
chain of command
bureaucracy
centralisation
decentralisation
delayering
matrix structure
distinguish between: (AO2)
flat and tall organisational structures
tall and vertical organisational structures
‘by product’, ‘by function’ and ‘by region’ organisational structures
construct different types of organisational charts (AO4)
evaluate the appropriateness of different organisational structures given a change in external factors (AO3)
evaluate the changes in organisational structures and, more specifically, project-based organisation and Handy’s ‘shamrock organisation’ (A03) HL
https://quizlet.com/_c4kvuj?x=1qqt&i=4jrhob
https://www.gimkit.com/view/6344a103ed13390021bbea4b
Accountability
The extent to which a person is held responsible for the success or failure of a task, job, or project. It allows senior managers to have better control over the running of their organizations.
Bureaucracy
The administrative systems within an organization, such as the formal policies and procedures of the business. It includes the formal rules, regulations, and procedures of the organization.
Centralization
The situation where decision-making is predominantly made by a very small group of senior managers at the top of the organizational hierarchy.
Chain of command
The formal lines of authority in an organization. It can be seen via an organizational chart, which shows the formal path through which commands and decisions are communicated from senior managers to subordinates.
Communication
The transfer of information from one entity to another. It is vital to how a business operates.
Decentralization
The situation in an organization where decision-making authority is delegated throughout, rather from a central authoritative group.
Delayering
This occurs when an organization removes one or more layers in its hierarchical structure, i.e., the number of layers of management is reduced, or made flatter.
Delegation
The act of line managers entrusting and empowering employees with authority to successfully complete a particular task, project, or job role.
Flat organization
Also known as a horizontal structure, this type of organizational structure has only a few layers of management.
Flat structure
Type of organizational structure that has few levels in the organizational hierarchy.
Hierarchical (hierarchy)
A type of organizational structure that is tall/vertical, with many levels in terms of ranks.
Levels of hierarchy
The number of layers of formal authority in an organization. It is represented in an organizational chart.
Line manager
The person directly above an employee in the organizational structure of a business.
Managers
People responsible for the day-to-day running of the business or a department within the business.
Matrix structure
A flexible type of organizational structure consisting of team members from different departments or divisions of the business who work together temporarily on a particular task or project.
Organization by function
Structuring a workforce according to business functions, i.e., specialised roles or tasks.
Organization by product
Structuring a workforce according to the goods or services sold. Each department focuses on a different product within the organization’s overall product portfolio.
Organization by region
Structuring a workforce according to different geographical areas based on where the firm’s operations are.
Organizational chart
A diagrammatic representation of an organization’s formal organizational structure.
Organizational structure
The formal interrelationships and hierarchical arrangements within a firm.
Outsourced workers (HL only)
Also known as outsourced vendors or the contractual fringe, these are the individuals or other organizations hired on a contract basis to carry out a specific but non-core role in Charles Handy’s Shamrock organization.
Peripheral workers (HL only)
According to Charles Handy, these are the contingent workers, consisting of part-time and temporary staff hired by the organization.
Professional core (HL only)
According to Charles Handy, these are the core workers consisting of full-time specialists who are vital for the organization’s operations and survival.
Project-based organization (HL only)
Also known as a matrix structure, this flexible organizational structure is based on the specific needs of a particular short-term or temporary project.
Responsibility
Refers to a line manager’s level of concern in term of the people they are in charge of. An organization chart shows the breadth and depth of a person’s roles and responsibilities in the business.
Shamrock organization (HL only)
Type of flexible organizational structure, coined by Charles Handy, advocating that organizations must adapt to changes in the business environment by having a core workforce, contingent workforce, and outsourced vendors.
Span of control
Refers to how many workers are directly accountable to (or under the authority of) a particular line manager.
Tall organization
Also known as a vertical structure, this type of organizational structure has many layers in the organizational hierarchy.
Tall structure
Type of organizational structure that has many levels of hierarchy, so the span of control is likely to be narrow.
Additional Notes
Additional Notes
The following terminology in relation to different types of organizational structures (AO2)
The following terminology in relation to different types of organizational structures (AO2)
Delegation
Span of control
Levels of the hierarchy
Chain of command
Bureaucracy
Centralization
Decentralization
Delayering
Matrix structure
Organization Chart
Organization Chart
Organisation chart is a graph that represents organisational structure by showing the relationships of accountability and responsibility.
Accountability is a down-to-top (upwards) type of professional relationship which means being responsible to someone on the higher level of the hierarchy. For example, if you are a clerk, then you are accountable to your line manager.
Responsibility is a top-down (downwards) type of professional relationship which means being in charge of someone on the lower levels of the hierarchy.
Organisation chart shows the following:
Functional departments
Chain of command
Span of control
Channels of communication
Levels of hierarchy
1. Delegation
1. Delegation
Assigning responsibility for a task to someone further down the chain of command. It empowers employees to make decisions; it shifts the decision-making authority from one level to a lower one. However, the person who delegates the work is still accountable for the outcome of the work.
Managers should delegate tasks that:
fit another employee’s skills better than their own
are repetitive (so manager’s time could be spent doing more complex work)
require less expertise
A good manager knows when and how to delegate work to a subordinate to optimise work and motivation for them both.
Example:
Leticia recently took the job of an accounting manager in a company. She had five people under her supervision, but found that she was staying later and later each day to complete the required work herself. After some time, she realised that she had to ask her subordinates to complete some of the tasks. The late work in the office was taking its toll on her and her time with her family.
Delegation Explained | Organisational Design
2. Span of Control
2. Span of Control
Span of control describes the number of subordinates that a manager or supervisor directly supervises.
Should a business have a wide or narrow span of control?
Depends on three main interrelated factors:
Employee competencies - This refers to the skills, qualifications, training, and experience of employees. Workers who are highly competent are more likely to be given greater authority and flexibility to make decisions and to organize their own work. Hence, the employer is more able and willing to use wider spans of control and delegation.
Managerial competencies - This refers to the attitudes and beliefs of of managers, and hence their management styles. Some managers believe that a workforce is most
efficient if employees are given greater freedom to make decisions and they are more likely to
delegate authority to junior employees, enabling the use of wide spans of controlThe business context - This refers to the nature of the organization and the market(s) in which it operates as well as the activities under consideration. Large, multinational companies (MNCs) will need to be structured differently from small sole traders or partnerships. MNCs will have wider spans of control as senior managers will be responsible for larger teams, possibly across multiple geographical locations. In the case of sole traders and small partnerships, the business owners may maintain narrower spans of control.
Narrow span of control
A narrow span of control means that each manager has few people to supervise. This allows for tighter (closer) control on decision making.
This structure is often used when the work is highly complex and varied and where employees may need more ongoing support.
There's close supervision and direct control of the supervisor over the employees.
Has many levels of management, less independence and less decision authority for subordinates, and a large distance between top management and staff.
May have:
Tall (vertical) organizational structure.
Long chain of command
Wide span of control
A wide span of control means that a manager will have many subordinates.
Workefrs have a greater degree of independence with a wide span of control as it is not possible for an individual line manager to monitor the work and progress of each and every subordinate in the team.
A wide span of control can help to reduce costs (as there are fewer levels of management in the organizational hierarchy) but this requires strong leadership.
Can present challenges for managers in terms of communication and control unless they are able to delegate effectively to members of their team.
Example:
When the work is less complex and variable, a manager can supervise dozens of employees. In mass production for example, where tasks are clearly defined or repetitive and require little supervision, the span of control is much wider.
Alternatively organizations with a lot of independence for employees can also have a wide span of control.
May have:
Flat (horizontal) organizational structure
Shorter chain of command
Span of Control (Organisational Structure)
3. Hierarchy and levels of hierarchy
3. Hierarchy and levels of hierarchy
Hierarchy is a term that refers to the ranking of people in an organisation according to their status or authority. It's number of layers of authority available within an organisation. The organizational hierarchy also indicates lines of communication, decision-making authority, accountabilities and responsibilities.
In the example below, there are five levels in the organizational hierarchy.
Tall/Vertical Structure
has a large number of levels of hierarchy and so the span of control is likely narrow. There will be many people between the person at the top of the organization and those at the bottom of the hierarchal structure.
Flat/Horizontal Structure
has fewer levels of hierarchy, decision making is decentralized. Has less promotional opportunities for employees.
4. Chain of Command
4. Chain of Command
The line of authority in an organisation, specifying who reports to whom.
Long chain of command:
Organisation with many levels of hierarchy
Communication takes a long time to reach the bottom layer of employees
Slows down the process of reacting to issues, and can cause customer dissatisfaction and other production issues.
Short chain of command:
Organisations with fewer levels of hierarchy
Communication flow is faster. This allows faster reaction to issues with products and makes the organisation more efficient in dealing with problems.
5. Bureaucracy
5. Bureaucracy
Bureaucracy is a system of administration with clear hierarchical structure in which people are expected to follow precisely defined rules and procedures.
It is used to describe the formal rules in an organisation, as well as the communication and impersonal relationships.
Hierarchy: Organizational structure with multiple levels, common in public administration, military, and sometimes large companies.
Administration: Involves formal policies, procedures, and communication.
Paperwork: Commonplace for tasks approval and compliance verification.
Hierarchical Structures: Clear roles and accountability
Advantages
Ensures control and accountability for managers, common in large and established organizations
Disadvantages
Inflexibility, slow response to changes, stifles creativity and innovation, slows decision-making
Centralization and Decentralization
Centralization and Decentralization
6. Centralization:
A situation where only one individual or small group of top managers makes decisions about the company’s direction. This structure is often used by small companies where the owner is responsible for all business activities.
Advantages and Disadvantages
Advantages:
Quick Decision-Making: Fewer people involved leads to faster decisions.
Consistency: Centralized control ensures uniformity in policies and procedures across the organization.
Clear Direction: Senior management can set clear objectives and strategies for the entire business.
Disadvantages:
Limited Employee Empowerment: Lower-level employees may feel disempowered and less motivated as they have little authority.
Overburdened Managers: Senior managers may become overloaded with decision-making responsibilities, potentially leading to burnout.
Reduced Responsiveness: Centralized structures may struggle to respond quickly to local market needs or customer feedback.
7. Decentralization:
A decentralized organization grants greater authority and decision-making power to employees at lower levels in the organizational hierarchy. This involves empowering individuals in various branches, departments, or divisions to make decisions that affect their work and the organization as a whole.
Relies on a team environment at different levels to achieve the company’s goals. This means that many decisions are not taken at the centre of the business; instead they are delegated to a lower level of management.
Advantages and Disadvantages
Advantages:
Increased Employee Motivation: Employees at lower levels gain authority and responsibility, which can enhance job satisfaction.
Better Decision-Making: Decisions can be made by those with direct knowledge of local conditions and customer needs, leading to more effective outcomes.
Workload Reduction: Senior managers can focus on strategic issues rather than day-to-day operations, as junior managers handle more operational decisions.
Disadvantages:
Inconsistent Decisions: Different branches or departments may make divergent decisions, leading to a lack of uniformity across the organization.
Potential for Misalignment: Local managers might prioritize their own department's goals over the overall objectives of the business.
Increased Training Needs: Employees at lower levels may require more training and support to make informed decisions effectively.
Centralisation and Decentralisation in Business Decision Making
8. Delayering
8. Delayering
involves reducing the number of levels in the organisational hierarchy
Advantages:
Improved Communication: A flatter organizational structure can facilitate better communication across departments, as there are fewer levels of hierarchy to navigate.
Flexibility and Responsiveness: Organizations can become more agile and adaptable to changing environments, allowing for swift adjustments in strategies and operations.
Can lead to more delegation and empowered employees, increasing motivation.
Delayering an organisation does not necessarily involve job cuts. But delayering can involve a wider span of control
Reduces administration costs
Disadvantages
However, it can create anxiety and sense of insecurity if some staff feel like their jobs are redundant, it can overload management staff who now have many more subordinates and prolong decision-making
Training and Development Costs: As responsibilities shift to junior employees, organizations may face increased costs related to training and development to ensure that these employees are equipped to handle their new roles effectively.
Increased Complexity in Management: While delayering aims to simplify structures, it can sometimes lead to confusion regarding roles and responsibilities, particularly if the organization does not manage the transition effectively.
Types of Organizational Structures (AO2), (AO4)
Types of Organizational Structures (AO2), (AO4)
Flat (horizontal) organisational structure
Flat (horizontal) organisational structure
Few levels of hierarchy
Decision-making is delegated to employees
Span of control is wide
Communication may flow from top down and bottom up.
Often suitable for small companies or startups, but may also work in larger organisations in some situations.
Employees have more authority to make decisions independently; they are empowered. The employees still have supervisors, but the sharing of decision-making power improves motivation and accountability.
Tall (vertical) organisational structure
Tall (vertical) organisational structure
Many levels of hierarchy
Span of control is narrow
Communication flows mostly from the top down with a long chain of command.
More formal and bureaucratic
Division of labour more specialized
Flat vs Tall Organizational Structures
Top 10 Companies with a Flat Organisational Structure
Organisational structure by product
Organisational structure by product
An organisational structure where the organisation is divided into different departments, each focused on a different product.
Each department focuses on a different product
Employees are assigned to the product or customer to which their work relates
Employees are focused on the specific market segment related to their product and, as a result, meet the customer needs more effectively
Can encourage competition between departments
Functions may be duplicated (eg. different sales teams for each product) which is more expensive
Organising a business by product or product line allows easier departmentalisation and best use of personal skills and specialised knowledge
This type of structure is ideal for organisations with multiple products.
Organisational structure by function
Organisational structure by function
An organisational structure in which the organisation is divided into smaller groups based on specialised functional areas, such as marketing, production, finance, IT and others.
employees are grouped according to a specialised set of roles or tasks
The level of bureaucracy in this organisational structure makes it difficult for organisations to respond to changes in the market quickly
Organisational structure by region
Organisational structure by region
An organisational structure used by organisations with operations in different geographical locations. Multinational companies in industries such as retail, manufacturing, hospitality, and transportation may use this type of organisational structure.
The organisation’s offices in each region can operate individually while following company policies and values.
Offices can be found in local, national or international locations. Each location is overseen and directed by one or several managers.
They take responsibility for the operation and its finances, and often work to tailor the business strategy to the local conditions.
Each regional location may report to an executive responsible for overseeing the operations of several locations, or it may report directly to the top management in the headquarters of the organisation.
The drawback of such organisational structure is that decision-making can become decentralised easily as the regional units have greater autonomy. This can affect the commitment to the overall organisational strategy.
Changes in organisational structures (HL) (AO3)
Changes in organisational structures (HL) (AO3)
Project-based organizations and Shamrock organizational structures allow for more flexibility given changing business environments.
Matrix Structure (or project-based organisation)
Matrix Structure (or project-based organisation)
An organisational structure that has two or more reporting structures; employees working on a project report to both a project manager and to a functional manager.
A matrix/project based structure is a flexible organizational structure based on the specific needs of a particular business to meet the changing needs of the organization.
structure in which team members report to multiple managers
Team members (whether external or internal) report to a project manager as well as to the department manager (such as the IT manager, the finance manager or the human resource manager).
Each team has representatives of the marketing team, finance team, human resources team and legal team. All of these specialists are needed to work on a project. This means that they report to the project leader as well as to the manager of their own department. As a result, the organisational structure looks like a matrix.
Employees may be part of multiple teams
Matrix Structure Benefits
Flexible, based on the specific needs of a particular business
Team members can assemble and reassemble as needed to complete new projects.
A project manager also has flexibility to choose the team members that are best suited for the project.
more efficient decision making and faster response times because of increased communication
greater autonomy
stimulates cooperation between areas of specialisation and between departments
experts from multiple areas can help generate new and creative ideas
Matrix Structure Limitations
can lead to confusion and conflict due to the complex reporting lines and people holding multiple roles
can isolate team members who work outside of their departments and ‘comfort zone’
Some employees may also be uncomfortable in such a dynamic environment, where teams can be changing frequently and new work relationships need to be established regularly.
Sub-cultures are formed which might unsettle some employees
Might also be conflicting interests, as employees report to two or more managers (their designated line manager and project managers in the matrix structure), so have to deal with uncertainties about prioritising different tasks. Conflict can result between managers and employees if there are divided loyalties, resulting in lower morale and productivity
Some employees may feel demoralized due to the increased workload and pressures, especially if they are involved in numerous assignments happening at the same time
Matrix structures are complex so can be expensive to execute
Additional resources and finance are required to fund the different teams in a matrix structure.
Shamrock Structure
Shamrock Structure
The shamrock structure has three groups of workers (core workers, temporary workers, and subcontractors) and provides greater flexibility.
Core employees. These are permanent employees who fulfil the core mission of the business.
Sub-contracted employees. These are workers who are subcontracted to complete specialised tasks. Many businesses will subcontract payroll or tax work to third parties, for example.
Temporary workers. These are workers who are hired only as needed as the business expands or contracts. They constitute a flexible workforce composed of part-time, temporary and seasonal workers.
Benefits:
Often businesses will need different numbers of employees with different skills at different times
Having a static set of employees can prevent a business from reacting to changes in the external environment.
Hiring more permanent employees can add to costs that cannot be reduced easily when the business needs to downsize again, due to strict labour laws in some countries.
Downsides:
There are fewer employees that are closely connected to the business.
Workers may feel less engaged in the business when they are not permanent employees.
For temporary workers especially, the flexible nature of the work can make them vulnerable to income fluctuations, a key concern for many workers in the gig economy
Business Studies - Organisation Structure: Business Exam Tips
How Apple Is Organized for Innovation: The Functional Organization
Appropriateness of different organizational structures given a change in external factors (AO3)
Appropriateness of different organizational structures given a change in external factors (AO3)
Structures: Various types including hierarchical, matrix, horizontal, vertical, by product, by region, and by function.
External Factors: Influences from the environment impacting businesses, categorized into social, technological, economic, environmental, political, legal, and ethical factors.
Change: Alterations in the external environment, prompting businesses to adjust their structures.
Impact of External Factors on Organisational Structures
Impact of External Factors on Organisational Structures
Economic Changes: Recession may lead to staff reductions and delayering; growth may require specialist additions and bureaucracy to ensure consistent quality.
Globalisation: Multinational expansion necessitates new units; outsourcing increases; competition drives structural adaptations.
Technological Advancements: New technology eliminates or creates positions, alters administrative tasks, and enables remote collaboration.
Sociocultural Shifts: Increased labour mobility prompts flexible structures; focus on human needs leads to distributed leadership and collaboration.
Conclusion
Conclusion
Dynamic Response: Businesses must adapt structures to align with changing external factors for optimal performance and sustainability
Impact of External Factors on Organizational Structures
Remote Work Trends:
During the COVID-19 pandemic, widespread adoption of remote work highlighted the benefits of fewer in-office staff.
Organizational structures may adapt to accommodate remote work, reducing the need for physical office space.
Gig Economy Opportunities:
Advancements in mobile technologies have fostered opportunities in the gig economy.
This reduces the necessity for traditional hiring methods, leading to flatter organizational structures.
Impact of Big Data:
Implementation of big data analytics in retail has streamlined customer loyalty programs.
Consequently, businesses may restructure marketing teams to reflect reduced need for in-house market researchers, leading to flatter structures.
Technological Advancements:
Failure of companies like Kodak and Polaroid to adapt to digital photography technology led to downsizing and eventual collapse, showcasing the impact of technological change on organizational structures.
Social Media Marketing (SMM):
Emergence of SMM has created new roles within organizations to address changing customer needs and engagement on various platforms.
Businesses integrate SMM teams to manage customer interactions and enhance brand presence, impacting organizational structures.
Market Competition:
Intense market competition may lead to workforce reductions and delayering to maintain competitive prices.
Airlines, for instance, resorted to cost-saving measures such as staff redundancies during the COVID-19 crisis.
Business Growth and Evolution:
Expansion through mergers, acquisitions, or globalization necessitates adjustments in organizational structures.
Larger businesses may adopt more complex structures to manage international operations effectively.
Crises Management:
Crises such as the COVID-19 pandemic can prompt organizational restructuring to mitigate risks and uncertainties.
Responses to crises may lead to changes in hierarchy, resource allocation, and operational procedures.
Review Questions
1. What is meant by organizational structure and what is its purpose?
2. How does accountability differ from responsibility?
3. What is meant by delegation?
4. What is meant by span of control?
5. What are the advantages of a wide span of control?
6. What are the advantages of a narrow span of control?
7. What is meant by levels of the hierarchy in an organization?
8. What is the chain of command?
9. What is bureaucracy?
10. What are the differences between centralized and decentralized structures?
11. What is delayering?
12. What is a matrix structure?
13. What is an organization chart?
14. What are the differences between flat and tall hierarchical structures?
15. What are the differences between organization by product, function and region?
16. What is project-based organization?
17. What is the Shamrock Organization and how does it differ from traditional organizational structures?
18. In the context of the Shamrock Organization, what is meant by core workers?
19. In the context of the Shamrock Organization, what is meant by peripheral workers?
20. In the context of the Shamrock Organization, what is meant by contract workers?
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