Business organisation structure, governance and management
Structure
Organisation structure is the pattern of authority, responsibility and communication. Candidates must know hierarchy, the scalar chain (line of command), span of control (number of direct reports), tall versus flat structures, centralisation versus decentralisation and formalisation. Common designs are functional (specialist departments, risk of silos), divisional (product or geography, clear accountability), matrix (dual reporting to function and project, better coordination but authority conflict) and network/virtual forms. Structure should fit strategy, size, technology and environment.
Governance and management
Corporate governance is the system by which organisations are directed and controlled. Agency theory explains the separation of ownership (shareholders) and control (managers), creating potential conflicts; boards therefore include independent non-executive directors, and use audit and remuneration committees, segregation of duties and transparent reporting. Management is the process of planning, organising, commanding, coordinating and controlling (Fayol). Levels are strategic, tactical and operational; delegation must carry authority, responsibility and accountability.
Traps: span of control is not chain of command; matrix has two bosses; non-executives must be independent; agency problems are not only fraud. Worked example: a CEO with four divisional directors, each with six managers, has a span of control of four; the scalar chain from CEO to manager has three levels. Rule of thumb: structure follows strategy, but strategy must also fit structure.