Organisational structure and design
What the exam tests
You must explain how work is divided and coordinated, compare structural types, and recommend a structure for growth. Questions often use organisation charts, span of control and centralisation decisions.
Core rules
- Structure defines division of labour, grouping, authority and coordination. It should fit strategy, size, technology and environment.
- Functional structure groups by specialist function (marketing, finance, operations). It gives expertise and clear career paths but can create “silos” and slow cross-functional projects.
- Divisional structure groups by product, region or customer. Each division can respond to its market, but duplication of functions raises costs.
- Matrix structure combines functional and project reporting. It improves coordination but creates dual authority and possible conflict.
- Tall structures have many levels and a narrow span of control; they can slow communication. Flat structures have few levels and a wider span, demanding more employee self-management.
- Chain of command is the line of authority; span of control is the number of subordinates reporting to a manager. Centralisation keeps decisions at the top; decentralisation pushes decisions closer to customers.
- Line managers have direct authority over subordinates; staff managers advise and support.
Worked example
A family hotel in Paphos opens four more hotels in different resorts. It currently uses a functional structure. Recommend a structure. Reasoning: a geographic divisional structure lets each hotel respond to local customers, labour markets and seasonality, with a hotel manager accountable for local performance. Keep finance, brand and procurement central to avoid duplication and maintain standards. This is a hybrid: divisional front line with central support. A pure functional structure would overload head office; a matrix might create confusion between hotel managers and function heads during peak season. The recommendation must state the trade-off: local responsiveness versus some loss of scale economies.
Traps that cost marks
- Saying a narrow span always means better control; it can create tall, slow hierarchies.
- Forgetting that matrix structures have two bosses.
- Treating decentralisation as abandoning control; it still requires standards and reporting.
- Assuming an organisation chart shows informal relationships.
- Recommending a structure without linking it to strategy, size or environment.