Cambridge Syllabus Notes

7.1 Organisational Structure – Control, Authority, Trust & Delegation

Learning Objective

Explain how an organisation’s structure supports its objectives, differentiate between the main types of structure, and describe the relationship between authority, responsibility, control and trust – especially when delegating tasks.

Key Definitions

Authority: The formal right given to a person or position to make decisions, give orders and allocate resources on behalf of the organisation.
Responsibility: The duty or obligation to carry out assigned tasks and achieve the outcomes for which a person is accountable.
Delegation: The process of assigning authority and responsibility for a specific activity to a subordinate while the manager retains overall accountability.
Control: Mechanisms (e.g., reporting systems, performance standards) used to ensure activities are carried out as planned.
Trust: The confidence that managers and employees have in each other’s competence and willingness to act in the organisation’s best interest.
Centralisation: Concentration of decision‑making authority at the top levels of the hierarchy.
Decentralisation: Distribution of decision‑making authority to lower levels or across units.

1. Relationship Between Objectives & Structure

Organisational structures are chosen to help achieve specific business objectives. When objectives change – for example, a firm moves from a single product line to a diversified portfolio – the structure is often redesigned to provide the appropriate span of control, coordination and flexibility.

Business Objective	Most Suitable Structure	Why It Fits
Rapid product development / innovation	Matrix or flat structure	Facilitates cross‑functional teamwork and quick decision‑making.
Cost control and efficiency	Functional (tall) structure	Clear specialisation and economies of scale in each function.
Market responsiveness in diverse regions	Divisional (geographic or product) structure	Each division has autonomy to react to local market conditions.
Strategic flexibility for a global network	Network / virtual structure	Relies on partnerships and technology to coordinate dispersed activities.

2. Types of Organisational Structure

Structure	Key Features	When to Use	Advantages	Disadvantages	Typical Context
Functional (hierarchical)	Departments grouped by specialist function (e.g., Finance, Marketing)	When deep expertise and economies of scale are critical	Specialisation, clear career paths, cost efficiency	Silo mentality, slow response to change	Large, stable firms with a single product line
Divisional (by product, geography or market)	Semi‑autonomous units each with its own functions	When the organisation serves distinct markets or product lines	Focus on results, flexibility, clear accountability per division	Duplication of resources, higher operating costs	Multinationals, diversified product ranges
Matrix	Dual reporting lines – functional and project/product managers	When both functional depth and project focus are needed	Efficient use of expertise, promotes collaboration	Complex reporting, potential conflict over authority	Technology, R&D, consultancy firms
Flat (horizontal)	Few or no middle managers; wide span of control	When rapid decision‑making and employee empowerment are priorities	Quick decisions, high motivation, low bureaucracy	Limited scalability, risk of manager overload	Start‑ups, small creative agencies
Network / Virtual	Core company linked to external partners via technology	When the firm needs flexibility and access to specialised external skills	Low overhead, high flexibility, rapid re‑configuration	Reliance on partners, coordination challenges	Project‑based firms, global supply‑chain organisations

3. Centralisation vs Decentralisation

Dimension	Centralised	Decentralised
Decision‑making	Concentrated at senior management	Spread to lower levels or autonomous units
Speed of response	Slower – approvals travel up the hierarchy	Faster – local managers act without waiting
Control	Strong – uniform policies and procedures	Weaker – relies on standards, performance monitoring
Motivation & empowerment	Potentially lower – limited autonomy	Higher – employees feel ownership of decisions
Typical use	Companies requiring tight coordination (e.g., finance, defence)	Businesses needing market agility (e.g., retail chains, multinational subsidiaries)

4. Authority vs Responsibility

Aspect	Authority	Responsibility
Nature	Formal right to decide and allocate resources	Obligation to perform tasks and achieve results
Source	Job description, organisational hierarchy, delegation	Job description, personal commitment, professional ethics
Direction	Top‑down – can be delegated down the line	Bottom‑up – outcomes reported upwards
Transferability	Can be delegated (partly or wholly)	Cannot be transferred – the individual remains accountable
Measurement	Scope of decision‑making power (e.g., budget limits)	Performance against targets or standards
Accountability	Answerable for how the authority is used	Answerable for the outcomes produced

Example: A sales manager may have authority to offer a discount of up to 5 % (delegated authority). The same manager is responsible for meeting the quarterly sales target of £2 million (responsibility). If the discount is mis‑used, the manager is answerable for the misuse of authority; if sales fall short, the manager is answerable for the result.

5. Delegation and Accountability

Define the task: Provide a clear description of what must be achieved.
Allocate authority: State the decision‑making limits (e.g., “approve purchases up to £3 000”).
Assign responsibility: The delegatee accepts personal duty for completing the task.
Retain ultimate responsibility: The manager remains answerable for the overall result.
Establish control mechanisms: Reporting, performance standards and feedback loops.

Common pitfalls

Over‑delegating authority without sufficient competence.
Failing to communicate the level of responsibility expected.
Unclear reporting lines leading to duplicated effort or gaps.
Using excessive controls that erode trust.

6. Control Mechanisms Linking Authority & Trust

Formal controls: Budgets, standard operating procedures, performance appraisals.
Informal controls: Team norms, peer pressure, managerial style.
Feedback loops: Regular reports, dashboards, review meetings that close the gap between authority exercised and results achieved.
When trust is high, organisations can rely more on informal controls and reduce the cost of excessive monitoring.

7. Practical Example – Delegating a Marketing Campaign

Scenario: A senior marketing manager (SMM) has authority to allocate up to £50 000 for promotional activities. The SMM delegates the launch of a new product campaign to a junior manager (JMM).

Authority transferred: JMM may approve media purchases up to £10 000.
Responsibility assigned: JMM must design, execute and achieve a target of 5 % sales growth.
Control in place: Weekly progress reports, a budget‑tracking spreadsheet, and a post‑campaign performance review.
Accountability: If the campaign falls short, the SMM remains responsible to senior leadership for the overall marketing budget, even though the JMM had the authority to spend within the agreed limit.

8. Relationship Between Structure, Authority & Trust

Highly centralised structures concentrate authority, requiring strong formal controls to maintain trust.
Decentralised or matrix structures disperse authority; therefore, clear responsibility and high trust are essential to avoid conflict.
Choosing the right structure balances the need for control (through authority) with the need for flexibility (through delegated responsibility) and the level of trust that can be sustained.

Suggested diagram: “Delegation Flow” – Manager’s authority → Delegated authority to employee → Employee’s responsibility → Performance feedback → Accountability loop.

9. Summary Checklist

Link objectives to the most appropriate organisational structure; recognise that changing objectives may trigger a structural redesign.
Know the key features, when to use, advantages and disadvantages of functional, divisional, matrix, flat and network structures.
Understand the impact of centralisation vs decentralisation on speed, control and motivation.
Authority = right to decide; Responsibility = duty to act – authority can be delegated, responsibility cannot.
Effective delegation: clear task, defined authority, assigned responsibility, retained accountability, and appropriate control mechanisms.
High trust reduces the need for heavy formal controls; trust is built through transparent delegation and consistent accountability.

the difference between authority and responsibility