the reasons and ways structures change, for example due to growth or delayering

7.1 Organisational Structure – Why and How Structures Change

Learning Objective

Explain why organisations change their structures and describe the main ways in which structures can be altered – for example as a result of growth or delayering – linking the choice of structure to business objectives.

1. Linking Structure to Business Objectives

The design of an organisation’s structure must enable the achievement of its strategic objectives. The table below provides a quick checklist that matches common objectives with the most appropriate core structure.

Exam‑style question (example):
“A technology start‑up aims to launch new software products every six months. Which organisational structure would best support this objective and why?”

2. Core Types of Organisational Structure (Cambridge Syllabus 7.1.2)

• Functional Structure – Departments are grouped by specialised functions (e.g., Marketing, Finance, Production).
• Hierarchical Structure – Two sub‑types:
  • Flat (Horizontal) – Few or no middle‑level managers; wide span of control; decision‑making delegated downwards.
  • Narrow (Tall) – Many layers of management; narrow span of control; close supervision of staff.
• Matrix Structure – Employees have dual reporting lines (function + product/region) to combine expertise with market focus.

3. Comparison of Core Structures

4. Delegation, Authority & Accountability (Syllabus 7.1.3)

• Delegation – Assigning authority and responsibility for tasks to lower levels.
  • Clarifies who makes decisions.
  • Links authority to specific performance targets.
  • Reduces overload on senior managers.
• Authority – The right to give orders and expect compliance. It is distinct from responsibility, which is the duty to perform the task.
• Accountability – The obligation to answer for results. In a well‑designed structure each employee knows:
  • What they are responsible for.
  • How performance will be measured.
  • Who they report to.

Diagram suggestion (delegation chain): a simple flowchart showing “Senior Manager → Middle Manager → Team Leader → Operative”, with arrows indicating the direction of delegated authority and the corresponding line of accountability.

5. Control, Authority and Trust (Syllabus 7.1.4)

Control mechanisms in different structures:

• Flat structures – Rely on performance metrics, self‑reporting systems and high levels of trust.
• Tall structures – Depend on close supervision, detailed reporting lines and formal control procedures.

Illustrative example:

• Tech start‑up – Operates with a flat structure; high trust enables rapid innovation, but formal controls are minimal.
• Traditional manufacturing firm – Uses a tall hierarchy; tight supervision ensures product quality and safety, reflecting lower trust in autonomous decision‑making.

6. Centralisation vs. Decentralisation (Syllabus 7.1.5)

• Centralisation – Decision‑making concentrated at the top.
  • Benefits: Consistency, easier coordination, strong strategic control.
  • Drawbacks: Slower response, may stifle initiative.
• Decentralisation – Decision‑making delegated to lower levels or individual units.
  • Benefits: Faster response to local conditions, greater employee motivation.
  • Drawbacks: Risk of inconsistent decisions; requires robust communication systems.

7. Why Structures Change

Organisations modify their structures to stay aligned with strategic goals and external pressures. Main drivers (per syllabus) are:

1. Growth – Expansion in size, product range or geographic reach often requires new layers, divisions or a shift from flat to taller structures.
2. Delayering – Reducing management levels to cut costs, speed up decisions and increase flexibility.
3. Technological change – New IT systems enable flatter or networked structures and remote collaboration.
4. Mergers & acquisitions – Integration of different cultures and processes may necessitate restructuring.
5. Market pressures – Increased competition or changing customer expectations demand more responsive structures.
6. Regulatory requirements – New laws can impose additional reporting lines or specialised compliance units.

8. Ways Structures Change

Practical steps used to alter an organisation’s structure:

• Adding new layers – Introduce middle‑management positions to improve control as the firm grows.
• Creating divisions or business units – Form separate profit centres for distinct products, markets or regions (useful for understanding growth, though not examined).
• Flattening (delayering) – Remove middle managers, broaden spans of control and delegate authority downwards.
• Introducing a matrix – Set up dual reporting lines to combine functional expertise with product/market focus.
• Outsourcing & forming networks – Transfer non‑core activities to external partners and coordinate via a network model (optional for deeper study).
• Redesigning job roles – Redefine responsibilities and reporting relationships to reflect the new structure.

9. Impact of Structural Change

1. Communication flow – may become faster (flattened) or more formalised (additional layers).
2. Employee morale – empowerment can boost motivation; added bureaucracy can reduce it.
3. Control mechanisms – new reporting lines require updated performance metrics and monitoring systems.
4. Short‑term disruption – training, role clarification and cultural adjustment are needed.

10. Example: From Functional to Divisional (Growth Scenario)

Key Points to Remember

• Structure must support the organisation’s strategy, not constrain it.
• Growth usually leads to more complex, layered structures; delayering seeks the opposite.
• Delegation, authority, accountability, control and trust are inter‑linked concepts that shape how a structure works.
• Centralisation vs. decentralisation is a continuum; the appropriate balance depends on size, market dynamics and technology.
• Effective change management – clear communication, training and monitoring – minimises disruption and sustains performance.