How businesses organise their people — hierarchies, span of control, delegation, and how structure affects communication.
Organisational structure refers to how a business arranges its people and roles. It determines who is in charge, who reports to whom, how decisions are made, and how communication flows. As a business grows, its structure typically becomes more complex.
| Term | Definition |
|---|---|
| Hierarchy | The levels of authority within a business, from the CEO at the top to shop floor workers at the bottom |
| Span of Control | The number of subordinates a manager directly supervises |
| Chain of Command | The line of authority from the top of the hierarchy to the bottom |
| Subordinate | An employee who reports to a manager above them in the hierarchy |
| Delegation | Passing authority and responsibility to someone lower in the hierarchy |
| Centralisation | Decision-making kept at the top of the hierarchy |
| Decentralisation | Decision-making authority spread to lower levels |
3 levels shown. Each director has a span of control of 2.
The number of levels in a hierarchy is linked to the size of the business. More levels = longer chain of command = slower communication. Fewer levels = faster decisions but managers have more to oversee.
One manager supervises many subordinates (e.g. 8–10). Suits routine work where employees are skilled and don't need close supervision. Reduces the number of managers needed.
One manager supervises few subordinates (e.g. 2–3). Suits complex tasks needing close supervision. More managers are needed, increasing costs.
| Wide Span | Narrow Span | |
|---|---|---|
| Levels of hierarchy | Fewer | More |
| Communication speed | Faster — fewer layers | Slower — more layers |
| Manager cost | Lower | Higher |
| Supervision quality | Less close | More detailed |
| Best suited to | Routine, skilled tasks | Complex, specialist tasks |
The chain of command is the path instructions travel from the top of the business to the bottom. A long chain of command can cause:
As businesses grow they must decide how to structure themselves. The two main approaches are tall hierarchies (many layers) and flat hierarchies (few layers).
Many levels of hierarchy. Each manager has a narrow span of control. Common in large businesses like the NHS or the Army.
✅ Benefits: Clear authority; close supervision; clear promotion path for employees.
❌ Drawbacks: Slow communication; expensive (more managers); workers feel distant from top.
Few levels of hierarchy. Each manager has a wide span of control. Common in small businesses and modern tech companies.
✅ Benefits: Fast communication; cheaper; workers feel more empowered and trusted.
❌ Drawbacks: Managers may be overstretched; less promotion opportunity; can become chaotic as business grows.
| Centralised | Decentralised | |
|---|---|---|
| Who decides? | Senior management only | Managers and staff at all levels |
| Speed of decisions | Can be slow — must go to the top | Faster — decided where the issue is |
| Consistency | High — one view applied everywhere | Lower — varies by manager/location |
| Staff motivation | Lower — less ownership | Higher — more responsibility |
| Example | McDonald's pricing and menus | John Lewis Partners setting local decisions |
Delegation is when a manager passes authority and responsibility for a task to a subordinate. The manager remains accountable for the outcome, but gives the employee the power to carry it out.
Frees up managers to focus on more strategic tasks. Motivates employees — they feel trusted and gain new skills. Develops future managers. Speeds up decisions at operational level.
If the subordinate lacks skills or experience, quality may suffer. Manager still carries responsibility if things go wrong. Can lead to inconsistency if multiple people handle similar tasks differently.
Small businesses typically have flat, informal structures — the owner makes most decisions. As the business grows:
Jeff Bezos started Amazon in a garage with a flat structure. Today Amazon employs over a million people globally with a complex hierarchy across dozens of departments and geographic regions. The company uses a mix of centralised strategy (set at HQ) and decentralised execution (individual teams have autonomy).
Click a term on the left, then its definition on the right.