5  Organisation Structure and Design

5.1 Structure and Design — the Distinction

Organisation structure is the formal arrangement of jobs, authority and reporting relationships within an organisation. Organisation design is the active process of building that structure to fit the organisation’s strategy, environment, technology and people. Robbins and Coulter put it simply: “managers are designing or redesigning organisational structures” whenever they group jobs, define authority, set spans of control or decide how decisions will be made (robbins2018?).

TipSix Building Blocks of Organisation Design (Robbins)
Block The question it answers
Work specialisation How finely is a job divided?
Departmentation On what basis are jobs grouped?
Chain of command Who reports to whom?
Span of control How many subordinates per manager?
Centralisation / Decentralisation Where are decisions made?
Formalisation How rule-bound is the work?

The first three are about who does what; the last three are about who decides.

5.2 The Building Blocks

5.2.1 Work specialisation

The division of work into smaller, repeatable tasks. Adam Smith’s pin factory and Frederick Taylor’s time-and-motion studies both rest on it. Specialisation raises efficiency up to a point, beyond which boredom and quality problems set in.

5.2.2 Departmentation

TipSix Bases of Departmentation
Basis Group jobs by Strength Weakness
Functional Function (production, marketing, finance) Specialisation, economies of scale Silos, slow cross-function response
Product / Divisional Product line Focus on product; clear P&L Duplication of resources
Geographic Region / territory Local responsiveness Coordination overhead
Customer Customer type Customer focus Underused capacity if customers shrink
Process Stage of work Process efficiency Limited to manufacturing-like flows
Matrix Two bases together (typically function × project) Flexibility, dual focus Two bosses; conflict

5.2.3 Chain of command and unity of command

The unbroken line of authority that links every position to the top. Fayol’s unity of command — one person, one boss — is its cornerstone. The matrix structure deliberately violates unity of command; the price is paid in coordination and conflict.

5.2.4 Span of control (Span of management)

How many subordinates a manager can effectively supervise. Narrow spans (4–6) build tall hierarchies with many levels; wide spans (10+) build flat organisations with fewer levels. The right span depends on task complexity, subordinate ability, geographic dispersion and supervisor skill.

flowchart TB
  subgraph Tall [Tall structure — narrow span]
    T1[CEO] --> T2[VP1] & T3[VP2]
    T2 --> T4[M1] & T5[M2]
    T3 --> T6[M3] & T7[M4]
  end
  subgraph Flat [Flat structure — wide span]
    F1[CEO] --> F2[M1] & F3[M2] & F4[M3] & F5[M4] & F6[M5] & F7[M6]
  end
  style T1 fill:#FCE4EC,stroke:#AD1457
  style F1 fill:#E8F5E9,stroke:#2E7D32

V.A. Graicunas’s 1933 formula for the geometric explosion of relationships as subordinates are added — direct + cross + group relationships — was an early warning that wider spans add coordination cost faster than they add subordinates.

5.2.5 Centralisation vs Decentralisation

Centralisation concentrates decision-making at the top; decentralisation pushes it down. The choice depends on the size of the firm, the geographic spread, the rate of change in the environment, and the calibre of lower-level managers. Most large modern firms are decentralised on operating decisions and centralised on strategic and financial decisions.

5.2.6 Formalisation

How much is written down — job descriptions, procedures, rules. Highly formalised organisations are predictable but rigid; weakly formalised ones are flexible but inconsistent.

5.3 Mechanistic vs Organic Structures

Tom Burns and G.M. Stalker’s classic study (1961) of UK electronics firms produced one of the most-tested distinctions in the discipline (burnsstalker1961?).

TipBurns and Stalker’s Two Forms
Feature Mechanistic Organic
Specialisation High, rigid Low, fluid
Hierarchy Tall, clear Flat, networked
Span Narrow Wide
Formalisation High Low
Decisions Centralised Decentralised
Communication Vertical Horizontal
Best fit Stable environment, routine tasks Turbulent environment, innovative tasks

Mechanistic suits a stable environment; organic suits a changing one. The same firm may run different business units in different modes.

5.4 Common Forms of Structure

TipFive Working Forms
Form One-line description When to use
Line Direct vertical authority — simplest form Small firms
Line and Staff Line authority for action; staff specialists for advice Mid-size firms
Functional Departments by function Single product, stable environment
Divisional / SBU Self-contained units by product, region or customer Large multi-product firms
Matrix Dual reporting (functional and project) Complex projects with shifting priorities

Modern variants include the team-based structure (cross-functional teams as the basic unit), the boundaryless organisation (Welch’s GE — minimal vertical and horizontal barriers), the virtual organisation (small core, much outsourced), and the network organisation (cluster of cooperating firms).

5.5 Mintzberg’s Five Configurations

Henry Mintzberg’s The Structuring of Organizations (1979) is the most influential framework at the postgraduate level (mintzberg1979?).

5.5.1 Five basic parts

Every organisation has five parts that pull on its design.

TipMintzberg’s Five Parts
Part Who is in it What they do
Strategic apex Top managers Set direction, manage relationships
Middle line Middle managers Connect apex to operating core
Operating core Front-line workers Produce the goods or services
Technostructure Analysts, planners Standardise work, output and skills
Support staff HR, legal, mailroom Provide indirect services

5.5.2 Five configurations

Each configuration is dominated by one part and one coordinating mechanism.

TipMintzberg’s Five Structural Configurations
Configuration Dominant part Key mechanism Example
Simple Structure Strategic apex Direct supervision Owner-managed start-up
Machine Bureaucracy Technostructure Standardisation of work Mass-production factory, post office
Professional Bureaucracy Operating core Standardisation of skills Hospital, university
Divisionalised Form Middle line Standardisation of outputs Multinational with SBUs
Adhocracy Support staff (with operating core) Mutual adjustment R&D consultancy, film production

A sixth — the Missionary organisation, dominated by ideology — was added in later editions, where the coordinating mechanism is standardisation of norms.

5.6 Lawrence and Lorsch — Differentiation and Integration

Paul Lawrence and Jay Lorsch’s contingency study of the plastics, food and container industries (1967) showed that successful firms differentiate their sub-units to match each unit’s environment, then invest in integrating mechanisms to keep the differentiated parts working together (lawrencelorsch1967?). The greater the differentiation, the more elaborate the integration.

5.7 Determinants of Structural Choice

Five contingency factors shape the right design. The standard contingency proposition: the right structure is the one that fits all five.

TipFive Determinants of Structure
Determinant What it implies Anchor study
Strategy Structure follows strategy Chandler (1962)
Size Larger firms tend to be more bureaucratic Aston group (Pugh et al.)
Technology Routine technology → mechanistic; non-routine → organic Joan Woodward (1965); Charles Perrow
Environment Stable → mechanistic; turbulent → organic Burns & Stalker; Lawrence & Lorsch
People (HR) Skilled, professional workforce → flatter, organic OB literature

Alfred Chandler’s Strategy and Structure (1962) is the source of the famous proposition “structure follows strategy” — that diversifying firms moved from functional to divisional structures because the new strategy required it (chandler1962?).

5.8 Authority, Responsibility, Accountability — and Delegation

Three concepts that recur in NTA stems:

TipAuthority, Responsibility, Accountability
Concept Meaning Direction of flow
Authority Right to act and command Down the chain
Responsibility Obligation to perform Up the chain (subordinate to superior)
Accountability Liability for results Up the chain

Delegation is the entrustment of authority for a specific task. Authority is delegated; responsibility cannot be. “A manager is accountable to his superior for whatever his subordinate does” — the most-tested sentence in this corner of the syllabus.

5.9 Practice Questions

Q 01 Building Blocks Easy

Which of the following is not one of the six building blocks of organisation design listed by Robbins?

  • AWork specialisation
  • BSpan of control
  • CDepartmentation
  • DJob evaluation
View solution
Correct Option: D
The six are work specialisation, departmentation, chain of command, span of control, centralisation, formalisation. Job evaluation is an HR/compensation activity.
Q 02 Span of Control Easy

A narrow span of control typically produces:

  • AA flat structure
  • BA tall structure
  • CA matrix structure
  • DA virtual structure
View solution
Correct Option: B
Narrow span (4–6 subordinates) → many levels → tall. Wide span → few levels → flat.
Q 03 Burns & Stalker Medium

Match Burns and Stalker's typology with its features:

(i) Mechanistic (a) Decentralised, fluid, horizontal communication
(ii) Organic (b) Centralised, formal, vertical communication
  • A(i)-(b), (ii)-(a)
  • B(i)-(a), (ii)-(b)
View solution
Correct Option: A
Mechanistic suits stable environments — formal and centralised. Organic suits turbulent environments — fluid and decentralised.
Q 04 Mintzberg Medium

Match Mintzberg's configuration with its dominant coordinating mechanism:

(i) Simple structure (a) Standardisation of skills
(ii) Machine bureaucracy (b) Direct supervision
(iii) Professional bureaucracy (c) Mutual adjustment
(iv) Adhocracy (d) Standardisation of work
  • A(i)-(b), (ii)-(d), (iii)-(a), (iv)-(c)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)
  • D(i)-(c), (ii)-(a), (iii)-(d), (iv)-(b)
View solution
Correct Option: A
Simple → direct supervision; Machine bureaucracy → standardisation of work; Professional bureaucracy → standardisation of skills; Adhocracy → mutual adjustment.
Q 05 Chandler Easy

"Structure follows strategy" is the proposition associated with:

  • AHenri Fayol
  • BAlfred Chandler
  • CHenry Mintzberg
  • DJoan Woodward
View solution
Correct Option: B
Alfred D. Chandler Jr. argued in Strategy and Structure (1962) that diversifying firms moved from functional to divisional structures because the new strategy required it.
Q 06 Matrix Easy

A matrix structure is most distinctive because it:

  • AHas only line authority
  • BViolates unity of command
  • CEliminates departmentation
  • DCentralises all decisions
View solution
Correct Option: B
Matrix combines two reporting lines (typically function × project) and therefore violates Fayol's unity of command. The price is paid in coordination and conflict.
Q 07 Lawrence & Lorsch Medium

Lawrence and Lorsch's contingency study introduced the twin concepts of:

  • ACentralisation and decentralisation
  • BMechanistic and organic
  • CDifferentiation and integration
  • DAuthority and responsibility
View solution
Correct Option: C
Successful firms differentiate sub-units to match each unit's environment, then invest in integrating mechanisms to keep them working together.
Q 08 Adhocracy Medium

A consulting firm working on shifting client projects with cross-functional teams and minimal formalisation is best described, in Mintzberg's terms, as:

  • ASimple structure
  • BMachine bureaucracy
  • CAdhocracy
  • DDivisionalised form
View solution
Correct Option: C
Adhocracy coordinates by mutual adjustment and is the configuration of choice for innovative, project-based work — R&D consultancies, film production.
ImportantQuick recall
  • Six building blocks (Robbins): Work specialisation, Departmentation, Chain of command, Span of control, Centralisation, Formalisation.
  • Burns & Stalker: Mechanistic (stable env, formal, centralised) vs Organic (turbulent env, fluid, decentralised).
  • Mintzberg’s five parts: strategic apex, middle line, operating core, technostructure, support staff.
  • Mintzberg’s five configurations: Simple → direct supervision; Machine bureaucracy → standardisation of work; Professional bureaucracy → standardisation of skills; Divisionalised → standardisation of outputs; Adhocracy → mutual adjustment.
  • Determinants of structure: Strategy (Chandler), Size (Aston), Technology (Woodward, Perrow), Environment (Burns & Stalker; Lawrence & Lorsch), People.
  • Authority is delegated; responsibility is not. Authority + Responsibility + Accountability = the triad.
  • Narrow span → tall; wide span → flat. Matrix → dual reporting.