Organisational structure and culture
How a business is structured and the culture it develops shape how decisions are made and how people work together.
Key structural concepts
Organisational structure defines how tasks, authority, and communication are arranged. Key concepts include the chain of command (who reports to whom), span of control (how many people a manager supervises), and centralisation versus decentralisation (whether decisions are made at the top or spread throughout).
Tall and flat structures
Tall structures have many management levels and narrow spans of control, allowing close supervision but slowing decisions. Flat structures have few levels and wide spans, speeding decisions and empowering employees but stretching managers thin. Many organisations have flattened in recent decades.
Functional and divisional structures
A functional structure groups people by specialty, such as marketing, finance, and operations, which builds expertise but can create silos. A divisional structure groups people by product, region, or customer, such as separate divisions for Europe and Asia, making each more responsive but duplicating functions.
Matrix and team structures
A matrix structure combines functional and project or product lines, so employees report to two managers. It encourages collaboration on complex projects but can cause confusion. Team-based and networked structures organise work around cross-functional teams and partnerships.
Organisational culture
Organisational culture is the shared values, beliefs, and norms that shape how people behave at work: 'how we do things around here'. Culture shows in visible artefacts (dress, office layout, rituals), stated values, and deeper assumptions. Edgar Schein's model describes these three levels.
Why culture matters
Culture affects motivation, ethics, innovation, and retention. A culture that values learning encourages experimentation; one that punishes mistakes encourages hiding problems. Peter Drucker is often credited with saying 'culture eats strategy for breakfast', meaning even good plans fail in the wrong culture.
Managing change
Organisations must adapt to new technology, competition, and markets. Kurt Lewin's model describes change as unfreezing (preparing people for change), changing, and refreezing (making new ways stable). John Kotter's eight-step model emphasises creating urgency, building coalitions, communicating a vision, and anchoring changes in culture. Resistance often comes from fear of loss or uncertainty.
Worked example
A growing software company with 20 employees uses a flat structure where everyone reports to the founder. At 200 employees, the founder becomes a bottleneck. The company adds department heads and team leaders, introducing more levels and narrower spans of control, while trying to preserve its fast-moving, collaborative culture.
Key takeaways
Structure involves chain of command, span of control, and centralisation. Tall structures allow close control; flat ones speed decisions. Functional structures build expertise; divisional ones increase responsiveness; matrix structures combine both. Culture is shared values and norms, described by Schein's three levels. Culture shapes ethics, innovation, and retention. Change management models by Lewin and Kotter help overcome resistance.
Flashcard
Line of authority
Check your understanding
In a matrix structure, employees typically: