2.5 Organisation structure and employees
- Syllabus
- 2026
- Topic
- 2.5
- Level
- —
Learning objectives
2.5.1Organisational charts for different types of businessOrganisational charts for different types of business:• hierarchical and flat• centralised and decentralised.2.5.2Employee roles, responsibilities and accountabilityRoles and responsibilities of employees in terms of compliance and accountability:• span of control• chain of command• delegation.2.5.3Different functional areas within a businessThe different functional areas within a business:• human resources – workforce planning, recruitment and selection, training, health and safety, staff welfare, employment issues, industrial relations, disciplinary and grievance procedure, dismissal, unfair dismissal and redundancy• finance – wages/salaries, cash-flow forecasting, budgets and accounting• marketing – market research, product planning, pricing, sales promotion, advertising, customer service, public relations, packaging and distribution• production – manufacturing the product, designing new products, quality control and stock control.
Read structure and decision authority separately
An organisational chart shows formal roles, reporting relationships and levels of authority. Its shape and the location of decision-making are two separate design choices.
| Structural shape | Meaning | Possible benefits | Possible limitations |
|---|---|---|---|
| hierarchical | many management levels between senior leaders and frontline employees | clear promotion path, specialist supervision and close control | longer communication/decision routes, higher management cost and possible distortion between levels |
| flat | few management levels | shorter communication routes, quicker decisions and often more employee responsibility | managers may supervise many people; progression routes and close support may be limited |
| Decision authority | Meaning | Possible benefits | Possible limitations |
|---|---|---|---|
| centralised | important decisions are retained near the top/centre | consistent policy, strong control and coordinated direction | slower local response; senior managers may lack local information; employees may feel less trusted |
| decentralised | decision authority is passed to divisions, branches or lower managers | faster local response, use of local knowledge and greater ownership/motivation | decisions may be inconsistent, duplicated or harder for the centre to control |
Judge fit by business size, geographic spread, manager capability, need for consistency, speed of market change and risk. A global chain may centralise brand standards while decentralising local staffing or promotion decisions.
Flat does not automatically mean decentralised, and hierarchical does not automatically mean centralised. One describes the number of levels; the other describes where decision authority sits.
Connect span, command and delegation to accountability
| Term | Precise meaning | Organisational effect |
|---|---|---|
| span of control | number of employees directly supervised by one manager | a wide span gives more direct reports and employee independence but less manager time per person; a narrow span allows closer support but needs more managers |
| chain of command | formal route through which authority, instructions and accountability pass from senior to lower levels | a short chain can speed communication; a long chain can clarify layered responsibility but delay or distort messages |
| delegation | a manager passes authority to a subordinate to complete a task/decision | frees manager time, develops and motivates employees, and can speed action; unclear authority or insufficient skill/support raises error risk |
Delegation transfers authority to act, not the manager's ultimate accountability for ensuring the task is assigned appropriately and monitored. The employee is accountable for carrying out the delegated work within the agreed authority.
Clear roles specify who must follow policies, laws and procedures and who checks compliance. Use role → authority → action → reporting/check. Ambiguity can cause duplicated work, omitted controls or blame without responsibility.
Choose span and delegation by task complexity, employee experience, risk, location and manager capacity. A wide span may empower skilled staff but overload a manager supervising complex or safety-critical work.
Span of control is direct reports, not total workforce or number of hierarchy levels. A narrow span often creates more layers if workforce size is unchanged; it does not itself mean a shorter chain of command.
Map work to the four business functions
Functional areas group related expertise, but their decisions are interdependent: people, money, markets and production must support the same business objectives.
| Functional area | Core responsibilities in this syllabus | Typical decision/output |
|---|---|---|
| human resources | workforce planning; recruitment/selection; training; health and safety; staff welfare; employment issues and industrial relations; disciplinary/grievance procedures; dismissal, unfair dismissal and redundancy | obtain, develop, support and lawfully manage the workforce needed by the business |
| finance | wages/salaries; cash-flow forecasting; budgets; accounting | record/control money and provide financial information/limits for decisions |
| marketing | market research; product planning; pricing; sales promotion; advertising; customer service; public relations; packaging; distribution | identify customer needs and shape/deliver an offer that generates demand |
| production | manufacture products; design new products; quality control; stock control | turn resources/designs into the required output at suitable quality, quantity and timing |
Example: marketing identifies demand for a redesigned product → production assesses design, capacity, quality and stock → finance sets the budget and checks cash impact → human resources recruits or trains the required employees. A weak link can prevent the plan succeeding.
Classify by the primary responsibility, then explain links. Paying wages is finance; recruiting and handling employee grievances is human resources; public relations and pricing are marketing; quality and stock control are production.
Functions are not isolated departments in every business. A small owner may perform all four, and one decision may require several functions; the functional label identifies the main responsibility, not exclusive ownership of every consequence.