7.1 Organisational Structure

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7.1.1 The relationship between business objectives and organisational structure
Definition Organisational structure is the internal, formal framework of a business that shows the way in which management is organised and linked together, how authority is passed through the organisation, and who is responsible to whom.

Structure should follow strategy: it exists to help the business achieve its objectives. A business pursuing rapid innovation needs a structure that encourages ideas to move quickly; one pursuing low cost and consistency needs clear control and standard procedures. When objectives change — growth, international expansion, a new product range — the structure often has to change too.

The purpose and attributes of an effective structure
AttributeWhy it matters
FlexibilityThe business can respond quickly to changes in markets, technology and competition, without slow approval chains
Meeting the needs of the businessClear lines of authority, responsibility and communication so that work is coordinated and decisions are made at the right level
Allowing for growth and developmentThe structure can expand — new divisions, regions or products — without becoming unmanageable
Encouraging intrapreneurshipEmployees have authority and freedom to propose and develop new ideas (Topic 1.1.2) rather than being blocked by layers of approval
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