IB Business Management SLTopic 2 — Organisational StructurePaper 1 & 2Core idea~9 min read
How Organisations Are Structured
An organisational structure is really the answer to two questions: who reports to whom, and who is allowed to decide. Get the vocabulary straight on this page and the rest of the topic becomes easy, because every structure is just a different answer to those two questions.
📘 What you need to know
Organisational structure sets out the reporting relationships, roles and responsibilities in a business.
Hierarchy = the levels of authority, from top management down to shop-floor employees.
Chain of command = the formal line of authority that runs down through those levels, defining who reports to whom.
Span of control = how many people one manager directly supervises. Narrow spans mean more layers; wide spans mean fewer.
Bureaucracy = many levels of authority, which slows decisions and communication.
Centralised = decisions made at the top. Decentralised = decision-making delegated downwards.
The words on a chart
Two terms get confused more than any others. The chain of command runs down the chart; the span of control runs across it. One diagram fixes this permanently.
Span and layers are linked. One manager supervising nine people needs no middle layer; one supervising three needs three managers plus somebody to manage them.
Learn the pair
Narrow span → more layers • Wide span → fewer layers
What each term does for the business
Term
What it means
Why it matters
Hierarchy
The levels of authority from top to bottom
The higher the position, the more authority and power it holds
Chain of command
The formal line of authority flowing downwards
Defines who reports to whom, which keeps communication clear and people accountable
Span of control
The number of employees one manager supervises
A manager can only supervise so many people properly; too many and nobody gets support
Bureaucracy
An organisation with many levels of authority
Decisions and messages have to travel through every layer, which is slow
Delegation
Passing authority for a task down the chain
Frees senior managers and motivates staff, but the manager keeps final responsibility
Who is allowed to decide?
The second big question. A structure can look identical on paper and behave completely differently depending on where decisions are actually taken.
A chain restaurant often centralises the menu and the prices, then decentralises rotas and local promotions. Ask which decisions, not just how decentralised.
Centralisation buys you consistency and control. Decentralisation buys you speed and ideas. Neither is free, and the right answer depends on how much the business needs every branch to look identical.
Worked examples
WORKED EXAMPLE
Define the term span of control. [2]
The number, then the reason it is limitedSpan of control is the number of employees a manager or supervisor directly manages.It reflects the principle that one manager can only supervise a limited number of people effectively.2 marks
WORKED EXAMPLE
A supervisor manages 14 staff. Explain one advantage and one drawback of this wide span of control. [4]
Advantage — fewer layersWith 14 direct reports the firm needs fewer supervisors, which cuts management costs and shortens the chain of command, so messages reach the top faster.
Drawback — thin supervisionThe supervisor cannot give 14 people proper support or feedback, so training suffers, mistakes go unnoticed and staff may feel unsupported, raising labour turnover.
4 marks
WORKED EXAMPLE
A coffee chain growing from 10 to 60 branches is deciding how centralised to be. Recommend an approach. [10]
The case for centralisingCustomers expect the same drink and the same price in every branch, and central buying wins bulk discounts. Standards are easier to protect across 60 sites.
The case for decentralisingBranch managers know their own customers, so local staffing, opening hours and promotions work better decided on the spot. It also motivates managers and develops them for bigger roles.
Split the decisions
Menu, pricing, branding and suppliers stay central. Rotas, local marketing and small spending decisions go to branch managers within set limits.
A mixed approach: centralise what customers compare, decentralise what varies locallyDepends on how experienced the branch managers are. Delegating to untrained managers produces inconsistency rather than initiative.
💡 Exam tip
Count from the chart. Levels of hierarchy and span of control are often worth a mark each and just need careful reading.
Link span to layers every time. The two move in opposite directions and examiners look for that link.
Say which decisions when discussing centralisation, rather than treating it as all or nothing.
Connect structure to motivation. Delegation and autonomy are motivators, so this topic overlaps with the next one.
Use the case study’s size. A ten-person firm and a global one need different answers.
⚠ Common mix-up
Chain of command is not span of control. One is vertical, the other horizontal.
A wide span is not a long chain. Wide spans usually mean a shorter chain.
Delegation is not abdication. The manager passes the task but keeps the responsibility.
Bureaucracy is not the same as organisation. It specifically means too many layers of authority.
Decentralised does not mean nobody is in charge. Senior managers still set the boundaries within which others decide.
Up next: Reading Different Organisation Charts — tall against flat, and the three ways firms group their people: by function, by product and by region.
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