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Organisational Structure (i): Types of Structure and Organisation Charts

ICAN Foundation, Business Environment. Part (i) of two.

23 min read · Updated 5 November 2026

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In this part

An organisational structure is the formal arrangement of jobs, departments and reporting lines. It decides who does what, who reports to whom and who makes which decisions. This part covers the types of structure the Institute of Chartered Accountants of Nigeria (ICAN) Business Environment paper expects you to describe, draw and compare: simple, functional, divisional, matrix, project-based, network, and tall and flat structures.

By the end you should be able to name each structure, sketch it, state its strengths and weaknesses, and recommend the right one for a business described in an exam scenario. Part (ii) covers authority, delegation, span of control, centralisation and the factors that shape structure.

In 30 seconds

A structure groups people into departments and links them by reporting lines. A functional structure groups by work done. A divisional structure groups by product, place or customer. A matrix gives people two bosses, one for their function and one for their project. Tall structures have many levels and narrow spans of control. Flat structures have few levels and wide spans.

No structure is best everywhere, so every exam answer must tie the choice to the business in the question.

What is an organisational structure?

An organisation is a group of people working together towards shared goals. Its structure is the pattern of roles, departments, reporting lines and communication channels that holds the group together. Without a structure, nobody knows what they are responsible for or whom to ask.

Why every organisation needs a structure

  • Division of work. A structure splits a large goal into jobs that individuals can master. This is specialisation, and it raises output and quality.
  • Coordination. Specialised jobs must fit together. The structure decides who brings the pieces together.
  • Control. It shows who monitors whose work, so problems are spotted and corrected.
  • Communication. It sets the routes by which instructions go down and information comes up.
  • Accountability. Every task and decision has an owner who answers for the result.

The formal structure and the organisation chart

The formal structure is the one management designs and writes down. An organisation chart is a diagram of it: boxes for roles or departments and lines for reporting relationships. Charts make a structure easy to explain, which is why the exam often asks you to draw or describe one.

A chart has limits. It shows only the formal structure, not the informal relationships through which much work really gets done. It shows reporting lines but not how much influence each person has, and it goes out of date as soon as people or roles change.

Key terms you must know

  • Hierarchy: the levels of authority in an organisation, from the top to the bottom.
  • Chain of command (scalar chain): the unbroken line of authority from the top manager down to the lowest employee.
  • Unity of command: the principle, from Henri Fayol, that each employee should receive orders from one superior only.
  • Span of control: the number of subordinates who report directly to one manager.
  • Departmentation: grouping jobs into departments or units.
  • Line and staff: line managers direct the core work of the organisation. Staff roles, such as legal or human resources specialists, advise and support.
  • Delegation: passing authority for a task down to a subordinate. Part (ii) covers it in full.

How organisations group jobs: bases of departmentation

Before choosing a structure, a firm decides how to group its jobs. There are five common bases, and large firms often mix them.

BasisGroups people byExampleSuits
FunctionThe work they doFinance, marketing, productionOne product or a few similar ones, stable markets
ProductWhat is soldBiscuits, bottled water, juiceDifferent products with different needs
GeographyWhere customers areLagos, Abuja, Port HarcourtCustomers spread over wide areas
CustomerWho buysRetail, corporate and government customers of a bankCustomer groups with different needs
ProcessStage of productionCutting, assembly, packingManufacturing with clear stages

Types of organisational structure

Simple (entrepreneurial) structure

In a simple structure the owner-manager sits at the top and makes most decisions. There are few levels, few rules and little specialisation. A small shop, a start-up or a one-person consultancy usually works this way.

It is quick and cheap to run, and everyone knows who is in charge. Its weakness is dependence on one person. As the firm grows, the owner cannot decide everything, and the structure starts to strain.

Functional structure

A functional structure groups staff by the work they do. Each department, such as finance, marketing or operations, is led by a head who reports to the chief executive.

Functional structureA managing director at the top with four departments below: finance, marketing, operations and human resources.Managing directorFinanceAccounts and budgetsMarketingSales and promotionOperationsProduction and supplyHuman resourcesRecruitment and pay
A functional structure. Staff are grouped by the work they do, and every department reports to the managing director.

Advantages of a functional structure

  • Specialists work together, so skills deepen and expertise is shared.
  • It avoids duplication and gives economies of scale, because each function is done once for the whole firm.
  • Control is simple and career paths inside each function are clear.

Disadvantages of a functional structure

  • Departments can become silos that pursue their own goals and communicate poorly.
  • Decisions that cross departments must go up to the top, which is slow and overloads the chief executive.
  • Nobody below the top is responsible for the profit on a product or market.
  • Staff focus on the department, not the customer.

When it suits

It suits small and medium firms with one product or a few similar ones, operating in a stable environment.

Divisional structure

A divisional structure splits the organisation into divisions based on product, geography or customer. Each division is semi-autonomous and has most of the functions it needs. Head office sets strategy, allocates capital and monitors results.

Divisional structureHead office at the top with three product divisions below. Each division has its own production, sales and finance.Head officeBiscuits divisionOwn production,sales and financeWater divisionOwn production,sales and financeJuice divisionOwn production,sales and finance
A divisional structure organised by product. Each division runs most of its own functions. Head office sets strategy and monitors results.

Advantages of a divisional structure

  • Each division focuses on its own market, so it responds faster to local needs.
  • Profit responsibility is clear, because each division has its own results.
  • Divisional heads gain general management experience.
  • The chief executive and head office are freed to concentrate on strategy.

Disadvantages of a divisional structure

  • Functions are duplicated in every division, which raises cost.
  • Divisions may compete with each other for resources instead of working together.
  • The firm loses some economies of scale.
  • Standards and policies can drift apart, and head office may find it hard to control the divisions.

When it suits

It suits large firms with varied products, or firms spread over wide areas or serving different customer groups.

Matrix structure

A matrix structure overlays two ways of grouping on the same people. Each employee reports to a functional manager, for example the head of finance, and also to a project or product manager. This breaks the principle of unity of command on purpose, to bring specialists and projects together.

Matrix structureA grid with three functions across the top and three projects down the side. A person sits where a function and a project cross, so reports to both.FinanceMarketingOperationsProject AProject BProject C
A matrix structure. Each dot is a person. A person reports to a functional head (column) and to a project manager (row).

Matrix structures come in three common forms. In a functional matrix the functional manager has most of the authority. In a project matrix the project manager has it. In a balanced matrix they share it.

Advantages of a matrix structure

  • Specialists are shared across projects, so skills are used fully.
  • Functions and projects are coordinated, which suits complex work.
  • The organisation can respond quickly to change.
  • Staff gain wider skills and experience.

Disadvantages of a matrix structure

  • Two managers can give conflicting instructions, which causes confusion and stress.
  • Power struggles between functional and project managers slow decisions.
  • Roles and accountability can become unclear.
  • It costs more, because there are more managers and more meetings.

When it suits

It suits project-driven work such as construction, consulting and systems development, where specialists move between projects.

Project-based and team-based structures

A project team is a temporary group, drawn from several departments, formed to complete a specific task and then disbanded. A bank might form one to deliver a six-month system upgrade. Team members may keep a line to their home department.

Project teams are flexible and focused on one goal. Their weaknesses are uncertainty about what happens when the project ends and a conflict of loyalty between the team and the home department.

Network and virtual structures

In a network structure, a small core firm keeps the activities it does best and outsources the rest to other firms through contracts. A clothing brand that designs and markets its products but uses outside firms to make and deliver them is an example. A virtual organisation takes this further and relies on information technology to link its partners.

The benefits are low fixed cost and great flexibility. The risks are loss of control over quality and delivery, dependence on suppliers and exposure of confidential information.

Tall and flat structures

Tall and flat describe the shape of the hierarchy. They are not separate types, because a functional or divisional structure can be either. The difference lies in the number of levels and the span of control.

Tall and flat structuresTwo small organisation charts. The tall one has five levels and each manager has two reports. The flat one has two levels and the top manager has six reports.Tall: many levels, narrow spansFlat: few levels, wide spans
The same organisation can be tall or flat. A tall structure has five levels and a span of two. A flat structure has two levels and a span of six.
FeatureTall structureFlat structure
Levels of managementManyFew
Span of controlNarrowWide
SupervisionCloseLooser, staff have more freedom
CommunicationSlow and may be distorted as it passes through levelsFaster and more direct
Cost of managementHigher, because there are more managersLower
PromotionMany small stepsFewer chances to move up
MotivationPromotion steps motivate, but staff may feel over-supervisedStaff have more responsibility, but may feel overloaded

Delayering

Delayering means removing one or more levels of management to make a structure flatter. Firms do it to cut cost, speed up decisions and bring management closer to customers. The consequences include wider spans of control, heavier workloads for the managers who remain, fewer promotion steps and redundancy costs.

More from the syllabus: networks, virtual structures, poor design and charts

Mixed structures

Few organisations use one pure form. A mixed structure combines features of two or more structures, for example a functional structure for the head office with a divisional or matrix arrangement for product lines or large projects. The matrix is itself a way of mixing two lines of reporting.

The network structure in detail

A network structure groups employees by specialisation and lets specialists from different parts of the organisation pair up on projects. It has no tall chain of command running through layers of middle managers. Instead, clusters of departments, business units or local offices work together on an ad hoc basis. The syllabus lists these features:

  • a fairly non-hierarchical structure, with charts drawn project by project, where pods report to a project manager or division head;
  • an affinity for outsourcing, so a needed skill is bought from contractors and not hired full-time;
  • a concentration on specialisation, with silos by specialty or location;
  • empowered project managers, who take most day-to-day decisions;
  • a lean central leadership, which handles design and big-picture decisions; and
  • an overlap with the divisional structure, though the silos are based on competence and not product line.
AdvantagesDisadvantages
Natural communication across divisionsRedundancy: several teams may do similar work
Openness to change, as people are less tied to hierarchies and fixed workflowsRelatively weak leadership, with fewer checkpoints for management control
Versatility: people move freely from project to projectUnbalanced workloads, with some groups stretched and others idle

Virtual arrangements

A virtual organisational structure uses information and communication technology to operate across geographic barriers. Employees work remotely and the organisation coordinates their work through technology. A virtual network also brings together independent entities towards a common goal, relying on outsourcing, partnerships and contracts. A software firm, for example, may keep its hub in one country and outsource development, web design and customer service to different countries.

A virtual team rests on four things:

  • communication across time zones, in real time and delayed
  • coordination through project management tools
  • balance between work time, personal time and shared tasks
  • trust, since face-to-face contact is minimal

Steps in moving to a virtual structure:

  • plan and assemble the resources and tools
  • train employees in protocols and digital tools
  • set clear goals and roles with a transparent performance measure
  • build regular formal and informal communication
  • build trust through transparency and collaboration
AdvantagesDisadvantages
Lower operating costs: rent, utilities, maintenance and travelCommunication barriers such as time zones and language
Global access to expertise and resourcesReduced team cohesion and a sense of isolation
Flexibility for the firm and its staffDifficulty monitoring performance
A smaller environmental footprint, with less commutingHeavy dependence on technology, so failures disrupt work
Security risks from remote access to sensitive data

Consequences of a poorly designed structure

A business needs a fit between its structure and its industry. Signs of a poor fit are low productivity, high staff turnover and hiring problems, technology that does not match decision-making, and an inability to grow. The syllabus lists these consequences:

  • Poor communication. People are unsure who needs information. A new customer form approved by the owner but not shared with the bookkeeper leads to credit and invoicing errors and delayed payment.
  • Conflict and lack of coordination. Unclear objectives, no liaison between groups and a gap between planning and operations.
  • No strategic management. Key managers never meet to plan new products, channels or markets.
  • Reduced productivity. An employee with two bosses gets conflicting orders, and production cannot plan when sales does not warn it of large orders.
  • High staff turnover. Skilled people leave a rigid, centralised firm where they have no say.
  • Damage to the company. Slow answers and late delivery lose customers and harm reputation.

Organisational charts

An organisational chart shows who is responsible for what, who reports to whom and how teams fit together. It helps communication, role clarity and efficiency, and it helps new staff settle in.

Type of chartWhat it shows
HierarchicalThe traditional form. Each person has one direct supervisor, so lines of authority are clear
DivisionalGroups employees by product, service or region. Each division runs with its own resources and leadership
MatrixDual reporting to functional managers and to project or product managers
FlatFew or no layers of middle management, as in a start-up. It shows open communication and fast decisions

Limits of charts: they do not show informal channels of communication, they say little about management style, and they usually leave out customers.

Comparing the structures at a glance

StructureGrouped byMain strengthMain weaknessSuits
SimpleNothing formalFast and cheapDepends on one personSmall, young firms
FunctionalWork doneSpecialist skills, economies of scaleSilos, slow cross-department decisionsFew products, stable markets
DivisionalProduct, place or customerMarket focus, clear profit responsibilityDuplication and rivalryLarge, varied or dispersed firms
MatrixFunction and project togetherFlexible use of specialistsTwo bosses, conflictProject-based work
NetworkCore firm plus contractorsLow cost, flexibleLess controlFirms with clear core skills

Worked example: choosing a structure

Scenario. Alheri Foods Ltd, based in Kano, makes biscuits, bottled water and fruit juice and sells in twelve states. It has one managing director and four departments: production, sales, finance and human resources. Managers complain that nobody can say which product makes a profit, and the sales team says production decisions take too long. Recommend a structure.

  1. Find the problems. There is no profit accountability by product, and decisions that cross departments wait for the managing director. These are classic weaknesses of a functional structure that has outgrown its business.
  2. List the options. A divisional structure by product, a divisional structure by geography, or a matrix.
  3. Test each option against the facts. The three products need different production lines and serve different customers, so product divisions fit. Geographic divisions would duplicate production in every region. A matrix would add two-boss confusion that a firm of this kind does not need.
  4. Recommend. Create three product divisions: biscuits, water and juice. Each gets its own production and sales and answers for its own profit.
  5. Protect against the weaknesses. Keep finance and human resources at head office as shared services to avoid duplication, and set group targets so divisions cooperate instead of competing.

Notice the pattern. The answer names the problem, weighs the options against the facts in the scenario, makes a clear recommendation and deals with the risks. That is what earns the marks.

Choosing and judging a structure

The reasoning behind each structure

Every structure answers one question: how should the work be divided and coordinated? A functional structure groups people by the work they do. It builds deep expertise and avoids duplication, but it can make departments focus on their own targets and slows decisions that cross departments, because the first person who sees the whole business is the managing director. A divisional structure groups people by product, region or customer.

Each division is a small business with its own profit figure, so performance is visible and decisions are fast and close to the market. But functions are duplicated across divisions and the divisions may compete or neglect the group’s interest. A matrix overlays functions and products or projects so each person has two bosses.

It shares scarce skills across projects and fits complex or changing work, but dual reporting can cause conflict, confusion and slow decisions unless roles are clear.

Tests for a good structure

A structure fits when it suits the organisation’s strategy, size, technology and environment; makes clear who is responsible for what; allows quick and accurate communication in both directions; avoids needless layers and duplication; and can change as the business changes. Warning signs of a poor fit are slow decisions, conflicts between departments, unclear responsibility, low morale and high turnover, and rising cost.

Tall and flat structures: the effect on the organisation

A tall structure has many levels, narrow spans and strong control, but communication is slow and costly and distant managers lose touch. A flat structure has few levels and wide spans. It speeds communication and empowers staff, but managers can be overloaded and promotion opportunities are fewer. Delayering removes levels of management to cut cost and speed decisions.

Its effects include lower payroll cost, faster communication and more responsibility for those who remain, but also redundancy, loss of experience, overload, falling morale and fewer promotion steps.

Worked example: matching structure to need

A biscuit, water and juice maker organised by function cannot tell which product earns a profit, because costs and sales are spread across departments. A divisional structure by product would give each line its own manager, costs and profit figure, make cross-departmental decisions local, and reveal poor performers. The cost is duplicated functions and the need for group-level controls on shared resources.

Exam focus: the matrix structure in full

Examiners have asked for a full description of the matrix structure with its advantages and disadvantages (November 2025, Question 1). A strong answer has three parts.

Description

A matrix organisation has more than one line of reporting. Each employee reports to a functional manager, for example the head of finance, and also to a project or product manager, so in effect has two bosses. It suits organisations with diverse product lines, services or projects.

It gives more flexibility, and staff work with colleagues from other departments who bring different expertise, which exposes them to functions outside their own job.

Advantages

  • Flexibility and adaptability. Cross-functional teams respond quickly to changes in the market or in project needs.
  • Better use of resources. People can work on several projects, so skills are used fully and no one is overloaded or idle.
  • Cross-functional collaboration. Staff from different departments work together, which breaks down silos and improves problem-solving.
  • Specialist expertise. Project managers can build a team from experts in several functions.
  • Faster decisions. The right stakeholders are involved in the team, so fewer approvals are needed.
  • Employee development. Working across projects builds versatility and skills.
  • Global and local integration. Regional and global perspectives are combined to fit local market needs.

Disadvantages

  • Communication problems. Reporting to several managers makes messages unclear and slows decisions.
  • Conflicting instructions. The functional and project managers may give different orders.
  • Role ambiguity. Staff are unsure of their roles and may feel overwhelmed by competing demands.
  • Complex decision-making. Agreement between several managers takes time and frustrates staff.
  • Stress and burnout. Staff struggle to prioritise and manage their time, so productivity can fall.
  • Power conflicts. Each manager has their own goals, which can lead to disputes.

Exam tip. For a question asking for five advantages and five disadvantages, give each point a short heading and one explaining sentence. The marking guide gives half the marks for stating the point and the rest for the explanation. Note that faster decisions appears as an advantage, while decision-making complexity appears as a disadvantage. Link each to the scenario so the two do not seem to contradict each other.

Common mistakes in the exam

  • Describing a structure without its disadvantages, or the reverse. Questions that say ‘discuss’ or ‘evaluate’ need both sides.
  • Ignoring the scenario. A recommendation with no link to the business in the question scores poorly.
  • Confusing a matrix with a divisional structure. A matrix gives one person two bosses. A divisional structure gives each person one.
  • Mixing up spans of control. A narrow span makes a tall structure. A wide span makes a flat one.
  • Saying one structure is always best. The right answer depends on size, products, markets and environment.
  • Treating tall and flat as separate types. They describe the shape of any structure.

Quick revision: Part (i)

  • A structure divides work, coordinates it, controls it, carries communication and fixes accountability.
  • Know the five bases of departmentation: function, product, geography, customer and process.
  • For each of functional, divisional, matrix, project, network and simple: define it, draw it, give two advantages and two disadvantages, and say when it suits.
  • Matrix means dual reporting. It breaks unity of command.
  • Tall means many levels and narrow spans. Flat means few levels and wide spans. Delayering makes a structure flatter.
  • In every scenario answer: problem, options, recommendation, risks.

Practice questions: Part (i)

These are original questions written in the style of the ICAN exam. Try each one before you open the answer.

Section A style: multiple choice

Question 1. An engineer in a manufacturing firm reports to the head of engineering and also to the manager of a new product launch. Which structure does this describe?

  1. Functional
  2. Divisional
  3. Matrix
  4. Simple
Show the answer

C. Matrix. The engineer has two reporting lines, one to the function and one to the project. A functional structure gives one line. A divisional structure also gives one line, to the division.

Question 2. Alheri Ltd groups its staff into Lagos, Abuja and Kano units, each with its own sales and distribution teams. On what basis has it grouped its jobs?

  1. Function
  2. Product
  3. Geography
  4. Customer
Show the answer

C. Geography. The units are defined by place.

Question 3. Which of the following is a disadvantage of a functional structure?

  1. Specialists cannot develop their skills
  2. Departments may pursue their own goals and coordinate poorly
  3. Functions are duplicated in every unit
  4. Employees have two bosses
Show the answer

B. Silos are the main weakness. Option A is wrong because specialists develop well. Option C describes a divisional structure. Option D describes a matrix.

Question 4. A structure with few levels of management and wide spans of control is described as:

  1. Tall
  2. Flat
  3. Matrix
  4. Divisional
Show the answer

B. Flat. Few levels and wide spans make a flat structure.

Question 5. A bank forms a team from information technology (IT), operations and compliance to deliver a six-month system upgrade. The staff return to their departments afterwards. This is best described as:

  1. A project team
  2. A divisional structure
  3. A network structure
  4. A tall structure
Show the answer

A. A temporary team formed for one task and then disbanded is a project team.

Question 6. Which structure keeps only its core activities and uses outside firms for the rest?

  1. Functional
  2. Matrix
  3. Network
  4. Simple
Show the answer

C. Network. A core firm contracts out the other activities.

Question 7. Which of the following is a disadvantage of a virtual organisational structure?

  1. High office rent
  2. Reduced team cohesion
  3. Too many layers of management
  4. Slow growth
Show the answer

B. Remote workers can feel isolated. A virtual structure cuts office costs and has few layers.

Question 8. A network organisation typically:

  1. Has a strict, tall hierarchy
  2. Uses project-based pods and outsources specialist work
  3. Gives every employee one boss and a fixed workflow
  4. Has a very large central leadership team
Show the answer

B. Network structures are non-hierarchical, project-based and lean at the centre, and they lean on outsourcing.

Question 9. A structure in which each employee reports to both a functional manager and a project manager is:

  1. Functional
  2. Matrix
  3. Simple
  4. Divisional
Show the answer

B. This is dual reporting.

Question 10. A main disadvantage of a divisional structure is:

  1. Lack of profit information
  2. Duplication of functions
  3. No local decision-making
  4. Confusion over who is the boss
Show the answer

B. Each division needs its own functional staff.

Question 11. Removing levels of management to cut costs and speed decisions is:

  1. Delegation
  2. Delayering
  3. Centralisation
  4. Departmentation
Show the answer

B. The effect is a flatter structure.

Question 12. A flat structure typically has:

  1. Many levels and narrow spans
  2. Few levels and wide spans
  3. No managers
  4. One boss for everyone
Show the answer

B. Wide spans mean each manager supervises more people.

Section B style: written questions

Question 13 (10 marks). Explain what is meant by a matrix structure and state two advantages and two disadvantages of it.

Show the marking guide

Explanation (up to 2 marks). Employees report to two managers, a functional manager and a project or product manager. It overlays two ways of grouping on the same people and breaks unity of command.

Advantages (up to 4 marks, 2 each). Flexible use of specialists across projects. Better coordination between functions. Faster response to change. Wider skills for staff.

Disadvantages (up to 4 marks, 2 each). Conflicting instructions from two managers. Power struggles and slow decisions. Unclear roles and accountability. Higher cost. Stress for staff.

Award 1 mark for naming a point and a second mark for explaining it.

Question 14 (20 marks). Alheri Foods Ltd makes biscuits, bottled water and fruit juice and sells in twelve states. It is organised by function under one managing director. Product managers cannot tell which product earns a profit, and decisions that cross departments are slow.

(a) Explain functional and divisional structures. (6 marks)

(b) Recommend, with reasons, a structure for Alheri Foods Ltd. (8 marks)

(c) Explain the effects of delayering on an organisation. (6 marks)

Show the marking guide

(a) 6 marks. Functional: groups staff by work done, with advantages such as specialist skills and economies of scale, and disadvantages such as silos and slow cross-department decisions (3 marks). Divisional: groups by product, place or customer, with advantages such as market focus and clear profit responsibility, and disadvantages such as duplication and rivalry (3 marks).

(b) 8 marks. Recommend product-based divisions for biscuits, water and juice (2). Reasons: clear profit responsibility for each product (2), the products need different production and serve different customers (2), faster decisions inside each division (1). Safeguard: keep finance and human resources at head office as shared services to avoid duplication (1).

(c) 6 marks. Delayering removes levels of management (1). Benefits: lower cost (1), faster communication and decisions (1), management closer to customers (1). Drawbacks: wider spans and heavier workloads (1), fewer promotion steps, lower morale and redundancy costs (1).

A further written question

Question 15 (10 marks). Explain the main features and disadvantages of a network structure.

Model answers

Show the model answer to Question 13

Matrix structure. A matrix structure combines two ways of grouping people, usually by function and by project or product. Each person reports to a functional manager for technical matters and to a project or product manager for the work. Advantages: it shares scarce skills across projects; it improves communication and cooperation between departments; and it suits complex, changing environments.

Disadvantages: dual reporting can confuse staff and cause conflict when the two managers disagree; and it can be inefficient and slow unless there is close communication between the managers.

Show the model answer to Question 14

(a) Functional and divisional. A functional structure groups people by the work they do, such as production, sales and finance. It builds expertise and avoids duplication, but departments may pursue their own aims and decisions across departments are slow. A divisional structure groups people by product, region or customer, each division running as a small business.

It speeds decisions and shows each division’s profit, but duplicates functions and may lead to rivalry.

(b) Recommendation. Alheri Foods should adopt a divisional structure by product, with biscuits, bottled water and juice each led by a divisional manager. This gives a clear profit figure for each product, which the present structure cannot, and moves cross-departmental decisions into each division so they are faster. It also lets each division respond to its own market in the twelve states.

The costs of duplicated functions can be reduced by keeping some functions, such as finance and purchasing, at the centre.

(c) Delayering. Delayering removes levels of management. It cuts payroll cost, shortens the chain of command, speeds communication and gives remaining staff wider responsibility. But it may cause redundancies, lose experience, overload managers with wider spans, lower morale and remove promotion steps.

Show the model answer to Question 15

A network structure groups people by specialisation and lets specialists from different parts of the organisation, or outside it, pair up on projects without a tall chain of command. Features: a largely non-hierarchical arrangement drawn project by project; heavy use of outsourcing for needed skills; empowered project managers who take most day-to-day decisions; a lean central leadership handling design and big-picture decisions; and silos based on competence.

Disadvantages: several teams may duplicate work; leadership can be weak, since there are fewer checkpoints for control; and workloads can become unbalanced, with some groups overstretched and others idle.

Pathfinder on Organisational structure (i)

These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.

November Diet, 2025: Question 1 (20 marks)

Tests the matrix structure: a 5-mark description, five advantages and five disadvantages. Revise the full exam answer in the Exam focus section, then the comparison table.

Revise first: Exam focus: the matrix structure in full

May Diet, 2023: Question 6 (20 marks)

From the earlier Business, Management and Finance paper. Parts (a) and (b) ask you to describe the matrix and network structures and state their advantages and features.

Revise first: The matrix structure

November Diet, 2021: Question 6 (20 marks)

From the earlier Business, Management and Finance paper. Part (b) asks for disadvantages of the matrix and virtual structures.

Revise first: Network and virtual structures

Section A of each diet (multiple choice)

Multiple-choice questions can test structure types, departmentation, and tall and flat structures. Check Section A of every diet you practise for items on these points.

Revise first: Types of organisational structure

Source: ICAN Pathfinder, Business Environment. Diets covered: May Diet, 2021 to May Diet, 2026. November Diet, 2024 is not yet mapped.

Spotted a mistake? Tell us and we will check it.

Where this fits

See every past question on Business Environment and the topic each one tests in the Pathfinder question finder.

After it, move on to Financial Accounting.

All Business Environment topics

You are reading topic 4 of 32.

  1. Types of business organisation (i): sole proprietors, partnerships and LLPs01
  2. Types of business organisation (ii): companies, NGOs, cooperatives and joint ventures02
  3. Business functions, economic activities and the importance of business03
  4. Organisational structure (i): types of structure04 here
  5. Organisational structure (ii): authority, delegation and control05
  6. Committees, the board and directors06
  7. The business and its stakeholders07
  8. SWOT analysis and environmental scanning08
  9. The finance function09
  10. Internal control and internal audit10
  11. Ethics and corporate social responsibility11
  12. Management and leadership12
  13. Management theories: scientific, administrative and human relations13
  14. Organisational culture, behaviour, and formal and informal organisation14
  15. Groups, conflict and motivation15
  16. Communication in business16
  17. Digital communication17
  18. Technology business models, project management, emotional intelligence and social thinking18
  19. Introduction to economics19
  20. Demand and supply20
  21. Costs, revenue and profit21
  22. Market structures and price controls22
  23. Market failure, externalities and government intervention23
  24. National income accounting24
  25. Financial institutions and markets25
  26. Monetary and fiscal policy26
  27. Inflation and unemployment27
  28. Economic growth and development28
  29. Business uses of IT, big data and data analytics29
  30. Cybersecurity30
  31. E-commerce and e-business31
  32. Technology, globalisation and fintech32
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