Organisational Structure (ii): Authority, Delegation and Control

Structure is more than boxes and lines. It also settles how far authority reaches, how many people each manager can direct, how much work is passed down and where decisions are made. This part covers those control questions: authority and power, the chain of command, span of control, delegation, centralisation and decentralisation, the formal and informal organisation, and the factors that shape which structure a firm chooses.

Part (i) covers the types of structure. Read Part (i) first if you have not, because the examples here build on it.

Authority, power, responsibility and accountability

These four words are easy to confuse, and examiners test the difference.

Types of authority

• Line authority is the direct right to instruct subordinates in the chain of command. A production manager has line authority over the production team.
• Staff authority is the right to advise and support, not to command. A legal adviser or human resources (HR) specialist advises line managers but cannot instruct them.
• Functional authority gives a specialist the right to direct others on one function across departments. A finance director who sets the expense claim rules for every department has functional authority.

Sources of power

French and Raven identified five sources of power. Learn the names and one example of each.

• Legitimate power comes from the position, such as a head of department.
• Reward power comes from the ability to give pay rises, promotion or praise.
• Coercive power comes from the ability to punish, for example by discipline or dismissal.
• Expert power comes from knowledge or skill that others need.
• Referent power comes from respect and admiration for a person.

The chain of command and unity of command

The chain of command (scalar chain) is the line of authority from the top manager to the lowest employee. Instructions pass down it and reports pass up it. It makes clear who is in charge of whom, and it gives the organisation a route for control.

Its weakness is length. In a tall hierarchy, messages pass through many levels, which slows them and can distort them.

Unity of command says that each employee should have one superior. It prevents conflicting orders and makes accountability clear. A matrix structure breaks the principle deliberately, which is why it brings the risk of dual loyalties that Part (i) described.

Span of control

The span of control is the number of subordinates who report directly to one manager. A narrow span means few subordinates per manager. A wide span means many.

Factors that decide the right span

Worked example: span of control and the shape of the structure

A factory has 81 operatives. Compare a span of 3 with a span of 9. Work from the bottom up. Divide the number of people at each level by the span to find how many managers are needed at the level above, and stop when one person is left.

A span of 3 gives a tall structure with 40 managers and 4 levels. Management is expensive and decisions pass through many hands. A span of 9 gives a flat structure with 10 managers and 2 levels. It is far cheaper and faster, but each manager directs nine people, so supervision is looser. Which is better depends on the factors in the table above.

Delegation

Delegation is passing authority for a task, and the responsibility to carry it out, to a subordinate. The manager gives the subordinate the right to act and expects the work to be done.

Benefits of delegation

• It frees managers from routine work, so they can plan and make the decisions only they can make.
• It develops subordinates and prepares them for promotion.
• It speeds up decisions, because they are made closer to the work.
• It motivates staff, who feel trusted and valued.
• It uses the skills of the whole team.

Why managers fail to delegate

• They fear losing control.
• They believe they can do the task better and faster themselves.
• They do not trust their subordinates.
• They fear a subordinate will do the job so well that it threatens their own position.
• They lack the skill to explain a task and set up controls.

Why subordinates resist delegation

• They fear blame if they make a mistake.
• They lack confidence, training or resources.
• They see no extra reward for extra responsibility.
• They are given the task but not the authority to do it.

How to delegate well

1. Set a clear objective, standard and deadline.
2. Choose the right person and train them if needed.
3. Give authority that matches the responsibility.
4. Provide the resources the task needs.
5. Agree how progress will be checked, and keep control through reports, not interference.
6. Accept that mistakes will happen, support the subordinate and reward success.

Centralisation and decentralisation

Centralisation keeps decision-making at the top of the organisation. Decentralisation passes it down to lower levels. Few organisations are fully one or the other. It is a matter of degree, and it can differ by type of decision. A firm may decentralise pricing but centralise borrowing.

Do not confuse decentralisation with dispersion. A firm can have branches in twelve states and still make every decision at head office.

What favours each approach

Advantages and disadvantages

Controls that make decentralisation safe

• Clear limits on what each manager may decide, such as spending limits.
• Budgets and targets for each unit.
• Regular reports to head office.
• Appraisal of unit performance.
• Shared policies on matters that must be consistent, such as brand standards and accounting methods.

The formal and the informal organisation

Alongside the formal structure, every organisation has an informal organisation: the network of personal relationships, friendships and groups that forms among people. Management does not design it, and it does not appear on the organisation chart.

The informal organisation can help. It speeds up communication, gives people a sense of belonging and fills gaps that the formal structure leaves. It can also harm. Rumour spreads quickly, cliques can resist change and groups may pursue their own goals instead of the organisation’s.

Good managers recognise it, communicate openly so rumour has less room, and involve informal leaders in change.

What shapes the choice of structure?

No single structure suits every organisation. Several factors push a firm towards one design.

Mechanistic and organic structures

Burns and Stalker described two ends of a range.

Mintzberg’s five configurations

Henry Mintzberg described five common organisational forms. Learn the names and one feature of each, then spend your time applying the ideas above.

Worked example: delegation and centralisation in a retailer

1. Diagnose. The company is over-centralised. Decisions are slow, the top is overloaded, local knowledge is wasted and shop managers are demotivated.
2. Decide what to decentralise. Pricing of local items, hiring of shop staff and local promotions depend on local knowledge and speed, so shop managers should decide them.
3. Decide what to keep central. Supplier contracts and bulk buying earn discounts. Brand standards and financial reporting must be consistent. These stay at head office.
4. Delegate properly. Give authority that matches the responsibility, for example price changes within an agreed band and hiring within the shop’s staff budget. Train the managers and set clear targets.
5. Keep control. Use weekly sales reports, monthly budget reviews and spot checks.
6. State the result and the risk. Decisions become faster and the managing director is free for strategy. The risk is inconsistent prices, and the price bands deal with it.

Authority, delegation and control in more detail

Authority, power, responsibility and accountability: how they fit

Authority is the right to give orders and take decisions that come with a position. Power is the ability to influence others, and it may come from expertise, reward, punishment or personal appeal, with or without a formal position. Responsibility is the duty to perform a task. Accountability is the duty to answer for results to a superior.

A manager can delegate authority and responsibility for a task, but cannot delegate accountability for the result: if a delegated task fails, the manager still answers to his own superior. This is why delegation needs trust, clear instructions and checks.

Span of control and the shape of the structure: a calculation

The span is the number of people who report directly to one manager. Take 1,000 operating staff. With a span of 10, they need 100 supervisors, who need 10 managers, who report to one director: four levels in all. With a span of 5, the same staff need 200 supervisors, 40 managers, 8 senior managers and 2 executives under one head: six levels. A narrow span gives tighter supervision but a taller structure with more cost and slower communication.

A wide span gives a flatter structure but needs staff who can work with little supervision.

The factors that set the right span

• Ability of the manager. A skilled, experienced manager can supervise more.
• Ability and training of subordinates. Well-trained staff need less supervision, so a wider span works.
• Nature of the work. Simple, repetitive work allows a wide span. Complex, varied work needs a narrow one.
• Geographical spread. Staff in many places are harder to supervise.
• The need for coordination and contact, and the availability of technology and support staff.

Delegation: the process

Good delegation follows a sequence. Decide what to delegate. Choose the person with the right skills. Explain the task, the expected result and the limits of authority. Give the authority and resources to do it. Agree how and when progress will be checked. Then let the person work, and review the outcome.

Managers fail to delegate for reasons such as fear of losing control, belief that they can do the job better, lack of trust, fear of being shown up by a capable subordinate and lack of time to explain. Subordinates resist because of fear of blame, lack of confidence, extra work without extra reward and lack of support.

Centralisation and decentralisation: a reasoned choice

Centralise decisions that need consistency, affect the whole organisation or involve big sums: pricing policy, major investments, standards and treasury. Decentralise decisions that need local knowledge or speed: staffing a shop, local promotions, handling customer problems. Decentralisation works only with controls: clear limits of authority, targets, regular reports, budgets and audits. Without them, the centre loses sight of what is happening.

Exam focus: centralised and decentralised structures

This was examined in May 2026 (Question 2). It asks for the factors that influence the choice, the characteristics of a decentralised system, and the advantages of each. Learn the direction of each factor as well as the factor itself.

Factors that influence the choice

Characteristics of a decentralised structure

• Distribution of authority. Managers and employees at different levels decide within their roles, so the people closest to the issue make the call.
• Empowerment. Lower-level staff feel valued and motivated, which raises job satisfaction and ownership of work.
• Flexibility and adaptability. The organisation responds more quickly to market shifts and customer needs.
• Open communication. Information flows up, down and sideways, which supports collaboration and innovation.

Advantages of each

For a four-mark answer, choose four points for each side and give each a short heading and one sentence of explanation.

Exam focus: disadvantages of centralisation and decentralisation, network and virtual structures, poor design and organisation charts

Disadvantages of a centralised structure

• Message distortion. Messages are changed as they pass through management layers, and middle managers may hide problems.
• Good decisions, bad implementation. Without a control system, top managers cannot check how decisions are carried out.
• Demotivating. Staff with no say in decisions feel unempowered.
• High turnover. Demotivated staff leave.
• Low creativity. Fewer people contribute ideas.
• A bet for success. It works only if top managers decide well.
• Rigid work culture. Staff just carry out orders.
• Undeveloped competencies. Subordinates get little chance to grow.

Decisions also have to travel up and down the same layers, which is slow, especially across dispersed sites.

Disadvantages of a decentralised structure

• Less knowledge sharing, because divisions and teams work in silos.
• Teams putting themselves first, and deciding on what suits them rather than the organisation.
• Difficulties in communication and collaboration, because each manager has different preferences and schedules.

Network structure

Employees are grouped by specialism and then partner across the organisation on projects. There is no cascading hierarchy. Features: a fairly non-hierarchical structure; a natural affinity for outsourcing; concentration on specialisation; empowered project managers; lean central leadership; and overlap with the divisional structure. Advantages: natural communication, openness to change, and versatility. Disadvantages: potential for redundancy (several teams doing similar work), relatively weak leadership with fewer control checkpoints, and unbalanced workloads.

Virtual structure

A virtual structure uses information and communication technology to run operations across geographical barriers, often with outsourcing, partnerships and contracts. Its benefits are reduced operating costs, global access to expertise and resources, and flexibility.

• Steps to adopt it: plan and assemble resources; train employees; set goals and clear roles; build communication channels; and build trust.
• Four central aspects: communication, coordination, balance (work, personal and collaborative time) and trust.
• Advantages: cost savings on rent, utilities and travel; enhanced flexibility, including 24-hour operation; access to global talent; improved employee satisfaction; and environmental benefits from less commuting.
• Disadvantages: communication barriers (time zones and language); decreased team cohesion; difficulty monitoring performance; dependence on technology; and security concerns about remote access to sensitive data.

Factors that influence management’s choice of structure include company size and scale (a small business may suit a flat structure, a large one a hierarchical or matrix structure) and business goals and strategy.

Consequences of a poorly designed structure

• Poor communication. People are unsure who needs information, so orders, invoicing and credit decisions suffer.
• Conflicts and lack of coordination. Conflicting goals, no liaison and no link between planning and operations.
• Lack of strategic management. Key executives do not meet regularly enough to build long-term strategy.
• Reduced productivity. Poor communication and conflicting instructions, for example from two bosses, lower morale and output.
• High employee turnover. Skilled people leave a firm that gives them no authority, and it becomes hard to hire.
• Damaged company. Frustrated staff create problems for customers too.

Organisation charts

• Advantages: they show a clear reporting structure, help new employees, help manage workload (how many people each manager has), and make planning easier.
• Disadvantages: they do not show informal channels; they are hard to keep up to date; they say nothing about management style; and they oversimplify complex relationships.

Common mistakes in the exam

• Saying that delegation removes the manager’s accountability. It does not.
• Mixing up responsibility and accountability. Responsibility is the duty to do the task. Accountability is answering for the result.
• Treating a firm with many branches as decentralised. Decentralisation is about where decisions are made, not where staff sit.
• Saying decentralisation is always better. It needs capable managers and good controls.
• Getting spans backwards. A narrow span makes a tall structure.
• Listing factors that shape structure without applying them to the business in the question.

Quick revision: Part (ii)

• Authority is the right to command. Power is the ability to influence. Responsibility is the duty. Accountability is answering for the result.
• Know line, staff and functional authority, and the five sources of power.
• The chain of command runs top to bottom. Unity of command means one boss.
• Span of control drives the shape: narrow means tall, wide means flat. Be able to calculate levels and managers, as in the 81-operative example.
• You can delegate authority and responsibility but not ultimate accountability.
• Know what favours centralisation and decentralisation, and the controls that make decentralisation safe.
• Factors shaping structure: strategy, size, technology, environment, people and growth. Know mechanistic and organic.

Practice questions: Part (ii)

These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer.

Section A style: multiple choice

Section B style: written questions

A further written question

Model answers

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