UNIT 2. Chapter 12. Organisation structure Flashcards Preview

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Def. Organisational structure

The internal, formal framework of a business that shows the way in which management is organised and linked together and how authority is passed through the organisation.


What are the types of organisational structures? (5)

• Hierarchical structure
+ Geographical organisation structure
+ Functional organisation structure
+ Product organisational structure
• Matrix structure


What is the hierarchical structure?
Advantages (3)
Disadvantages (2)

• The structure with many layers of people, with fewer people at the top.

• The role of individual is clear
• There's a clear identifiable chain of command
• Can be divided by geographical location, function or product.

• Non efficient communication as there is lack of coordination between horizontal departments.
• Inflexible, and resistant to change as managers only pay attention to their department.


Geographical organisation structure sum. (3)

Firms organised by geographical location, that report to a central headquarter.

• Higher consumer satisfaction as products are amended according to location

• Cannot make use of economies of scale


Product organisation structure sum. (3)

Firms are organised by the product that they produce.

• Allows flexibility in product lines

• Unnecessary competition between products


Functional organisation structure sum. (3)

Firms are organised by their function such as marketing, finance or R&D.

• High level of specialisation

• Lack of team work for the better of the business itself


Def. Matrix structure

An organisational structure that creates project teams that cut across traditional functional departments.

Employees have to report to their product and functional manager, allowing both vertical and horizontal communication.


Advantages (4) and disadvantages (3) of matrix structures

• Allows communication between all members, avoiding subunit orientation.
• Less unnecessary competition between divisions.
• Discussions between specialists bring up better ideas and solutions
• Better responses created for fast changing markets

• Lack of bureaucratic control of managers over junior employees
• Lack of accountability
• Conflicts of interests as there are 2 managers to report to


What are the key principles of organisational structure? (4)

• Level of hierarchy
• Chain of command
• Span of control
• Delegation


Def. Level of hierarchy

A stage of the organisational structure at which the personnel on it have equal status and authority


Problems of tall and narrow organisational structures with many levels of hierarchy? (4)

• Communication may be slow and distorted down the chain
• Narrow span of control -> Little delegation and close supervision
• Junior staff may lack in decision making powers
• Higher business costs due to middle managers


Def. Chain of command

This is the route through which authority is passed down an organisation - from the chief executive and the board of directors.


Def. Span of control

The number of subordinate reporting directly to a manager. Could be either wide or narrow.


Def. Delegation

Passing authority down the organisational hierarchy.

Proven by Herzberg to be very beneficial for motivation of the staff.


Advantages (3) and disadvantages (2) of delegation

• Gives managers better focus on more important issues
• Shows trust in subordinates -> motivates them
• Develops and trains staff for more senior positions

• If the task if vague and the employee is not trained, delegation is risky
• If managers delegate boring jobs -> not motivating.


Def. Centralisation
Def. Decentralisation

Centralisation is keeping all of the important decision making powers within head office or the centre of the organisation.

Decentralisation is decision-making powers are passed down the organisation to empower subordinates and regional/ product managers.


Factors influencing the organisational structure (4)

• The style of management: e.g. Theory X leaders would want small span of control and tall hierarchy, while Theory Y leaders would want to opposite.
• Economic recessions or competition leading to need to cut overheads -> delayering to a shorter structure.
• Corporate objectives: e.g. If the business wants to go global, geographical structure would be applicable
• Certain new technologies can reduce the need for certain employees or middle managers.


Advantages (4) and disadvantages (3) of delayering

• Reduces business costs
• Improves communication (shorter chain of command)
• Increase in span of control -> more delegation
• Possible increase in employee motivation
• Redundancy payments
• Increase in workload for current managers -> stress
• Loss of job security from employees


Def. Delayering

Removal of one or more of the levels of hierarchy from an organisational structure.


Accountability vs Authority vs Responsibility

Delegation gives subordinates AUTHORITY to make certain decisions to complete the job. If the job is done poorly, they will be held ACCOUNTABLE. However, the overall RESPONSIBILITY of performance of the department and its labour rests with the manager.


Advantages of centralisation (3)

• Rapid decision making as there is little scope for discussion
• Prevents conflict as there are consistent policies
• Greater economies of scale


Advantages of decentralisation (3)

• Junior staff would have better understanding of the situation, therefore can have better solutions
• Better motivation
• Better training the junior employees


Def. Line managers

Managers who have direct authority over people, decisions and resources within the hierarchy of an organisation.


Def. Staff managers

Managers who, as specialists, provide support, information and assistance to line managers.


Def. Informal organisation

The network of personal and social relations that develop between people within an organisation.