structures

Question 1

tall organisational structure

Answer 1

• Many layers of management
• Long chain of command
• More promotion opportunities
• May have a narrow span of control
• Slower to respond to changes
• Managers may be more autocratic or bureaucratic

Question 2

flat organisational structure

Answer 2

• Fewer layers of management
• Shorter chain of command
• Fewer promotion opportunities
• May have a wider span of control
• Faster communication
• Employees may feel more empowered

Question 3

Explain what is meant by the term ‘delayering’.

Answer 3

Delayering involves removing one or more levels of hierarchy from the organisational structure.

Delayering is, however, seen as a way of reducing operating costs, particularly as a response to an economic downturn.

Question 4

Highlight some of the possible advantages of delayering.

Answer 4

• It offers opportunities for better delegation, empowerment and motivation as the number of managers is reduced and more authority passed down the hierarchy
• It can improve communication within the business as messages have to pass through fewer levels of hierarchy
• It can reduce costs as fewer (expensive) managers are required
• It brings managers into closer contact with the business’ customers – which should (in theory) result in better customer service

Question 5

Identify possible disadvantages of delayering.

Answer 5

• Not all organisations are suited to flatter organisational structures - mass production industries with low-skilled employees may not adapt easily.
• Delayering can have a negative impact on motivation due to job losses, especially if it is really just an excuse for redundancies.
• A period of disruption may occur as people take on new responsibilities and fulfil new roles.
• Those managers remaining will have a wider span of control which, if it is too wide, can damage communication within the business.
• There is also a danger of increasing the workload of the remaining managers.
  Delayering may create skills shortages within the business.

Question 6

Explain what is meant by ‘downsizing’ and why a business might downsize.

Answer 6

Downsizing is when a firm closes down or merges aspects of their operations in order to:

• reduce costs
• remain competitive in the marketplace

Question 8

centralised organisations

Answer 8

A centralised structure keeps decision making and authority at the top of the hierarchy, amongst the senior managers. Most fast-food businesses primarily depend on a centralised organisational structure so as to ensure control predominantly rests at one place over their thousands of outlets. Pizza Hut, McDonald’s and Burger King are food service orgs that follow a centralised structure in order to promote consistency in food quality and customer satisfaction at every location.

Question 9

Decentralised Organisations

Answer 9

Decentralised organisations delegate decision making further down the hierarchy, away from the centre. It involves more managers in the hierarchy.

Question 10

advantages of centralised organisations

Answer 10

• Easier to implement common policies and standardised procedures across the whole business.
• Easier to co-ordinate and control from the centre.
• Quicker decision-making (usually).

Question 11

disadvantages of centralised organisations

Answer 11

• More bureaucratic – often extra layers of managers in the hierarchy.
• Lack of authority down the hierarchy may lead to lack of motivation for junior managers.
• Can lead to demotivated staff who are not being given the opportunity to be involved in the decision-making process.
• Customer service can be less effective since decision making can be slower and less flexible locally.

Question 12

advantages of decentralised organisations

Answer 12

• Involving staff in decision making can improve levels of motivation and commitment.
• The business will be more responsive to changes in individual/local markets as staff in each. department have a greater local knowledge.
• Involving staff in decisions can lead to greater creativity and innovation.
• Decentralisation is well suited to businesses aiming for a flat structure.
• Decentralisation is a good way of training and developing junior managers.

Question 13

disadvantages of decentralised organisations

Answer 13

• Decentralised organisations delegate authority down the chain of command, thus reducing the speed of decision-making.
• Decentralisation may lead to poor decisions as junior managers may not be as experienced as the managers in the head office.
• Decision-making may be less strategic.
• Harder to ensure consistency of policies and standardised procedures throughout the business.
• Harder to achieve tight financial control – risk of rising costs.

Question 13

Explain what is meant by a Matrix organisational structures

Answer 13

In a matrix structure, individuals from different functional areas or departments work come together to work in project teams. For example, a project or task team established to develop a new product might include engineers and design specialists as well as those with marketing, financial, personnel and production skills.

Question 14

Describe some of the advantages that can arise from a matrix structure.

Answer 14

• Can help to break down traditional department barriers, improving communication across the entire organisation.
• Can allow individuals to use particular skills within a variety of contexts.
  different employees can be a project leader at different times.
• Allows employees to develop new skills on different projects.
• Likely to result in greater motivation amongst the team members.
• Share good practice and ideas encourages cross-fertilisation of ideas across departments.
• A good way of sharing resources across departments – which can make a project more cost-effective.

Question 15

Identify possible disadvantages of a matrix structure.

Answer 15

• Employees may have to report to two different managers, potentially leading to divided loyalties.
• Working simultaneously on a project team while also in a functional role can create a heavy pressure of work for individuals.
• There may not be a clear line of accountability for project teams given the complex nature of matrix structures.
• Can be expensive and difficult to co-ordinate.
• Team members may neglect their functional responsibilities while they are working on team projects.

Question 16

Explain what is meant by ‘functional grouping’ as a form of organisational structure.

Answer 16

A functional grouping is an organizational structure in which the business is divided into smaller groups based on specialized functional areas, such as IT, Finance, or Marketing. The department head of each functional area reports to the CEO; the CEO then coordinates and integrates the work of each function.

Question 17

Disadvantages of Functional Grouping

Answer 17

• Different functional groups may not communicate with well with one another, leading to poor decision making.
• Staff working in silos can potentially decrease flexibility and innovation.
• The business can become slow to respond to external changes in the market.

Question 17

Advantages of Functional Grouping

Answer 17

• Brings together employees with similar skills allowing expertise to develop.
• It may be more efficient since there is less duplication of resources, eg, there is only one finance department, rather than each department having its own.
• Functional grouping often allows for greater operational efficiency because employees with shared skills and knowledge are grouped together.
• This arrangement allows for increased specialisation.

Question 18

Explain what is meant by ‘product or service grouping’ as a form of organisational structure.

Answer 18

Product or Service Grouping is a framework in which a business is organised in separate divisions, each focusing on a different product or service. Such divisions may be according to:

• the particular line of products or services they produce (eg, IT Services, Financial Services, Property Services);
• the customers they deal with (eg customers in retail stores and customers online);
• the geographical area they serve (eg, UK division, Europe division, Asia division.

Question 19

Advantages of Product/Service Grouping

Answer 19

• Easier to focus on specific market segments.
• Easier to identify products that are poorly performing.
• Meets customer needs more effectively.
• Extends knowledge or expertise within specialised divisions.
• Able to respond to market changes more flexibly and quickly.

Question 20

Disadvantages of Product/Service Grouping

Answer 20

• Duplication of functions and resources, eg, a different sales team for each division.
• More difficult to share expertise and resources across departments.
• Departments based on products may end up competing with each other, creating negative rivalries.
• Managers strive to achieve divisional, rather than organisational goals.

Question 21

Explain what is meant by ‘customer grouping’ as a form of organisational structure.

Answer 21

Customer grouping occurs when an organisation divides its operations by types of customer. A large outdoor clothing business such as Mountain Warehouse or North Face may divide its customers into Retail (high street sales) and Online operations.

Question 22

Advantages of Customer Grouping

Answer 22

• Customer groups are more responsive to changing customer needs.
• Better organised to meet the needs of local markets, eg, different tastes or fashions in different towns or countries.
• Customer grouping encourages concentration on customer needs, which can lead to higher levels of customer satisfaction and loyalty.
• Develops knowledge and expertise in the customer area, eg what advertising works best in retail stores compared with online selling.
• Easy to compare performance for each customer grouping and find out what works and what doesn’t.

Question 23

Disadvantages of Customer Grouping

Answer 23

• More likely to be duplication of resources, such as administration staff or IT equipment across each Customer grouping.
• More difficult to share expertise and resources across departments.
• Departments may compete against each other – eg, retail division competing with the online sales team.
• Departments based on products may end up competing with each other, creating negative rivalries.
• Managers strive to achieve divisional, rather than organisational goals.