Organisational Structure

Question 1

purpose of org structure

Answer 1

needed as a business **GROWS **larger to provide a framework for authority and responsibility to ensure clarity over job roles

KEY: use org structure as an eval point whenever business suggests growing/expanding - will the structure need to change to facilitate the growth? what structure should they use?

Question 2

pros of functional structure

divided into the specialist departments

Answer 2

• increased specialisation in that area - increased productivity and efficiency thus lower unit costs
• greater sense of ownership over work of department - more committed to high quality performance thus more likely to meet objectives
• possibly greater EOS - all marketing for e.g. carried out by one department so lower unit costs

• more clarity over job role should increase productivity

Question 3

cons of functional structure

Answer 3

• lackof horizontal communication links reduces cooperation - could slow down projects thus reduces flexibility to changing market conditions and loss of competiveness OR customer dissatisfaction OR reduce efficiency and increase costs (will depend on context)
• may compete for resources due to silo mentality- hostile environment may be demotivating thus higher absenteeism

Question 4

functional structure eval

Answer 4

best used in stable industries with little need for change or innovation - apply to case - if very dynamic industry then less appropriate than matrix or product structure for e.g.

Question 5

what are divisional org structures?

Answer 5

organises activities by location or product groups, each division has its own marketing, production and research teams

Question 6

pros of product based/geographical org structure

cost, reactive, specialisation, needs

Answer 6

1. encourages specialisation - focusing on what people are best at will increase efficiency and productivity thus lower unit costs and lower price without lower profit
2. more responsive to market changes/more localised decision making as departments are closer to the market and more aware of needs - can gain first-mover advantage thus increases market share
   3.better product portfolio mgmt due to more accurate cost and revenue allocation - allows loss makers/profitable products to be identified thus can remove dogs to save costs which might increase profits to reinvest in new profitable products
3. easier to implement customer-centric marketing strategies - can monitor needs of that particular market and better meet them thus increases satisfaction

don’t use both point 2 and 4

Question 7

cons of product/geographical structure

Answer 7

1. wasteful duplication of roles as opposed to centralised marketing for e.g. - reduces efficiency due to lower EOS thus higher unit costs
2. loss of control over activities of each division - may take decisions that damage whole brand image - lower LT sales
3. divisions may compete for resources to meet their own objectives rather than the business objectives - may damage work morale and motivation thus reducing productivity

Question 8

eval divisional structure

Answer 8

depends on how distinct the markets for each product/location are

if needs are drastically different, costs of duplication of roles will outweigh benefits of focusing on needs

Question 9

cons of functional structure

Answer 9

• silo mentality may make communication and coordination hard - reduce efficiency
• compete against each other for resources
• may develop their own cultures which may differ from overal business culture and further reduce flexibility to change

• combine points 1 and 3 to say that this reduces flexibility to changing market conditions as they take much longer to coordinate efforts - could reduce competitiveness if it delays a product launch or business fails to adapt to new rivals for e.g.

Question 10

pros of tall structure

many layers of management

Answer 10

• path for career advancement - motivating thus higher productivity/lower turnover
• better supervision due to lower SOC - ensure employees performing well thus more likely to meet objectives
• clarity over job role (who is responsible for what) - more focused performance
• better manager relationships - support (same impact as point 1)

Question 11

cons of tall structure

Answer 11

• higher management costs - charger higher prices thus less competitive and lower sales
• poor communication due to long chain of command - distortion/delay will reduce productivity thus increase unit costs
• slower to implement change in all layers - less flexible and responsive to changing market conditions thus lower competitiveness
• more direct managerial control can be demotivating
• little scope for delegation and job enrichment - demotivating
• negative work culture - one-way top-down could create mistrust, worsening resistance to change

Question 12

pros of flat structure

defined by fewer layers of management

Answer 12

• better communication - could increase collaboration thus increase innovation leading to new USP and edge
• lower management costs
• more flexible and less resistant to change - respond to changes in market so increase competitiveness and sales
• less direct control and more delegation and job enrichment (wide SOC) - autonomy is motivating

Question 13

cons of flat hierarchical structure

Answer 13

• less scope for promotion - less employee commitment and motivation so high turnover
• wide SOC puts stress on managers - reduces productivity thus increases unit costs
• less well-defined roles could cause confusion - wasteful duplication of work thus increasing costs and lowering profits (revenues constant)
• less effective manager supervision - cannot ensure employees performing well so may not meet objectives

Question 14

eval for functional structure

Answer 14

best for stable industries with little need for innovation and change

Question 15

why are hierarchical structure less flexible?

Answer 15

a sense of division is created within the organisation as managers tend to defend their own position in the hierarchy and are not encouraged to view problems from the perspective of any other department

Question 16

what is the need for an org structure?

Answer 16

as a business grows larger, it needs clarity on:

• what each person’s role is
• who each worker is responsible to
• the authority each worker has
• relationships between different people and departments
• The number of subordinates reporting to each senior manager
• Formal channels of communication - horizontal and vertical

Question 17

how does the business’ objectives influence its org structure?

Answer 17

as objectives change, structure needs to change to allow the business to perform in a way that meets the objective, for e.g.:

• business grows larger - more managers needed or will put too much pressure on owner; may need regional departments
• new rivals - more flexible structure
• intrapreneurship is encouraged - flatter structure that allows delegation, teamworking and less managerial control
• change in objectives - e.g. if want to increase foreign sales, may create regional marketing departments

Question 18

delayering

Answer 18

removing layers of management from a hierachy

Question 19

pros of delayering

these are mainly pros of flat structure

Answer 19

• reduce management costs (salaries, benefits, training) - lower total costs so higher profits can be retained thus reinvest in xyz
• better communication - increase productivity thus lower unit costs
• faster decision making - more flexible so can adapt to changing needs thus increase competitiveness OR can take new opportunities (new products, promo, strategy)
• better motivation because (1) more opportunities for delegation so more job satisfaction and retention thus lower R+T costs and (2) less bureucracy and direct control so encouraged to innovate thus product/process improvements and competetice advantage

Question 20

cons of delayering

Answer 20

• redundancies can (1) demotivate due to less security so lower productivity/worse quality, (2) be costly so reduce cash flow thus cannot pay for xyz , (3) cause negative publicity so damages brand image thus lower LT sales
• greater manager workloads - more stress, thus less effective performance/supervision and lower quality end product/service
  -loss of expertise to rival firms - loss of competitive advantage thus may lose market share

Question 21

delayering eval

Answer 21

• benefit/cost depends on number of layers removed
• will flatter structure suit the culture needed? some require more rigid structure for culture of compliance
• impact on motivation depends on how effectively changes are communicated to reduce uncertainty and remaining employees reassured
• is delayering a significant enough change to the org structure? maybe whole structure needs to be changed depending on growth/external changes?

Question 22

pros of delegation

Answer 22

• more responsibility motivates employees - higher productivity thus lower unit costs and profit margins OR offer better customer service thus increasing satisfaction and repeat sales
• frees up senior managers for more important strategic decisions - more experienced and skilled so will make better decisions thus
• will train and upskill employees on the job - lower need to recruit externally thus lower recruitment costs
• more local decision making may increase responsiveness to customer needs thus increasing satisfaction with better service, and repeat sales

Question 23

cons of delegation

Answer 23

• may see additional work as burden without reward instead of challenge
• subordinate workers may lack experience or skills to take effective decisions
• manager may be reluctant to give up control or empower with authority due to lack of trust - inefficient!
• managers may only delegate boring tasks - not stimulating
• may delegate excessively to shirk duties - excessive burden, burnout and WLB
• harder in small business - fewer people

Question 24

delegation eval

Answer 24

• depends on subordinate’s skill - should be given enough clarity and training so they can perform well
• depends on nature of work - should not delegate strategic or significant decisions as it is vital that someone experienced does it. Could take input instead of full delegation
• if skilled employees, delegation necessary to enrich jobs otherwise may leave and will be hard to find replacement
• manager must be Theory Y and trust employees with enough authority to effectively delegate
• employees should be consulted beforehand to understand limits to not overburden them

Question 27

pros of centralisation

Answer 27

- **more consistent customer service** - leads to stronger brand image and greater consumer trust, thus increasing customer loyalty - **greater EOS** from centralised buying and marketing - lower unit costs, increased margins - **quick decision making** as few people involved - increase flexibility in emergencies/dynamic industries to respond to change, thus maintain competitiveness - **experienced senior managers** make decisions - more effective decision making thus lower risk and more likely to meet objectives/less risk of damage to brand image - **easier financial control** - adhering to budgets will help to avoid borrowing more money thus reducing long term finance costs ## Footnote *consistency key in multi-location franchises/branches- strengthens brand image and reputation

Question 28

cons of centralisation

Answer 28

- **inflexible decisions** - less reactive to **local conditions** so poor customer service OR missed opportunities to (increase sales, lower costs - depending on context) - **demotivating** if subords have no authority - lower job satisfaction, higher turnover thus higher recruitment costs OR poor innovation thus hard to increase competitiveness - **senior managers not necessarily specialised** in every area of the business - less effective decision (could use as BAN for the 'experienced' advantage) ## Footnote * e.g. in a hotel cannot wait for CEO to give approval on a decision before solving customer problem! requires quick, situational decision making * decentralisation important in multi-location businesses to meet different customer needs in that area as well as capitalise on current market opportunities

Question 29

pros of decentralisation ## Footnote decision making is DELEGATED to subordinates OR departments OR locations

Answer 29

- **more flexible** - adapt to **local conditions** so better customer service OR capitalise on opportunities to (increase sales w/ trendy promo, launch new popular products, lower costs w/ cheaper supplier deal, etc) - **more motivated** by more responsibility - greater job satisfaction thus retention OR encourages innovation thus USP + competitiveness - **train junior staff **on the job - reduces need for external recruitment thus recruitment+training costs thus higher profits for other things ## Footnote this is KEY in (1) multi-location businesses where local conditions are different and (2) in tertiary sectors where customer service is paramount

Question 30

cons of decentralisation

Answer 30

- **less consistent decisions** like (1) production methods and (2) customer service - **less consistent brand image** and customer trust thus lower loyalty - **DEOS** due to decentralised purchasing/buying which increases unit costs - **inexperienced employees** may make worse decisions than senior mgmt - increases risk of abc thus business will have to do xyz - **slower decision making** thus lower flexibility for crisis/local needs (use as BAN for flexibility point) - **less financial control**- risk of overrunning budget (borrowing extra, liquidity issues)

Question 31

central/decentralised eval

Answer 31

- if rapid **customer service** is key, decentralised - **multi-site/intl. locations** need more DC - depends on **skill level** of those being delegated to - **depends on degree of de/centralisation** - what authority is given out and what is not? balance w/ franchise for consistent brand image but localised decisions - if **culture of compliance crucial**, for e.g. due to crisis or industry like hospital, more centralised ## Footnote - impact depends on the EXTENT of centralisation relative to decentralisation

Question 32

matrix structure

Answer 32

Cuts across departmental of a hierarchical structure and creates an interdepartmental team of specialists to complete a specific project

Question 33

matrix structure pros

Answer 33

- **crossover of departmental expertise can increase innovation** - and lead to a new USP and competitive edge thus premium pricing - **cross-departmental communication is easier** - could increase productivity and thus respond to changes in needs with new projects much faster - competitive advantage - **success of project becomes priority,** not the best interests of their individual departments - improved focus on company objectives improves performance

Question 34

cons of matrix structure

Answer 34

- **power-struggles between project and functional managers** - demotivating thus lower productivity - **may slow down decision making as more managers involved - reducing flexibility - **may cause employee burnout as may have regular roles plus this** - if less productive then quality of project may suffer - **Theory X managers** may be reluctant to give authority to subordinates - demotivating - **Less direct control** from senior managers could increase risk of poor decisions - damage brand reputation

Question 35

eval for matrix structure

Answer 35

1. **needed in highly dynamic** industries like tech and fashion where needs change rapidly and business needs to be flexible OR dynamic/uncertain projects 2. **clear communication** required so that roles of managers and team members are defined to avoid confusion and conflict 3. success of project may depend on **who is chosen to be part of the teams** 4. **requires a more democratic management culture** to empower and motivate employees to be innovative 5. must be able to work in teams effectively - train if not

Question 36

eval for ???? structure

Answer 36

industries that require innovation and flexibility but requires a more democratic mgmt culture

Question 37

matrix structure eval

Answer 37

- success depends on the skill level of the individuals chosen - depends on their ability to work effectively in a group - must receive effective training to do so - success depends on management style

Question 38

line managers

Answer 38

have **direct authority** over decision making and carry out line functions that directly impact the **core activities** of the business

Question 39

staff managers

Answer 39

**specialist managers** employed to **give advice to senior line managers**, e.g. economists, experts advising on the environmental impact of certain processes. **Do NOT have line authority** over staff or resources in the org

Question 40

why is there potential for conflict between line and staff managers?

Answer 40

- line managers might resent experts telling them how to do their jobs - Line managers may feel jealous that they do not have the same access to business directors - Staff managers can be paid very well due to status and experience despite having less loyalty to the business (services in high demand)