1.4.3 Organisational Design

Question 1

What is Hierarchy?

Answer 1

The series of levels in a business, organised by the amount of authority and responsibility that workers have.

Question 2

How is an organisation divided up?

Answer 2

Board of Directors

 - -> Gives direction to the business 
 - -> Managing Director, Finance Director, Marketing Director, Production Director 

Managers

 - -> Make sure targets are met 
 - -> Sales Managers, Finance Managers, Human Resources Manager, Production Managers 

Team Leaders
–> Responsible for a team of supervisors and shop-floor workers

Supervisors
–> Oversee things on a day-to-day basis

Shop-floor Workers

 - -> Do the actual work 
 - -> Sales Representative, Market Researchers, Production Workers

Question 3

What are the three types of organisational structure

Answer 3

1. Tall
2. Flat
3. Matrix

Question 4

What are organisations with lots of levels in their hierarchy called?

Answer 4

Organisations with lots of levels in their hierarchy are called tall structures

Note: Tall structures have long chains of command

Question 5

What is an advantage of a tall structure?

Answer 5

There are lots of layers of management so there are more opportunities for promotion –> this can be motivating for employees –> motivated employees tend to be more productive –> producing more means more profit

Question 6

What is a disadvantage of a tall structure?

Answer 6

Tall structures can negatively impact communication and efficiency Vertical communication (getting messages between the different levels) can take a long time, especially for messages going from the very top to the very bottom of the structure.

Question 7

What are organisations with only a few levels in their hierarchy called?

Answer 7

Organisations with only a few levels in their hierarchy are called flat structures

Note: People are given more responsibility and freedom, which can be motivating for employees

Question 8

What is a disadvantage of a flat structure?

Answer 8

Horizontal communication (getting messages throughout one level) can be slow in a flat structure due to the relatively large number of people at each level.

Question 9

What is the Chain of Command?

Answer 9

The path of communication and authority up and down the hierarchy

Question 10

What is a Span of Control?

Answer 10

The number of people who report directly to a manager

Note: Managers in a flat structure have wide spans of control –> This means they hot lots of workers
answering to them

Question 11

What is a Wide Span of Control?

Answer 11

When a manager has many subordinates

Question 12

What is a Narrow Span of Control?

Answer 12

When the manager has a few subordinates

Question 13

Which structure has a wide span of control?

Answer 13

Flat structures tend to have a wide span of control

Question 14

What happens if the span of control is too wide?

Answer 14

If the span of control is too wide, managers find it hard to manage effectively and can become demotivated.

Question 15

Which structure has a narrow span of control?

Answer 15

Tall structures have a narrow span of control

Note: They aren’t responsible for many people –> This allows them to monitor the people below
them more closely.

Question 16

A hierarchical structure example

Answer 16

Director
|
Manager
|
———————————————————————————
| |
Team Leader Team Leader
| |
—————————– —————————
| | | |
Supervisor Supervisor Supervisor Supervisor
| | | |
—————- —————— —————- —————
| | | | | | | | | | | | | | | | | | | |
Workers Workers Workers Workers

                                   Here, the manager has a span of control of two people.
                                      Each supervisor has a span of control of five people.

Question 17

What type of organisational structure is a small business most likely to have?

Answer 17

A small business is likely to have a flat structure and a centralised organisation

Question 18

What is Centralisation?

Answer 18

A type of business organisation where decisions are made by senior managers at the top of the business (hierarchy)

Question 19

What is Decentralisation?

Answer 19

A type of business organisation in which the authority to make most decisions is shared between people (branch managers and junior managers) at different layers of the organisational structure

Question 20

What are the advantages of a centralised structure?

Answer 20

1. Quicker Decision Making
   - -> Top layer = fewer staff
   - -> Senior managers don’t have to consult anybody else
2. Business leaders have lots of experience of making business decisions
3. Consistency
   –> Managers get an overview of the whole business, so decisions are consistent throughout
   the business
4. Senior managers aren’t biased towards one department so they can make the best decisions for
   the business as a whole.

Question 21

What are the disadvantages of a centralised structure?

Answer 21

1. Not many people are expert enough to make decisions about all aspects of the business
2. Excluding employees from decision-making can be demotivating
3. Middle / Junior managers lack authority
   - -> They feel less empowered –> so they lack motivation –> results in decrease in productivity

Question 22

What are the advantages of a decentralised structure?

Answer 22

1. Involvement in decision-making motivates employees
   
   • -> Lower levels of management more empowered –> more motivation –> Increased productivity
2. Employees can use expert knowledge of their sector
3. Day-to-day decisions can be made quickly without having to ask senior managers

Question 23

What are the disadvantages of a decentralised structure?

Answer 23

1. Junior managers/employees may not have enough experience to make decisions
2. Inconsistencies may develop between divisions in a business
3. Junior managers/employees may not be able to see the overall situation and needs of the whole
   organisation

Question 24

What is a Matrix Structure?

Answer 24

A way of organising staff by two different criteria

Note: Businesses might use matrix structures if their operations tend to be project-based

Question 25

What are the advantages of using a matrix structure?

Answer 25

1. Matrix structure is ideal for a business that works on a project-by-project basis
2. Very flexible structure means that staff from different departments can jump in and out of different
   job roles
3. Perfect to exploit the specific skills of staff
4. Clear objectives –> this increase motivation –> which will lead to an increase in productivity

Question 26

What are the disadvantages of using a matrix structure?

Answer 26

1. Conflict of interest across projects
2. This structure could lead to conflict because department managers might have different ideas
   about how a strategy could be implemented