1.4.3 Organisational Design

Question 1

Organisational design/structure

Answer 1

Creates a formal hierarchy that establishes who is accountable for whom throughout an organisation.

Authority and responsibility, job roles and titles, accountability, how communication flows.

Question 2

Hierarchy

Answer 2

The number of layers of management or supervision in the organisation structure.

Question 3

Span of control

Answer 3

The number of employees for whom a manager is responsible.

Question 4

Chain of command

Answer 4

The lines of authority within a business.

Question 5

Benefits and drawbacks of a tall organisational structure

Answer 5

+ Closer supervision.
+ More opportunities for promotion.
+ Specialist managers.

-Slower decision making.
-Increased costs.
-Messages difficult to be passed down.

Question 6

Benefits and drawbacks of a flat organisational structure

Answer 6

+ Quicker decision making.
+ Staff more motivated due to greater responsibility and independence.
+ Messages easier to pass down.
+ Reduces costs.

-Limits career progression.
-Managers more stressed
-Managers can’t keep track of employees easily.

Question 7

Centralised structure

Answer 7

Keep decision making firmly at the top of the hierarchy (amongst senior management, head office, central budget).

Question 8

Benefits of a centralised structure

Answer 8

• Easier to co-ordinate and control from centre.
• Economies of scale and overhead savings.
• Quicker decision making – easier to show strong leadership.
• Consistency across business – common policies and practices.

Question 9

Drawbacks of a centralised structure

Answer 9

• Standardised approach may not work in all locations – junior managers likely to respond much closer to customer needs.
• Demotivating for junior management.
• Customer service misses flexibility and speed of local decision making.

Question 10

Decentralised structure

Answer 10

Decision making is spread out to include more junior managers in the hierarchy as well as individual business units or trading locations.

Question 11

Benefits of a decentralised structure

Answer 11

• Decisions are made closer to customer needs.
• Better able to respond to local circumstances.
• Motivates junior managers.

Question 12

Drawbacks of a decentralised structure

Answer 12

• Decision making not necessarily strategic.
• Harder to achieve tight financial control.
• Diseconomies of scale.
• Harder to ensure consistent practices and policies.

Question 13

Matrix structure

Answer 13

Individuals work across teams and projects as well as within own department or function.

Question 14

Factors influencing type of organisational structure

Answer 14

• Size of the business.
• Type of business.
• Competitive environment.
• Management and leadership style.