3: Organisational and business structures Flashcards
Organisational and business structures
Describe the management hierarchy (4 parts)
Top managers: managing the business
Middle managers: managing managers
First line managers: managing staff on direct operations
Direct operational staff: doing the work
((Accountability goes up, power + authority goes down))
What is organisational structure
Formed by the grouping of people into departments or sections and the allocation of responsibility and authority, organisational structure sets out how the various functions (ops, marketing, HR, finance, etc) are arranged
What is organisational structure intended to do?
- link individuals in an established network
- allocate the tasks
- give individuals authority required to perform the work
- coordinate objectives
- faciliate the flow of work
What are Mintzberg’s building blocks? (6)
- Operating core
- Middle line
- Strategic apex
- Support staff
- Technostructure
- Ideology
What are the basic principles of organisational structure?
- Division of work
- Scalar chain
- Correspondence of authority and responsibility
- Appropriate centralisation
- Unity of command
- Unity of direction
- Equity
What are the five types of organisational structure?
- Simple
- Machine bureaucracy
- Professional bureaucracy
- Divisionalised
- Adhocracy / innovative
Advantages of the entrepenurial structure
- Quick decisions can be made with skill and flair
- Goal congruence - objectives are pursued exclusively
- Flexible / adaptable to change
Disadvantages of the entreprenurial structure
- cannot easily expand beyond a certain size
- cannot easily cope with diversification
- lack of career structure for lower level employees
- may be too centralised with too much decision-making power retained by the entrepreneur
What is a functional structure and list its benefits?
Board of directors
MD
Production, marketing, IT, Finance, HR
- good career opportunities
- efficient as functional tasks are well-known and understood by individuals
- exploits specialist functional skils
What is divisionalisation?
The division of a business into autonomous regions or product businesses, each with its own revenues, expenditures, and capital asset purchase programmes, and therefore each with its own profit responsibility
What is a matrix structure?
Formalises veritcal and lateral lines of communication
May be temporary and involves managers being appointed for projects
What is a centralised organisation?
One in which decision-making authority is concentrated in one place
Describe geography
Some functions may be centralised rather than ‘scattered’ in different offices, departments or locations
Describe authority
Centralisation also refers to the extent to which people have to refer decisions upwards to their superiors.
Decentralisation therefore implies increased delegation and autonomy at lower levels
Benefits of centralisation
- Decisions are made at one point and so are easier to co-ordinate
- Senior managers can take a wider view of problems and consequences
- Senior management can balance the interests of different functions
- Senior managers keep control
- Possibly cheaper
- Quality of decisions is (theoretically) better due to senior managers’ skills and exp.
Benefits of decentralisation
- Avoids overburdening top managers, in terms of workload and stress
- Improves motivation of more junior managers who are given responsibility and authority
- Greater awareness of local problems by decision makers
- Supports managerial succession
What is span of control?
The number of people (subordinates) reporting to one person
Describe scalar chains
The chain of command from the most senior to most junior
What is a tall business?
One which, in relation to its size, has a large number of levels in its management hierachy, normally because there are narrow spans of control
What is a flat business?
One which, in relation to its size, has a small number of hierarchal levels, normally because there are wide spans of control
Advantages and disadvantages of a tall business
- Narrow control spans
- Small groups enable teams to participate in decisions
- Large number of steps on the promotional ladder promotes career planning and training
//
- Inhibits delegation
- Rigid supervision can be imposed
- Increased admin and overhead costs
- Same work passes through too many hands
Advantages and disadvantages of a flat business
- More opportunities for delegation
- Relatively cheap
- In theory, speeds up communication between strategic apex and operating core
//
- Requires that jobs can be delegated
- Sacrifices control
- Managers only get a superficial idea of what goes on
What is a mechanistic organisation?
stable, efficient and suitable for slow-changing operating environments
What is an organic organisation?
flexible, adaptive and suitable for fast-changing or dyanmic operating environments
What is a bureaucracy?
‘A continuous organisation of official functions bound by rules’
Advantages and disadvantages of bureaucracies
- Ideal for standardised, routine tasks
- Very efficient in stable environments
- Some people are suited to the structured, predictable environment
//
- promotes slow decision making
- uniformity creates conformity
- find it hard to learn from mistakes due to lack of feedback
- slow to change
- poor uptake or use of tech
Businesses may take one of which basic legal forms? (3)
- sole tradership
- partnership
- companies
What is a sole tradership?
A single propreitor who owns the business, taking all the risks and enjoying the rewards of the business
What are the features of a sole tradership?
- There is no legal distinction between the propreitor and the business
- The propreitor is wholly liable for the debts of the business
- Sole traders may take drawings out the business
- If a sole trader dies, the business assets and liabilities form part of the estate but the sole tradershop as such ceases to exist
What is a partnership?
The relation which subsists between persons carrying on a business in common with a view of profit
What are the features of a partnership?
- Frequently, partners are jointly and severally liable for the debts of the partnership
- Partners take drawings from the business
- If a partner dies, the partnership may automatically be dissolved
What is a limited liability partnership (LLP)?
It is possible to form an LLP in which LLP’s have. a legal identity seperate from its owners
Because of this, some of the funding restrictions suffered by general and limited partnerships are relaxed
What is a company?
A legal entity registered such under statue (Companies Act 2006)
What are the features of a company?
- Company is legally distinct from its owners
- Shareholders take dividends, not drawings
- Shares are a form of property that can easily be sold by their owners
- If a shareholder dies, their shares are transferred to another person without any effect on the company at all
Differences between private and public companies
Public (plc):
- whose constitution states it is public and has complied with the registration procedures for such a company
- may offer shares for sale to public at large
Private (ltd):
- A company who has not been registered as a public company under statue
- may not offer securities to public at large
Advantages and disadvantages of companies
- seperate legal personality
- limited liability of members (shareholders)
- security for loans
- perpetual succession
//
- seperation of ownership and control
- ownership of assets
- accounting records and returns
- regulations and expense
- publicity
Name the types of alliances (5)
- Joint venture
- Licences
- Strategic alliances
- Agents
- Groups
What is a joint venture?
A seperate business - usually but not always Ltd. - can be formed in which businesses take a financial stake and management is provided as agreed
What is a licence? (Licensing agreement)
A licensing agreement is a permission to another company to manufacture or sell a product, or to use a brand name
What is a strategic alliance?
A strategic alliance is an informal or weak contractual agreement between parties or a minority cross-shareholding arrangement where each party takes a small number of shares in the other parties
Normally no seperate company is formed
National airlines have created such alliances to cross-book passengers
What is an agent?
Agents can be used as the distribution channel where local knowledge and contracts are important
The arrangements may be restricted to marketing and product support
What is a group in terms of companies?
Parent company owns all the shares of a subsiduary company (simple group structure)
