Booklet 8: Organisational Design

Question 1

What is Organisational Design?

Answer 1

Organisational design refers to how an organisation is structured. Staff at higher levels of the hierarchy (e.g. company directors) have greater levels of authority and responsibility.

Question 2

What is the Span of Control?

Answer 2

This refers to the number of staff under the direct supervision of a manager in a business.

Question 3

Advantages of a Narrow Span of Control.

Answer 3

1. Tight control and supervision
2. Better co-ordination of activities
3. Managers have time to think and plan
4. Better communication

Question 4

Disadvantages of a Narrow Span of Control.

Answer 4

1. Subordinates may be de-motivated because of the excess supervision.
2. Costly for an organisation.
3. Suitable supervisor with the ability and experience.

Question 5

Advantages of a Wide Span of Control.

Answer 5

1. Lowers the cost of supervision.
2. The person in charge will have a vast amount of experience and they will be experienced in making important decisions and in leading large groups.

Question 6

Disadvantages of a Wide Span of Control.

Answer 6

1. Difficult for effective communication and control.
2. If one employee is bad at their job, then the wide span of control becomes difficult.
3. It places a lot of stress on even good supervisors/ managers.
4. Supervisors may feel taken advantage off.

Question 7

What is a Chain of Command?

Answer 7

Chain of command refers to the reporting system from the top of the hierarchy to the bottom.

Question 8

Advantages of Centralised Structure.

Answer 8

1. Highly skilled manager making the decision.
2. Tighter finance control.
3. Economies of scale can be achieved if everything is centralised.

Question 9

Disadvantages of Centralised Structure.

Answer 9

1. Demotivating to all subordinates.
2. Heavy stress on senior management.
3. Lowers subordinates don’t gain future experience.

Question 10

Advantages of Decentralised Structure.

Answer 10

1. Reduced work for senior managers.
2. Subordinates gain future experience.
3. May motivate subordinates.
4. Local management reacts to local conditions.

Question 11

Disadvantages of Decentralised Structure.

Answer 11

1. Different decisions made by different people.
2. Managers may not want autonomy.
3. Wrong decisions may be made by the firm.

Question 12

Advantages of Tall hierarchical structure.

Answer 12

1. More promotional opportunities.
2. Narrow span of control- tighter control over employees.
3. Less delegation.

Question 13

Disadvantages of Tall hierarchical structure.

Answer 13

1. No valuable feedback available.
2. No control with lower staff.
3. More layers mean more responsibility.

Question 14

Advantages of Flat hierarchical structures.

Answer 14

1. Narrow span of control- tighter control over employees.
2. Less delegation- less stress.
3. More promotional opportunities.

Question 15

Disadvantages of Flat hierarchical structures.

Answer 15

1. No control with lower staff.
2. Chinese whispers can occur.
3. No valuable feedback available.

Question 16

What is outsourcing?

Answer 16

Outsourcing occurs where one business uses the services or expertise of a service company (i.e. another business) in order to undertake business functions.

Question 17

Advantages of outsourcing.

Answer 17

1. Cost efficient.
2. High quality.
3. Good reputation.
4. Focus on other business activities.

Question 18

Disadvantages of outsourcing.

Answer 18

1. Costly.
2. Low quality.
3. Poor reputation.