Ch3 Governance - Organizational Structure

Question 1

Types of business ownership

Answer 1

1. Sole proprietorships
2. Partnerships
3. Corporations

Question 2

Advantages & disadvantages of organizational structures
(decision-making, responsibility, lines of communnication and reporting)

Answer 2

1. Simple structure
   decision making - centralized (owners, group of senior managers)

A: quick, responsive / adapt to changes timely; in line with strategic objectives

D: job dissatisfaction - employees not empowered, leading to turnover, reduced profit and potential for subsequent reorganization

2. Functional structure
   decision making - centralized (executives and senior managers, but departments have some latitude)

A: promotes learning and facilitates economies of scale; allows for specialization and staff can progress and advance their careers so there will be a logical progression for highly motivated individuals

D: interdepartmental communication may be limited; cross-departmental work teams are required which will make top management of each functional group lose control; further delegation is required to help mitigate the loss of control

3. Divisional structure
   decision making: centralized by division, which operates autonomously

divisions responsible for business-level strategies
executive team - for corporate strategies

A: better for organizations having multiple products and in different locations

Employees can focus on one product and develop their own culture - higher probability of success for divisional strategy; reduce turnover and increase efficiencies and divisional profits

D: will create a culture of competition; outdoing other divisions instead of competition; imcompatibilities between products and services

4. Matrix structure (functional + divisional)
   A: empowered employees, higher morale, freely-flowing cross discipline communications- quicker response for problems and solutions (open exchange of information)

D: multiple lines of communication and unclear chain of command for leadership; unclear direction leading to poor employee morale; more managers and expensive, wasting company resources

5. Network structure (virtual matrix)
   for unstable environment and constantly chaning conditions requiring innovation and quick response

(all A’s and D’s with matrix structure)

Unique A’s and D’s
A: decreased overhead expenses; flexible work arrangements to attract top talent for less money

D: reliance on technology, internet connectivity or network; imbalance of work if workload cannot be divided appropriately