LO3/4 Flashcards
Organisational structure
A formal way of outlining the way that authority, responsibility and information will flow in a business.
Division of work
The process of dividing a job or project into smaller tasks and assigning responsibility for their completion to a specific group or individual.
Hierarchy
The number of levels in the organisational structure.
Chain of command
The route through which authority is passed down through an organisation.
Delegation
I’m Passing authority (but not responsibility or accountability) down through the organisational hierarchy to a subordinate.
Pros
- it can motivate and empower workers that have been given more responsibility
- time to focus on more complex tasks of more importance
- it can develop the workforce’s skills and flexibility
- the quality of the work may improve due to more highly skilled subordinates
Cons
- subordinates may not have the skills or experience to do a “good” job
- loss of control may result in decisions being made that do not reflect the overall objectives of the business
Span of control
The number of subordinate reporting to each manager/supervisor.
Functional approach
This approach separates a business into departments.
Product approach
This approach separates a business according to the types of products it manufacturers.
Geographic approach
The type of approach separates a business according to the geographic areas it operates in.
Advantages of a narrow span of control
- more opportunities for promotion for employees
- easier to control workers
- more likely to know when employees have a problem
- more managers reduce promotion opportunities
- better control over subordinates work
- easier to communicate
Disadvantages of a narrow span of control
- slower decision making
- workers can be demotivated
- expensive
- more supervision reduced worker motivation
Break-even
The level of output where TOTAL REVENUE = TOTAL COST
Break-even level of output
Total fixed cost / contribution per unit
Contribution per unit
Price - variable cost per unit
Margin of safety
ACTUSL SALES - BREAK-EVEN LEVEL OF OUTPUT
- the amount by which sales can fall before a loss is made
Cash inflows
The flow of money into a business.
Cash outflows
The flow of money out of a business.
Net cash flow
The difference between cash inflows and cash flows in a given time period.
Income statement
A financial statement that records the revenue, costs and profits of a business for a given period of time.
Subordinate
An employee who is below another employee in an organisational hierarchy
Wide span of control
Advantages
- less expensive as fewer managers/supervisors are needed
- less supervision improves worker motivation
- faster communication and decision making
Disadvantages
- fewer managers/supervisors reduces promotion opportunities
- less control over subordinate work
- effective communication may be difficult
Narrow span of control
Advantages
- more managers/supervisors increases promotion opportunities
- better control over subordinate work
- effective communication may be easier
Disadvantages
- more expensive as more managers/supervisors are needed
- slower communication and decision making
Tall organisational structure
- many layers of hierarchy
- long chains if command
- narrow spans of control
- centralised decision making (minimal delegation)
Flat organisational structure
- few layers of hierarchy
- short chains of command
- wide spans of control
- decentralised decision making (more delegation)
