Module 1, Chapter 1 - Organisational Structure Flashcards
How can an internal structure of an organisation be visually represented?
The internal structure of an organisation can be represented visually through an organisational chart or diagram which also illustrates how information and work flows through the business.
What are the positives of understanding an organisation’s shape?
It can help management to make more effective decisions on how to change or adapt the organisation to achieve its objectives and business goals.
What factors influence the shape of an organisation? Provide three examples
- The layer of management
- The authority for decision making; and
- The business need.
Complete the sentence in respect of management layer. Organisations are divided ….
…. horizontally and vertically.
What are vertical divisions?
Vertical divisions are the layers of management.
What are horizontal divisions?
Horizontal divisions manifest as departments.
Tall structures are often best suited to very large organisations where centralisation of operations is needed to provide appropriate levels of control. Provide positives and negatives of the tall structure
Negatives includes:
- If the leadership at the top is weak, poor decision making can ripple down through the organisation, which can lead to low staff morale, poor productivity and inefficiency.
- The hierarchy in a tall structure can cause delays in decision making and the flow of communications.
- The role of employees can be limited to their specific function/department, with little scope to become involved in other types of work.
Positives includes:
- Tasks are easily designated in this structure as employees and departments have well-defined responsibilities.
What is the main difference between a flat structure and a tall structure?
A flat structure has fewer layers of management and day-to-day operational decisions may be delegated to higher-level managers who interact with employees directly. Higher-level managers have more control over their area of operations, are given more authority over decisions and are more empowered to make decisions than their counterparts in tall structure organisations.
Provide examples of the benefits of flat structures
- Flat structures often have higher employee morale than tall structures as employees are more in control over everyday decisions
- There are fewer layers of management to go through to get to the ultimate decision maker, resulting in a faster response to issues
- Flat structures cost less to run than tall structures as there are fewer management salaries to pay
Provide examples of the negatives of flat structures
- There are limited opportunities for promotion as there are fewer levels available to climb in the organisation
- Employee roles and responsibilities may be less well-defined, which can make it difficult to delegate tasks
- It can also be a difficult structure to maintain if an organisation grows and needs more centralised control over its operations
What are the names of the two authorities for decision making?
Centralised and decentralised.
What is the purpose of an organisational structure and what should it set out? Give two examples
- An organisational structure should set out the hierarchy within an organisation; and
- Define each job role and how each role fits into the work of the whole organisation.
How are decisions made in a centralised structure?
In a centralised structure, authority for key decisions rests with the senior management at the centre of the business who then delegates authority to implement these decisions to middle- and lower-level managers in the chain of command.
Why are centralised structures useful for large organisations? Give four reasons.
- Centralised structures are good for retaining control and maintain consistency across areas such as operations, customer experience and quality, as standard policies and practices can be decided at the top and implemented throughout the rest of the organisation
- It is easier to show strong leadership in this type of structure
- Decision making is able to happen quickly (particularly in times of crisis) as the authority rests in one place – with the senior management team
- Communication and reporting is easier as all the information is stored in one place and it is easier to coordinate and control
Give one negative of a centralised structure
Centralised structures are less flexible, meaning the managers have less control over decisions.
How is decision making delegated in a decentralised structure?
It is delegated across a larger group, including managers, lower down the chain of command as well as individual business units or trading locations.
What are the positives of decentralised structures?
- Decisions can be made with the local market in mind. This promotes good customer service as the manager has the power to make quick decisions to resolve customer problems and complaints without having to contact a central team for a decision
- Being given the authority to make such decisions is more empowering for managers lower down in the organisational hierarchy
- It is more motivating for staff as there are more opportunities for development
- Decisions can be made that are directly relevant to their location rather than disseminated down from a ‘faceless’ central hub that may not fully understand the needs of that location or its customers
What are the negatives of decentralised structures? Give two reasons
- As standardised policies and procedures are less likely to be implemented in a decentralised structure, quality across different locations may vary
- It is harder for senior management to retain tight control over the business as decisions are being made away from the centre. This can mean areas such as financial control can be harder to maintain and could result in issues such as spiralling costs.
How is a functional structure created, and what is its main purpose?
A functional structure involves dividing an organisation into smaller groups or departments based on the specialised function they perform (e.g. IT, finance, marketing and human resources. Each functional unit has its own priorities and objects and reports directly, usually via the departmental head, to senior management. It is then the responsibility of senior management to coordinate the activities of each functional area to ensure the organisation works as a cohesive whole to achieve its overall business purposes.
Which organisations benefit from functional structures the most?
This type of structure works for small companies and start-ups and in larger companies which concentrate on a single product or service.
What are the positives of functional structures?
It is ideal in situations where the external business environment is stable and not prone to rapid changes that would involve the organisation responding with a change in business strategy. A functional structure promotes efficiency and cost-effectiveness as all employees with similar, specialised knowledge are grouped together in one place.
Provide two negatives of functional structures.
- This type of structure can be more bureaucratic with complicated communication and decision-making processes, leading to less flexibility and innovation.
- Functional areas may work effectively in their own department, but as each area is not accountable for others, cross-departmental projects may be impacted by information not being shared, duplication and differing priorities. A lack of transparency between departments and poor collaboration and challenge on projects can lead to poor decision making and a tendency towards groupthink.
Which types of organisations use a divisional structure?
Organisations with a divisional structure are usually large and dynamic, operating over a wide geographical area and often with more than one product line or service.
What does a divisional structure consist of?
They typically consist of smaller organisations (divisions) under an umbrella or ‘parent’ group. Each division is a discrete operating unit with its own complete set of departmental functions – IT, HR, finance, marketing, etc.
The general manager/division chief reports directly to the top management of the umbrella group and is accountable for the performance of their division.
