Module 1, Chapter 1 - Organisational Structure

Question 1

How can an internal structure of an organisation be visually represented?

Answer 1

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.

Question 2

What are the positives of understanding an organisation’s shape?

Answer 2

It can help management to make more effective decisions on how to change or adapt the organisation to achieve its objectives and business goals.

Question 3

What factors influence the shape of an organisation? Provide three examples

Answer 3

1. The layer of management
2. The authority for decision making; and
3. The business need.

Question 4

Complete the sentence in respect of management layer. Organisations are divided ….

Answer 4

…. horizontally and vertically.

Question 5

What are vertical divisions?

Answer 5

Vertical divisions are the layers of management.

Question 6

What are horizontal divisions?

Answer 6

Horizontal divisions manifest as departments.

Question 7

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

Answer 7

Negatives includes:

1. 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.
2. The hierarchy in a tall structure can cause delays in decision making and the flow of communications.
3. 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:

1. Tasks are easily designated in this structure as employees and departments have well-defined responsibilities.

Question 8

What is the main difference between a flat structure and a tall structure?

Answer 8

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.

Question 9

Provide examples of the benefits of flat structures

Answer 9

1. Flat structures often have higher employee morale than tall structures as employees are more in control over everyday decisions
2. There are fewer layers of management to go through to get to the ultimate decision maker, resulting in a faster response to issues
3. Flat structures cost less to run than tall structures as there are fewer management salaries to pay

Question 10

Provide examples of the negatives of flat structures

Answer 10

1. There are limited opportunities for promotion as there are fewer levels available to climb in the organisation
2. Employee roles and responsibilities may be less well-defined, which can make it difficult to delegate tasks
3. It can also be a difficult structure to maintain if an organisation grows and needs more centralised control over its operations

Question 11

What are the names of the two authorities for decision making?

Answer 11

Centralised and decentralised.

Question 12

What is the purpose of an organisational structure and what should it set out? Give two examples

Answer 12

1. An organisational structure should set out the hierarchy within an organisation; and
2. Define each job role and how each role fits into the work of the whole organisation.

Question 13

How are decisions made in a centralised structure?

Answer 13

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.

Question 14

Why are centralised structures useful for large organisations? Give four reasons.

Answer 14

1. 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
2. It is easier to show strong leadership in this type of structure
3. Decision making is able to happen quickly (particularly in times of crisis) as the authority rests in one place – with the senior management team
4. Communication and reporting is easier as all the information is stored in one place and it is easier to coordinate and control

Question 15

Give one negative of a centralised structure

Answer 15

Centralised structures are less flexible, meaning the managers have less control over decisions.

Question 16

How is decision making delegated in a decentralised structure?

Answer 16

It is delegated across a larger group, including managers, lower down the chain of command as well as individual business units or trading locations.

Question 17

What are the positives of decentralised structures?

Answer 17

1. 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
2. Being given the authority to make such decisions is more empowering for managers lower down in the organisational hierarchy
3. It is more motivating for staff as there are more opportunities for development
4. 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

Question 18

What are the negatives of decentralised structures? Give two reasons

Answer 18

1. As standardised policies and procedures are less likely to be implemented in a decentralised structure, quality across different locations may vary
2. 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.

Question 19

How is a functional structure created, and what is its main purpose?

Answer 19

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.

Question 20

Which organisations benefit from functional structures the most?

Answer 20

This type of structure works for small companies and start-ups and in larger companies which concentrate on a single product or service.

Question 21

What are the positives of functional structures?

Answer 21

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.

Question 22

Provide two negatives of functional structures.

Answer 22

1. This type of structure can be more bureaucratic with complicated communication and decision-making processes, leading to less flexibility and innovation.
2. 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.

Question 23

Which types of organisations use a divisional structure?

Answer 23

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.

Question 24

What does a divisional structure consist of?

Answer 24

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.

Question 25

Why are divisional structures useful?

Answer 25

This structure is ideal for rapidly responding to local business needs and is more flexible for a changing external business environment. Staff can concentrate on the product line or service provided by their division with a management structure that supports their organisational objectives.

Question 26

List one negative of a divisional structure.

Answer 26

A divisional structure can be costly as resources (IT, HR, marketing, etc.) are duplicated.

Question 27

What are the roles of senior management within a divisional structure? List two.

Answer 27

1. Senior management needs to provide effective guidance on how to implement new strategies and partner across divisions.
2. Senior leaders also need to make strategic decisions on allocating resources to prevent office politics being the basis of decisions, resulting in one division undermining another.

Question 28

In a matrix structure, how are products managed?

Answer 28

In a matrix structure, products are managed horizontally.

Question 29

In a matrix structure, how are functions managed?

Answer 29

Functions are managed vertically, with each product line having its own functions (e.g. finance, sales, marketing). Therefore, employees usually report to both the project/product manager and head of their function.

Question 30

Provide three advantages of a matrix structure.

Answer 30

1. This type of structure helps to minimise the likelihood of a silo effect developing across teams, as often seen in organisations with a functional structure. It is more dynamic than a functional organisational structure, with fewer barriers to communication between teams.
2. Employees also have more opportunities to increase their specialised knowledge working on different projects across the matrix and the organisation can maximise efficiency of delivery of projects by selecting the most capable employees to work on them.
3. Duplicating functions in every geographical location in which the organisation is based offers more flexibility in terms of meeting local customer needs, meaning the organisation can reach a wider audience and operate on a global level.

Question 31

Provide a description of the major disadvantage of a matrix structure.

Answer 31

A major disadvantage of a matrix structure is its complexity in terms of chain of command. The manager-to-employee ratio is usually higher in a matrix structure and having more than one manager to report to can result in a conflict of employee loyalties and difficulties in deciding how to prioritise work.

Having blurred lines of authority can also mean that decision making can be slower, particularly where managers in different parts of the matrix disagree, resulting in deadlock and difficulties when it comes to conflict resolution.

Question 32

Which type of organisation benefits from a matrix structure?

Answer 32

The matrix structure benefits larger organisations with a complex operational structure (e.g. an organisation taking on different projects across different geographical locations that requires a lot of cross-department interaction).

Question 33

Why would a smaller company not benefit from using a matrix structure?

Answer 33

Smaller companies with a simpler operational structure would not benefit from implementing a matrix structure due to its complexity and cost.

Senior management needs to allocate resources efficiently across the matrix. Poor resource allocation can lead to slowing down of processes and difficulties in delivering projects to time and on budget.