organisational structure

Question 1

Why Do Businesses Need to be Organised?

Answer 1

The structure determines:
Who is responsible for what job and
Who is responsible to whom.

Question 2

businesses organised function

Answer 2

FUNCTION – separated into different departments e.g. Sales, Human Resources, Production etc.

Question 3

businesses organised by function Advantages

Answer 3

Advantages

• Allows specialisation – Each department can focus on one specific area. The specialisation can lead to efficiencies as staff become expert e.g sales workers learning the lead time requirements for furniture shops.
• Specialisation leads to efficiency – reduce costs
• Accountability – managers are responsible for allocating resources, recruiting and leading staff e.g. production managers will be responsible for the design manager regarding new designs of wooden chairs.
• Clarity – specialist staff in dept know each other- Understanding role within organisation
• Finance workers will be recruited by that department and trained by their superiors – good for motivation with help and support

Question 4

businesses organised by function Disadvantages

Answer 4

Disadvantages-
- Communication & co-ordination problems
- Inertia – staff become resistant to change
- Bureaucracy – large increase in paperwork
- Suitability – as firm grows, more layers

Question 5

Business Organisation Important terms

Answer 5

• Authority – the right to make decisions and carry out tasks
• Span of control – the number of people a superior is responsible for
• Chain of Command – the relationship between different levels of authority in the business
• Hierarchy – shows the line management in the business and who has specific responsibilities
• Delegation – authority to carry out actions passed from superior to subordinate
• Empowerment – giving responsibilities to people at all levels of the business to make decisions
• Delayering – Reducing the amount of workers by removing layers of hierarchy. Makes a organisation chart flat!

Question 6

ADVANTAGES OF HIERARCHICAL STRUCTURES

Answer 6

• AUTHORITY - Establishes clear authority for work and departments, Specialised departments with each person knowing their role
• COMMUNICATION – managers know their subordinates and can issue instructions
• QUICK PROBLEM SOLVING - Subordinates know who to report to when there is a problem
• MANAGERIAL ECONOMIES OF SCALE – Specialists e.g. accountants work together in an efficient manner

Question 7

DISADVANTAGES OF HIERARCHICAL STRUCTURES

Answer 7

• ISOLATION – Workers only work with others in their department – can lead to problems when working with other departments (tunnel vision!)
• CENTRALISATION – Hierarchies are often centralised. This leads to senior management making all the main decisions. Workers may become demotivated
• BUREAUCRACY – Too many layers leads to slow decision making – results in unhappy customers