Organisational structures

Question 1

Describe a functional structure.

Answer 1

1. Board of directors
2. Departments e.g. finance
3. Department jobs e.g. production will perform stock control

Question 2

Describe a matrix structure.

Answer 2

1. Chief executive
2. Departments e.g. HR
3. Project teams from departments (temporary or permanent)

Question 3

What is the main difference between a functional and matrix structure?

Answer 3

A functional structure has a board of directors where as a matrix structure has just a chief executive.

Question 4

State some advantages of a functional structure.

Answer 4

Advantages:

• coordination from the top & sense of overall direction
• clear lines of communication & authority for all employees
• lets specialists operate in particular areas such as marketing & R&D to develop innovative ideas

Question 5

Give the disadvantages of a functional structure.

Answer 5

Disadvantages:

• senior managers can become remote and unaware of local issues as the business grows
• decision making can be slow due to long lines of communication which can damage competitiveness
• provides little coordination & direction to those lower in the organisation

Question 6

What are the advantages of a matrix structure?

Answer 6

Advantages:

• helps to break down traditional department barriers, improving communication across the entire organisation
• allows individuals to use particular skills in a variety of contexts
• it avoids the need for several departments to meet regularly, so reduced costs & improved coordination

Question 7

State some disadvantages of a matrix structure.

Answer 7

Disadvantages:

• heavy workloads of the project members
• project members have divided loyalties as they report to 2 or more line managers
• there may not be a clear line of accountability for project teams given the complex nature of matrix structures

Question 8

What 4 main factors affect which organisational structure is used?

Answer 8

1. Business environment
2. Size of the business
3. Corporate objectives
4. Culture of the organisation

Question 9

Explain how business environment can effect an organisational structure.

Answer 9

Business environment

• fierce competition can encourage delayering to decrease costs
• rapid change can emphasise the need for a matrix structure to ensure the organisation remains responsive
• matrix structures also prevent inflexible hierarchies getting in the way of rapid decision making
• monopoly firms may take a large functional structure where there is little need to keep costs down due to limited competition

Question 10

How can the size of the firm effect which organisational structure is used?

Answer 10

Size of the business

• many small firms begin with the director playing a central role-matrix
• growing firms can’t sustain being under single control & so traditional structures usually form i.e. functional
• span of control in a matrix might be too large in a bigger company

Question 11

Explain how corporate objectives effect organisational structures.

Answer 11

Corporate objectives

-innovative & highly competitive organisation may opt for a matrix structure in order to complete tasks effectively

Question 12

How does the culture of an organisation have an effect on the organisational structure used?

Answer 12

Culture of the organisation

• a firm with an innovative culture like google may adopt a matrix structure to minimise bureaucracy & to allow teams to carry out the necessary research and development and market research
• on the other hand, an organisation that values tradition may be suited to formal hierarchical structure
• this structure places emphasis on positions rather than people & encourages the continuance of existing policies

Question 13

Why do managers adapt their organisational structure?

Answer 13

To improve the competitiveness of their business.

Question 14

What is delayering?

Answer 14

Delayering

• removing one or more levels of hierarchy from the organisational structure (creates a flatter structure)
• often involves removing ‘middle managers’ such as branch managers who can be replaced with local managers who manage a number of branches
• involves removing non-essential employees often to cut costs & improve communication/decision making

Question 15

What are the advantages of delayering?

Answer 15

Advantages:

• offers opportunities for delegation & empowerment as the number of managers is reduced & more authority is given to junior employees
• improves communication as messages pass through fewer levels of hierarchy
• reduces costs as fewer employees are required and employing middle managers can be expensive

Question 16

What are the disadvantages of delayering?

Answer 16

Disadvantages:

• not all organisations are suited to flatter structures. Large firms with many low-skill employees may not adapt easily
• can demotivate workers due to job losses, especially if its just an excuse for redundancies & cost cutting
• initial disruption can occur as people take on new job roles and responsibilities
• those managers remaining will have a wider span of control which can actually damage communication within the firm

Question 17

What are the 2 main types of organisational structures?

Answer 17

• functional

- matrix

Question 18

Define the term ‘flexible workforce’.

Answer 18

Flexible workforces are those that are adaptable to changing conditions and demands.

Question 19

Give 3 characteristics of a flexible workforce.

Answer 19

• not resistant to change
• multi skilled
• well trained

Question 20

What can encourage labour flexibility?

Answer 20

Performance related pay.

Question 21

State some ways of creating a flexible workforce.

Answer 21

• part & full time workers
• highly skilled core workers & lower skilled secondary/temporary workers
• outsourcing
• flexible hours for employees
• home or teleworking
• multi skilled employees

Question 22

How can having a mix of temporary and core workers make your workforce more flexible?

Answer 22

Temporary workers allow the firm to reach peak demand without having sustained increased costs.

Core workers allow the firm to always hit their bottom level of demand whilst having the skills to produce quality products and train temporary workers.

Question 23

Give examples of temporary workers.

Answer 23

• part time
• zero hour contract
• seasonal contract

Question 24

How do flexible hours work?

Answer 24

This entails working during core hours each day e.g. 10-4 and then making up the over hours at times that suit them.

Question 25

State some advantages of flexible working.

Answer 25

• firms can easily meet fluctuations in demand
• it is more simple to cover for absent staff
• wage costs can be reduced
• firms can meet the demand for highly specialised skills relatively cheaply
• firms can respond to rapid changes in circumstances

Question 26

What are the disadvantages of flexible working?

Answer 26

• communication problems can occur if workers are used irregularly
• systems such as empowerment and team working may be hard to implement
• lack of security may detract from employee motivation and morale
• a higher turnover of labour may result

Question 27

Define centralisation.

Answer 27

Centralisation is when the majority of decisions are the responsibility of just a few people at the top of the organisation.

Question 28

Define decentralisation.

Answer 28

Decentralisation is when control shifts sideways or horizontally (between people at the same level in the organisation).

Question 29

State the advantages of centralisation.

Answer 29

• senior management have more control over the business
• communication may improve if there are fewer decision makers
• senior managers in theory should be more skilled and experienced so decision making should be quicker and of better quality
• procedures such as purchasing and ordering can be standardised throughout the firm. This can lead to EOS & lower costs.

Question 30

What are disadvantages of centralisation?

Answer 30

• senior managers may make decisions based on the business as a whole. Local managers would make decisions based on their local firm or department, this decision making using the business as a whole may not suit the whole firm. This is more true for larger or global firms.
• decisions made by the top give very little responsibility and empowerment to local or middle managers as they do not have the responsibility to deal with problems effectively. This may lead to a lack of motivation.

Question 31

What are the advantages of decentralisation?

Answer 31

• provides managers with greater job satisfaction by involving them in decision making
• reduces the stress and burdens put on senior management so they can concentrate on more important tasks
• by delegating authority of decision making managers are being prepared for higher positions in the business when the time is right
• managers are better informed to make decisions as they work on the ‘front line’
• delegation allows greater flexibility. Decisions should be made quicker if managers don’t have to consult senior managers every time.

Question 32

State the disadvantages of decentralisation.

Answer 32

• Dysfunctional decision making. A decision by one manager to improve their segment of the organisation may have negative implications for others. For example, a managing keeping costs low in one department may have an adverse effect on the quality of service provided in other departments.
• Loss of control. There is a danger that as senior management become removed of underlying decisions in the firm and day to day operations in local stores, the senior managers will lose control.