Unit 1 outcome 1.3 - business structures Flashcards
What are the 4 different types of business structure?
- Hierarchical (tall) structure
- flat structure
- matrix structure
- entrepreneurial structure
What is a hierarchical structure?
- Traditional structure for many medium and large organisation, sometimes called a pyramidal structure.
- Decisions and instructions are passed down from the senior staff to the workforce, and information passes back up
What does Specialisation in a tall structure allow?
Allows the organisation to benefit from economies of scale in its operations
What are the 3 types of decisions within a tall structure?
- operational decisions
- Tactical decisions
- Strategic decisions
What are 2 advantages of a Tall structure?
- the structure is clearly defined and each member of staff knows their role and who to report to
- with many levels come many promotion opportunities which can motivate staff
What are 2 disadvantages of a Hierarchical structure?
- Communications take time to flow down through the levels, which slows down decision-making
- The organisation can be slow to react to changes in the market
What is a flat structure?
When there are very few levels in the hierarchy, so communications are passed quickly from one level to another, speeding up the processing of information and decision-making
What are 2 advantages of a flat structure?
- information can be communicated quickly between levels
- the organisation can respond quickly to external factors such as competition
What are 2 disadvantages of a flat structure?
- Fewer levels means fewer promotion opportunities so quality staff may leave to gain promotion in larger organisations
- As there are less management levels, staff may be delegated more tasks, which could put them under pressure
What is a matrix structure?
This emphasises getting people together who have particular specialist skills and placing them in project teams to complete specific tasks.
There is no hierarchy
What are 2 advantages of the matrix structure?
- Each team has specialised staff from all functional areas
- Complex problems can be solved
What are 2 disadvantages for the matrix structure?
- many managers across all project teams will mean high wage costs
- Duplication of resources such as administration staff and equipment for each project team.
What is an entrepreneurial structure?
A structure common in small businesses, where decisions have to be made quickly
What are 2 advantages of an entrepreneurial structure?
- Decisions are made quickly as there is little consultation
- Staff know who they need to report to
Name 2 disadvantages of an entrepreneurial structure?
- This structure can create a heavy workload for the main decision maker
- If the owner is busy or not available, key decisions can’t be made
What is centralised management?
- when the control and decision-making lies with the most senior directors or managers or the owners of the organisation
- decisions start at the top, and they are passed down to the workforce
- subordinates have no authority
What are 3 advantages of a centralised management?
- procedures are standardised which ensures consistency
- there is low risk of important information leaking from branches or departments
- a high degree or corporate identity and strategy exists as decisions are made for the whole organisation
What are 3 disadvantages of a centralised management?
- Less responsibility is given to subordinates which can result in demotivated staff
- Decisions will not reflect the needs of local markets
- the organisation will react slowly to external factors such as competition
What is decentralised management?
- decision-making and control are delegated to and carried out by subordinates, relieving senior management
- decisions are made throughout the lower end
Name 3 advantages of decentralised management?
- The business reacts quickly to external factors
- decisions are made quickly as local managers don’t need to consult senior managers before implementing decisions.
- More subordinates are empowered which encourages creativity
Name 2 disadvantages of decentralised management?
- the organisation can lose an overall corporate image if each department/branch is operating differently
- local branches could start to compete with each other if they are allowed to make key decisions
Why do organisations change their structure overtime?
to ensure that they can cope with changing circumstances
What are the two steps businesses can be forced to make to become more competitive and to survive the worst of a recession?
- De-layering
- Down sizing
What is de-layering?
The cutting out of levels of management within the organisation in order to ‘flatten out’ the structure
What does de-layering overcome?
the effects of aggressive competition in the market place
Name 3 advantages of de-layering;
- money is saved on paying expensive management salaries
- quicker decision-making and communications are possible as there is a shorter chain of command
- there is a wider span of control
What are 3 disadvantages of delayering?
- there are fewer promotion opportunities for staff
- redundancy payments will cost the organisation a significant amount of money
- the organisation will lose key members of staff in the restructure
Why do organisations use down-sizing? and how?
to attempt to reduce costs
- reducing the scale of their operations to meet actual market demand
- stripping out excess capacity within the organisation (at all levels and within all functions)
- consolidating complimentary operations under one function
- reducing the resources of the organisation following increases in productivity
What does down-sizing mean? (3)
- the closure of factories or production units
or - merging two or more separate operations under separate management functions and bring them together under one management umbrella
or - scaling down of their production capacity
What are 2 advantages of down-sizing?
- cost of wages and rent will be reduced
- the business is more efficient and can become more competitive
Name 2 disadvantages of down-sizing?
- valuable skills and knowledge are lost when redundancies ae made
- remaining staff feel vulnerable and are demotivated
What do organisational charts show?
The structure of the organisation in diagrammatic form where individuals are identified in specific positions within the organisation, showing their links to others along lines of authority and responsibility
Name 3 advantages of organisational charts?
- each individual can be names in the position they hold, providing clear identification
- they identify appropriate lines of communication or where bottlenecks occur
- they identify the span of control or number or subordinates each individual has
Name the 2 disadvantages of organisational charts:
- they don’t show how much authority each position in the chart carries
- they don’t identify any informal relationships that occur
What is the span of control?
the number or workers or subordinates under a supervisor or manager
name 2 important factors considered when deciding on the span of control of any manager or supervisor?
- the calibre and ability of the manager or supervisor must be considered as some people are better at managing and leading as others and therefore can cope with a larger number of subordinates
- the calibre and ability of the subordinates must be considered as intelligent, motivated and able subordinates will need little in the way of control, and therefore a superior can manage a relatively large number of people. The same will not be true if subordinates are lazy, demotivated or less able.
What are the 3 types of relationships within a business?
- line relationships
- functional relationships
- staff relationship
