Week 2 - Organisational Structure Flashcards
What is organizational structure a key component of? What does the organizational control system state
Organizational structure is a key component of the control system.
The organizational control system states that individuals and teams are given roles and decision rights to optimize contribution of development and implementation of organization’s business strategy. People are more focused on their roles through this strategy
What factor drives a decentralized organization to operate in a centralized way?
Communication between departments enables a decentralized organization to operate in a centralized way.
What performance metrics are in place for cost centres, profit centres & investment centres?
For cost centres: How can cost be minimized
Profit centres: revenue (how well they earn this)
Investment centres: ROI
What is a responsibility centre and what does the cost, profit and investment centre do?
The responsibility centre holds each work unit accountable for the decisions they make when they are given decision making rights and responsibilities.
Cost centre: knows the optimal input mix, decision rights for input mix (labor, capital and raw materials), minimise cost given quantity and quality constraints
Profit centre: Division has knowledge of price and quality, decision rights over input product mixes and prices, maximise profits or ‘excess profits’ which is measured by central
Investment centre: Division has knowledge of optimal price/quantity and knowledge about investment opportunities.
Decision rights over input and product mixes, prices, and capital investments, maximize ROI or residual income, which
Central can measure
What are functional & divisional structures driven by? Which one is centralized and which decentralized?
Functional structure (departments divided by their speciality) is driven by the need for specialization. Example of specialization include marketing, R&D, sales etc (centralised)
Divisional structure (departments split by products they specialise in) is driven by the need for market responses (decentralized)
What is the silos effect and what is a possible way to solve this?
The silos effect is when miscommunication occurs between work units and they become more isolated from each other.
A possible way to solve this would be goal congruence (managers act in best interest of organization).
Evaluate work unit performance as a whole instead of individual performance
The matrix structure also helps to mitigate the silos effect by facilitating communication through work units
What is the matrix structure?
Where team reports to multiple members of leadership, it helps to facilitate communication between units and exploit innovation spillovers and mobile specialist.
