AS Economics: Organisational structures

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  • Created on: 20-03-13 23:02
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Hierarchical organisations
An organisation with multiple layers of management often associated with centralised decision making; which gives most decision making
powers to the top staff in an organisation.
This also entails a chain of command; the sequence of authority down which instructions are passed in an organisation. The span of control
is the number of subordinates directly answerable to a manger.
ADVANTAGES: decisions made quickly, without lengthy consultation, and the pattern of responsibility is clear.
DISADVANTAGES: referring everything to head office can waste time, can be frustrating and demotivating for people denied the chance to
influence decisions.
HOWEVER, some hierarchical organisations have been delayering and delegating (meaning that people lower down in the chain of
command can make decisions.) Another recent trend is decentralisation; decision-making powers are given to local branches within the
business, rather than at the head office.
ADVANTAGES: delegating responsibility will motivate some people who might appreciate extra freedom; not referring everything to head
office will save time. DISADVANTAGES: entails a risk of having less contact with subordinates, so can weaken
supervision and communication. Requires managers to trust the subordinates, & vice versa.
Entrepreneurial Structures
This is where organisations have a relatively fluid structure in which multilateral lines of communications allow everyone to be in touch with
everyone else. They facilitate innovation and readiness to carry the risk associated with business decisions.
ADVANTAGES: decisions can be taken and implemented quickly; staffs are adaptable and flexible towards switching between activities
according to current priorities.

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An entrepreneurial culture is likely to have loose lines of authority that may benefit a small business, but this would be a disadvantage for
larger companies.
Matrix management
This involves bringing together teams from different departments, to work on specific projects in which all have relevant expertise.
ADVANTAGES: will have flexibility and reach decisions quickly. It can empower team members and encourage creativity, it can also help to
improve communications between departments.
DISADVANTAGES: Control by senior managers can be difficult.…read more


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