What makes firms effective?

• A hierarchical structure is an organisation with multiple layers, often associated with centralised decisions. No delegation

Advantages:

• Decisions are controlled
• Can motivate
• In some organisations, a tall structure is needed to avoid poor performance

Disadvantages:

• Communication can fail
• Long time to make decisions
• Staff may become demotivated

• Span of control: The number of subordinates directly answerable to a manager
• The number is smaller with a taller structure
• Chain of command: The sequence of authority down which instructions are passed

Centralisation

• An approach that gives most decision making to the top staff in an organisation
• Often autocratic

Advantages

• Quick decision process
• No consultation
• Pattern of responsibility

Disadvantages

• Can waste time
• Frustrating/demotivating for employees, they are denied the chance to influence decisions

Decentralisation

• Occurs when powers for decision making are given to local branches/ division managers
• Involves delegation

Advantages

• Allowing others to make decisions= Increased motivation
• More freedom to act
• Local knowledge

Disadvanatages

• Involves costs
• Risk of managers losing control
• Trust is essential

Entrepreneurial Structure

• Often used by small businesses
• Informal and flexible
• Staff are adaptable
• Everyone is in contact with everybody else
• Facilitate innovation
• Advantage: Quick decision making
• Disadvantage: Lack of specialism

Matrix Structure

• Brings teams together, from different departments, to work on specific projects in which they all have relevant expertise
• Cross departmental team
• Advantage: Can empower team members and encourage creativity and improve cross-departmental communication
• Disadvantage: Control by senior management is more difficult

Factors influencing appropriate organisational structure

• No single structure which is best in all situations

• Pace of change: An entrepreneurial/matrix structure allows fast decision making and implementation. Valuable in a fast changing environment, where technology evolves rapidly.
• Stable situation= hierarchical structure
• Business size: larger businesses become ineffective without systematic chain of command. Small businesses can rely on direct communication to help a flexible entrepreneurial structure to…