What makes firms effective?

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


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


  • 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


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


  • Quick decision process
  • No consultation
  • Pattern of responsibility


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


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


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


  • 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…


No comments have yet been made

Similar Economics & Business Studies resources:

See all Economics & Business Studies resources »See all The company, revenue and costs resources »