2.5.1

Organisational Structures

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Centralised Organisational Structures

Centralised organisational structures have a few people at the top of the hierarchy who make all the important decisions in a business.

Benefits

Benefits

  • Centralised organisational structures usually have consistent decisions and company policies across all the business’ different functions.
  • The people at the top of the hierarchy usually have the most experience and expertise. They also have a complete view of the organisation and what its overall goals are, so they may be best-positioned to make the best decisions.
Drawbacks

Drawbacks

  • Decision making can be slow because all decisions are made by a few people at the top of the business. The people at the top will end up with a lot of decisions that will take time.
  • Because the people at the top of the hierarchy are less involved in the day-to-day work (operations) in a business, they can become disconnected from reality. This can lead to bad decisions.
  • Businesses often have lots of different functions, each needing different skills. The people at the top are unlikely to have specialist knowledge of all the different functions.

Decentralised Organisational Structures

In decentralised organisations, decision-making responsibilities are delegated by the top management to middle and lower level managers in the business.

Benefits

Benefits

  • Decisions can be made faster because communication has to travel through less layers before being implemented.
  • Decisions are being made by people who have specialist knowledge and are closer to the day-to-day operations of the business.
Drawbacks

Drawbacks

  • Decentralised organisations may have inconsistent decisions made across different business functions.
  • Some of these decisions may not be aligned with the overall aim or objectives of the business.

Tall vs Flat Organisational Structures

As well as being centralised or decentralised, organisational structures can also be classified as tall or flat.

Tall organisational structures

Tall organisational structures

  • A tall organisational structure is a hierarchy with a long chain of command (lots of layers) in the organisation.
  • Usually, each manager has a smaller span of control (is responsible for a smaller number of employees), but lots of people are managers.
Flat organisational structures

Flat organisational structures

  • A flat organisational structure means the opposite. There are fewer layers in the organisational hierarchy.
  • This means that managers have a larger span of control (manage or are responsible for more employees).
Jump to other topics
1

Investigating Small Business

1.1

Enterprise & Entrepreneurship

1.1.1The Dynamic Nature of Businesses1.1.2Risk & Reward1.1.3The Role of Business Enterprise1.1.4The Role of Business Enterprise 21.1.5The Role of the Entrepreneur1.1.6End of Topic Test - Dynamic Nature of Business1.1.7Grade 9 - Dynamic Nature of Business
1.2

Spotting a Business Opportunity

1.2.1Customer Needs1.2.2Market Research1.2.3Market Segmentation1.2.4The Competitive Environment1.2.5Primary & Secondary Market Research1.2.6End of Topic Test - Business Opportunities1.2.7Application Questions - Business Opportunities1.2.8Exam-Style Questions - Market Segmentation1.2.9Diagnostic Misconceptions - Competition
1.3

Putting a Business Idea into Practice

1.3.1Business Aims1.3.2Business Objectives1.3.3Business Revenues & Costs1.3.4Costs - Calculations1.3.5Revenue - Calculations1.3.6Business Profits & Break-Even Analysis1.3.7Profits & Losses - Calculations1.3.8Interest - Calculations1.3.9Cash & Cash Flow1.3.10Cash & Cash Flow 21.3.11Cash Flow - Calculations1.3.12Sources of Business Finance1.3.13End of Topic Test - Business in Practice1.3.14Grade 9 - Business in Practice1.3.15Exam-Style Questions - Business in Practice1.3.16Diagnostic Misconceptions - Profit1.3.17Diagnostic Misconceptions - Company vs Business1.3.18Diagnostic Misconceptions - Economies of Scale1.3.19Diagnostic Misconceptions - Cash Flow1.3.20Diagnostic Misconceptions - Break-even1.3.21Diagnostic Misconceptions - Fixed Costs
1.4

Making the Business Effective

1.4.1The Options for Start-Up & Small Businesses1.4.2Limited Liability1.4.3Franchising & Not-For-Profits1.4.4Business Location1.4.5The Marketing Mix1.4.6Business Plans1.4.7End of Topic Test - Effective Business1.4.8Application Questions - Effective Business1.4.9Exam-Style Questions - Business Plans
1.5

Business Stakeholders

1.5.1Business Stakeholders1.5.2Technology & Business1.5.3Legislation & Business1.5.4Legislation & Business 21.5.5The Economy & Business1.5.6External Influences1.5.7End of Topic Test - Business Stakeholders1.5.8Grade 9 - Business Stakeholders1.5.9Diagnostic Misconceptions - Recessions
2

Building a Business

2.1

Growing the Business

2.1.1Business Growth2.1.2Finance2.1.3Changes in Business Aims & Globalisation2.1.4Ethics & Business2.1.5The Environment & Business2.1.6End of Topic Test - Growing a Business2.1.7Application Questions - Growing a Business2.1.8Exam-Style Questions - Business Growth
2.2

Making Marketing Decisions

2.2.1Product2.2.2Product Life Cycle2.2.3Price2.2.4Pricing Methods2.2.5End of Topic Test - Product & Price2.2.6Grade 9 - Product & Price2.2.7Promotion & Advertising2.2.8PR & Sales Promotions2.2.9Sponsorship & Product Placement2.2.10Promotional Mix2.2.11End of Topic Test - Promotion2.2.12Application Questions - Promotion2.2.13Exam-Style Questions - Promotional Mix2.2.14Place & Wholesalers2.2.15Direct to Consumer2.2.16E-commerce & M-commerce2.2.17Diagnostic Misconceptions - Decreasing Price2.2.18Diagnostic Misconceptions - Advertise vs Promote2.2.19Diagnostic Misconceptions - Social Media
2.3

Making Operational Decisions

2.3.1Job Production2.3.2Batch & Flow Production2.3.3Working with Suppliers2.3.4Effective Supply Chains2.3.5Just In Time & Just In Case2.3.6Managing Quality2.3.7Total Quality Management2.3.8The Sales Process2.3.9End of Topic Test - Operational Decisions2.3.10Grade 9 - Operational Decisions2.3.11Exam-Style Questions - Managing Stock2.3.12Diagnostic Misconceptions - JIT vs JIC
2.4

Making Financial Decisions

2.4.1Gross Profit & Net Profit - Definitions2.4.2Gross Profit - Calculations2.4.3Net Profit - Calculations2.4.4Rate of Return2.4.5Rate of Return - Calculations2.4.6Research & Financial Data2.4.7Marketing Data2.4.8Percentage Change - Calculations
2.5

Making Human Resource Decisions

2.5.1Organisational Structures2.5.2Organisational Structures 22.5.3Recruitment2.5.4Effective Recruitment2.5.5Training a Workforce2.5.6Motivating a Workforce2.5.7End of Topic Tests - Human Resources2.5.8Application Questions - Human Resources2.5.9Exam-Style Questions - Human Resources2.5.10Diagnostic Misconceptions - Owners vs Shareholders2.5.11Diagnostic Misconceptions - Internal Recruitment2.5.12Diagnostic Misconceptions - Employee Motivation

Practice questions on Organisational Structures

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  1. 1
    Disadvantages of centralised organisational structures:Fill in the list
  2. 2
    Who makes decisions in centralised organisational structures?True / false
  3. 3
    Which of these is not a characteristic of people at the top of an organisational hierarchy?Multiple choice
  4. 4
    Compared to centralised organisational structures, in decentralised organisations...True / false
  5. 5
    Which of these is not a drawback of decision-making in decentralised organisations?Multiple choice
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Percentage Change - Calculations

Organisational Structures 2