f1 Acca Lesson2

Session Objectives
Topic 2 Describe the different ways in which

organisations may be structured
Organisational Structure Explain basic organisational structure
concepts
Explain centralisation and
decentralisation and list their advantages
and disadvantages
© accountingclassroom.com 2008 Student Notes for ACCA F1-Accountant in Business © accountingclassroom.com 2008 Student Notes for ACCA F1-Accountant in Business
Types of Organisational
Session Objectives
Structure
Explain the informal organisation and its Entrepreneurial
relationship with the formal organisation Functional
Describe the impact of the informal Product / Division / department
organisation on the business Geographically structured
Matrix structure
Structure on Entrepreneurial Centralised Entrepreneurial
Basis Structure
Entrepreneurial Structure: Entrepreneurial Structure:

Advantages Disadvantages
Quicker decisions No defined career structure
Quick in response to changes in market Success depends on the capabilities of
Goal congruence the manager / owner
Effective control Difficult to diversify / grow
Bonding with workforce
Structure on Functional Basis Functional Structure:
Advantages
Can avail economies of scale
Leads to standardisation
Provides career advancement
opportunities
Specialists fit into the structure easily
Functional Structure: Structure on the Basis of Product /

Disadvantages Division / Department
Results in empire building
Slower decisions BOD
Intra-function conflicts
Limited diversification possible
Garments Shoes and Bags

Accessories
Division Division
Product / Division / Department: Product / Division / Department:
Advantages Disadvantages
Provides growth opportunities Results in potential loss of control
Gives top management sufficient time to May lead to duplication
focus on more strategic matters May lead to isolation of specialists
Provides a training ground for future May result in lack of goal congruence
general managers Difficulties arise in allocation of central
Facilitates further diversification cost
There is clear responsibility for products
/divisions
Structure on Geographical Structure on Geographical

Basis Basis: Advantages
Facilitates the organisation’s
geographical growth
Provides a training ground for future
general managers
Gives top management sufficient time to
focus on more strategic matters
The responsibilities are clearly defined
on a geographical basis
Structure on Geographical
Matrix Structure
Basis: Disadvantages
Results in potential loss of control
May lead to duplication
May lead to isolation of specialists
May result in lack of goal congruence
Difficulties arise in allocation of central
cost
Matrix Structure:
Matrix Structure: Advantages
Disadvantages
Provides advantages of both divisional Results in a dual command and conflict
and functional structures Leads to a dilution of functional authority
Other advantages include: Dual command results in time
The structure provides flexibility consuming meetings
Provides customer orientation Involves additional administration costs
Supports and encourages teamwork
Basic Organisational Structure
Scalar Chain
Concepts
Scalar chain The number of different levels of
Span of control authority through which decisions are
Centralisation and decentralisation passed in the organisation.
It indicates the line of authority
Span of control Wide Span of control
Number of subordinate employees Prevalent in the case of a flat structure

directly accountable to a manager. where there are few managerial levels
The larger the number of employees a

manager controls the wider is his span of
control.
It can be:
Wide
Tall
Factors Influencing Span of
Tall Span of control
Control
Prevalent in the case of a tall structure has Nature of work
many levels Repetitive work may result in wider the
span of control
Type of personnel
Better quality and skill sets of personnel
may result in wider the control
Location of personnel
If the personnel are widely spread,
there will be a narrow span of control
Centralisation and Factors Affecting

Decentralisation Decentralisation
Centralised structure Style of management
It is a structure which results in Abilities of personnel
relatively large number of decisions
being taken by management at the top Location of organisation’s branches
of the organisation and personnel
Decentralised structure Size of organisation
It is a structure which results in a Scale of activities
dispersal of decision-making
responsibility to operational managers
Advantages of Disadvantages of
Decentralisation Decentralisation
Gives top management sufficient time to Leads to loss of control by the head
focus on more strategic matters office
The resulting decisions are of better May result in incorrect or
quality as these are taken by people dysfunctional decisions
having local expertise
Poor managerial decisions may
Leads to greater motivation due to result if these are taken by
increased training and career path
inexperienced managers
Leads to a smaller chain of command.
This facilitates quicker responses and
There is a duplication of roles within
flexibility
the same organisation
Advantages / Disadvantages of
Informal Organisations
Informal Organisations
It is a network of relationships that exist Advantages
within an organisation. • Results in higher levels of motivation
• Results in better interdivisional
They arise due to common interests or communication
friendships. Disadvantages
• May lead to increased inefficiencies if
such informal structures are in conflict
with the formal structure
• May lead to more opposition to
change
• May result in excessive gossip and
rumour.

f1 Acca Lesson2

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Session Objectives

Topic 2 Describe the different ways in which

Entrepreneurial Structure: Entrepreneurial Structure:

Functional Structure: Structure on the Basis of Product /

Garments Shoes and Bags

Structure on Geographical Structure on Geographical

Span of control Wide Span of control

Number of subordinate employees Prevalent in the case of a flat structure

The larger the number of employees a

Centralisation and Factors Affecting

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