Organising
Organising means identifying and grouping work, defining authority and responsibility, and building relationships so people work together effectively. Questions test structure types, delegation, decentralisation and span of management.
Structure
- Functional structure: grouping by function (production, marketing, finance). Suited to single-product firms; gives specialisation but can create departmental silos.
- Divisional structure: grouping by product or territory. Suited to multi-product firms; each division is accountable for its own results but resources may be duplicated.
- Formal vs informal: the informal organisation arises from social interaction, cuts red tape and speeds communication, but can spread rumour and resist change.
Delegation
Three elements: authority (right to command), responsibility (obligation to perform) and accountability (answerability). Authority can be delegated; responsibility can be assigned; accountability always flows upward and cannot be delegated. Authority and responsibility must be balanced.
Decentralisation
Systematic dispersal of decision-making authority to lower levels. Delegation is between two persons; decentralisation is organisation-wide and is an extension of delegation.
Span of management
Narrow span gives a tall structure with close supervision but high cost and slow communication; wide span gives a flat structure with faster communication but risks overload.
Worked example
A firm opens three regional offices, each headed by a manager who may sanction discounts up to 5% without head-office approval. Reasoning: this is decentralisation, because the power is dispersed systematically across regions by policy. Had only one manager been allowed that discount for one deal, it would be delegation.
Traps that cost marks
Saying accountability can be delegated; confusing decentralisation with delegation; assuming a tall structure is always superior.