ACCA Applied Knowledge · Business and Technology

Business organisational structure: formula sheet

Full chapter guide

Key formulas

Strategic apex: Top management → sets strategy and overall direction; Dominates the simple structure.
Middle line: Middle managers → link apex to operating core; Dominates the divisionalised form.
Operating core: Operators → do the basic work; Dominates the professional bureaucracy.
Technostructure: Analysts → design and standardise work; Dominates the machine bureaucracy. Controls work, does not do it.
Support staff: Support staff → provide indirect services; Outside the main work flow. Often important in an adhocracy.
Configuration match: Simple = direct supervision | Machine = standard processes | Professional = standard skills | Divisionalised = standard outputs | Adhocracy = mutual adjustment; Learn these pairs. They are the quickest way to answer.
Functional grouping: Group by activity: finance, marketing, production, HR; Best for stable, single-product or small organisations. Strength is specialisation; weakness is poor cross-function coordination.
Divisional grouping: Group by product, market or geography, each division semi-autonomous; Best for large, diverse organisations. Strength is focus and clear profit responsibility; weakness is duplication of functions.
Matrix grouping: Two bases at once, e.g. function × project, giving dual reporting; Staff have two bosses. Strength is flexibility; weakness is conflicting authority.
Geographical grouping: Group by area, e.g. region or country; Suits firms whose customers differ by location. Strength is local responsiveness; weakness is duplication and inconsistency.
Product grouping: Group by product or product line; Suits firms with distinct products. Strength is product expertise; weakness is duplicated resources.
Centralisation: Authority concentrated at the top; Gives control, consistency and economies of scale, but is slower and may demotivate local managers.
Decentralisation: Authority spread to lower levels; Gives speed, local knowledge and motivation, but risks inconsistency and loss of control.
Delegation: Task + authority passed down; accountability stays with the delegator; Responsibility can be shared, accountability cannot be given away.
Span of control: Number of subordinates reporting directly to one manager; Wide span means a flatter structure and more freedom. Narrow span means a taller structure and closer supervision.
Scalar chain: Line of authority from top to bottom of the organisation; A Fayol idea. The longer the chain, the slower communication and decisions tend to be.
Span of control: Span of control = number of subordinates reporting directly to one manager; Count direct reports only, not staff further down the chain.
Span and levels (rule of thumb): Narrow span → more levels → tall structure; wide span → fewer levels → flat structure; This holds when total staff numbers stay the same.
Scalar chain: Scalar chain = line of authority from top management to the lowest level; The longer the chain, the slower communication and decisions tend to be.
Staff in a simple hierarchy: Staff at the next level = managers at the level above × span; For a uniform span. Example: 1 manager × span 4 = 4 staff, then 4 × 4 = 16.
Formal organisation features: Formal = defined roles + official authority + written rules + official channels; Created by management, deliberate, stable and documented.
Informal organisation features: Informal = personal relationships + group norms + unofficial channels; Arises spontaneously, not shown on an organisation chart, based on personal influence.
Advantages of formal structure: Clarity + accountability + control + consistency; Weakness: can be rigid, slow and bureaucratic.
Advantages of informal organisation: Speed + support + morale + flexibility; Weakness: rumours, resistance to change, goals that conflict with management.
Shamrock organisation (Handy): Shamrock = Core + Contractual fringe + Flexible labour force; Some versions add the customer as a fourth leaf. Say which version you are using.
Flexibility types: Flexible firm = Functional + Numerical + Financial flexibility; Functional is about skills, numerical about headcount, financial about pay.
Trade-off rule: More flexibility and lower fixed cost ⇒ less control and more dependence on others; Use this as the frame for advantages and disadvantages of any modern form.
Weber's features of bureaucracy: Hierarchy + rules + specialisation + written records + merit-based careers; Use these as a checklist. Weber saw bureaucracy as the most efficient form for large organisations.
Entrepreneurial structure: Owner at centre → direct control → quick decisions; Best for small, young or simple businesses. Risk: over-reliance on one person.
Structure fit rule: Stable environment + large size → mechanistic/bureaucratic; Changing environment → organic/flexible; A tendency, not an absolute law. Link to the scenario given.

Quick revision

Mintzberg's five parts: strategic apex, middle line, operating core, technostructure, support staff.
Technostructure designs and standardises work, for example analysts and planners; support staff provide indirect services.
Departmentation groups work by function, geography, product, customer or process.
Centralisation keeps decisions at the top, giving consistency and control but slower, less local decisions.
Decentralisation spreads decisions downward, giving speed and motivation but a risk of inconsistency.
Span of control is the number of subordinates a manager directly supervises.
A narrow span gives a tall structure with many levels; a wide span gives a flat structure.
The scalar chain is the line of authority from top to bottom of the organisation.
The formal organisation is the official structure; the informal one is the network of personal relationships.
Bureaucratic structures rely on rules and clear hierarchy; entrepreneurial structures rely on the owner's control.
A matrix structure gives staff two reporting lines, often function and project.
Network and virtual structures rely on outsourcing and technology links rather than one large in-house workforce.

Common mistakes

Treating technostructure and support staff as the same thing. Fix: Technostructure standardises and controls work. Support staff provide services such as catering or legal advice.
Putting accountants in the operating core. Fix: Classify by role in the organisation. In a manufacturer, accounting analysts are technostructure. In an audit firm, auditors are the operating core.
Treating divisional and geographical structures as the same thing. Fix: Remember geography is a basis of grouping. A division is a semi-autonomous unit that may be grouped by geography, product or market. Check the wording in the question.
Listing generic advantages with no link to the scenario. Fix: Pick points that match the facts. If the firm has many countries, stress local knowledge and duplication.
Treating delegation and decentralisation as the same thing. Fix: Delegation is one manager to one subordinate for a task. Decentralisation is a structural policy for the whole organisation.
Saying the delegating manager is no longer responsible. Fix: The manager remains accountable. Only the task and the authority to do it are passed on.
Counting all staff under a manager as the span. Fix: Count only people who report directly to that manager. Lower levels belong to other managers' spans.
Saying a wide span means a tall structure. Fix: Remember that wide span means flat. A wide span needs fewer managers, so fewer levels.
Saying informal organisations are always harmful. Fix: State that informal groups can help (communication, morale, problem solving) or hinder (rumours, resistance). Give both sides.
Thinking the informal organisation appears on the organisation chart. Fix: Remember that charts show only the formal structure. Informal links are unofficial and unwritten.

Exam tips

Learn the five blocks and five configurations as a table in your head: block, role, configuration, coordinating method.
In scenario questions, classify people by what they do, not by job title.
For technostructure versus support staff, use the control-versus-service test every time.
In multiple response questions, count the required answers before you select.
Do not spend long on this topic in the exam. Most questions can be answered by spotting one or two clue words.
In objective tests, find the grouping clue first. It usually points straight to one structure.
Watch for 'two bosses' or 'dual reporting'. That is the signature of a matrix.
For multiple response questions, select exactly the stated number and make sure each option fits the structure named.