CAIB 4 CHAPTER 1 EXAM SCRIPT
COMPREHENSIVE STUDY GUIDE
●● 1. Line organization
2. Functional organization
3. Line and staff organization
Answer: Identify 3 basic forms of organizational structure based on the
way authority and responsibility is delegated.
●● Smaller brokerages in which senior management personally directs
the activities of the subordinates.
Presuming all senior executives are fully familiar with all aspects of the
brokerage's business, line organization is best suited for the noted
brokerage as all decisions are directly made by senior executives.
Authority flows vertically downward from the most senior executive
officer. Responsibility flows upward to the most senior position.
Answer: Identify which type of brokerage is best suited for a line
organization and briefly explain why this is so.
●● 1. Simplicity
2. Clear delegation of authority
3. Quick decision making
,Answer: Identify 3 advantages of the line organization
●● 1. Line managers must be knowledgeable in a wide range of areas in
order to make decisions.
2. Power is concentrated at the top
3. Limits growth and development of employees by stifling innovation.
Answer: Identify 3 disadvantages of the line organization.
●●
Answer: Create a chart to illustrate a line organization.
●● It was created to overcome the key weakness of the line organization
which is the concentration of too many activities in too few managers.
Answer: Identify why the functional organization form was created.
●● Provides employees with expert advice
Answer: Identify 1 advantage of a functional organization.
●● 1. Overlap in authority, resulting in conflicting and inconsistent
instructions. (Employees feel they have more than one "boss.")
2. Decision making can be slow if it does not firmly belong to 1
manager.
, 3. Employees are frequently distracted from their primary roles, as there
are too many managers giving instructions.
Answer: Identify 3 disadvantages of a functional organization.
●● True
Answer: True or False - Most brokerages find it an extremely difficult
form to implement the functional organization properly.
●●
Answer: Create a chart to illustrate functional organization.
●● 1. Areas of authority and responsibility are clearly defined.
2. Decisions are made quicker (as each employee has a line manager).
Expert advice is readily available to line managers, when needed.
Answer: Identify 2 advantages of the line and staff organization.
●● 1. Conflict may arise when staff managers attempt to exert line
authority or when line managers ignore staff advice.
2.Line managers may resent having to seek advice which they feel
obligated to accept.
3. There is a cost associated with providing staff advice that is not
directly related to producing revenue. The brokerage must be large
enough to generate revenue to cover production costs plus the cost of the
staff functions.
COMPREHENSIVE STUDY GUIDE
●● 1. Line organization
2. Functional organization
3. Line and staff organization
Answer: Identify 3 basic forms of organizational structure based on the
way authority and responsibility is delegated.
●● Smaller brokerages in which senior management personally directs
the activities of the subordinates.
Presuming all senior executives are fully familiar with all aspects of the
brokerage's business, line organization is best suited for the noted
brokerage as all decisions are directly made by senior executives.
Authority flows vertically downward from the most senior executive
officer. Responsibility flows upward to the most senior position.
Answer: Identify which type of brokerage is best suited for a line
organization and briefly explain why this is so.
●● 1. Simplicity
2. Clear delegation of authority
3. Quick decision making
,Answer: Identify 3 advantages of the line organization
●● 1. Line managers must be knowledgeable in a wide range of areas in
order to make decisions.
2. Power is concentrated at the top
3. Limits growth and development of employees by stifling innovation.
Answer: Identify 3 disadvantages of the line organization.
●●
Answer: Create a chart to illustrate a line organization.
●● It was created to overcome the key weakness of the line organization
which is the concentration of too many activities in too few managers.
Answer: Identify why the functional organization form was created.
●● Provides employees with expert advice
Answer: Identify 1 advantage of a functional organization.
●● 1. Overlap in authority, resulting in conflicting and inconsistent
instructions. (Employees feel they have more than one "boss.")
2. Decision making can be slow if it does not firmly belong to 1
manager.
, 3. Employees are frequently distracted from their primary roles, as there
are too many managers giving instructions.
Answer: Identify 3 disadvantages of a functional organization.
●● True
Answer: True or False - Most brokerages find it an extremely difficult
form to implement the functional organization properly.
●●
Answer: Create a chart to illustrate functional organization.
●● 1. Areas of authority and responsibility are clearly defined.
2. Decisions are made quicker (as each employee has a line manager).
Expert advice is readily available to line managers, when needed.
Answer: Identify 2 advantages of the line and staff organization.
●● 1. Conflict may arise when staff managers attempt to exert line
authority or when line managers ignore staff advice.
2.Line managers may resent having to seek advice which they feel
obligated to accept.
3. There is a cost associated with providing staff advice that is not
directly related to producing revenue. The brokerage must be large
enough to generate revenue to cover production costs plus the cost of the
staff functions.
