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Business Environment Applications I: Business Structures and Legal Environ
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1. What are the pri- 1. Functions or departments
mary factors that 2. Chain of command
influence and di- 3. Centralized or Decentralized
rect organiza- 4. Level of formality
tional structure?
2. 1. Functions or The functions and departments in an organization serve to define the division of
departments work along task-oriented lines. The employees are grouped by their functional
skills into departments, which are then led by functional, departmental, or project
managers (Davoren, n.d.). For example, a large organization produces a significant
quantity of one line of goods, such as a brand of clothing, and wants to do so
quickly and economically.
- Functions and departments help define the division of work along functional or
task-oriented lines as well as departmental (Davoren, n.d.).
3. Advantages of -Grouping employees by function, knowledge, and skill levels inspires higher levels
Functions and of productivity and performance.
Departments
-Establishing fixed roles and responsibilities facilitates greater levels of account-
ability and security.
-Reporting to one manager or supervisor streamlines overall communications.
-Cooperating and communicating within the department maintains a higher level
of clarity.
-Working in one department does not preclude employees from pursuing career
growth into another department.
4. -Boredom may result if employees feel their roles are monotonous or repetitive.
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Disadvantages of -Feelings of low morale and conflicts may arise if performance reviews or ap-
Functions and praisals are not handled fairly.
Departments
-Paying more to highly skilled employees increases costs for the department.
-Communicating between departments is weak and problematic for coordination,
flexibility, innovation, and teamwork.
-Adapting to change may be difficult due to the rigidity of the structure.
-Making decisions may result in delays and is usually done without consulting with
team members.
5. 2. Chain of com- The hierarchy of the chain of command provides a system of control and deci-
mand sion-making.
- The chain of command typically refers to the reporting hierarchy within the orga-
nization. It ensures all employees know where they are on the organizational chart
and how they can contact those above them about concerns or ideas (Heathfield,
2018).
Hierarchy of authority is essentially the chain of command—a control mechanism
for making sure the right people do the right things at the right time.
- Command and control within the traditional chain of command are clearly de-
fined. They begin at the top with the uppermost management, such as the CEO or
president of an organization, and flows downward through management to staff
and employees
6. Advantages of -It clearly defines the reporting relationships to let everyone know who is respon-
Chain of com- sible for different tasks, including providing information and direction, and who
mand has authority and responsibility to assign tasks.
-Only one boss or manager oversees and bears responsibility and accountability
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