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9609 · 7.1.2

Types of structure: functional, hierarchical (flat and narrow), matrix — practice questions

Practice and worked examples for 9609 Types of structure: functional, hierarchical (flat and narrow), matrix. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Engineering firm wins defence contract needing multidisciplinary teams (engineers, procurement, legal) for 18 months while maintaining functional departments. Recommend a structure.

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Pure functional: Departments slow to integrate for contract — silo problem.

Pure project: Loses functional expertise depth when contract ends.

Matrix recommended: Engineers report to engineering head and project manager — flexible staffing across contract life.

Cost: Dual meetings, role ambiguity — needs strong 7.2 communication and 7.1.4 trust.

Worked example 2

Innovate Ltd is considering delayering to reduce costs. Its current 'tall' structure has 1 CEO ($200,000 p.a.), 4 senior managers ($90,000 p.a. each), 16 junior managers ($60,000 p.a. each), and 160 developers ($45,000 p.a. each). The proposed 'flat' structure removes the junior manager layer. The 16 junior managers will be made redundant at a one-off cost of $40,000 each. The 4 senior managers' salaries will increase by 10% to reflect their wider span of control. Calculate: (a) The annual wage cost saving. (b) The payback period for the restructuring.

Show solution outline

Step 1: Calculate the current annual wage bill.

  • CEO: 1 * 200,000=200,000 = 200,000
  • Senior Managers: 4 * 90,000=90,000 = 360,000
  • Junior Managers: 16 * 60,000=60,000 = 960,000
  • Developers: 160 * 45,000=45,000 = 7,200,000
  • Total Current Wage Bill: 200,000+200,000 + 360,000 + 960,000+960,000 + 7,200,000 = **8,720,000∗∗8,720,000**

Step 2: Calculate the new annual wage bill.

  • New Senior Manager salary: 90,000∗1.10=90,000 * 1.10 = 99,000
  • CEO: 1 * 200,000=200,000 = 200,000
  • Senior Managers: 4 * 99,000=99,000 = 396,000
  • Developers: 160 * 45,000=45,000 = 7,200,000
  • Total New Wage Bill: 200,000+200,000 + 396,000 + 7,200,000=∗∗7,200,000 = **7,796,000**

Step 3: Calculate the annual wage cost saving (a).

  • Annual Saving = Current Wage Bill - New Wage Bill
  • Annual Saving = 8,720,000−8,720,000 - 7,796,000 = **924,000∗∗924,000**

Step 4: Calculate the total one-off restructuring cost.

  • Total Redundancy Cost = 16 managers * $40,000/manager = $640,000

Step 5: Calculate the payback period (b).

  • Payback Period = Total Restructuring Cost / Annual Saving
  • Payback Period = 640,000/640,000 / 924,000 = 0.6926 years
  • To convert to months: 0.6926 * 12 = 8.31 months.
  • Final Answer: The annual saving is $924,000 and the payback period is 0.69 years (approx. 8.3 months).
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