Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which characteristic is associated with increased administration and overheads in tall organizations?

1. Encourages delegation

2. Inhibits initiative

3. Supports rapid communication

4. Requires fewer management levels

The correct answer is: Inhibits initiative

In tall organizations, which are characterized by many hierarchical levels, a significant amount of administration and overhead costs can arise. This is primarily due to the concentration of control and authority at higher levels, which often leads to a bureaucratic structure. The characteristic that inhibits initiative is significant in this context because employees may feel less empowered to make decisions independently. Instead, they often have to go through multiple layers of management to seek approval or direction. This reliance on higher management for approvals not only slows down decision-making processes but also increases the time and resources spent on administrative activities, thus leading to higher overhead costs. Additionally, the rigid structure can discourage creativity and innovation, as employees might hesitate to propose new ideas or take action without explicit permission. This bureaucracy can create a culture of compliance rather than one of initiative-taking, further contributing to the administrative burden within the organization.