Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which type of organizational structure is characterized by simplicity and direct control?

1. Functional

2. Divisional

3. Matrix

4. Entrepreneurial

The correct answer is: Entrepreneurial

The entrepreneurial organizational structure is characterized by simplicity and direct control primarily due to its relatively flat hierarchy and small size, which allows for quick decision-making and a direct line of communication between top management and employees. In this type of structure, the owner or top management typically maintains a hands-on approach, directly overseeing operations without the complexities seen in larger, more bureaucratic organizations. This structure thrives in startups and small businesses where agility, rapid responses to market changes, and innovation are essential. The simplicity of the structure eliminates the layers of management typically found in other structures, enabling a more dynamic and responsive organizational environment. In contrast, the functional structure divides the company into departments based on functions, which can lead to more complexity in control and communication. The divisional structure creates separate entities for different products or regions, adding layers of management and diluting direct control. The matrix structure, which combines functional and divisional approaches, can further complicate direct oversight by introducing dual reporting lines, making it less straightforward than the entrepreneurial model.