Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Why might a hollow structure be beneficial for organizations?

1. It increases the organizational asset base significantly

2. It allows for greater emphasis on core competencies while reducing overhead

3. It ensures maximum employee retention in every function

4. It eliminates the need for external suppliers and partners

The correct answer is: It allows for greater emphasis on core competencies while reducing overhead

A hollow structure is beneficial for organizations primarily because it allows them to focus on their core competencies while reducing overhead costs. In this type of organizational model, the core activities of the business are retained, while ancillary functions are outsourced to external partners or contractors. This strategic choice enables organizations to enhance their efficiency and flexibility since they can leverage external resources and expertise. By doing so, they can allocate more resources and attention to their key strengths and competitive advantages, ultimately leading to better performance and innovation. The other options do not accurately represent the benefits of a hollow structure. While increasing the organizational asset base may seem attractive, hollow structures typically reduce the need for owning and managing a large infrastructure. Maximum employee retention is not guaranteed because outsourcing might lead to job reductions in certain areas. Lastly, the hollow structure embraces the use of external suppliers and partners rather than eliminating them, thereby creating a network that supports the organization’s core functions.