CMA Adapted—Organizational Structure and Span of Control Relco Industries recently purchased Arbeck, Inc., a manufacturer of electrical components that the construction industry uses. Roland Ford has been appointed as chief financial officer of Arbeck, and the president of Relco, Martha Sanderson, has asked him to prepare an organizational chart for his department at Arbeck. The chart that Ford has prepared is shown on the following page.

Ford believes that the treasurer’s department should include the following employees:

assistant treasurer; manager of accounts receivable and four subordinates; manager of investments and three subordinates; and manager of stockholder relations and two subordinates—

a total of 13 employees besides the treasurer. The controller’s department should consist of an assistant controller; a manager of general accounting and four subordinates;

a manager of fixed asset control and three subordinates; and a manager of cost accounting with four subordinates—a total of 15 employees besides the controller.

When Ford presented his plans (Chart A)
to Sanderson, she told him that she believed the organizational structure was too tall and showed him, by drawing Chart B, how she had envisioned his department at Arbeck.
There would be a reduction in personnel, and 10 employees would report directly to the treasurer, while 13 employees would report directly to the controller.
Ford replied that he believed the span of control was too broad for both the treasurer and the controller and would create problems.

Sanderson said that she preferred a flat organizational structure, as she believed that its benefits outweighed the problems that could arise from too great a span of control.
Required:

a. For the organizational structure chief financial officer Ford proposed, describe the 1.. advantages and disadvantages of that structure.
2.. impact of the resulting span of control.
3.. effect on employee behavior.

b. For the flat organizational structure Relco president Sanderson proposed, describe the 1.. advantages and disadvantages of that structure.
2.. impact of the resulting span of control.
3.. effect on employee behavior.

c. When determining the appropriate span of control for Arbeck, Inc., discuss the factors that Ford and Sanderson should consider.

Transcribed Image Text:

Problem 12: Organizational Structure and Span of Control Chart A Chief Financial Officer Treasurer Controller Assistant Treasurer Assistant Controller Manager Investments (3) Manager Manager Fixed Asset Control (3) Manager Manager Accounts Receivable (4) Stockholder General Relations Accounting Manager Cost Accounting (2) (4) (4) Chart B Treasurer (10) Chief Financial Officer Controller (13)