Chapter 1, Problem 1.1Q

What types of circumstances would encourage management to establish a complex organizationalstructure?

To determine

Complex organizational structure

A complex structure means an organizational structure of larger size having higher number of resources in divisions, teams or projects. An organizational structure can be complex due to multiple steps in a process, multiple stakeholders, etc.

To explain: Circumstances that will encourage the managementto choose a complex structure.

Answer to Problem 1.1Q

Circumstances like possibility of businessexpansion, an increase in profits, risk reduction, attaining some tax benefits will encourage management to establish a complex organizational structure.

Explanation of Solution

A complex organizational structure has higher number of divisions and it is bigger in size. Many circumstances or situations can encourage management to form a complex structure for the organization. Some of them are:

1 Possibility of expansion: If management will find an opportunity to expand its operations, to grow and to earn more profits then, it would consider choosing a complex structure and will increase its resources.

2 Possibility of earning more profits: If a situation occurs that require structure of the organization to be bigger or complex and that can make higher profits for the company then management can consider forming a complex organizational structure.

3 Possibility of risk reduction: Management can establish a complex structure by investing in different activities and diversifying its operations to reduce the risk.

4 Possibility of using some tax benefit techniques: If a situation occurs that require organization to operate in complex structure but that can give some tax benefits to the company then management would choose complex organizational structure.