Advantages And Disadvantages Of An Entrepreneurial Business Construction

Advantages And Disadvantages Of An Entrepreneurial Business Construction

What's a business construction?

A enterprise structure relates to how the business is organised with regards to who makes the decisions and instructs which part of the business. Often drawn as a diagram, it shows the relationship between resolution maker(s) and different departments within the business.

The entrepreneurial business construction

In the entrepreneurial business construction, any resolution that must be made is made centrally, either by one individual or at head office, the outcomes of which are then communicated to workers. This is the most 'inflexible' of organisational buildings, as workers have little to no say or input within the decision-making process, instead having to just follow any orders which are issued.

The entrepreneurial business construction is most commonly found in sole traders with just a couple of workers, or in organisations which must make selections quickly corresponding to publishing where there may be usually precious little time available to debate things in conferences when there's a deadline that has to be met. In this instance, somebody has to make a decision shortly without having to discuss or justify it.

For a sole trader, they're usually the only owner of the enterprise, and so what they say goes. Because they own it, nobody has the authority to dam or delay their decision. Whilst many may invite advice from the folks they employ, they may often have an thought of their minds already about what they want achieved, and so will probably just make the choice straight away themselves.

Advantages of the entrepreneurial enterprise construction

The main advantage of the entrepreneurial enterprise structure is the ability to make decisions quickly. Without prolonged meetings and discussions, or proposals sat waiting for approval, decisions can be made just about immediately and changes put into place. This allows companies to shortly adapt to any change in market conditions. It is usually a leadership style which is used by governments in emergencies, with virtually all countries having laws in place which allow legislation to bypass parliament or equivalent bodies and be enacted when velocity and response time is high priority.

One other advantage is that it is likely one of the least expensive business buildings available, and in most cases will be the least expensive option. This is because there are no layers of middle managers to pay or maintain (e.g. company automobiles).

Thirdly, everybody is aware of who is in charge and who they are accountable to, removing the probabilities of confusion being created if different division heads asked for different things from workers (e.g. the head of the production division asks workers to improve the quality of the product by spending more time on every, similtaneously the head of the finance division asks for increased output to generate more revenue).

Disadvantages of the entrepreneurial enterprise structure

Despite its advantages, there are a number of disadvantages to the entrepreneurial business structure.

Because of its autocratic nature, with workers being told what to do with no input on the decision, there's always a real hazard of them dropping morale and motivation if they strongly disagree with the decision. The extent of their discouragement will rely on a number of factors corresponding to how strongly they disagree, as well as the amount of explanation (if any) they get as to why that particular choice was made.

Those making the decisions might not know as much about the problem, market conditions etc. as they think they do. Whilst they make quick decisions, they aren't essentially the best selections, and it may be higher for the business to have a specialist manager in place who's an knowledgeable in a particular area.

It could also not be a suitable organisational structure if the business grows, as the choice makers have just too many choices to make. As stated earlier, choices will be made shortly in an entrepreneurial enterprise structure. But when there are so many choices to be made inflicting delays as completely different workers wait for solutions, it may actually be faster to appoint a manager and delegate responsibility to them for making sure decisions.

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