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Understanding Organizational Structures

This document discusses different types of organizational structures including functional, divisional, matrix, and hybrid structures. It describes the key characteristics of each type of structure and compares their advantages and disadvantages. Functional structures group employees by specialty, while divisional structures create business units for specific products, customers, or geographic regions. Matrix structures combine functional and divisional approaches. The document also covers considerations for tall vs flat organizational designs and the importance of minimizing chains of command.

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Mehak Ahuja
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19 views23 pages

Understanding Organizational Structures

This document discusses different types of organizational structures including functional, divisional, matrix, and hybrid structures. It describes the key characteristics of each type of structure and compares their advantages and disadvantages. Functional structures group employees by specialty, while divisional structures create business units for specific products, customers, or geographic regions. Matrix structures combine functional and divisional approaches. The document also covers considerations for tall vs flat organizational designs and the importance of minimizing chains of command.

Uploaded by

Mehak Ahuja
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Managing Organizational

Structure
10-2
Designing Organizational Structure
Organizational Structure
Formal system of task and reporting
relationships showing how workers use
resources.
10-3
Factors Affecting Organizational Structure
10-4
Types of Structure
Function
Group of people, working together, who
possess similar skills or use the same kind
of knowledge, tools, or techniques to
perform their jobs
10-5
Types of Structure
Functional Structure
An organizational structure composed of all
the departments that an organization
requires to produce its goods or services.
10-6
Functional Structure
Advantages
Encourages learning from others doing
similar jobs.
Easy for managers to monitor and evaluate
workers.
Allows managers to create the set of
functions they need in order to scan and
monitor the competitive environment
10-7
Functional Structure
Disadvantages
Difficult for departments to communicate
with others.
Preoccupation with own department and
losing sight of organizational goals.


10-8
Example -
Functional
Structure
10-9
Divisional Structures
Divisional Structure
Managers create a series of business units
to produce a specific kind of product for a
specific kind of customer
10-10
Figure 10.4
Product,
Market, and
Geographic
Structures
10-11
Types of Divisional Structures
Product Structure
Managers place each distinct product line or
business in its own self-contained division
Divisional managers have the responsibility
for devising an appropriate business-level
strategy to allow the division to compete
effectively in its industry
10-12
Product Structure
Allows functional managers to specialize
in one product area
Division managers become experts in
their area
Removes need for direct supervision of
division by corporate managers
Divisional management improves the
use of resources

10-13
Types of Divisional Structures
Geographic Structure
Divisions are broken down by geographic
location
Global geographic structure
Managers locate different divisions in each of
the world regions where the organization
operates.
Generally, occurs when managers are
pursuing a multi-domestic strategy

10-14
Global Geographic and
Global Product Structures
Figure 10.5
10-15
Types of Divisional Structures
Market Structure
Groups divisions according to the particular
kinds of customers they serve
Allows managers to be responsive to the
needs of their customers and act flexibly in
making decisions in response to customers
changing needs
10-16
Matrix Design Structure
Matrix Structure
An organizational structure that
simultaneously groups people and
resources by function and product.
Results in a complex network of superior-
subordinate reporting relationships.
The structure is very flexible and can respond
rapidly to the need for change.
Each employee has two bosses (functional
manager and product manager) and possibly
cannot satisfy both.
10-17
Matrix Structure
Figure 10.6
10-18
Hybrid Structures
Hybrid Structure
The structure of a large organization that
has many divisions and simultaneously
uses many different organizational
structures
10-19
Tall and Flat Organizations
Tall structures have many levels of
authority and narrow spans of control.
As hierarchy levels increase,
communication gets difficult creating delays
in the time being taken to implement
decisions.
Communications can also become distorted
as it is repeated through the firm.
Can become expensive
10-20
Tall Organizations
Figure 10.9
10-21
Tall and Flat Organizations
Flat structures have fewer levels and
wide spans of control.
Structure results in quick communications
but can lead to overworked managers.

10-22
Flat Organizations
Figure 10.9
10-23
Minimum Chain of Command
Minimum Chain of Command
Top managers should always construct a
hierarchy with the fewest levels of authority
necessary to efficiently and effectively use
organizational resources

Common questions

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Tall organizational structures, with many levels of authority, can result in delayed communications as messages are relayed through multiple layers, potentially leading to miscommunication. This inefficiency can increase the costs associated with decision-making and harm organizational agility .

A divisional structure organizes the company around specific products, markets, or geographic areas, unlike a functional structure which organizes by similar functions or tasks. Its advantages include specialization in product lines, minimized need for corporate oversight due to division-specific management, and improved resource utilization .

The 'Minimum Chain of Command' principle involves creating an organizational hierarchy with the fewest necessary levels. This design limits bureaucratic overhead, speeds up decision-making, and optimizes resource use by reducing unnecessary layers of management .

Flat structures, having fewer hierarchical levels with wider spans of control, can result in quicker communications but also risk overburdening managers with too many direct reports. The trade-off lies in balancing efficient communication with the risk of managerial exhaustion .

Product structure allows each business line or product to operate independently within its own division, granting managers strategic autonomy to innovate and compete effectively. It fosters specialization as managers focus on leveraging the unique strengths and requirements of their specific product lines .

A market structure organizes divisions according to customer types, enabling managers to tailor strategies and decisions based on specific customer needs. This structure enhances flexibility and responsiveness, allowing the organization to adapt quickly to changes in customer demands .

Hybrid structures combine elements from multiple organizational structures, such as functional and divisional forms, to leverage the strengths of each. They are beneficial for large organizations requiring flexibility and adaptability, allowing various divisions to operate under different structural configurations tailored to specific needs .

A matrix structure can result in a complex network of reporting relationships, making it difficult for an employee to manage having two bosses, typically a functional manager and a product manager. This dual authority may lead to conflicts and challenges in satisfying both managers' directives .

A global geographic structure would be effective in multi-domestic strategies where the need for local responsiveness is high due to different customer needs across regions. By creating divisions based on geographic locations, firms can tailor products and strategies to regional preferences, thereby enhancing competitive advantage .

A functional structure encourages learning and sharing among workers with similar skills, simplifies manager oversight, and allows managers to monitor the competitive environment effectively . However, it can lead to poor inter-departmental communication and a narrow departmental focus that detracts from organizational goals .

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