Fundamentals of Organizational Structure
Organization Structure Three Components Formal reporting relationships Grouping of people and departments Design of systems to ensure effective communication, coordination, and integration
Linkages Vertical Control Centralized decision-making How achieved: Hierarchical referral Rules and plans Vertical Information Systems
Linkages Horizontal Learning Decentralized decision-making How achieved: Information systems Direct contact Task forces Integrator Teams
Organizational Structure Required Work Activities Reporting Relationships Departmental Grouping Options Functional Divisional Multifocused Horizontal Modular
Functional Structure CEO Finance Marketing Engineering
Divisional Structure AKA Product Structure Decentralized decision-making Strengths Weaknesses
Divisional Structure CEO Product One Product Two Product Three
Divisional Structure CEO Soft Drinks Aquafina Gatorade
Geographical Structure Designed according to where product will be offered
Geographic Structure CEO United States Asia Europe
Matrix Structure Combines functional and divisional structure Conditions Need to share scarce resources Two critical outputs: In-depth knowledge and new products Complex and uncertain domain Who’s in charge? Strengths Weaknesses
Horizontal Structure Reengineering Faster and better service for customers Organized around processes and teams Strengths Weaknesses
Modular Structure Subcontracts processes Manages them from a central hub Business focuses only on core competency Strengths Weaknesses
Hybrid Structure Centralized functional structure for stable products; other products may have self-contained departments Certain departments work through entire organization (functional), but processes are focused in other areas (horizontal).
Applications Have scarce resources and need efficiency? Need inter-functional coordination, innovation, and learning?
What Causes Problems? Decision-making is delayed Non-responsiveness to environmental changes Too much conflict/ “Turf wars”