Organizational Structure

Organizational Structure refers to formalized patterns of interactions that link a firm’s tasks, technologies, and people

ª  Structure provides a means of balancing two conflicting forces

9  Need for the division of tasks into meaningful groupings

9  Need to integrate the groupings for efficiency and effectiveness

Traditional Forms of Organizational Structure

ª  Structure provides a means of balancing two conflicting forces

9  Need for the division of tasks into meaningful groupings

9  Need to integrate the groupings for efficiency and effectiveness

Dominant Growth patterns of Large Corporations

ª  Simple Structure

9  An organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serve as an extension of the top executive.

ª  Advantages

9  Highly informal

9  Centralized decision making

9  Little specialization

ª  Disadvantages

9  Employees may not understand their responsibilities

9  May take advantage of lack of regulation

ª  Functional Structure

9  An organizational form in which the major functions of the firm, such as production, marketing, R&D, and accounting, are grouped internally. 

ª  Advantages

9  Enhanced coordination and control

9   Centralized decision making

9   Enhanced organizational-level perspective

9   More efficient use of managerial and technical talent

9   Facilitated career paths and development in specialized areas

ª  Disadvantages

9  Impeded communication and coordination due to differences in values and orientations

9  May lead to short-term thinking (functions vs. organization as a whole)

9   Difficult to establish uniform performance standards

ª  Divisional organizational structure

9  An organizational form in which products, projects, or product markets are grouped internally.

9  Also called multidivisional structure or M-Form

ª  Advantages

9  Separation of strategic and operating control

9   Quick response to important changes in external environment

9   Minimal problems of sharing resources across functional departments

9   Development of general management talent is enhanced

ª  Disadvantages

9   Can be very expensive

9   Can be dysfunctional competition among divisions

9   Differences in image and quality may occur across divisions

9   Can focus on short-term performance

ª  Strategic business unit (SBU) structure

9  An organizational form in which products, projects, or product market divisions are grouped into homogeneous units.

ª  Advantages

9  task of planning and control by the corporate office more manageable

9  individual businesses can react more quickly to important changes

ª  Disadvantages

9  may become difficult to achieve synergies

9  additional level of management increases overhead expenses

ª  Holding company structure

An organizational form in which the divisions have a high degree of autonomy both from other divisions and from corporate headquarters

ª  Advantages

9  cost savings associated with lower overhead

9  autonomy increases the motivational level of divisional executives

ª  Disadvantages

9  inherent lack of control and dependence

9  limited staff support

ª  Matrix organizational structure

an organizational form in which there are multiple lines of authority and some individuals report to at least two managers

ª  Advantages

9  Facilitates the use of specialized personnel, equipment and facilities

9  Provides professionals with a broader range of responsibility and experience

ª  Disadvantages

9  Can cause uncertainty and lead to intense power struggles

9  Working relationships become more complicated

9  Decisions may take longer