FUNCTIONAL ORGANIZATIONAL STRUCTURES

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FUNCTIONAL ORGANIZATIONAL STRUCTURES
A. The building blocks of a typical
organization structure
General Manager
Engineering
Manufacturing
Marketing
Finance and Accounting
Personnel
Research and Development
B. The building blocks of a process-oriented
functional structure
General Manager
Foundry and Castings
Milling and Grinding
Screw Machining
Customer Service
Loading and Shipping
Billing and Accounting
Inspection
Finishing and Heat Treating
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ADVANTAGES OF A FUNCTIONAL STRUCTURE

• Structure is tied to key activities within the
  business
• Enhances operating efficiency where tasks are
  routine and repetitive
• Preserves centralized control of strategic
  results
• Allows benefits of specialization and
  learning/experience curve effects to be fully
  exploited

• Promotes high emphasis on craftsmanship and
  professional standards
• Well suited to developing distinctive
  competencies in one or more functional areas
• Simplifies training of management specialists

Environment Best in low uncertainty,
stable Size Best for small to medium Goals/Strate
gy Internal efficiency technical specialization
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DISADVANTAGES OF A FUNCTIONAL STRUCTURE

• Forces profit responsibility to the top.
• May lead to uneconomically small units or under
  utilization of specialized facilities and
  manpower.
• Functional myopia often works against
  entrepreneurship, against adapting to change, and
  against attempts to restructure.
• Limits development of general managers.

• Functional specialists often attach more
  importance to whats best for the functional area
  than to whats best for the whole business.
• Poses problems of functional coordination.
• Can lead to interfunctional rivalry, conflict,
  and empire building.
• May promote overspecialization and narrow
  management viewpoints.

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A DECENTRALIZED BUSINESS/PRODUCT TYPE OF
ORGANIZATION STRUCTURE
Chief Executive Officer
Vice President, Administration
Vice President, Corporate Support Services
Finance
Engineering Services
Accounting
Planning
Research Development
Personnel
Marketing Services
Legal Affairs
Public Relations
Manufacturing Services
General Manager Business Division B
General Manager Business Division C
General Manager Business Division A
Quality Control
Quality Control
Quality Control
Personnel
Personnel
Personnel
Purchasing
Purchasing
Purchasing
Manufacturing
Manufacturing
Manufacturing
Marketing
Marketing
Marketing
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ADVANTAGES OF BUSINESS/PRODUCT TYPE STRUCTURE

• Puts responsibility for business strategy in
  closer proximity to each businesss unique
  environment
• Offers logical and workable means of
  decentralizing responsibility and delegating
  authority in diversified organizations

• Allows critical tasks and specialization to be
  organized to fit business strategy
• Frees CEO to handle corporate strategy issues
• Creates clear profit/loss accountability

Environment Moderate to high uncertainty,
changing Size Moderate to very
large Goals/Strategy Customer responsiveness
external effectiveness
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DISADVANTAGES OF BUSINESS/PRODUCT TYPE STRUCTURE

• Leads to proliferation of staff functions, policy
  inconsistencies between divisions, and problems
  of coordination of divisional operations
• May lead to excessive divisional rivalry for
  corporate resources and attention

• Business/division autonomy works against
  achieving coordination of related activities in
  different business units
• Poses a problem of how much authority to
  centralize and how much to decentralize
• Raises issue of how to allocate corporate level
  overhead

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A MATRIX ORGANIZATION STRUCTURE
General Manager
Heads of Functional Departments - RD,
Engineering, Manufacturing, Marketing, Finance,
Personnel
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Managers of Business Units, Venture Teams,
Product Lines, Geographic Areas, and/or Projects.
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
Functional Specialists
(Arrows indicate reporting channels)
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ADVANTAGES OF A MATRIX STRUCTURE

• Promotes making trade-off decisions on the basis
  of whats best for the organization as a whole.
• Creates checks and balances among competing
  viewpoints

• Permits more attention to each dimension of
  strategic priority
• Facilitates simultaneous pursuit of different
  types of strategic initiatives
• Encourages cooperation, consensus building,
  conflict resolution, and coordination of related
  activities

Environment High uncertainty Size Small to
moderate Goals/Strategy Flexibility
specialization
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DISADVANTGES OF A MATRIX STRUCTURE

• It is hard to move quickly and decisively without
  getting clearance from many other people
• Promotes an organizational bureaucracy and
  hamstrings creative entrepreneurship

• Violation of the scalar chain principle of one
  manager
• Very complex to manage
• Hard to maintain balance between the two lines
  of authority
• So much shared authority can result in a
  transactions logjam and disproportionate amounts
  of time being spent on communications