Fundamentals of Organizational Structure

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Fundamentals of Organizational Structure
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Organization Structure

• Three Components
• Formal reporting relationships
• Grouping of people and departments
• Design of systems to ensure effective
  communication, coordination, and integration

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Linkages

• Vertical
• Control
• Centralized decision-making
• How achieved
• Hierarchical referral
• Rules and plans
• Vertical Information Systems

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Linkages

• Horizontal
• Learning
• Decentralized decision-making
• How achieved
• Information systems
• Direct contact
• Task forces
• Integrator
• Teams

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Organizational Structure

• Required Work Activities
• Reporting Relationships
• Departmental Grouping Options
• Functional
• Divisional
• Multifocused
• Horizontal
• Modular

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Functional Structure
CEO
Finance
Marketing
Engineering
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Divisional Structure

• AKA Product Structure
• Decentralized decision-making
• Strengths
• Weaknesses

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Divisional Structure
CEO
Product One
Product Two
Product Three
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Divisional Structure
CEO
Soft Drinks
Aquafina
Gatorade
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Geographical Structure

• Designed according to where product will be
  offered

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Geographic Structure
CEO
United States
Asia
Europe
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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
• Whos in charge?
• Strengths
• Weaknesses

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Horizontal Structure

• Reengineering
• Faster and better service for customers
• Organized around processes and teams
• Strengths
• Weaknesses

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Modular Structure

• Subcontracts processes
• Manages them from a central hub
• Business focuses only on core competency
• Strengths
• Weaknesses

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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).

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Applications

• Have scarce resources and need efficiency?
• Need inter-functional coordination, innovation,
  and learning?

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What Causes Problems?

• Decision-making is delayed
• Non-responsiveness to environmental changes
• Too much conflict/ Turf wars