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

Whos 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 selfcontained 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