Organization Structure: Departmentation

Departmentation by Enterprise Function

Most widely employed basis for organizing

activities and is present in almost every enterprise at some level in the organization structure. No generally accepted terminology for functional departments: A manufacturing enterprise employs the terms production, sales, and finance; a wholesaler is concerned with such activities as buying, selling, and finance; and a railroad is involved with operations, traffic, and finance.

Departmentation by Enterprise Function

Departmentation by Territory or Geography

Rather common in enterprises that operate

over wide geographic areas.

Departmentation by Territory or Geography

Departmentation by Customers

Departmentation by Product

Matrix Organization
The combining of functional and project or

product patterns of departmentation in the same organization structure.

Matrix Organization (in engineering)

Guidelines for Making Matrix Management Effective

1. Define the objectives of the project or task. 2. Clarify the roles, authority, and responsibilities of managers and team members. 3. Ensure that influence is based on knowledge and information, rather than on rank. 4. Balance the power of functional and project managers. 5. Select an experienced manager for the project who can provide leadership. 6. Undertake organization and team development. 7. Install appropriate cost, time, and quality controls that report deviations from standards in a timely manner.

Strategic Business Units (SBUs)

Distinct little businesses set up as units in a

larger company to ensure that a certain product or product line is promoted and handled as though it were an independent business.

Strategic Business Units

Organization Structures for the Global Environment

Organization structures differ greatly for

enterprises operating in the global environment. The kind of structure depends on a variety of factors, such as the degree of international orientation and commitment.

The Virtual Organization

A rather loose concept of a group of

independent firms or people that are connected often through information technology. These firms may be suppliers, customers, and even competing companies.

Boundaryless Organization
Jack Welch, former CEO at GE (General

Electric), stated his vision for the company as a boundaryless company, an open, anti-parochial environment, friendly toward the seeking and sharing of new ideas, regardless of their origin. The purpose was to remove barriers between the various departments as well as between domestic and international operations.

Choosing the Pattern of Departmentation

There is no one best way of departmentation

that is applicable to all organizations and all situations. Managers must determine what is best by looking at the situation they face. The jobs to be done and the way they should be done The people involved and their personalities The technology employed in the department The users being served Other internal and external environmental factors in the situation