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 Who’s 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 self contained 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”