Fundamentals of Fundamentals of Organizational StructureOrganizational Structure

Organization StructureOrganization Structure

Three ComponentsThree Components Formal reporting relationshipsFormal reporting relationships Grouping of people and departmentsGrouping of people and departments Design of systems to ensure effective Design of systems to ensure effective

communication, coordination, and communication, coordination, and integrationintegration

LinkagesLinkages

VerticalVertical ControlControl Centralized decision-makingCentralized decision-making How achieved:How achieved:

Hierarchical referralHierarchical referral Rules and plansRules and plans Vertical Information SystemsVertical Information Systems

LinkagesLinkages

HorizontalHorizontal LearningLearning Decentralized decision-making Decentralized decision-making How achieved:How achieved:

Information systemsInformation systems Direct contact Direct contact Task forcesTask forces IntegratorIntegrator TeamsTeams

Organizational StructureOrganizational Structure

Required Work ActivitiesRequired Work Activities Reporting RelationshipsReporting Relationships Departmental Grouping OptionsDepartmental Grouping Options

FunctionalFunctional DivisionalDivisional MultifocusedMultifocused HorizontalHorizontal ModularModular

Functional StructureFunctional Structure

CEO

Finance

Marketing

Engineering

Divisional StructureDivisional Structure

AKA Product StructureAKA Product Structure Decentralized decision-makingDecentralized decision-making StrengthsStrengths WeaknessesWeaknesses

Divisional StructureDivisional Structure

CEO

Product One

Product Two

Product Three

Divisional StructureDivisional Structure

CEO

Soft Drinks

Aquafina

Gatorade

Geographical StructureGeographical Structure

Designed according to where product Designed according to where product will be offeredwill be offered

Geographic StructureGeographic Structure

CEO

United States

Asia Europe

Matrix StructureMatrix Structure

Combines functional and divisional Combines functional and divisional structurestructure

ConditionsConditions Need to share scarce resourcesNeed to share scarce resources Two critical outputs:Two critical outputs:

In-depth knowledge and new productsIn-depth knowledge and new products Complex and uncertain domainComplex and uncertain domain

Who’s in charge?Who’s in charge? StrengthsStrengths WeaknessesWeaknesses

Horizontal StructureHorizontal Structure

ReengineeringReengineering Faster and better service for Faster and better service for

customerscustomers Organized around processes and Organized around processes and

teamsteams StrengthsStrengths WeaknessesWeaknesses

Modular StructureModular Structure

Subcontracts processesSubcontracts processes Manages them from a central hubManages them from a central hub

Business focuses only on core Business focuses only on core competencycompetency

StrengthsStrengths WeaknessesWeaknesses

Hybrid StructureHybrid Structure

Centralized functional structure for Centralized functional structure for stable products; other products may stable products; other products may have self-contained departmentshave self-contained departments

Certain departments work through Certain departments work through entire organization (functional), but entire organization (functional), but processes are focused in other areas processes are focused in other areas (horizontal).(horizontal).

ApplicationsApplications

Have scarce resources and need Have scarce resources and need efficiency?efficiency?

Need inter-functional coordination, Need inter-functional coordination, innovation, and learning?innovation, and learning?

What Causes Problems?What Causes Problems?

Decision-making is delayedDecision-making is delayed Non-responsiveness to Non-responsiveness to

environmental changesenvironmental changes Too much conflict/ “Turf wars”Too much conflict/ “Turf wars”