Fundamentals of Organizational Structure

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Presentation transcript:

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”