1. Business Administration
Organizational Structures
and
Organizational Environment
Source: Richard L. Daft, Jonathan Marphy, Hugh Willmott
Organization Theory and Design
2014, 2nd edition, Cengage Learning
ISBN

2. A Sample Organization Chart

3. Functional vs. Divisional Structure - Example

4. Functional Structure Strengths Weaknesses
Functional Structure
Strengths Weaknesses
Slow response time to environmental changes
May cause decisions to pile on top, hierarchy overload
Leads to poor horizontal coordination
Results in less
innovation
Involves restricted
view of goals
Allows economies of scale within functional departments
Enables in-depth knowledge and skill development
Enables organizations to accomplish functional goals
Is best with only one or a few products
Horizontal coordination: Coordination between (functional) departments

5. Divisional Structure Strengths Weaknesses
Divisional Structure
Strengths Weaknesses
Suited to fast change in unstable environment
Leads to customer satisfaction
Involves high coordination
Allows units to adapt to differences
Best in large organizations with
several products
Decentralizes decision making
Eliminates economies of scale in functional departments
Leads to poor coordination
Eliminates in-depth competence and technical specialization
Makes integration and standardization across product lines difficult
Decentralized decision making: Decisions take place at lower levels of the organizations, so not only at top level.

6. Geographic Structure
Organized to meet needs of users/customers by geography
Particularly common in large non-profit organizations
Many multinational corporations are organized by country
Focuses managers and employees on specific geographic regions
Strengths and weaknesses similar to divisional organization

7. Sample Geographic Structure

8. Hybrid Structure
Organizations often use hybrid structure, combining characteristics of various approaches.
Common type: combination of functional and divisional structures
Often used in rapidly changing environments
Greater flexibility

9. An Organization’s Environment

10. Dimensions of the Environment
Dimensions of the Environment
Simple-Complex dimension:
Environmental complexity/heterogeneity 
number and dissimilarity of relevant external elements
Stable-Unstable dimension:
Are external elements dynamic?
Combined into a framework for assessing uncertainty
This is about the external environment, so not about the environment inside the organization.
Simple: little and/or similar external elements
Complex: many and/or diverse external elements
Stable: few changes
Unstable: many changes

11. Framework for Assessing Environmental Uncertainty

12. Adapting to Environmental Uncertainty
Organizations need the right fit between internal structure and the external environment:
Positions and Departments
 An employee/department for every sector
Buffering and Boundary Spanning
- Buffering: absorbing external effects on technical core
- Boundary-spanning: keep in touch with environment
Buffering: traditional approach but static and defensive  for example: Purchasing department buffers organizational core by means of stocks, HR department buffers organizational core by finding/hiring/training employees.
Boundary-spanning:
Get info about changes in (external) environment
Send info into environment presenting the organization in a favourable light

13. Adapting to Environmental Uncertainty
Differentiation and Integration
- Differentiation: Establishing various departments, differing in terms of managers and formal structures
- Integration: Quality of collaboration among departments
Organic vs. Mechanistic Management Processes
- Mechanistic system: formalized and centralized
- Organic system: not formalized and decentralized
Planning, Forecasting, and Responsiveness
With increasing environmental uncertainty, these
become more important, but also more difficult.
Formalized: Many rules, procedures, descriptions, etc.
Not formalized: Few rules, procedures, descriptions, etc.
Centralized: Decisions are mainly taken in the top levels of the organization
Decentralized: Decisions are taken in different levels of the organization, so also in the lower levels
Responsiveness: Acting fast in response to changes in the environment

14. Framework for Organizational Responses to Uncertainty