MFGA 3309: Departmentalization Overview

MFGA 3309: Managing Organizational Structure and Culture

• The course is MFGA 3309, Managing Organizational Structure and Culture, offered at the International Islamic University Malaysia.

Departmentalization

• Departmentalization is adopted by companies expanding to supply goods/services, produce varied products, and operate in multiple markets.

• Forms of Departmentalization include:

  • Functional (arranging by department function, e.g., marketing, finance, production).
  • Product (organizing by specific products).
  • Customer (grouping by customer type).
  • Geographic (grouping by location).
  • Process (grouping activities by process).

Pros of Departmentalization

• Specialized training for departments.
• Shared responsibilities within management.
• Easier coordination within departments.
• Streamlined supervision.

Cons of Departmentalization

• Inter-departmental documentation challenges.
• Decision-making delays.
• Difficulty monitoring accountability and performance.

Divisional Structures

• Divisional structure involves multiple business units producing specific products for particular customer segments.

Divisional Organizational Chart Example

• A hierarchical structure with a CEO at the top overseeing various Vice Presidents (V.P.s) for product/service areas, each with R&D, operations, human resources, finance, and marketing heads.

Product, Market, and Geographic Structures

• These diagrams visually represent different organizational structures (product, geographic, and market). They clarify how divisions, managers, and functions are categorized in companies. Specific example structures were illustrated for washing machines, lighting, and TV/stereo divisions.

Product Departmentalization

• Arranging departments based on the type of products generated. Example: cosmetics, clothing, appliances under a president.

Product Structure Overview (Summary)

• Product structure enhances specialization in product areas and expertise for division managers. It reduces corporate manager supervision needs and improves resource use efficiency.

Types of Divisional Structures: Geographic Structure

• Divisions are categorized by geographic location and potentially further divided into regional offices globally.
• Global Geographic structure means locating divisional offices worldwide.
• Multi-domestic strategy use cases often feature this structure.

Geographic Departmentalization

• Division based on geographical location, example: Central, Northeast, Southwest under a president.

Global Product Structure

• Each product division has responsibility for global manufacturing and marketing decisions.

Global Geographic and Product Structures Diagrams

• Illustrative organizational charts (diagrammatic representations of reporting relationships). They detail how global geographic and product structures are organized.

Market Structure

• Divisions grouped by specific customer types (e.g., large businesses, small businesses, educational institutions).
• This structure allows managers to react quickly to customer needs.

Matrix Design Structure

• An organizational structure that groups people and resources based on both function and product simultaneously. This structure is highly flexible, allowing rapid adaptation to changing needs. Each employee reports to two managers, potentially a functional manager and a product manager.

Product Team Structure

• A cross-functional team of managers from different departments focuses on a particular product. The structure eliminates dual reporting and empowers teams for new or redesigned product development.

Hybrid Structures

• Found in large organizations, hybrid structures use multiple organizational structures simultaneously. Example presented was Federated's structure with corporations.

Coordinating Functions: Allocating Authority

• Authority: The manager's power to make decisions and utilize resources based on their organizational position.
• Hierarchy of Authority: The organization's chain of command detailing authority levels for each manager.
  • Span of Control: The number of direct reports (subordinates) for each manager.
• Line Managers: Those in the organizational chain who have formal authority over people and resources.
• Staff Managers: Functional area specialists who provide guidance to line managers.

Tall and Flat Organizations

• Tall Organizations: Many levels of authority, narrow spans of control; communication difficulties and expense.
• Flat Organizations: Fewer authority levels, wide spans of control; faster communication, but potentially overworked managers.

Minimum Chain of Command

• Top managers should create the hierarchy with the least needed levels of authority, effectively using organizational resources.

Centralization and Decentralization of Authority

• Centralization: Top managers retain decision-making authority. Results in stability and predictability but less employee input.
• Decentralization: Lower-level managers/employees make decisions. Fosters flexibility but may lead to conflicting goals and communication difficulties.

Integrating Mechanisms

• Mechanisms that are used for coordination: direct contact, liaison roles, task forces, cross-functional teams, integrating roles. The examples illustrate how teams with different functions may come together for a common goal within a larger company.

Organizational Culture

• A shared set of beliefs, expectations, values, and norms that shape how members interact and achieve organizational goals.

Sources of Organizational Culture

• Organizational culture emerges from many sources including organizational ethics, organizational structure, the employment relationship, and its members' characteristics.

Characteristics of Organizational Members

• Members' characteristics (values and norms) over time can become similar to a degree. This has the potential to hinder the ability to adapt to change and the environment.

Organizational Ethics

• Moral values, beliefs, and rules for the appropriate conduct of the company/its people among themselves and externally.

Employment Relationship

• HR policies affect how much employees are invested and influenced in organizational goals.

Organizational Structure

• In a centralized organization, people have little autonomy; norms of cautiousness, obedience, and traditions prevail. Stability and predictability are key factors.
• In a flat, decentralized structure, people have more freedom; creative and courageous norms; innovations and adaptability are desired goals.

Strong, Adaptive Cultures Versus Weak, Inert Cultures

• Adaptive Cultures: Values/norms help the organization build momentum, grow and change effectively in pursuit of goals.
• Inert Cultures: Values/norms fail to motivate people, hence can lead to organizational stagnation and failure over time.