Types of Organizational Structure PDF

## LESSON 2 ### TYPES OF ORGANIZATIONAL STRUCTURE ### LEARNING OBJECTIVE: - The learners shall be able to distinguish the various types of organization structures. The board and senior leaders are the group responsible in determining the type of organizational structure that would greatly suppor...

## LESSON 2 ### TYPES OF ORGANIZATIONAL STRUCTURE ### LEARNING OBJECTIVE: - The learners shall be able to distinguish the various types of organization structures. The board and senior leaders are the group responsible in determining the type of organizational structure that would greatly support the internal operations, how work activities are executed and the chain-of-command. There are several organizational structures that reflect different uses of chain of command in an organization. ### FUNCTIONAL ORGANIZATIONAL STRUCTURE Functional organizational structures are the most common. A structure of this type groups individuals based on similar skills, expertise and resources use. Common departments such as human resources, marketing, production, finance and at times research and development are organized by separating each of these areas and grouped into a single department. Below is the functional organizational chart which puts into picture the functional structure of an organization. | | | --------------------------------- | | **Vice President** | | | | **Manager Human Resource** | | **Manager Marketing** | | **Manager Production** | | **Manager Finance** | | **Manager Research and Development** | | | **Figure 6 Functional Organizational Chart** Here are the strengths and weaknesses of functional organizational structure: #### Strengths 1. employees in the same department also understand each other's "lingo" 2. job context is understood within departments due to relatedness of function 3. clear-cut chain of command which clearly establishes who reports to whom 4. enhanced coordination as workers within the same department easily come to a meeting of the minds 5. leaves no doubt when it comes to accountability and management privileges, so directives are clear and unified 6. relies on divisions of labor, which turns employees into expert specialists 7. experts on hand also makes training easier, and problems get solved more quickly 8. equipment and personnel are clustered rather than being duplicated in more than one area which increases efficiency #### Weaknesses 1. slow and less accurate coordination and communication between departments 2. limited decision making authority of individual department managers 3. different departments have diverse concerns that at times customers' interests and needs might become unnoticed ### PRODUCT/SERVICE ORGANIZATIONAL STRUCTURE Another common structure is to be arranged by a specific product type. In order to take benefit of the numerous product/service lines within the business, companies execute a product/service-based organizational structure. Each portion of the structure can center as an individual unit inside the entire company. Each product group falls within the reporting structure of an executive and that person oversees everything related to that particular product line. The structure may also have numerous levels of managers and employees. Here are the strengths and weaknesses of product organizational structure: #### Strengths 1. responsibility for each product can be pinpointed at the division level 2. concentration on one product can yield higher quality of output 3. team spirit builds up on each product line 4. rivalry among divisions can improve business 5. promotes autonomous decision making 6. faster reply to customer appeal #### Weaknesses 1. less giving out of resources across divisions 2. extra doubling-up of effort resulting in higher costs 3. customers who demand more than one product/service will have to work with more than one division 4. company may be slow to identify that a product must be changed, dropped or added 5. could be stifled by one product focus | | | ------------------------------ | | **Food Manufacturer** | | | | **Salad Dressing** | | **Luncheon Meats** | | **Macaroni and Cheese** | | **Ketchup** | | **Barbecue Sauces** | | | **Figure 7 Product Organizational Chart of a Food Manufacturer** ### CUSTOMER ORGANIZATIONAL STRUCTURE Certain business organizations are organized by customer type in order to make certain specific customer expectations are satisfied by a customized service approach. This type of structure specializes in the needs of each customer group but at times overlook the needs of different customer types. A hospital typically uses this type of structure. A patient seen as an outpatient has very different needs than those of patients who spend time in the hospital as in-patients. A customer-centered structure creates customized care for those patients. | | | -------------------------------- | | **Hospital President** | | | | **Medical Staff Vice President** | | **Outpatient Vice President** | | **Employees Vice President** | | **Inpatient Vice President** | | **Volunteer Vice President** | | | **Figure 8 Customer Organizational Chart-Healthcare** ### GEOGRAPHIC ORGANIZATIONAL STRUCTURE Geography-based structure is used for organizations that have offices or business units in different geographic locations. This structure defines a reporting and functional system across multiple locations. This type of structure allows an organization's offices to operate individually while adhering to company policies and values. Office locations can be local, national or international. Each geographic location is overseen and directed by one or several executives. These executives oversee and direct the functions of the location and have responsibility for the entire operation and its finances. Geography-based structure is used mainly in industries like retail and hotel chains, transportation and other large national and international organizations. Manufacturing organizations with several plants in different geographical locations, may choose to operate using a geographic structure. This is done to better support logistical demands and differences in geographic customer needs. Typically a structure that is organized by geographical regions reports up to a central oversight person. This type of structure is evident in companies that go beyond a city or state limit and may have customers all across the country or in multiple states. | | | ---------------------------- | | **Drug Company President** | | | | **North Region Vice President** | | **South Region Vice President**| | **Central Region Vice President** | | **East Region Vice President** | | **West Region Vice President** | | | **Figure 9 Geographical Organizational Chart-Drug Company** #### Strengths 1. Unique needs of each type of customer are well served 2. Focus on customers’ needs and preferences 3. Unprofitable product lines more likely to be dropped #### Weaknesses 1. May be less sharing of resources across division/departmental boundaries 2. More duplication of effort and infrastructure resulting in higher costs 3. Internal systems may evolve in different ways to serve different customer segments ### MATRIX ORGANIZATIONAL STRUCTURE A matrix structure combines features of both functional and divisional structures all together in an organization. Typically matrix structure is used in large multinational companies. This structure can generate power struggles because most areas of the company will have a double management that of a functional manager and a product or divisional manager working at equal level and covering some of the same managerial territory. A challenge with this type of structure is when employees are given direction from two different managers and they ought to prioritize their work responsibilities. For example, in the matrix organizational chart below, a recording engineer who works for a music publisher may have engineers who report to him but may also use his expertise and work with teams to develop new music albums. | | | --------------------------- | | **Music Publisher** | | | | **Recording Engineer** | | **Prod Manager** | | **Designer Manager** | | | | **Album Manager 1** | | **Studio A Engineer** | | **Prod A Assistant** | | **Designer A** | | | | **Album Manager 2** | | **Studio B Engineer** | | **Prod B Assistant** | | **Designer B** | | | **Figure 10 Matrix Organizational Chart-Music Publisher** #### Strengths 1. Enables organization to use its resources efficiently (provides flexibility to assign staff to project requirements and reassign as needed) 2. Takes full advantage of the use of teams (maintaining in-depth technical expertise in critical functions) 3. Provides individuals an opportunity to work with different skills and expertise 4. Requires managers to cooperate with one another and moderates their power over subordinates #### Weaknesses 1. Multiple bosses may result in confusion 2. Slows down decision making 3. Conflicting demands from bosses leads to personal stress and reduced work quality 4. Power struggle between managers regarding resources 5. Can disrupt the work and get in the way of customer service 6. Subordinates may play one boss against another ### TEAM ORGANIZATIONAL STRUCTURE A team-based organizational structure groups employees who carry out definite duties into project teams that do specific functions. This type of organizational structure permits and guarantees the best treatment for activities such as product development, customer support and process-improvement initiatives. With low-overhead and minimal management, this consents to exploit successful opportunities and evade threats. #### Strengths 1. Focus on organization is outward to customer 2. Reduces number of levels of management – “flatten organizations” (reduced management cost; less need for coordination) 3. Time and money saved due to reduced need to pass information up and down the hierarchy and between departments 4. Promotes self-management by employees (greater job satisfaction because of more involvement) 5. Broadens individuals’ knowledge and skill bases 6. Faster decision making, reduced cycle time and improved responsiveness to customers #### Weaknesses 1. Involves major transformation of the organization (difficult, timely and costly change; new systems required for virtually everything) 2. Company may need to retain functional expertise if not sufficient within each process 3. May require major and costly training initiative