Organizational Structure Advantages And Disadvantages – In most companies, executives rely on vertical and horizontal linkages to create a structure that they hope will fit the needs of their company’s strategy. Four types of structures are available to executives: (1) simple, (2) functional, (3) multidivisional, and (4) matrix (Figure 9.6 “Common Organizational Structures”). However, like snowflakes, no two organizational structures are exactly alike. When creating a structure for their company, executives will take one of these types and adapt it to the company’s unique circumstances. As they do, executives must understand that the choice of structure will influence their company’s strategy and strategic choices in the future. Once a structure is created, it controls some future strategic moves and supports others. If a firm’s structure is designed to maximize efficiency, for example, the firm may not have the flexibility to respond quickly to take advantage of new opportunities.
Most organizations start with a simple structure. In this type of structure, there is usually no need for an organizational chart. Simple structures are not based on formal systems of division of labor (Figure 9.7 “Simple structure”). If the business is a sole proprietorship, one person performs all the tasks that the organization is supposed to perform. Many professions, such as doctors, lawyers, and architects, have a simple structure that meets their business needs. The same applies to small business owners; For example, in the TV series
Organizational Structure Advantages And Disadvantages
, shows bar owner Mo Cieslak and Comic Book Guy handling all aspects of their business.
Matrix Organization: The Advantages And The Disadvantages
If the company consists of multiple individuals, tasks will be informally distributed among them rather than each individual developing a narrow area of expertise. For example, in a family-run restaurant or bed-and-breakfast, each person will contribute as much as necessary to tasks such as cleaning toilets, preparing food, and serving guests (hopefully not in that order). Meanwhile, strategic decision-making is highly centralized in a simple structure. In fact, often the business owner makes all the important decisions. Since a simple structure does not emphasize hierarchy, organizations using this type of structure have fewer rules and regulations. The process of evaluating and rewarding employee performance is also often informal.
The informality of simple structures creates advantages and disadvantages. Additionally, the flexibility offered by simple structures encourages creativity and individuality among employees. Informality also has negative aspects. Important tasks can be neglected if no one person is specifically assigned responsibility. A lack of clear guidance from the top of the organization can create confusion for employees, weaken their motivation, and leave them dissatisfied with their work. Therefore, based on a simple structure, a business owner should make sure to communicate with employees often.
As a small organization grows, the person in charge of that organization often finds that a simple structure is insufficient to meet the needs of the organization. Organizations grow and become more complex, which may require a more formal division of labor and a stronger emphasis on hierarchy and vertical relationships. In many cases, these companies evolve from using a simple structure to relying on a functional structure .
Types Of Organizational Design And Structures
In a functional structure, employees are divided into departments that handle functions related to the functional area of the business, such as marketing, production, human resources, information technology, and customer service (Figure 9.9 “Structure Functional”). Each of these five areas will have a manager who coordinates all activities related to their area of operation. Everyone in a company who works to market the company’s products, for example, will report to the manager of the marketing department. Marketing managers and those responsible for the other four areas will report to the CEO.
Using a functional structure creates advantages and disadvantages. A major advantage of adopting a functional structure is that each person tries to learn a lot about their specific role. By being hired in a department that consists entirely of marketing professionals, a person has a better chance of becoming a marketing expert. Thus, a functional structure seeks to create highly qualified specialists. Second, grouping everyone who performs a specific function into one department reduces costs and creates efficiencies. Also, since all the people in a particular department share the same background, they interact well with each other. In other words, conflicts within departments are relatively rare.
There is one major drawback to using a functional structure: implementation of strategic changes is much slower than other structures. For example, suppose a textbook publisher decides to introduce a new type of textbook that includes “scratch and sniff” photos that allow students to smell various products while reading about them. If the publisher is based on a simple structure, the company leader can assign someone to guide this unique new product through all aspects of the publishing process.
Holding Company Advantages And Disadvantages
However, if the publishing house is organized through a functional structure, all departments of the organization will have to be closely involved in the creation of new textbooks. As the new product falls outside each department’s routines, it can be proverbially lost. And, unfortunately for book authors, the publishing process grinds to a halt whenever a functional area fails to meet its responsibilities in a timely manner. More generally, because functional structures are slow to implement change, they work best for organizations that offer narrow, stable product lines.
The specific functional departments that appear on an organizational chart vary depending on the organizations that use functional structures. In the example given earlier in this section, a company is divided into five functional areas: (1) marketing, (2) manufacturing, (3) human resources, (4) information technology, and (5) customer service. On the TV show
, a Dunder Mifflin branch in Scranton, Pennsylvania, uses a different approach to a functional structure. As of 2009, the office is divided into six functional areas: (1) Sales, (2) Warehouse, (3) Quality Control, (4) Customer Service, (5) Human Resources, and (6) Accounting. As the office was limited to selling paper, a functional structure suited the branch at that time.
Advantages And Disadvantages Of Partnership Business
Many organizations offer a variety of products and services. Some of these organizations sell their offerings to diverse geographic regions. These approaches require companies to respond to the needs of local consumers. However, as mentioned, operational structures change slowly. As a result, when expanding, many companies abandon the use of a functional structure because it does not suit their large size. Often, the new option is a multi-divisional structure. In this type of structure, employees are divided into departments based on products, services and/or geographic regions.
In the multidivisional form, the company is divided into semi-autonomous divisions, which have their own support (corporate) structures, and each division is responsible for its own production and increases its own profit. The company still has a central office that oversees the other divisions, but the main responsibility of the central office is to develop overall strategies for the business, not to be responsible for the operations of each division.
The Jim Pattison Group is an example of a company organized this way. As mentioned in the opening bullet point of this chapter, the majority of the company’s employees are in one of nine product categories: food and beverage, media, entertainment, automotive and agriculture, periodical distribution and marketing, signs, packaging, forest products, and port services. and investments. And cooperation.
Organic Vs Mechanistic Organizational Structure
A big advantage of a multi-divisional structure is that it allows a company to act quickly. When the Jim Pattison Group made a strategic move such as the acquisition of Ocean Foods, only the relevant division (in this case, food and beverage) was involved in integrating the new unit into the company’s range. On the other hand, if the group is organized through a functional structure, the transition will be very slow as all divisions of the company must be involved. A multi-divisional structure also helps an organization better meet customer needs. For example, in the summer of 2006, the investment and partnership arm of the Jim Pattison Group created Great Pacific Bank Limited in Barbados. As a division of the Jim Pattison Group handles all of the firm’s investment businesses, the discretion and expertise needed to decide when to enter the banking business in Barbados is more readily available.
Of course, empowering divisions to act quickly can backfire if people in the divisions take actions that don’t fit the company’s overall strategy. In 2002, McDonald’s faced such a situation. McDonald’s French division published a surprising advertisement in a magazine.
Eat at McDonald’s multiple times a week. Executives at McDonald’s headquarters in suburban Chicago were concerned about the message being sent to their customers, and of course made it clear they strongly disagreed with the nutritionist.
Solution: 11 Advantages And Disadvantages Of Functional Organizational Structure
Figure 9.11: Problems can arise when local divisions are given too much power. Senior McDonald’s executives were outraged when an ad from McDonald’s French division suggested that only children eat the food.
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