Two basic kinds of organizational structures exist-Formal and informal.
Types of Organization Structures
Two basic kinds of organizational structures
exist-Formal and informal. There is the formal organizational structure which
represents the relationships between resources as designed by management. The
formal organizational structure is conveyed in the organization chart. Then
there is the informal organizational structure, which represents the social
relationships based on friendships or interests shared among various members of
an organization. The informal organizational structure is evidenced in the
patterns of communication commonly called the “grapevine.” The informal network
can be used to encourage rapid execution of strategies.
In formal organization structure there is the
question of what management levels and personnel with the organization will be
responsible for various implementation tasks. The five types of organizational
structures that are commonly seen are the simple, functional, divisional,
strategic business unit (SBU), and matrix structures. A schematic diagram of
each of these structures is shown in Figure 4-1
A simple organizational structure has only two
levels, the owner-manager and the employees. Small firms with one product or
only a few related ones usually exhibit this structure.
Functional Organizational Structure As organizations grow and develop a number of
related products and markets, their structures frequently change to reflect
greater special-ization in functional business areas. Such line functions as
production and operations, marketing and research and development (R&D) may
be organized in departments.
Divisional Organizational Structure As firms acquire or develop new products in different
industries and markets, they may evolve a divisional organizational structure.
Each division may operate autonomously under the direction of a division
manager, who reports directly to the CEO. Divisions may be formed on the basis
of product lines (automotive, aircraft), markets (customer, in-dustrial
buyers), geographic areas (north, south, international), or chan-nels of
distribution (retail store, catalog sales). Each division not only has its own
line and staff functions to mange but also formulates and implements strategies
on its own with the approval of the CEO.
Business Unit Structure When a divisional structure becomes unwieldy
because a CEO has too many divisions to manage effectively, organizations may
reor-ganize in the form of strategic business units (SBUs) or strategic groups.
This structure groups a number of divisions together on the basis of such
things as the similarity of product lines or markets. Vice presidents are
appointed to oversee the operations of the newly formed strategic busi-ness
units, and these executives report directly to the CEO.
Organizational Structure A matrix organizational structure is used to
facilitate the develop-ment and execution of various programs or projects. Each
of the depart-ment vice presidents listed at the top has functional
responsibility for all the projects, whereas each of the project managers
listed down the side has project responsibility for completing and implementing
the strategy. This approach allows project mangers to cut across departmental
lines and can promote efficient implementation of strategies.
advantages and disadvantages of the different structures are presented below.
Tags : Strategic Management - Concept Of Corporate Strategy
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