Functional Organization Structure

 A small sized freight forwarder called express way is applying such structure .Functional
organization is the most common type of organizational structure. This is where the
organization is divided into smaller groups based on its special functions such as IT,
finance or marketing. This departmentalization allows greater operational efficiency
because the employees have their skills and knowledge to be shared within the group.
The basis of this functional organization structure is an arrangement where a worker has
different managers for different areas of the organization operation. Since this type of
structure has many departments, it could also have several reporting structures as well. In
a functional organization structure, the reporting relationships are grouped based on the
specialty or functional area. Separate areas are established to take care of different
concerns.
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The advantages of Functional Organization:

 The team is managed by an experienced person with a high ability and skills who can

adequately understand and review the entire work.

 The team members work with other people in the field and it allows sharing of thoughts
and knowledge to make the people learn new skills.

 The staffers have the chance to get promoted within their functional areas which can be a
reason for them to stay long term. The company is getting the advantage of their expertise
and knowledge.

 Because of people’s technical expertise and high specialization , the workers with
specialized skills can perform tasks quickly, efficiently and with more confidence, while
reducing of work-related mistakes. The clear nature of the career path within the
functional unit makes it possible for employees to be highly motivated to advance their
careers as they move up within the hierarchy. This will keep them aiming for
advancement and development.
  Each function share the common resources achieving economies of scale and accordingly
achieving the efficiency objective or cost control

 This is ideal structure for small businesses that focus on one product or service because
you can maximize performance by encouraging peer cooperation among different units at
various levels of management through supervision and coordination. Specialization leads
to operational efficiencies and enhances productivity levels.

The disadvantages of Functional Organization:

 The functional organization may have unhealthy competition working with the other
areas. There may be a lack of understanding as to how significant that specific are to the
company due to the restricted view of the organizational goals ,the functional goals are
more important to employees

 Because the people in the functional organization are grouped according to their special
set of skills, roles or task, the entire team will operate well. However, the business
strategies and the level of bureaucracy and high formalization make it difficult to
respond to changes immediately referring to low flexibility .Another disadvantage of
functional organization structure is that these functional groups may not be able to
communicate more often which decreases flexibility and innovation.

 When a company uses this type of structure, it groups its people according to their
knowledge and skills which help them become specialists on that field. It also requires a
management system which allows promotion, development and visibility of skills of
people in each functional area. It helps to bring in-depth knowledge and skill
development among the employees to achieve the goals of the company
  Management issues may arise because it is more bureaucratic and the functional
organization are not accountable to each other and the poor horizontal coordination
within the department may occur. Also little empowerment to given to employees would
affect the employees’ motivation and also due to lack of innovation and restricted views
of organizational goals. This structure can be rigid and the standardized ways and high
formalization can hamper or impede faster decision making.

 Another weakness of functional organizational structure is there could be lack of unit

coordination. This means that though the functional units can perform with higher level
of efficiency however, there could be difficulty working well with each other thus,
cooperation is compromised. Some people may be territorial or there may be some who
are unwilling to cooperate. These unhealthy coordinations may lead to delays, reduced
commitments, competing interests, waste of time, and getting late in finishing the project.

 Vertical information linkage include hierarchical referral, meetings ,reports and using
vertical information systems Horizontal linkage involves using network liaison
departmental roles to coordinate between departments

 Accordingly the firm maintains a vertical structure with dominant vertical

communication ,mostly a written one ,high centralization ,formalization and
specialization, narrow span of control with many reporting levels

Divisional organizational structure

 The divisional structure groups workers according to geography, product line or

customer. Each division operates as a separate company, complete with all the necessary
functions, though sometimes upper management controls some functional areas such as
finance. Duplication of roles across divisional units is one of this structure's drawbacks,
as it means less efficiency and economy. However, the divisional structure lets each
 product line excel, better serves customer niches and can cater to geographic and cultural
differences.
 In our case the Procter and Gamble company follows a product based structure dividing
the firm by the product types it provides (Homecare –Personal Care-Food )

The advantages of product based Organization:

 The organization may have healthy competition working with the other areas. There is an
understanding as to how significant that specific are to the company due to the clear view
of the organizational goals ,the product goals are more important to employees

 The product manager acts as a full time integrator who integrates all functions within his
range of responsibility tom serve the interest of the customers served by the product he
presents

 Because the people in the organization are grouped according to products , there is low
level of bureaucracy and low formalization make it easy to respond to changes
immediately referring to high flexibility .Another advantage of organization structure is
that communication is excellent which increases flexibility and innovation.

 The workplace is highly decentralized providing a high levels of responsibilities and

authority to lower managerial levels this improves the morale, motivation and
organizational commitment

 This structure is flexible and the innovative ways and low formalization lead to faster
decision making.

 Another advantage of organizational structure is coordination. The is means that though

the divisions lacks efficiency however, team work is available, cooperation is emphasize
This healthy coordinations reduce delays in getting goals achieved
The disadvantages of product based Organization:

 This departmentalization allows less operational efficiency because the employees skills
and technical experience is not emphasized as they are grouped around products not skills
. The basis of this organization structure is an arrangement where a worker has product
manager
 The decentralization may result in lack of control over the organization units

 Vertical information linkage include hierarchical referral, meetings ,reports and using
vertical information systems Horizontal linkage involves the full time integrator and
using teams ,a quality control team is made up of cross functional employees working
always on the quality issue

 Accordingly the firm maintains a flat structure with dominant horizontal

communication ,mostly a verbal one, low centralization ,formalization and
specialization, wide span of control with many reporting levels

Geographical organizational structure

 The geographical structure groups workers according to geography, Each area operates
as a separate company, complete with all the necessary functions, though sometimes
upper management controls some functional areas such as finance. Duplication of roles
across divisional units is one of this structure's drawbacks, as it means less efficiency and
economy. However, the geographical structure lets each product line excel, better serves
customer niches and can cater to geographic and cultural differences.
 In our case the Abaza Car Dealer divides his operations into 3 regions Area 1 :Cairo and
Upper Egypt , Area 2 :Alex, and Delta ,and Finally Area 3 Canal ,Hurghada and Sinai

The advantages

 The organization may have healthy competition working with the other areas. There is an
understanding as to how significant that specific are to the company due to the clear view
of the organizational goals ,the product goals are more important to employees
  The area manager acts as a full time integrator who integrates all functions within his
range of responsibility tom serve the interest of the customers served by the product he
presents

 Because the people in the organization are grouped according to products , there is low
level of bureaucracy and low formalization make it easy to respond to changes
immediately referring to high flexibility .Another advantage of organization structure is
that communication is excellent which increases flexibility and innovation.

 The workplace is highly decentralized providing a high levels of responsibilities and

authority to lower managerial levels this improves the morale, motivation and
organizational commitment

 This structure is flexible and the innovative ways and low formalization lead to faster
decision making.

 Another advantage of organizational structure is coordination. The is means that though

the divisions lacks efficiency however, team work is available, cooperation is emphasize
This healthy coordinations reduce delays in getting goals achieved

The disadvantages of Functional Organization:

 This departmentalization allows less operational efficiency because the employees skills
and technical experience is not emphasized as they are grouped around products not skills
. The basis of this organization structure is an arrangement where a worker has product
manager
 The decentralization may result in lack of control over the organization units

 Vertical information linkage include hierarchical referral, meetings ,reports and using
vertical information systems Horizontal linkage involves the full time integrator and
using tasks forces, made up of cross functional employees working always on the
organizational issues like customer quality complaints
  Accordingly the firm maintains a flat structure with dominant horizontal
communication ,mostly a verbal one, low centralization ,formalization and
specialization, wide span of control with many reporting levels

Matrix Structure

 Pharco pharmaceuticals applies this structure This structure mixes 2 structures , the

functional structure with the divisional product based organizational structure .

 It is a very strong form of horizontal linkage that enhances coordination and cooperation

across the firm

 An employee has a responsibility of reporting to the functional manager as well as the

project manager who acts as full time integrator coordinating between all functions to

serve the objectives and the success of the project

 This structure in the firm gives more power to the project manager as the primary

authority and the secondary goes to the functional managers ,to solve the issue of power

balance to avoid the conflict of interests which would reduce the ability to achieve the

organizational objectives

 The functional part enhances the skills and technical experience and the divisional

structure enhances team work ,creativity and innovation

 Horizontal communication is enhanced through the divisional structure and less vertical

communication is available

 The major issue here is the sense of pressure by the employees as they have double

assignments ,meetings ,objectives ,and reporting activities ,this structure is time

consuming and is very costly

  Vertical information linkage include vertical information systems Horizontal linkage
involves the full time integrator ,and information systems used (Oracle)

 Accordingly the firm maintains a flat structure with dominant horizontal

communication ,mostly a verbal one, low centralization ,formalization and
specialization, wide span of control with many reporting levels

Mechanistic And Organic Organizations

 As previously explained the Express freight forwarder keeps a mechanistic structure as

the firm is a traditional type organization due to high formalization ,highly centralized

work place ,high specialization and division of labor ,vertical hierarchy and narrow span

of control ,many rules to follow ,rigid and traditional culture ,many controls. An

efficiency organization away from innovation and creativity, and limited flexibility with

minimum empowered roles

 As previously explained Procter and Gamble keeps an organic structure as the firm is a

innovative a type organization due to low formalization ,highly decentralized work place

,low specialization and division of labor ,flat hierarchy and wide span of control ,few

rules to follow ,open and adaptive culture ,few controls. A learning organization

innovation oriented looking for creativity, and high flexibility