"If business has caused the problems, then business can solve them.

" (Peter Drucker)

"Making money is art, and working is art, and good business is the best of art." (Andy Warhol)

Types of Organization Structure

Many organizations have a hierarchical or pyramidal structure, with one person or a group of people at
the top, and an increasing number of people below at each successive level. There is a clear line or chain of
command running down the pyramid. All the people in the organization know who is their supervisor or boss
(to whom they report), and who are their immediate subordinates (to whom they can give instructions).
Individuals may offer specialist advice to others on certain technical matters. The person concerned may
be an "assistant to" a manager appointed to assist with the workload of a superior. He has no authority of his
own, but acts in the name of his superior and on his authority. He does not constitute a level in the hierarchy.
Yet the activities of most companies are too complicated to be organized in a single hierarchy. Shortly
before the First World War, the French industrialist Henry Fayol organized his coal-mining business according
to the functions to be carried out. Functional organization has become the most common form for
manufacturing companies as it enables optimal control and accountability. The company is divided up into
departments, called functions, including production, finance, marketing, sales, and personnel or staff
department. A senior manager (usually a director) is responsible for both the internal oversight of the function
and ensuring its adequate coordination with the other functions in a business.
Functional organization is efficient, but there are two standard criticisms. Firstly, people are usually
more concerned with the success of their department than the whole company. Secondly, separating functions is
unlikely to encourage innovation. The sample of functional structure is shown in Figure 1.
Managing Director
Company
Secretary
I I I I
Marketing R&D Accounting Production Personnel
Dept Dept Dept Dept Dept
Figure 1. Functional structure

Divisional structure or, as it is sometimes called, the multidivisional company is associated with market
expansion and product diversification. In both cases traditional functional structures showed themselves to be
inadequate in coordinating and controlling the firm's activities. Divisionalization was a particularly American
development and is associated with 'pioneer' companies like General Motors and DuPont. Under such an
organization structure each division is self-contained and operates as a profit centre. Divisions can be grouped
around products or markets or a combination of the two. The activities of various divisions are directed by
central headquarters (HQ) which take a global view of corporate strategy. Other central activities might include
R&D and purchasing, to benefit from economies of scale. The duel existence of divisional profit centres and
central units is a source of tension for many firms operating this structure, especially in the allocation of costs
by the central unit into the individual divisions. The illustration of a divisional structure is shown in Figure 2.
Group
Headquarters
Group
functions
e.g. finance

Division 1 Division 2 Division 3 Division 4

Figure 2. Divisional structure

The matrix structure is the most complex of the organizational forms. It is used in organizations where
there is a great deal of interaction between departments or where staff report to more than one manager. In
some large business organizations, work will be carried out along two avenues. Firstly, staff will work in their
respective departments such as marketing, production or personnel. Secondly, staff from these departments will
be assigned to projects or task forces, which will draw staff from across the divisions. This means that a
member of the marketing staff may have to report to the Marketing Director and the Project Manager at the
same time. (See Figure 3).
Marketing R&D Personnel Operations Finance

Task Force 1
Task Force 2
Task Force 3
Task Force 4

Figure 3. Matrix structure

The matrix structure does work well when staff understand their positions in the matrix. There are risks
associated with such a situation when staff are confused about whom they should report first. The effectiveness
of the matrix may be also limited to specific cultures. Matrix organizations are not successful in Italy where
bosses are seen as father figures. Since matrix organization requires people to have two bosses, Italians find it
difficult relating to two 'fathers'.
In reality a firm may display a mixture of structures. For example, many divisionalized companies have
functional specialisms within each division. In a functional organization we may find different departments
organized along different lines.

Comments
successive — наступний chain of command — система підпорядкування to report to smb — бути в
підпорядкуванні у когось immediate subordinate — безпосередній підлеглий workload — обсяг роботи,
навантаження authority — повноваження line structure — лінійно-функціональна структура to
constitute — утворювати, складати accountability — підзвітність, відповідальність personnel/staff
department — відділ кадрів oversight — керівництво to be concerned with — піклуватися про divisional
structure — галузева структура diversification — диверсифікація (розширення номенклатури продукції
або асортименту товарів) self-contained — самодостатній economies of scale — економія масштабу
interaction — взаємодія respective — відповідний staff ... will be assigned to the projects... which will
draw staff from across the divisions — співробітникам ... доручають проекти..., які залучають
співробітників з різних підрозділів to confuse — збивати з пантелику specialism — спеціалізація
Economies of scale (scale effect) - економія масштабу: зумовлена зростанням виробництва за рахунок
скорочення усереднених витрат на виробництво, і, внаслідок цього, собівартості одиниці продукції при
збільшенні обсягів виробництва.
Span of control - норма керування: вимірюється максимальною кількістю підлеглих одного керівника.
Diversification — диверсифікація: розширення сфери виробництва або продажу за рахунок нових
продуктів; відбувається шляхом нарощування власних потужностей. Диверсифікація відбувається з
метою або зменшення залежності від одного ринку, ємність якого звужується (наприклад, ринку
солодощів), або збалансування сезонних коливань ринку (наприклад, ринку морозива), або забезпечення
простору на ринку.

Task 1. Answer the questions.

1. What does a hierarchical structure of organization comprise?
2. What does the chain of command mean?
3. Why did the functional structure become the most common form of manufacturing companies?
4. What does product diversification mean?
5. What are the two standard criticisms of the functional organization?
6. What are the advantages and disadvantages of the divisional structure?
7. Why is the matrix structure called the most complex one?

Task 2. Find in the text English equivalents of the following Russian word combinations:
На кожному наступному рівні; надавати доручення; людина, про яку йдеться; діяти від імені керівника;
виробнича компанія; відповідати за; відповідне узгодження; сприяти нововведенням; багатофіліальна
структура; розширення ринку; намічати спільні орієнтири; розподіл коштів; робота відбувається за
двома напрямками; співробітникам доручають проекти, які залучають співробітників з різних галузей;
організовані за різними принципами.
Task 3. Match the synonyms.
1. to report to a. example
2. hierarchy b. strain
3. personnel c. complicated
4. self-contained d. to guarantee
5. sample e. supervisor
6. tension f. to mix
7. complex g. staff
8. to ensure h. pyramid
9. to confuse i. to be answerable to
10. superior j. complete in itself

Task 4. Substitute the following definitions with the words in the box.
span of control workload responsibility
economies of scale matrix hierarchy
diversification authority pyramid
subordinate
1. junior in rank or position
2. structure with a triangular or square base and sloping sides meeting at a point
3. organization with grades of authority from the lowest to the highest
4. power or right to give orders and make others obey
5. extending the range of goods and services in a firm or geographic region
6. amount of work to be done
7. number of people who are directly accountable to the same supervisor
8. person's obligation to carry out certain tasks or activities
9. making a product more economical by manufacturing it in larger quantities
10. array of numbers displayed in rows and columns

Task 5. Study the organization. Which department:

a) puts the products into boxes and crates?
b) places ads in magazines?
c) pays the staff?
d) purchases supplies?
e) sells the products to customers?
f) plans how to sell new products?
g) services the machines and equipment?
h) arranges courses for the staff?
i) recruits new employees?
j) manufactures products?
k) invoices customers?
l) looks after customers problems and complaints?
m) dispatches the products and sends them to customers?
n) organizes control systems to prevent mistakes?
o) deals with taxation, investments and cash management?

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