ESSENTIALS OF MANAGEMENT:

An International Perspective
Sixth Edition
Weihrich and Koontz

Chapter 8: Organizational Structure:

Departmentation
After studying this chapter, you should understand:

1. The basic patterns of traditional

departmentation, their advantages and
disadvantages
2. Matrix organizations
3. Strategic business units (SBUs)
4.The virtual organization
5. That there is no single best pattern of
departmentation.

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Departmentation
By Enterprise
Function

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 Departmentation by Enterprise
Function
• There is no generally accepted terminology: A
manufacturing enterprise employs the terms
"production," "sales," and "finance"; a wholesaler is
concerned with such activities as "buying," "selling,"
and "finance"; and a railroad is involved with
"operations," "traffic," and "finance"
• Functional departmentation is the most widely
employed basis for organizing activities and is
present in almost every enterprise at some level in
the organization structure

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 Departmentation by Territory or Geography

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 Departmentation by Territory or
Geography
• Departmentation based by territory is
rather common in enterprises that
operate over wide geographic areas
• The advantages and disadvantages of
departmentation by territory or
geography are shown in Figure 8-2

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Departmentation by Customer Group

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Departmentation
by Product

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 Matrix Organization

• Matrix Organization is the combining

of functional and project or product
patterns of departmentation in the same
organization structure

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 Matrix Organization

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 Guidelines for Making Matrix
Management Effective
1. Define the objectives of the project or task
2. Clarify the roles, authority, and responsibilities of managers
and team members
3. Ensure that influence is based on knowledge and
information, rather than on rank
4. Balance the power of functional and project managers.
5. Select an experienced manager for the project who can
provide leadership
6. Undertake organization and team development
7. Install appropriate cost, time, and quality controls that report
deviations from standards in a timely manner
8. Reward project managers and team members fairly

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 Strategic Business Units (SBUs)

• Strategic Business Units are distinct

little businesses set up as units in a
larger company to ensure that a certain
product or product line is promoted and
handled as though it were an
independent business

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 Strategic Business Units (SBUs)

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 Organization Structures for the
Global Environment
• Organization structures differ greatly for
enterprises operating in the global
environment
• The kind of structure depends on a
variety of factors, such as the degree of
international orientation and
commitment

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 The Virtual Organization

• The virtual organization is a rather loose

concept of a group of independent firms
or people that are connected often
through information technology
• These firms may be suppliers,
customers, and even competing
companies

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 Choosing The Pattern Of Departmentation
• There is no one best way of departmentizing
that is applicable to all organizations and all
situations
• Managers must determine what is best by
looking at the situation they face
– the jobs to be done and the way they should be
done,
– the people involved and their personalities,
– the technology employed in the department,
– the users being served, and
– other internal and external environmental factors in
the situation
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© 2004 H. Weihrich Departmentation