#4 Types of Organization

Structure
Sonakshi Gupta

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Departmental
Grouping
Options

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Type of Structure
• Functional Structure
• Divisional Structure
• Matrix Structure
• Geographic Structure
• Horizontal Structure
• Virtual Network & Outsourcing
• Hybrid Structure

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 Activities are grouped together
by common function
All specific skills and knowledge
are consolidated
It is most effective when
Functional  in depth knowledge is
important
Structure efficiency is important
there is little need for horizontal
coordination
Org. needs to be controlled
through vertical hierarchy
Slow response to env. change
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Functional: Strengths & Weaknesses
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 Also called Product structure or
strategic business unit structure
Divisional Separate divisions can be
Structure/M organized according to products,
services, product groups, major
form/decentrali projects, businesses or profit
centers.
zed form
Distinctive Feature  Grouping is
based on organizational outputs.

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Divisional Structure

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Reorganization from Functional
to Divisional (Difference)

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Divisional: Strengths & Weaknesses
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 Grouping is done to meet the needs of
the customers by geography
(Customer’s needs & preferences might
differ based on the region)
Each geographic unit includes all the
Geographic functions required to produce and
Structure market product in that region.
Many MNC’s are organized by country
they operate their business
Strengths and weaknesses are similar
to divisional structure
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Sample Geographic Structure
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Sample
Matrix
Organization

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 A dual hierarchy might seem unusual
but Matrix is the correct structure
when following conditions are present
• Need for shared and flexible use of
people and equipment across
Conditions for products (Share scarce resources
across product lines)
Matrix • When two or more critical outputs
Structure are required E.g. technical
knowledge (functional structure) &
new products (Divisional structure).
• The environment is both complex
and uncertain.

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  Multi-focused in that both product &
function or product & geography are
emphasized at the same time (Possible
through Matrix Structure)
 It is used when both technical
expertise(Functional) and product
Matrix innovation and change(Divisional) are
Structure important for meeting organizational goals.
 The product manager and functional
manager have equal authority and
employees reports to both managers.
 Dual Hierarchy (disobeys the unity of
command)
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Matrix: Strengths & Weaknesses
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 Organizes employees around core
processes.
Organization shifts towards horizontal
structure during reengineering/BPR
Horizontal BPR means the redesign of a vertical
organization along its horizontal workflows
Structure and processes.
A process refers to an organized group of
related tasks and activities that work
together to transform inputs into outputs
that create value for customers. Eg. NPD &
customer service
Reengineering changes the way managers 19

think about how work is done.

 In HS all employees throughout the
organization who work on a particular
process have easy access to one another so
they can communicate and coordinate their
efforts.
Horizontal Eliminates both vertical hierarchy and old
departmental boundaries (Silos)
Structure Rather than focusing on narrow jobs
structured into distinct functional
departments, they emphasize core processes
that cut horizontally across the organization
and involve teams of employees working
together to serve customers.
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Sample Horizontal Structure

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 Structure is created around
cross-functional core processes
rather than tasks, function or
geography
Characteristics
of Self-directed teams, not
individuals, are dominant players
Horizontal
Process owners are responsible
Structure for entire process

Team members are cross-trained

to perform one another’s job
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 Teams have freedom to think
creatively
Characteristics Customers drive the organization.
of (Customer satisfaction,
Horizontal employee satisfaction & financial
contribution)
Structure
Culture is one of openness, trust,
and collaboration; focus on
continuous improvement
(gradual change in the process).
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Horizontal: Strengths & Weaknesses
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 Recent developments in Org Design extend horizontal
coordination & collaboration beyond the boundaries
of the traditional organization
Most widespread design trend in recent years is
outsourcing
Virtual • Contract out certain tasks/functions to other
companies (Core competency)
Networks and A few organizations carry outsourcing to the extreme
Outsourcing to create a virtual network structure (modular
structure).
 Such Structures subcontracts most of its major
functions or processes to separate companies and
coordinates their activities from a small
headquarters organization.
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Virtual
Network
Example

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Virtual Network Strengths
and Weaknesses
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 Most large Org often use a Hybrid Structure
Combination of characteristics of various
structure approaches

Hybrid Tailored to specific needs

The company can get advantage of all the
Structure structure that they are using in their
structure & can also avoid some of the
weakness
Often used in rapidly changing
environments
Offers greater flexibility
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Two Hybrid Structures

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 • Each structure meets different needs and
is a tool that can help managers be more
effective
• Structural alignment aligns structure with
Application of organizational goals (Structure supports the
organizational goals)
Structural • Symptoms of Structural Deficiency:
Design • Decision making is delayed or lacking
quality
• Organization does not respond
innovatively to a changing environment
• Employee performance declines, goals
are not being met
• Too much conflict is evident 30
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