C.3 Organizational Structure Flashcards
Three components of structure
- Reporting relationships, hierarchy levels, span of control
- departments
- communication, coordination, and integration
vertical structure:
reporting: who reports to who
horizontal structure:
communication: how do they talk to each other? IT, informal, or formal system
Five organizational design alternatives
- geographical
- matrix
- horizontal
- virtual network
- hybrid
what is functional structure
Easy to understand; Activities grouped by common functions or similar knowledge.
when would you want functional structure
- managers want a lot of control and hierarchy
- efficiency
- effectiveness
- when you have only a few products
functional structure pros
- allows economies of scale within a department
- enables in-depth knowledge and skill development
- enables org to accomplish functional goals
functional structure cons
- slow response time to environmental changes
- may cause decision pile up
- leads to poor horizontal coordination among departments
- less innovation
what is divisional structure
product structure or strategic business units. i.e. organized by products
when would you use divisional structure
- when you have multiple products
- functional would take a really long time to create products efficiently. in comparison
divisional structure pros
- suited to cast change in unstable environment
- leads to customer satisfaction (product responsibility points are clear)
- involves high coordination across functions
- allows units to adapt to product, region, customer differences
- decentralizes decision making
divisional structure cons
- eliminates economies of scale across departments
- leads to poor coordination across product lines
- eliminates in-depth competence and technical specialization
- makes integration and standardization across product lines difficult
economies of scale
a proportionate savings in cost gained by an increased level in production
functional vs divisional
functional:
- efficiency
- control
- vertical
- economies of scale
divisional
- flexible
- adaptable
- coordination
geographical structure
- kind of like divisional but instead of different product categories they’re regions
- geographic if it’s ONE product but offered slightly differently in different regions
- horizontal coordination and highly adaptable within a region
matrix structure
both product and function or product and geography are emphasized at the same time. generally happens when they don’t have enough people where each product line can have its own group of experts
three conditions for matrix structure
- scarce resources
- want specialization but you have multiple products
- environment is very uncertain -> you need all hands on deck for a product when shit hits the fan
matrix structure pros
- achieves coordination to meet dual demands from customers
- suited to complex decisions in unstable environment
- flexible sharing of HR across products
- functional and product skill development
- medium-sized with multiple products
matrix structure cons
- dual authority can be frustrating and confusing
- participants need good interpersonal skills and extensive training
- time consuming (i.e. meetings and conflict)
- need to adopt collegial and horizontal culture
- great effort to maintain power balance
horizontal design
- activities/people are grouped around core processes
- instead of managers, orgs have process owners that coordinate the process
- instead of departments, orgs have self-managed teams
- org is flat, with few vertical levels
process
organized group of related tasks and activities that work together to transform inputs into outputs that create value for customers
horizontal structure pros
- enables rapid response to customer needs
- customer focused
- broader view of org goals
- focus on teamwork and collaboration
- improves quality of life for employees
horizontal structure cons
- determining core processes to organize around is difficult and time-consuming
- requires major org changes
- traditional managers have to give up power and authority
- requires significant training
- can limit in-depth skill development
virtual network design
functions such as accounting, marketing, manufacturing, etc. are outsourced to separate companies and coordinated by the central hub.
common with start ups, tech companies, companies with very high differentiation type of strategy bc they only focus on specific product or service they make
