Product Organization structured
Activities are on the basis of individual products,
product line, and service and are grouped into departments in product organization
structure.
All important functions like marketing, production, finance and human resources are contained within each department.
All important functions like marketing, production, finance and human resources are contained within each department.
Advantages
·
The product based organization
is more appropriate than functional form of organization for the firms
producing multiple products.
·
Coordination among
functions area likes design, producing, marketing is effective as all functions
are performed in each department.
·
Since, each
department is independent; most of the decisions can be made at departmental
level without involving the top management
·
Responsibility and
accountability for the market share, sales, profit/loss are clearly fixed. Thus
either credit for the success or blame for the failure of products can be
clearly attributes to particular departments.
Disadvantages
·
One of the major
disadvantages is that there are duplications of equipment’s and personnel’s
among each department.
·
Procurement of
special staff for each department is costly affair
·
Some decision such
as pay, promotion, quality, design and pricing may be inconsistent between
department resulting conflicts within the departments
Geographical Organisation structured
The activities or functions are grouped into
departments based on the activities performed in the geographical areas/region.
Each geographical unit includes all the functions required to produce and
market the products and services in a particular area.
Multinational organizations, enterprises operating
in diverse geographical markets serving an expansive geographical area are
organized based on the geographical structured. This structured is also used by
chain stores like KFC, MCD or a multinational like Citi Bank, HSBC
Advantages
·
Allows tailoring of
strategy to needs of each geographical markets.
·
Takes advantage of
economies of local operations
·
Products and
services are better designed to the climate needs of specific geographical.
·
A geographical
structured allows a firm to respond to the technical needs of different
international are.
·
Producing and
distributing products un different national or global locations may give the organization
an opportunity to better serve the consumers’ needs of various nations.
·
This organization
structured enables a company to adapt to varying legal systems.
·
It also allows
firms to delegate accountability and responsibility to different region
according to their performance.
Disadvantages
·
Poses a problem of
how much geographical uniformity headquarters should impose versus how much
geographical diversity should be allowed
·
Greater difficulty
in maintaining consistent company image/reputation from area when managers
exercise much strategic freedom
·
Adds other layers
of management to run the geographic units
·
Can result in
duplication of staff services at headquarter and regional levels, creating a
relative cost disadvantage
·
Result in
inconsistent decisions from one region to another region.
·
Result in
duplication of equipment and personnel
Decentralized Business Unit Structure
In a diversified firm,
the basic organizational building blocks are its business units; each business
is operated as a stand along profits center.
Strategic Business Units
A single chief executive cannot control a number of
decentralized units of a broadly diversified company. The business can be
effectively controlled, if the related businesses are grouped into strategic
units and the efficient and senior executive is delegated with the authority
and responsibility for its management. The senior executive will in turn report
the matter to chief executive.
Advantages
·
Reduction of the corporate headquarters’ span of control. The chief
executive at the corporate headquarters has to control the general manager or
group manager of each strategic unit
·
This structure permits better coordination between the general divisions
with similar mission, products, markets and technologies
·
It allows strategic management to be done at the most relevant level
within the total enterprise
·
It helps to allocate corporate resources to areas with greatest growth
opportunities.
·
Business units are organized based on the strategically relevant method
·
Makes the task of strategic review by top executives more objectives and
more effectives
Disadvantages
·
The first disadvantages are that corporate headquarters becomes more
distant from the division.
·
Conflicts between or among the strategic unit’s managers for greater
share of corporate resources can become dysfunctional.
·
Corporate portfolio analysis become a complete one in structure
·
Increase layer of management
Functional Organization Structure
A functional organization structure is a
hierarchical type of organization structure wherein people are grouped as per
their area of specialization. These people are supervised by a functional
manager who has expertise in the same field, which helps him to effectively
utilize the skills of employees, which ultimately helps him in achieving the
organization’s business objectives.
In this kind of organization structure, people are
classified according to the function they perform in the organization. The
organization chart for a functional organization structure shows you the
president, vice president, finance department, sales department, customer
service department, administration department, etc.
Each department will have its own department head,
and he will be responsible for the performance of his section. This helps the
organization control the quality and uniformity of performance. The functional
organization structure is suitable for an organization which has ongoing
operations and produces some standard products or goods, such as manufacturing
and production industries.
The functional organization structure helps
organizations run their business and earn profit. This type of structure suits
organizations intended to produce some product or service on a continuous
basis. Here, employees feel secure, perform well and tend to be highly skilled.
The project manager doesn’t have any role in functional organization, and even
if he exists, his role will very limited and he will be known as either the
expediter or coordinator.
Advantages of
the Functional Organization Structure
·
Employees are
grouped as per their knowledge and skills, which helps achieve the highest
degree of performance.
·
Employees are very
skilled and efficient because they are experienced in the same work and hence
they perform very well.
·
Their role and
responsibility is fixed, which facilitates easy accountability for the work.
·
The hierarchy is
very clear, and employees don’t have to report to multiple bosses. Each
employee reports to his functional manager, which reduces the communication
channels.
·
There is no
duplication of work because each department and each employee has a fixed job
responsibility.
·
Employees have a
clear career growth path.
·
Within the
department, cooperation and communication is excellent.
Disadvantages
of the Functional Organization Structure
·
Employees may feel
bored due to the monotonous, repeated type of work and may become lazy.
·
If the performance
appraisal system is not managed properly, conflicts may arise. For example, an
employee may feel demoralized when a lower performing employee is promoted.
·
The cost of high
skilled employee is higher.
·
The departments
have a self-centered mentality. The functional manager pays more attention to
only his department; he usually doesn’t care about other departments.
·
Communication is
not good among the departments, which causes poor inter-department
coordination. This decreases flexibility and innovation. Moreover, there is a
lack of teamwork among different departments.
·
Employees may have
little concerns and knowledge about anything happening outside their
department. This causes obstacles in communication and cooperation.
·
When the
organization becomes larger, functional areas can become difficult to manage
due to their size. Each department will start behaving like a small company
with its own facilities, culture and management style.
Matrix Organizational Structure
The matrix structure groups employees by both
function and product. This structure can combine the best of both separate
structures. A matrix organization frequently uses teams of employees to
accomplish work, in order to take advantage of the strengths, as well as make
up for the weaknesses, of functional and decentralized forms. An example would
be a company that produces two products, "product a" and
"product b". Using the matrix structure, this company would organize
functions within the company as follows: "product a" sales
department, "product a" customer service department, "product
a" accounting, "product b" sales department, "product
b" customer service department, "product b" accounting
department. Matrix structure is amongst the purest of organizational
structures, a simple lattice emulating order and regularity demonstrated in
nature.
Matrix structure is only one of the three major structures. The other two
are Functional and Project structure. Matrix management is more dynamic than
functional management in that it is a combination of all the other structures
and allows team members to share information more readily across task
boundaries. It also allows for specialization that can increase depth of
knowledge in a specific sector or segment.
Advantages
However, the matrix structure also has significant advantages that make
it valuable for companies to use. The matrix structure improves upon the “silo”
critique of functional management in that it diminishes the vertical structure
of functional and creates a more horizontal structure which allows the spread
of information across task boundaries to happen much quicker. Moreover, matrix
structure allows for specialization that can increase depth of knowledge &
allows individuals to be chosen according to project needs. This correlation
between individuals and project needs is what produces the concept of
maximizing strengths and minimizing weaknesses.
Disadvantages
Disadvantages are an increase in the complexity of the chain of command.
This occurs because of the differentiation between functional managers and
project managers, which can be confusing for employees to understand who is
next in the chain of command. An additional disadvantage of the matrix
structure is higher manager to worker ratio that results in conflicting
loyalties of employees.
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