Functional, Divisional and Matrix structure

Functional Structure

The functional structure groups employees together based upon the functions of specific jobs within the organization. Functional structures are useful for relatively big companies. Employees within the functional structure are differentiated to perform a specialized set of tasks. For instance, the marketing department would be staffed only with marketers responsible for the marketing of the company's products. This specialization leads to operational efficiencies where employees become specialists within their own realm of expertise. The most typical problem with a functional organizational structure is however that communication within the company can be rather rigid, making the organization slow and inflexible. Therefore, lateral communication between functions become very important, so that information is disseminated, not only vertically, but also horizontally within the organization. Functional structures are often characterized by a large degree of formalization, making each function reliant on standardized ways of operating. Decision-making power is often centralized at the top of the hierarchy.

Functional organizational structures are best suited for companies producing standardized goods and services at large volumes and low cost. Therefore, functional structures may be most effective for companies operating in rather stable environments with low rates of change and dynamism.
As apposed to e.g. a simple organizational structure, the functional structure works best when the surrounding environment is rather stable, and when customers expect a standardized range of products not subject to continuous change in e.g. taste, fashion or innovation. If the environment becomes more complex and uncertain, the functional structure may not be the best suited structure for the company, and the company may need to change their structure to be able to cope with new challenges and uncertainties.



Divisional Structure

The divisional structure is broken down into three areas: product, market, and geographic.

• Product Structure

Product structure groups employees together based upon specific products produced by the company. An example of this would be a company that produces three distinct products, "product a", "product b", and "product c". This company would have a separate division for each product.

• Market Structure

Market structure groups employees together based upon specific markets in which the company sells. When I worked at the ISP, we also used a form of market structure. We sold internet access to individual consumers and business customers. So the sales and customer service departments were organized using market structure. Consumer sales and consumer customer service worked together, and corporate sales and corporate customer service worked together.

• Geographic Structure

Geographic structure groups employees together based upon specific geographic location. This is often used by large companies that operate in many areas throughout the United States or in both the U.S. and overseas.


Matrix Structure

Matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. 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 the most complex of the different organizational structures.

Conclusion

Finding the organizational structure that works best for a particular company is very important. Using the wrong structure can result in poor communication, poor product development, poor customer service, and a myriad of other business problems. Any of these things can be detrimental to a company and could result in lost revenue or even complete failure of the company.

Horizontal and Vertical Organizational structure

• Horizontal is a form of managing workers in which decision-making is spread among workers along horizontal lines, as opposed to a hierarchical or pyramidal management structure. The philosophy behind this form of management is that a collaborative model improves morale, productivity and creativity. It is a method often used in organizations that are heavily focused on product development or core business processes. Cross-functional work teams, where workers with expertise in different areas work together on one project, are a common feature of a horizontal organizational structure.The philosophy of a more level, egalitarian work team may be adopted in organizations that value collaboration and encourage individual initiative among workers.
•  In a vertical structure, often decisions made at the top filter down to lower level workers. These workers are then usually expected to implement those decisions without objection. Sometimes workers may not understand the reasoning behind a particular decision. An employee may resent the change because he or she does not see the need for it.
• In comparison, within a horizontal organizational structure, those who manage the company typically want to encourage free thinking, individual initiative, and collaboration among staff. Creativity is valued more than uniformity within the organization.

A VERTICAL STRUCTURE

Organizational structure

Theories about organizational structure can help with plans for organizational success. These theories may influence how an organization allocates resources. Organizational theory describes how an organization interacts with its environment. Early theories were overly bureaucratic and have given way to organizational theories that apply to a multitude of dynamic situations.

Classical Organization Theory

Classical organization theory was developed in the first half of the 20th century as a way of bringing together scientific management, bureaucratic theory and administrative theory. Scientific management focused on getting the best people and equipment, and scrutinizing each production task. Bureaucratic theory involved establishing a hierarchy to describe the division of labor in a company and recognizing the importance of specialization. Administrative theory worked to establish a set of management principles that applied to all organizations. Classical organization theory didn't work because it described motivation only as a function of economic rewards.

Neoclassical Organization Theory

Improvements in organization theory led to consideration of the work environment. Productivity improves in an environment with coherence of values and purpose. Organizations can succeed with a cohesive environment where subordinates are accepting of managerial authority. The key to this theory is maintaining equilibrium. Of course, there can be unpredictable responses to managerial authority.

Contingency Theory

Contingency theory deals primarily with conflict, which previous theories considered something to be avoided at all costs. Conflict is unavoidable, but according to contingency theory it is manageable. Organizations evolve to meet their own strategic needs in rational, sequential and linear ways. Adapting to changes in the environment is important to managerial and organizational success. Managers must be able to make decisions contingent on current circumstances.

Systems Theory

Systems theory describes the interrelatedness of all parts of an organization and how one change in one area can affect multiple other parts. Systems may not always interact in a lineal manner. Small changes in one part may cause big changes in another part, while large changes in one area may only result in small changes in another. Organizations act as systems interacting with their environment. Any equilibrium is constantly changing as the organization adapts to its changing environment

neoclassical theory