Functional structure; a design that groups people together on the basis of their
common expertise and experience or because they use the same resources.
Advantages of a functional structure:
- Functional structure develops first and foremost because it provides people
with the opportunity to learn from one another and become more
specialized and productive. When people with skills in common are
assembled into afunctional group they can learn the most efficient
techniques for performing a task, or the best way to solve problems.
- People who are grouped together by common skills can supervise one
another and control one another’s behavior
- People in a function who work closely with one another over extended time
periods develop norms and values that allow them to become more
effective at what they do.
Control problems in a functional structure:
- All organizations become divided into independent functions because this
promotes specialization and the division of labor, a major source of
increased effectiveness.
- Communication problems; as more organizational functions develop, each
with its own hierarchy, they become increasingly distant from one another.
They develop different subunit orientations that cause communication
problems.
- Measurement problems; to exercise control over a task or activity, there
has to be a way to measure it. However, as organizations grow and the
number and complexity of their functions and products increases, the
information needed to measure the contribution of any one function or
product to overall profitability is often difficult to obtain.
- Location problems; Geographic spread can pose a problem within a
functional structure when centralized control from one geographic location
prevents this from happening: manufacturing, sales and other support
activities are not allowed to become responsive to the needs of each
region.
- Customer problems; as the range and quality of an organization’s products
increases, more and more customers are attracted to the organization and
they have different kinds of needs. Servicing the needs of new kinds of
customer groups and tailoring products to suit them are relatively difficult
in a functional structure.
- Strategic problems; as an organization becomes more complex, top
managers may be forced to spend so much time finding solutions to
everyday coordination problems that they have no time to address the
longer-term strategic problems facing the company.
, Managers regain control of their organizations when they decide to adopt a more
complex structure which is the result of three design choices:
1) An increase in vertical differentiation; this typically involves increasing
the number of levels in the hierarchy, deciding how much decision-
making authority to centralize at the top of the organization and
deciding how much to use rules, SOPs and norms to standardize the
behavior of low-level employees.
2) An increase in horizontal differentiation; this involves overlaying a
functional grouping of activities with some other kind of subunit
grouping – most often, self-contained product teams or product
divisions that contain the functional resources needed to meet their
goals.
3) An increase in integration; the higher the level of differentiation the
more complex the integrating mechanisms that managers need to use
to control organizational activities. Organizations need to increase
integration between subunits to increase their ability to coordinate
activities and motivate employees.
Divisional structure; a structure in which functions are grouped together
according to the specific demands of products, markets or customers.
Product structure; a divisional structure in which products (goods or services) are
grouped into separate divisions, according to their similarities or differences.
Product division structure; a divisional structure in which a centralized set of
support functions services the needs of a number of different product lines. See
figure 6.4
Multidivisional structure; a structure in which support functions are placed in self-
contained divisions. See figure 6.6
Self-contained division; a division that has its own set of support functions and
controls its own value-creation activities.
Corporate headquarters staff; corporate managers who are responsible for
overseeing the activities of the divisional managers heading up the different
divisions.
For the overall structures see also figure 6.7
Advantages of a multidivisional structure:
- Increased organizational effectiveness; a division of labor generally
increases organizational effectiveness. In a multidivisional structure there
is a clear division of labor between corporate and divisional managers.
- Increased control; corporate managers monitor the performance of
divisional managers. The extra control provided by the corporate office
encourages the stronger pursuit of internal organizational efficiency by
divisional managers.
common expertise and experience or because they use the same resources.
Advantages of a functional structure:
- Functional structure develops first and foremost because it provides people
with the opportunity to learn from one another and become more
specialized and productive. When people with skills in common are
assembled into afunctional group they can learn the most efficient
techniques for performing a task, or the best way to solve problems.
- People who are grouped together by common skills can supervise one
another and control one another’s behavior
- People in a function who work closely with one another over extended time
periods develop norms and values that allow them to become more
effective at what they do.
Control problems in a functional structure:
- All organizations become divided into independent functions because this
promotes specialization and the division of labor, a major source of
increased effectiveness.
- Communication problems; as more organizational functions develop, each
with its own hierarchy, they become increasingly distant from one another.
They develop different subunit orientations that cause communication
problems.
- Measurement problems; to exercise control over a task or activity, there
has to be a way to measure it. However, as organizations grow and the
number and complexity of their functions and products increases, the
information needed to measure the contribution of any one function or
product to overall profitability is often difficult to obtain.
- Location problems; Geographic spread can pose a problem within a
functional structure when centralized control from one geographic location
prevents this from happening: manufacturing, sales and other support
activities are not allowed to become responsive to the needs of each
region.
- Customer problems; as the range and quality of an organization’s products
increases, more and more customers are attracted to the organization and
they have different kinds of needs. Servicing the needs of new kinds of
customer groups and tailoring products to suit them are relatively difficult
in a functional structure.
- Strategic problems; as an organization becomes more complex, top
managers may be forced to spend so much time finding solutions to
everyday coordination problems that they have no time to address the
longer-term strategic problems facing the company.
, Managers regain control of their organizations when they decide to adopt a more
complex structure which is the result of three design choices:
1) An increase in vertical differentiation; this typically involves increasing
the number of levels in the hierarchy, deciding how much decision-
making authority to centralize at the top of the organization and
deciding how much to use rules, SOPs and norms to standardize the
behavior of low-level employees.
2) An increase in horizontal differentiation; this involves overlaying a
functional grouping of activities with some other kind of subunit
grouping – most often, self-contained product teams or product
divisions that contain the functional resources needed to meet their
goals.
3) An increase in integration; the higher the level of differentiation the
more complex the integrating mechanisms that managers need to use
to control organizational activities. Organizations need to increase
integration between subunits to increase their ability to coordinate
activities and motivate employees.
Divisional structure; a structure in which functions are grouped together
according to the specific demands of products, markets or customers.
Product structure; a divisional structure in which products (goods or services) are
grouped into separate divisions, according to their similarities or differences.
Product division structure; a divisional structure in which a centralized set of
support functions services the needs of a number of different product lines. See
figure 6.4
Multidivisional structure; a structure in which support functions are placed in self-
contained divisions. See figure 6.6
Self-contained division; a division that has its own set of support functions and
controls its own value-creation activities.
Corporate headquarters staff; corporate managers who are responsible for
overseeing the activities of the divisional managers heading up the different
divisions.
For the overall structures see also figure 6.7
Advantages of a multidivisional structure:
- Increased organizational effectiveness; a division of labor generally
increases organizational effectiveness. In a multidivisional structure there
is a clear division of labor between corporate and divisional managers.
- Increased control; corporate managers monitor the performance of
divisional managers. The extra control provided by the corporate office
encourages the stronger pursuit of internal organizational efficiency by
divisional managers.
