Functional vs divisional organizational structure. Functional Vs. Divisional Organizational Structure 2019-01-14

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Types of Traditional Organizational Designs: Simple, Functional & Divisional Designs

functional vs divisional organizational structure

Some divisional companies exist to market the byproducts of other industries. Unfortunately, making decisions in hierarchical or pyramid-shaped organizational structures often leads to never-ending discussions of responsibility without team members ever taking any decisive action, so explore the benefits and drawbacks of each structure before settling on the one that works best for your venture. Moreover, the functional heads of all the departments report directly to the top management of the organisation. Divisional Design A divisional design structure gives larger companies the capacity to separate large sections of the business into semi-autonomous units or divisions. It facilitates adaptability and flexibility in handling diverse product or service lines, territories, differing needs of customers, alignment of divisional and corporate goals, etc. The organization structure should be carefully chosen and this will depend on the nature of the business and the preference of the top management.

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Functional Vs. Matrix Organization Structure

functional vs divisional organizational structure

Matrix A hybrid organizational structure, the matrix structure is a blend of the functional organizational structure and the projectized organizational structure. As organizations grow or their requirements change, the organizational structure can change to support its objectives. Thus, the green widget division would handle its own accounting activities, sales and marketing, engineering, production, and so forth. Very large companies with a wide variety of business and wide market coverage demonstrate the superiority of the divisional system. What Is a Matrixed Work Environment? It is a combination of the functional and divisional structures. Some managers wear functional hats and are involved in the day-to-day, more routine activities.

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4 Types of Organizational Structures

functional vs divisional organizational structure

Organizations that use a simple structure are typically flat, in that there are not many hierarchical levels such as in what you see on the screen now. They have production plants in a number of countries to produce and sell in respective countries. The divisional organizational structure is characterized by centralized decision-making and decentralized management. And besides, we get together frequently and have plenty of chances to discuss differences over a cup of coffee. This structure is all about decentralized leadership and eradicating unnecessary levels of management.

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Functional vs. divisional organizational structure

functional vs divisional organizational structure

A company will choose their organizational structure based on their needs. Management must consider how much stress will be associated with a certain pattern and whether such stress should be a serious concern. This feature is optional and can be turned off. What criteria should I use? As opposed to, the divisional structure where it is easy to fix responsibility, as every product of the organisation has separate departments. For example Samsung, Reliance etc.

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Different Types of Organizational Structure

functional vs divisional organizational structure

The hierarchical structure makes it easy to identify promotional paths for employees, providing an additional motivating factor for the workers. In particular, a division is run by its own management group, which looks out for the best interests of the division. This set-up also puts professionals who specialize in one thing together. Thus, a company organized on divisional lines could have operating groups for the United States or Europe, or for commercial customers, or for the green widget product line. Vertical Many small businesses start off with a horizontal structure. There was less differentiation between goals, since the functional specialists to a degree shared the product goals.

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Divisional organizational structure — AccountingTools

functional vs divisional organizational structure

Tax implications and additional regulations are also applicable to companies that operate in multiple countries. Each division behaves like its own company, with its own top-level management and its own subdivided units. Balanced Matrix Structure A balanced matrix has properties of both types of organizations; i. Production managers, on the other hand, noted that their jobs were well defined and that rules and procedures were more important to them. The temptation to perform every task yourself and run the company on your own beckons, but the outcome of that choice speaks for itself.

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Company Organizational Structure: Functional vs. Divisional vs. Matrix vs. Flat

functional vs divisional organizational structure

This can create tunnel vision that prevents workers from understanding the needs of co-workers tending to another project. This should increase productivity and quickly hip managers to any issues that may arise since information moves fast. As such, this company would have a quality assurance department, housing assistance, job training and a family services department. A flat structure establishes a top-down management style for temporary projects or important events. Suitability Functional structure is suitable for organizations that operate in a single location with a single product category Divisional structure is appropriate for companies that have multiple product categories and is present in a number of locations.


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Types of Traditional Organizational Designs: Simple, Functional & Divisional Designs

functional vs divisional organizational structure

Types of Organizational structure If you search the internet for this topic, you will see many theories differentiating organizations into various kinds. This approach is useful when decision-making should be clustered at the division level to react more quickly to local conditions. It is a combination of both functional and a divisional organization at the same time. This is not a bad thing. The East Coast and West Coast, for example, may sell the same product, but the responsibility for those sales would be delegated to separate internal organizations. Control is also difficult because of the huge organizational structure and it also leads to conflict.


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