Hi, J C Jhuraney, thank you. I shall go by this process.
Organizational Structure
As you may know, there are three main types of organizational structure: functional structure, divisional structure, and matrix structure. Each structure has its own strong and weak points.
In the functional structure, employees work in departments based on what they are doing, i.e., we have the engineering department, maintenance department, finance department, research department, warehouse department, and purchasing department. This structure enhances the experience of each function. For example, all the maintenance engineers work in the same department, allowing them to exchange knowledge and support each other. This structure saves money because of economies of scale. However, it makes coordination between different departments more difficult than other structures and does not allow for flexibility due to centralization.
The divisional structure divides employees based on the product/customer segment/geographical location. Each division is responsible for a certain product and has its own resources such as finance, marketing, warehouse, maintenance, etc. This structure is decentralized, allowing for flexibility and quick response to environmental changes. It also enhances innovation and differentiation strategies. However, it results in duplication of resources, as each division needs its own resources, hindering the exchange of knowledge between professionals working in different divisions.
The matrix structure combines both functional and divisional structures. For example, we can have a functional structure and assign a manager for each product. Some employees may have two managers: a functional manager and a product manager. While this structure attempts to derive benefits from both functional and divisional structures, it can be challenging to implement due to dual authority. The matrix structure is particularly useful for multinational companies.
It is essential to consider the pros and cons of each managerial decision. Writers may suggest that divisional or matrix structures are the latest trends and that organizations need to reengineer their structures immediately. However, many organizations still successfully operate with a functional structure. It is crucial to choose a structure that best suits your needs based on your strategy, the number of products, technology used, and the size of your company/organization.
Management should take steps to mitigate the disadvantages of the chosen structure and enhance its positive effects. For instance, if a divisional structure is deemed suitable, tools should be implemented to facilitate knowledge exchange among engineers in different divisions, such as LAN forums and conferences. Conversely, with a functional structure, cross-functional teams can be formed to solve problems and enhance product development.
Developing countries often lack research on organizational structures, with most studies focusing on Japanese, American, and European companies. This poses a challenge for managers in developing countries as cultural differences can impact the effectiveness of certain structures in various regions. Companies may struggle to achieve consistent results across different countries, highlighting the need for tailored approaches.
Companies may adopt a combination of functional, divisional, and matrix structures. Even decentralized companies may centralize specific departments like human resources or marketing.
Regardless of the structure chosen, the most crucial aspect is the results achieved. Companies should measure their performance against similar organizations, assessing factors such as decision-making speed, employee motivation, product development pace, and strategy execution effectiveness.
Regards