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CREATING EFFECTIVE ORGANIZATIONAL STRUCTURE.. Traditional Forms of Organizational Structure Organizational structure refers to formalized patterns of

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  • Traditional Forms of Organizational StructureOrganizational structure refers to formalized patterns of interactions that link a firms tasks, technologies, and people10-*

  • Traditional Forms of Organizational StructureStructure provides a means of balancing two conflicting forcesNeed for the division of tasks into meaningful groupingsNeed to integrate the groupings for efficiency and effectiveness10-*

  • Dominant Growth Patterns of Large Corporations10-*

  • SIMPLE STRUCTURESimple StructureAn organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serve as an extension of the top executive.


  • SIMPLE STRUCTUREAdvantagesHighly informalCentralized decision makingLittle specialization

    DisadvantagesEmployees may not understand their responsibilitiesMay take advantage of lack of regulation10-*


  • FUNCTIONAL STRUCTUREFunctional StructureAn organizational form in which the major functions of the firm, such as production, marketing, R&D, and accounting, are grouped internally.10-*

  • FUNCTIONAL STRUCTUREAdvantagesEnhanced coordination and control Centralized decision making Enhanced organizational-level perspective More efficient use of managerial and technical talent Facilitated career paths and development in specialized areas10-*

  • FUNCTIONAL STRUCTUREDisadvantagesImpeded communication and coordination due to differences in values and orientationsMay lead to short-term thinking (functions vs. organization as a whole) Difficult to establish uniform performance standards10-*


  • DIVISIONAL STRUCTUREDivisional organizational structure An organizational form in which products, projects, or product markets are grouped internally.Also called multidivisional structure or M-Form


  • Divisional StructureAdvantagesStrategic business unit (SBU) structure Separation of strategic and operating control Quick response to important changes in external environment Minimal problems of sharing resources across functional departments Development of general management talent is enhanced10-*

  • Divisional StructureDisadvantages Can be very expensive Can be dysfunctional competition among divisions Differences in image and quality may occur across divisions Can focus on short-term performance10-*

  • SBU StructureStrategic business unit (SBU) structure An organizational form in which products, projects, or product market divisions are grouped into homogeneous units.


  • SBU StructureAdvantagestask of planning and control by the corporate office more manageableindividual businesses can react more quickly to important changes

    Disadvantagesmay become difficult to achieve synergiesadditional level of management increases overhead expenses


  • Holding Company StructureHolding company structure An organizational form in which the divisions have a high degree of autonomy both from other divisions and from corporate headquarters.


  • Holding Company StructureAdvantagescost savings associated with lower overheadautonomy increases the motivational level of divisional executives

    Disadvantagesinherent lack of control and dependencelimited staff support


  • Matrix Structure10-*

  • Matrix StructureMatrix organizational structurean organizational form in which there are multiple lines of authority and some individuals report to at least two managers.10-*

  • Matrix StructureAdvantagesFacilitates the use of specialized personnel, equipment and facilitiesProvides professionals with a broader range of responsibility and experienceDisadvantagesCan cause uncertainty and lead to intense power strugglesWorking relationships become more complicatedDecisions may take longer


  • QUESTIONStrategic business unit (SBU) and holding company structures result from extensive A.Diversification B.Vertical integration C.International expansion D.Organizational flattening10-*

  • THANK YOU !10-*

    Simple structure is the oldest and most common organizational formStaff serve as an extension of the top executives personalityHighly informalCoordination of tasks by direct supervisionDecision making is highly centralizedLittle specialization of tasks, few rules and regulations, informal evaluation and reward system

    Organized around products, projects, or marketsEach division includes its own functional specialists typically organized into departmentsDivisions are relatively autonomous and consist of products and services that are different from those of other divisionsDivision executives help determine product-market and financial objectives

    Strategic business unit (SBU) structureDivisions with similar products, markets, and/or technologies are grouped into homogenous SBUsTask of planning and control at corporate office is more manageableMay become difficult to achieve synergies across SBUsAppropriate when the businesses in a corporations portfolio do not have much in commonLower expenses and overhead, fewer levels in the hierarchyInherent lack of control and dependence of CEO-level executives on divisional executives

    Answer: A.Diversification