Organizational Structure « Operations, Processes, and Decisions http://sameh.wordpress.

com/2006/05/13/a7/

A Management Blog

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, above, the employees are working in departments based on what they are doing i.e.
we have engineering department, maintenance department, finanance department, research department,
Warehouse department, purchasing department. This structure enhances the experience of each function. For
example, all the maintenance engineers are working in the same department and thus they will exchange
knowledge and support each other. This structure saves us money because of the economies of scale. This
structure makes the coordination between different department more difficult than other structures. It also
does not allow for flexibility becasue of the centralization.

Divisional structure divides, shown above, the employees based on the product/customer
segment/geographical location. For example, each division is responsible for certain product and has its own
resources such as finance, marketing, warehouse, maintnenace..etc. Accordingly, this structures is a
decentralized structure and thus allows for flexibility and quick response to environmental changes. It also
enhances innovation and differentioan strategies. On the other hand, this struture results in duplication of
resources becasue, for ex., we need to have warehouse for each division. Obviuosly, it does not support the
exchange of knowledge between people working in the same profession because part of them are working in
one division and the others are working in other divisions.

Matrix structure, shown above, combines both structures. For example, we can have a functional structure
and then assign a manager for each product. Some employees will have two managers: functional manager and
product manager. This type of structure tries to get the benefits of functional structure and also of divisional
structure; however, it is not easy to implement becasue of the dual authority. This struture is vey useful for
multinational companies.

It is important to keep in mind that each managerial decision has its pros and cons. Sometimes, writers will
convinve you that divisional or matrix structure are the recent trends and that you need to reengineer your
structure tomorrow morning. Obviuosly, this is not true. Many organizations still has functional structure and
is doing very well. It is very important to select the structure that best service your condition. What is your

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strategy? How many products do you have? What type of technology are you using? How big is your
company/organization?

Management should take necessary actions to decrease the disadvantages of the chosen structure and to
enhance its the positive effects. For example, if we think the divisional structure is the best type for our
condition then we should have tools to exchange knowledge between engineers working in different divisions.
These tools can include forums on the LAN and conferences to exchange knowledge. Conversely, if we adopt
functional struture, we can form teams from different functions to solve problems and develop our products.

Developing countries suffer from the lack of research. Most of research on organization structure based on
studying Japanes, American and European compoanies but it is rare to find a research based on a sample of
african companies. That is a challenge for managers working in developing countries because the research
does not really tell them what to do and what to expect. The differences in cultures can affect the results of
adopting certain structure in certain part of the world. Sometimes, you deal with the same organization in
different parts of the world and get very different standard of service. This shows that this multinational
organization failed to reach the same results in the developing country.

Management should not think they are going to double their profits because they adopted flat structure (less
number of management layers). If this structure reengineering is not part of a certain strategy, it will not work.
For example, if we adopt flat structure and then transfer the authorities of the middle management to the top
management then we are increasing centralization and decreasing our flexibility. Similarly, if we adopt
functional structure and allow for the duplication of resources, then we will get the disadvantages of the
functional structure and will lose one of its main advantages which is economies of scale.

Many companies have combination between functional, divisional and matrix structure. Many of the
decentralized companies will have one or two department centralized such as human resources or marketing.

Whatever structure you have, the results are the most important. The results are not your perception that you
are the best. Measure yourself compared with similar companies. Do you need one week to take a decision
that they make in one hour? Are your employees motivated more than those in other companies? Are you
devloping new products and services faster than other companies? Are you achieving your main strategy?

Read Also:

Advices for new employees

Management in Developing Countries

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Manufacturing Managment

on May 13, 2006 at 1:31 pm Comments (29)

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1. On August 8, 2006 at 11:20 am umer farooq said:

This site is so informatic about HR but

I m student of MBA i have project
how to build a HR department in organization ?
Kindly help me how to start this project

Reply

2. On August 8, 2006 at 7:50 pm sameh said:

If you want to form the HR department then you need to have different sections that cover all the HR
function which I assume you know such as recruitment, training, career planning….

If you’ll talk about HR policies then you should keep in mind the organization strategy, size, technolgy,
envirnment

In the MBA project, you usually need to apply something you learned in class in the project. So, try to
apply the theoritical tools you learned in class

I hope that helps

Reply

3. On January 22, 2007 at 8:30 pm rachael said:

i need that improvement!

Reply

4. On February 19, 2007 at 10:58 am Eoin Burns said:

I’m doing a small report on managing an organisational change in a company and I have found your site
easy, informative and above all, helpful. Thanks very much indeed.

Eoin Burns

Bsc in Construction Management

Reply

5. On July 26, 2008 at 12:35 pm Mustafa Sharifi said:

Dear all,

It’s indeed very useful information about organization structure.

With many thanks

Mustafa Sharifi

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Organizational Structure « Operations, Processes, and Decisions http://sameh.wordpress.com/2006/05/13/a7/

Reply

6. On September 2, 2008 at 6:57 am Isha said:

Very helpufll inideed. Gracious…

Reply

7. On October 8, 2008 at 4:17 am FAIZA said:

I VISITED UR SITE AND I GOT VERY VERY VALUABLE INFORMATION ABOUT MY

ASSIGNMENT.THANKS

Reply

On August 23, 2009 at 5:08 am zabih said:

Thanks that u have got full information form it and Trust on u that u r ding to do well in future

Reply

8. On October 30, 2008 at 1:44 pm Bertalem said:

what is processes based restructuring? its benefits and disadvantages?

Reply

9. On November 4, 2008 at 7:46 am ‫ ﺳﺎﻣﺢ‬said:

I don’t know this expression “Process Based Restructuring”. There is process reengineering which is
redesigning the process to eliminate waste, duplication, ….

Reply

10. On November 29, 2008 at 3:40 am desrinda said:

Hi Sameh, assalamu’alaykum.

I’ve taken the image and reffered this blog entry at mine, http://kelas.wordpress.com/2008/11
/29/organisasi-industri-11/

Jazakumullah,
Desi.

Reply

11. On December 17, 2008 at 10:45 am dhories said:

ok

Reply

12. On July 13, 2009 at 3:56 pm Vishal said:

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Organizational Structure « Operations, Processes, and Decisions http://sameh.wordpress.com/2006/05/13/a7/

Crisp information. Simple to understand. Thanks!

Reply

13. On October 1, 2009 at 11:18 am sunil said:

very helpful.i really thankful

Reply

14. On October 3, 2009 at 9:15 am luciann said:

Your organization structure is educative. thanks & be blessed

Reply

15. On December 12, 2009 at 11:44 am Samir said:

This site was very helpful, It provided effective information thus making it a lot easy to do my
assignment. Thank You.

Bsc Construction Project Management.

Reply

16. On December 27, 2009 at 2:06 pm Rohail said:

This is a very good site i like this article

Reply

17. On December 27, 2009 at 2:09 pm Robail yasrab said:

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Reply

18. On February 4, 2010 at 11:38 am Hardik H said:

it is a really great and use full information for me and my colleage friends to prepare drafet on inustrial
visit, sugen torrent power, kamrej. and i always thanks full to you.

thank you

Reply

19. On February 15, 2010 at 12:43 pm Ali said:

This information put some orders and took of some mess up in my head.
But you’ve given 3 structures, could u advise me the fourth structure for my essay?

Reply

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Organizational Structure « Operations, Processes, and Decisions http://sameh.wordpress.com/2006/05/13/a7/

On February 15, 2010 at 5:15 pm ‫ ﺳﺎﻣﺢ‬said:

Please refer to the following article

http://en.wikipedia.org/wiki/Organizational_structure

Thanks

Reply

20. On April 1, 2010 at 1:59 pm Hasan said:

What a simple informative document. Thank you very much.

Reply

21. On April 27, 2010 at 10:33 am Hakeem said:

This is a special site for organisation structure. Helpful and understandable. Thank you

Reply

On April 27, 2010 at 10:47 am ‫ ﺳﺎﻣﺢ‬said:

Thanks

Reply

22. On June 13, 2010 at 4:05 pm thushan said:

thanks for the informatoin.its easy to understand…..

Reply

On June 13, 2010 at 4:31 pm ‫ ﺳﺎﻣﺢ‬said:

You are welcome

Reply

23. On July 30, 2010 at 10:58 am krishna kumar said:

i am krishna kumar iread of this aritcal thinku you for healp

Reply

24. On August 12, 2010 at 2:34 pm Mfon said:

This is highly educative on management structure.

I learnt so much from here. Keep it up.

Reply

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Organizational Structure « Operations, Processes, and Decisions http://sameh.wordpress.com/2006/05/13/a7/

25. On September 22, 2010 at 5:32 pm utpal das said:

I have found this site to be very resourcefull and hope that this would be more student friendly in the
future …

Reply

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Organizational Structure
Challenges for Strategic Planning in Developing Countries
Electronic Requisition
Management in Developing Countries

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How to demotivate your employees?

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