Traditional Structures
of Business Organization
i.
Functional
Structure
Most business organizations start
out with a functional structure, or a small variation of this structure. This
is the basic "building block" for other structures. In this
structure, there is a central office which oversees various departments or
major functions, e.g., human resources, finances, sales, marketing,
engineering, etc.
Think of a picture that has a box at the top labeled
"Central Office". Think of a row of boxes underneath the top box. Each
box is labeled, e.g., sales, engineering, human resources, etc.
Connect the boxes with lines coming down from the top box to
each of the boxes below. Use functional structures when the organization is
small, geographically centralized, and provides few goods and services. When the organization experiences bottlenecks
in decision making and difficulties in coordination, it has outgrown its
functional structure.
The classic functional organization is a hierarchy where
each employee has one clear superior. Staff members are grouped by specialty,
such as production, marketing, engineering, and accounting at the top level,
with engineering further subdivided into functional organizations that support
the business of the larger organization (e.g., mechanical and electrical).
Functional organizations still have projects, but the
perceived scope of the project is limited to the boundaries of the function:
the engineering department in a functional organization will do its work
independent of the manufacturing or marketing departments.
For example, when a new product development is undertaken in
a purely functional organization, the design phase is often called a design
project and includes only engineering department staff. If questions about
manufacturing arise, they are passed up the hierarchy to the department head,
who consults with the head of the manufacturing department. The engineering
department head then passes the answer back down the hierarchy to the
engineering project manager.
ii. Projectized
Structure In this structure, there
is a centralized corporate office and under it, are various divisions each of
which is dedicated to producing and / or selling a certain type of business or
product, e.g., product 1, product 2, etc.
Each division that is dedicated to a certain business or
product is, in turn, is organized as its own functional structure.
So, for example, the division dedicated to making product 1
has its own sales department, human resources, etc. Basically, project
structure is a bunch of functional structures each of which reports to one
central office.
Use a divisional structure when the organization is
relatively large, geographically dispersed, and/or produces wide range of
goods/services.
In a projectized organization, team members are often
collocated. Most of the organization’s resources are involved in project work,
and project managers have a great deal of independence and authority. Projectized
organizations often have organizational units called departments, but these
groups either report directly to the project manager or provide support
services to the various projects.
iii. Matrix Structure Think of the functional structure. Imagine if
you took someone from each of the major functions in the functional structure
(the boxes along the bottom of the organization chart), e.g., people from
sales, engineering, etc., and organized them into a separate group intended to
produce and sell one certain kind of product or service.
Members of this group stay together until that product is
produced or they continue to sell and service it. This overall structure (made
up of a functional structure that also has groups assigned to products) is a
matrix structure.
This structure is useful because it focuses highly skilled
people from across the organization to work on a complex product or
service.
It can be difficult, though, because each person essentially
reports to two supervisors: the supervisor of the functional area (e.g.,
engineering) and the product manager, as well.
When the organization needs constant coordination of its
functional activities, then lateral relations do not provide sufficient
integration. Consider the matrix structure.
To adopt the matrix structure effectively, the organization
should modify many traditional management practices.
Matrix organizations are a blend of functional and
projectized characteristics.
Weak matrices maintain many of the characteristics of a
functional organization, and the project manager role is more that of a
coordinator or expediter than that of a manager.
In similar fashion, strong matrices have many of the
characteristics of the projectized organization—full-time project managers with
considerable authority and full-time project administrative staff.
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