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ORGANIZATIONAL STRUCTURE

It has already been emphasized in class that an organizations structure depends primarily on theorganizations goals and objectives and the strategy it adopts. It is the basic framework defining theroles, responsibilities and power in the system.

We have seen the various types of structures namely, centralized, flat, functional, matrix anddivisional. Let us classify some of known firms into these heads.

Basecamp (37signals)

Ive always kept hierarchy to a minimum. Then an employee said, Promote me, and I was forced tore-evaluate my organizational structure.Fried, CEO Basecamp

37signals is a small Chicago based software company that follows flat structure. It does not favorvertical ambition but rather revere horizontal ambition wherein employees are given full freedom toexpand their knowledge and expertise in different fields. The CEO Jason Fried says, Instead ofrewarding high performers with managerial responsibilitieswhich often drives people further awayfrom the job they are actually good atwe reward with responsibilities closer to the work.

The company has stopped all other products except Basecamp, and has changed its name to it. Theorganization structure remains to be flat.

Centralizedstructure has the top management with the decision making power which supervises andexercises control over the departments. Whereas in a decentralized structure, the decision makingpower is distributed among different departments which may have different degrees of freedom.

Flatstructure: It is usually adopted by small companies (like entrepreneurial start-ups) where there

are fewer levels of management and low departmentalization. They is generally little formalization andhave wide spans of control. An advantage of using a flat organizational structure for management isthat decisions can be made relatively quickly.

Example: 37signals

Ive always kept hierarchy to a minimum. Then an employee said, Promote me, and I was forced tore-evaluate my organizational structure.

37signals is a small Chicago based software company that follows flat structure. It does not favourvertical ambition but rather revere horizontal ambition wherein employees are given full freedom toexpand their knowledge and expertise in different fields.

Functionalstructure: Here each portion of the organization is grouped according to its function forexample there may be a marketing department, a sales department and a production department.This organizing of specialization leads to operational efficiency where employees become specialistswithin their own realm of expertise. However, one of the drawbacks to a functional structure is that thecoordination and communication between departments can be restricted by the organizationalboundaries of having the various departments working separately.

Example: McDonalds Corporate organizational structure is functional. Each department has aspecialized task and all report to the CEO. The structure consists of the CEO on the top, followed bythe chairman of the board to the board of directors. CFO follows next and next is the COO, Humanresource, legal and secretary, operations, supply chain and franchising and finally the presidents ofdifferent regions. There is a large degree of formalization and standardized ways of operations.

Matrix structure: It is a combination of two or more structures, usually divisional and functional. Herean employee has more than one boss to report to ie. Here the reporting relationships are set up as agrid or matrix rather than in the traditional hierarchy seen in other organizational structures (bothhorizontal and vertical flow of information). Employees generally have a dual reporting relationship:functional as well as the project manager.

Example: Starbucks

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Starbucks is known for its great customer experience and the company has utilized the matrixorganizational structure in their benefit to better serve their customers. This structure groupsemployees by both function and product thereby enabling them to create products that tailor tospecific regions and customers.

Divisionalstructure: A single company consists of separate, semi-autonomous units, each with its

own set of goals. This structure enables managers to supervise and focus on their respective divisionand be accountable for its success or failure. Also, narrow focus allows the companies to performeffectively as they pinpoint specific areas which need to be changed and adjusted. This structure isgenerally adopted by larger companies that operate in a wide geographic area or that have separatesmaller organizations within the umbrella group that cater to different types of products or marketareas.

Example: Walmart

Walmarts divisional structure is divided into three categories: product, market, and geographic.

Product Structure: Product structure groups employees which are based upon specific productsproduced by Wal-Mart. An example of this would be producing three distinct products, "product a","product b", and "product c" and having a separate division for each these products.

Market Structure: Market structure groups employees together based upon specific markets in whichit competes. At Walmart also a form of market structure is used. It sells products to individualconsumers and business customers. The sales and customer service departments are organizedusing market structure. Consumer sales and consumer customer service function together whilecorporate sales and corporate customer service worked together.

Geographic Structure: Geographic structure groups employees together based upon specificgeographic location. This is often used by Walmart as it operates in many areas throughout theUnited States or in both the U.S. and overseas.

References:

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

https://www.inkling.com/read/management-angelo-kinicki-brian-williams-5th/chapter-8/8-5-basic-

types-of

http://www.inc.com/magazine/20110401/jason-fried-why-i-run-a-flat-company.html

http://prabhmrkt.wordpress.com/2012/07/10/organizational-structure-starbucks-re-organizes-

structure-and-continues-to-grow/

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