What are the Different Types of Organizational Structures in Business?
Organizational structures define how teams are divided for activities such as task allocation, coordination, and supervision. Understanding the different types of structures, and their respective advantages and disadvantages, can help businesses align their teams with the company's business model and goals.
Let's explore the two major types of organizational structures.
Types of Organizational Structures:
Organizational structures can broadly be classified into functional and divisional structures. In his seminal book, 'High Output Management', Andrew Grove discusses these structures, providing a framework for understanding their applications and effectiveness in various business contexts.
Functional Structure:
In a functional organizational structure, the company is divided into departments based on their functions, such as marketing, finance, and operations. Each department is focused on its specific area of function, allowing for specialized processes and a high degree of functional expertise.
Example: In the marketing department, roles might be further specialized into stages of the value creation process such as lead generation, customer acquisition, and brand management. This specialization allows for deep focus and expertise in each area, contributing to more effective marketing strategies and execution.
Divisional Structure with a General Manager:
In a divisional structure, each division operates almost as its own company, with a general manager overseeing multiple functions geared towards a specific product or market segment. This structure allows for greater flexibility and faster decision making within divisions, as they are aligned more closely with product lines or geographic markets.
Example: A consumer electronics company might have separate divisions for its smartphone and laptop products. Each division would have its own marketing, development, and production departments, overseen by a general manager responsible for the division's overall performance and strategic direction.
Takeaway:
Choosing the right organizational structure is crucial for a company's success. Whether opting for a functional structure that emphasizes deep expertise and standardized processes or a divisional structure that prioritizes flexibility and responsiveness, businesses must align their organizational design with their objectives and market demands.