Introduction to Management

Chapter Summary

Every organization has some goals and objectives and one of the important factors that affect these goals is the organizational structure. The efficiency with which an organization accomplishes its goals and objectives depends on the structure it adopts.

Departmentation is the process of grouping activities to achieve organizational goals and objectives, and delegating authority to a manager to supervise the division and guide the staff, making him responsible for its results. The process of developing a structure is also referred to as organization design.

There are four major structural alternatives - functional structure, divisional structure, hybrid structure, and matrix structure. The functional structure is a type of organization structure which groups positions on the basis of main functional or specialized areas. The divisional structure is a type of departmentation based on similarity of products, services or markets. It has three major forms - product division, geographic division, and customer division.

The form of divisional structure chosen depends on the rationale for divisionalization. A divisional structure can be adopted by organizations that are fairly large and have different products or services, operate in different geographic areas or cater to different customer segments. Many organizations, especially large organizations, adopt hybrid structures in order to incorporate the advantages of both functional and divisional structures.

Organizations requiring functional expertise and/or efficiency, and which operate in uncertain environments can adopt a hybrid structure. A matrix structure is a type of departmentalization that superimposes a horizontal set of divisional reporting relationships onto a hierarchical functional structure. The essence of a matrix organization is the combination of functional and product or project patterns of departmentation in the same organization structure.

In addition to the major structural alternatives, other bases for departmentation include - departmentation by simple numbers, departmentation by time, and departmentation by process or equipment. SBUs are distinct businesses set up as units in a larger company to ensure that a certain product or product line is promoted and handled as though it were an independent business.

The basic purpose of SBU is to give all the products equal attention and care. There is no universal basis for departmentation that is applicable to all organizations and all situations. Every pattern of departmentation has its own advantages and disadvantages. So, an organization has to select the basis of departmentation that is best suited to its needs.

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