Business Notes

Organizational structures

a) What are the different types of organizational structures used in organizations today?

Organizational structure refers to the hierarchical arrangement of lines of authority, communications, rights and duties of an organization. Organizational structure determines how the roles, power and responsibilities are assigned, controlled and coordinated, and how information flows between different levels of management. A well thought out and strategic structure helps support good processes for communication and clarifies lines of authority.

One of the most common organizational structures used in organizations today is the functional structure. A structure of this type groups individuals by specific functions performed. Common departments such as human resources, accounting and purchasing are organized by separating each of these areas and managing them independently of the others. This sort of organization structure helps makes the organization more efficient as specialization by function is used. Employees get experienced in and competent at one particular job. However, functional organizational structures are not nimble, flexible or easily adaptable. Indeed, this type of structure is the most rigid of all possible structures. The rigidity of the functional organization structure makes it a poor fit for dynamic environments. This system may not be suitable for large businesses with many different markets and/or products. Example: a university business school may group its staff into the main subject fields (finance; human behavior; strategy and marketing; and operations management)

A divisional structure splits an organization up into self-contained entities based on their organization outputs; geographical region operated in; or the customer groups served. Another organizational structure that is used by organizations is product organizational structure. Each product group falls within the reporting structure of a senior leadership...