Fundamentals

Chapter 6: Organizational Structure

• hierarchy

o most supervision, decision making, communication occurs in clear paths between the bottom and the top of the firm

o employees communicate only with others lying 2 levels above/below

o high control and coordiantion, but costly information flow, less flexibility

A)Types of Organizational Structure

1.Functional Strcture

• CEO at the head and then the firm is divided into functions (R&D, finance, sales, marketing)

• Employees work within the function and are also promoted within the function

• high specialization, narrow jobs, narrow required skills since employee works just in the function

• cons: communication resides in own function, ignorance of other functions and their impact, no real cross functional communication

2.Divisional Structure

• CEO at the head and firm devided into divisions each of which has own functions

• divisions can be organized according products, customers, regions(divisions=minifirms)

o consider which tasks can be modulized and make divisions accordingly

• cons: divisions may focus on their own business, neglecting effect of others; self-canibalization

3.Matrix Structure

• balance between division and functions, can profit from both

• firm is divided into functional and divisional groups, each employee is assigned to 2 bosses

• functions are nested into the divisions( employees work for a certain function within a division

• cons: employees mostly focus on functional goals, since their promotion will be within the function; more bureaucracy, office policies due to incongurence of functional and divisional bosses

4.Network Structure

• cross-functional teams are build to deal with certain business issues

• flexible, relying in social-networks, fosters communication

• cons: no clear roles, responsabilities, decision structures, can be confusing, costly to coordinate

B) Factors affecting the choice of Structure

( firms...