Traditional organizational structures PDF

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Unit 5: Organizing

Activity 1: Traditional Organizational Structures What is organizing? Organizing is the process of bringing people and resources together to work toward a goal. Organizing creates structures to divide up the work, arrange the resources, and coordinate activities. Organizing identifies who does what, who is in charge of whom, and how different parts of the business relate to and work with one another. Organizing is one of the four fundamental functions of a manager along with leading, planning, and controlling.

What is Organizational Structure? An organizational structure is a formal arrangement that shows how divisions, departments, functions, and people link together and interact. These organizational workflows are depicted on a diagram called an organizational chart. The organizational chart represents the way the organization is intended to function. By examining the organizational chart of a business, there are certain things you should be able to learn. 

Work Responsibilities What the positions and job titles are.

 

Supervisory Relationships What the supervisory lines are and who reports to whom. Communication Channels What the connecting lines are and how the formal communication flows.



Levels of Management What the vertical layers of management are.

The traditional organizational structure is based on a hierarchy. The vertical hierarchy shows the chain of command. The horizontal element of the chart shows the different jobs or work specialization. Back in Unit 1, the following organizational chart showed different levels of management. Notice how this chart not only shows management levels, but also work responsibilities, supervisory relationships, and formal communication channels. An organizational chart cannot show everything that occurs in an organization. For example, the store manager from London may call one of the other store managers across the country looking for a particular product that is out of stock in his/her store.

Figure 1: A Typical Organization Chart

Traditional Organizational Structures The first decision in creating an organizational structure is to decide how to group people and jobs into work units. This process is called departmentalization. On what basis will jobs be grouped together? Some common bases are:  

function, product,

 

customer, and territory.

The four traditional organizational structures commonly used throughout the 20th century are: functional, divisional, hybrid, and matrix. Many organizations today still use one of these traditional structures.

Functional Structure In a functional structure, people performing similar tasks are grouped together. Members of functional departments share skills, technical expertise, and responsibilities, e.g., the people working in the finance department have education and training in finance and accounting. The organizational chart in Figure 2 shows only the top two layers of a common structure found in many businesses. This structure works best in businesses that produce only one product or service.

Figure 2: A Functional Organization Chart

Check out the organization chart for California ISO (California Independent System Operator Corporation) for a real-life example of an organization chart that is based on a functional structure ( See Handout).

Divisional Structure In a divisional structure people, jobs, and activities are together based on:  

product produced or service provided, process,

 

customer or client served, and geographic area.

The organizational chart shown in Figure 1 is an example of a divisional structure based on geography. Figure 3 shows a divisional structure based on product or brand. Cara Operations is a Canadian corporation that operates full-service restaurants and an airline caterer, the following depicts a possible organizational chart for Cara.

Figure 3: A divisional organization chart

Hybrid Structure A hybrid structure combines different types of divisional structure in the same organization. The larger the organization, the more likely it is that the organization will use a hybrid structure. In the example depicted by Figure 4, the top layer of organization is divided by product line. In the next layer, each product division is departmentalized by function, and then within each function there are regional divisions.

Figure 4: A Hybrid Organizational Chart

Matrix Structure The matrix structure combines the functional and divisional structures. The people in a matrix structure belong to two formal groups at the same time, a functional group and a project team. This distinction means they report to two supervisors. Matrix structures allow cross-functional teams to share expertise and information quickly to solve problems.

Figure 5: A Matrix Organizational Chart

Assignment: Assessing Organizational Structure What are the advantages and disadvantages of the functional, divisional, and matrix models of organizational structures? Based on what you studied in this activity, and your own research, complete the following table.

Structure

Functional

Divisional

Matrix

Advantages

Disadvantages...