CHAPTER 6 - Forms of Organizational Structure

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Forms of Organizational Structure

CHAPTER 6


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Learning Objectives

rms/osm401

After reading this chapter, you should be able to

discuss the factors that influence a firms organizational structure.

describe centralization and decentralization, delegation, andauthority as the key ingredients in establishing the decision-makinghierarchy.

explain the differences among functional, divisional, matrix, andinternational organizational structures.

describe the informal organization and discuss intrapreneuring.


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Forms of Organizational Structure

rms/osm401/Chapter 6

DivisionalOrganization

International

Organization

FunctionalOrganization

MatrixOrganization


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Basic Forms


Functional structure

Divisional structure

Matrix structure

International structure


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Functional Structure


Mostly practiced by small to medium-size firms.Such organizations are usually structured around

basicbusiness functions such as marketing, operations,

financeThe benefits of this approach: specialization within functional areas smoother coordination among them

Functional organization may foster centralization

and makes accountability more difficult


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Divisional Structure


Organizational structure in which corporate divisionsoperate as autonomous businesses under the largercorporate umbrella

Relies on product departmentalization

Structured around several divisions departmentsthat resemble separate businesses in that theyproduce and market their own products


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Divisional Structure



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Matrix Structure


Organizational structure created bysuperimposing one form of structure onto another

It is organized along two dimensions, such ascombining a functional and a divisional structure


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International Structure


Developed in response to the need tomanufacture, purchase, and sell in global markets


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Informal Organization


Network, unrelated to the firms formal authoritystructure, of everyday social interactions amongcompany employees

Negative reinforce office politics that put the

interests of individuals ahead of those of the firmCan cause harm due to distorted or inaccurate

information communicated without management inputor review


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3 Elements of Informal Organization


Informal groups

Organizational grapevine

Intrapreneuring


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Informal groups


Informal groups

Groups of people who decide to interact amongthemselves Positive impact on the company if they work together to

support the organization Negative impact on the company if they work together against

the organizations interests or dong doing something irrelevantto the organization


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Organizational Grapevine


An informal communication network that can runthrough an organization

How can manager eliminate this:

Maintaining open communication and responding

vigorously to inaccurate informationUse the key person in grapevine to sound out

employee reactions to new ideas

Manager may get valuable information from thegrapevine and use it to improve decision making


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Intrapreneuring


Process of creating and maintaining the innovationand flexibility of a small-business environment withinthe confines of a large organization

Experienced managers recognize that the informalorganization exists whether they want it or not

Managers know how to use the informalorganization to reinforce the formal organization

The energy of the informal organization can beharnessed to improve productivity

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CHAPTER 6 - Forms of Organizational Structure