21.10.

2021

Organization Structure
structure includes three key components pertaining to both
vertical and horizontal aspects of organizing:

designation of formal reporting relationships including number

of levels in the hierarchy and span of control of managers and
supervisors;
grouping of individuals into departments and of departments
into the total organization;
design of systems to ensure effective communication and
coordination across departments.

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Vertical linkages Horizontal linkages

Hierarchical referral Information systems
illustrated by the vertical lines. cross-functional information systems enable employees to
the lines of the organization chart act as the communication channel. routinely exchange information.
Rules and plans Direct contact
for repetitious problems and decisions, a rule or procedure can be
established so employees know how to respond without employees from different departments directly
communicating on each separate issue. communicate (to solve a problem)
Vertical information systems
this strategy to increase vertical information capacity includes periodic the liaison role can be used to identify a person in one
reports, written information and computer-based communications department with the responsibility for communicating and
distributed to managers.
achieving coordination with another department.

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Horizontal linkages Vertical linkages vs. Horizontal linkages

Task forces
a temporary committee composed of members from each department
to accomplish a specific task/solve a common problem
the task force is disbanded after tasks are accomplished.
Integrator
is created to achieve coordination between two or more departments.
the integrator does not have formal authority over team members but
nevertheless the integrator has responsibility for the entire project.
Teams
teams can be the strongest horizontal linkage mechanism.
teams are permanent task forces, often used in conjunction with a full-
time integrator.
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Techniques for Achieving

Coordination Coordination
coordination is the process of achieving unity of action among standardization
interdependent activities. work and process
outputs or targets
type of coordination used is directly related to the stability of direct supervision
the situation. using the hierarchy
where the problems are recurring and routine, coordination by departmentation
plan can be utilized.
using a liaison or an integrator
in situations that are rapidly changing and in which novel
problems are the rule, coordination by feedback is more task forces, teams
appropriate.

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Communication Departmentation
the exchange of information departmentation is the process through which organizational
in some organizations, communications are written and highly activities are grouped logically and assigned to managers.
formalized, whereas in others, they are unwritten and it is the organizationwide division of work.
informal. departments are created to perform important tasks.
organization structure restricts communications to relatively
few, formal channels.
departmental grouping options
lead to a lack of responsiveness.
departmentation by function, product, territory, matrix,
informal communications must be encouraged horizontal , virtual, or hybrid.

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Departmentation by function
President
grouping activities around essential functions such as
production, marketing and finance.
it is a simple, straightforward and logical way to organize and
more appropriate in mechanistic situations.

enables in-depth knowledge and skill development but leads Finance Marketing Production
to poor horizontal coordination among departments
as size and diversity of products increase, coordinating
becomes difficult and the organization may lose its
responsiveness.

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Departmentation by product President

department heads are typically responsible for both producing and

marketing a product
involves high coordination across functions
Vice President Vice President Vice President
decentralized decision-making, allowing departments to adapt to Product A Product B Product C
differences in products or customers

leads to poor coordination across product lines

Production
eliminates in-depth competence and technical specialization
makes integration and standardization across product lines difficult Finance

widely used in large organizations with several products Marketing

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Departmentation by territory President

geographic departmentation
seperate departments are organized for each of territories in
which the enterprise does business.
Vice President Vice President Vice President
organizing territorially can better serve to different tastes and Region A Region B Region C
needs of customers in each geographic area.

Production

Finance

Marketing

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Matrix structure
when the structure needs to be multifocused for simultaneous
emphasis on both product and function, the matrix structure
can be considered.
it gives dual lines of authority to both the functional and product
chains simultaneously.

a manager is put in charge of each project and is given the

authority and responsibility for completing the project.
this manager is assigned a number of personnel from the
various functional department.

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Matrix structure Matrix structure

violation of «unity of command»
achieves coordination necessary to meet dual demands from
customers
three conditions are necessary for the matrix: suited to complex decisions and frequent changes in unstable
environment
utilization of limited internal resources provides opportunity for both functional and product skill
environmental pressure for two or more critical factors development
such as in-depth technical knowledge and frequent new
products causes participants to experience dual authority, which can be
frustrating and confusing
the environment is both complex and uncertain. participants need good interpersonal skills and extensive
training
requires great effort to maintain power balance
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Horizontal structure Top

Management

organizes employees around core processes by bringing

together people who work on a common process so they
Process Team Team Team
can easily communicate and coordinate their efforts. Owner 1 2 3

Market Product
Research Testing Customer
structure is designed around cross-functional core Analysis Planning

processes rather than tasks, functions, or geography. New Product Development Process

the traditional vertical hierarchy with departmental Process

Owner
Team
1
Team
2
Team
3
boundaries is eliminated; «zero hierarchy»
Material
Analysis Purchasing
Flow
Distrib. Customer

self-directed teams are the basis of organizational design Logistics Process

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Horizontal structure Horizontal structure

process owners have responsibility for each core process flexibility and rapid response to changes in customer needs
team members are given the skills and authority to make directs the attention of everyone toward the production and
decisions central to the team’s performance delivery of value to the customer
customers drive the horizontal corporation with each employee has a broader view of organizational goals
effectiveness measured by performance objectives. promotes a focus on teamwork and collaboration
the culture is open, trustful and collaborative, with a improves quality of life for employees by offering them the
focus on continuous improvement. opportunity to share responsibility, make decisions, and be
accountable for outcomes

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Horizontal structure Virtual Network (Modular) structure

beyond the boundaries of the traditional organization
determining core processes to organize around is difficult and
time-consuming outsourcing
requires changes in culture, job design, management contracting out certain organizational functions such as
philosophy, and information and reward systems manufacturing, information technology, selling/advertising,
traditional managers may balk when they have to give up logistics, customer relations
power and authority the organization
requires significant training of employees to work effectively in subcontracts many or most of its major processes to
a horizontal team environment seperate companies ;
plans and coordinaties the activities from a small
headquarter.

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Virtual Network structure Virtual Network structure

enables the organization to obtain talent and resources managers do not have hands-on control over many
gives an organization immediate scale and reach without activities and employees
hugh investments in factories, equipment or distribution requires a great deal of time to manage relationships and
facilities potential conflicts with contract partners
enables the organization to be highly flexible and there is a risk of organizational failure if a partner fails to
responsive to changing needs deliver or goes out of business
reduces administrative overhead costs employee loyalty and corporate culture might be weak

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Hybrid Structure Symptoms of

Structural Deficiency
Vice President and
General Manager
decision making is delayed or lacking in quality
Functional
Structure Finance
Strategy and
Communication
Human
Resources the organization does not respond innovatively to a
changing environment
Director and
Process Owner Teams employee performance declines
Horizontal Structure

Parts Supply / Logistics Group

Director and
underachievement of departmental targets
Process Owner Teams

Vehicle Service Group

too much conflict is evident
Director and
Process Owner Teams

Technical Support Group

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