Organizational Structure Analysis

Management Theory and Practice/MGT 230

University of Phoenix

Organizational Structure Analysis

The success of any organization depends on many factors. A company’s organizational structure is an integral piece of that puzzle. Organizational structure is a process that defines the chain of command within an organization. To determine which structure best suits an organization, the staff and workload are divided into smaller groups, or departmentalized. The structures in which these smaller groups are departmentalized can be classified by three different approaches: functional, divisional, and matrix (Bateman, & Snell, 2011, p. 287).

What is Functional Structure?

The functional type of organization is a common type amongst many large businesses. This system creates different departments to specialize in areas from human resources, finance, revenue, to any other business function. Major corporations and organizations, such as The Walt Disney Company, the United States Military, many different Governmental units, and many Fortune 500 companies, have organized themselves into functional structures.

Davoren (n.d.) stated:

When companies use a functional organizational structure, people with similar knowledge and skills are grouped together. This makes it possible for employees to become specialists in their field. It requires a performance management system that allows for the promotion, development and visibility of individual skills within their functional area. The specialization that functional structures hone helps to bring about in-depth knowledge and skill development among the employees, and this can help you achieve your company’s functional goals… In addition, the clear nature of the career path within the functional unit makes it possible for employees to be highly motivated to advance their careers as they move up within the hierarchy.

A great example of this is when a company separates its human resources department or finance department. These two areas specialize in fields of insurance, money, and paychecks. Employees from any department can consult these departments to receive expert advice and information.

The functional organizational structure can also have some major draw backs that affect productivity and efficiency. Communication in businesses utilizing functional structures can be difficult because of predetermined operations and the high degree of formalization. This can make the decision-making process slow and inflexible. Since this structure is more bureaucratic and has a high level of politics, functional units are often not accountable for each other, resulting in poor coordination or cooperation within the departments. Negative levels of innovation and restricted views of organizational goals can affect employees’ motivation. Although functional units are often known to perform with high efficiency, cooperation with each other can be compromised. Groups may have difficulty working well together or they may become territorial or unwilling to cooperate. Disagreements among departments can cause delays and the outcome is reduced organizational commitment and loss of revenue.

For example, when a company separates marketing and public relations department. These two departments each interact with the public using their specialized skills and are hyper-efficient at their own craft. If one department treads on the other’s territory, conflict and disagreements can result, instead of cooperation.

What is Divisional Structure?

A divisional organization can be defined as “departmentalization that groups units around products, customers, or geographic regions” (Bateman, & Snell, 2011, p. 289). A divisional organizational structure is an organization that has several different product divisions in which each are a part of an overall corporation. An advantage to this structure is that each division has its own leader, such as a president or vice president. Having its own manager will ensure that each division receives the appropriate resources it needs from the company (Gillikin, n.d.). A disadvantage to the divisional organization is the competition that exists between divisions. When divisions compete against each other, there’s a possibility of office politics. If this happens, it can distract team members from proper strategic thinking, which is not beneficial to the overall well-being of the company. If the divisional organizational structure creates inter-office politics, the employees will be preoccupied with the conflict, rather than focused on the department tasks. Distracted employees do not put forth their best efforts, therefore hindering the overall effectiveness of the company.

What is Matrix Structure?

Matrix organizations “facilitates the horizontal flow of skills and information. It is used mainly in the management of large projects or product development process, drawing employees from different functional disciplines for assignment to a team without removing them from their respective position” (Business Dictionary, 2014). The benefits of a matrix organization structure is there is frequent open communication between departments, which, can lead to solving problems faster, and or developing ideas quicker because you have employees who are specialized in different areas working together. This allows employees to contribute their own perspective on the project, which can increase employee motivation. Matrix structure allows supervisors to select the brightest individuals from functional area departments and put them in team projects. In addition, functional supervisors can focus on what they specialize in, while, project managers supervisor the outcome of the project or development of the product. Drawbacks of matrix organization structure are in its complexity. It can be confusing at times for employees when they have two supervisors to report to and can receive different directions from each supervisor. Due to the overlap in supervision is hard to determine accountability. Furthermore, it can be a strain on financial resources when you have to maintain double management, (Johnson, n.d.).

Description and Analysis of Current Employer’s Structure?

BOBBY: The organizational structure of my current employer is a functional structure. The sections of my place of employment are separated according to its purpose. The functional type of structure is working well for my current organization. There is a sales, service and marketing department. Each of these departments has a manager and several staff members. The managers have meetings once each week at the beginning of the week to discuss what happened the week prior, problems that need addressing immediately and how they can improve in the upcoming meet. The managers of each department also meet, in depth, once a month. These more in depth meetings allow them to talk about problems that need addressing with the employees, sales strategy, or marketing for each department. It also allows them to look over the finances and resources of the company, overall, to see if there needs to be any reallocating. The final thing these meetings allow for, is the opportunity to discuss the goals that have been set, met, or goals that need to be set, and what needs to happen to achieve certain goals. I believe, for my company, the divisional organizational structure is working well, and meets the needs of the position the company is currently in.

HECTOR: I would describe the organization structure at my place of employment, Coyne Powersports Group, as a functional organization structure. We have our president at the top and our vice president under him. Each department head reports to the president and vice president. We have two other dealerships with the same organization structure. The organization structure seems to work fine, however, the president likes to stay involved in the day to day operations and he is not always available to make decisions or sign documentation because of other business ventures he is involved in. Because, he is 100% stock holder in the company all legal documentation must be signed by the owner president.

JESSICA: The organizational structure of Roadrunner Pharmacy is a functional structure. Departments are divided by their business function and all top level management report to the CEO and owner of the company. Each department has middle level and frontline managers to assist with goals and tasks. For this organization, a functional structure works well. Because it is a mid-sized company, with less than 500 employees nationwide, the CEO still has an influential presence at the home location. The only employees who do not report to the home office on a daily basis are the outside sales associates. These associates are managed by the sales director, however, who does report to the home office daily.

JON: The Walt Disney Company is a multinational multimillionaire dollar entertainment company. It is an excellent example of a working Functional Organization. It has a built in hierarchy starting with its CEO Bob Iger. Below Iger there are different chairmen that hold different positions that maintain separate functions of the company. As Disney maintains different lines-of-business, it can be complicated and vast to understand. The most clear to understand would be the Disneyland Resort in Anaheim. It departmentalizes Human Resources, Finances, Marketing, Public Relations, Information Technology, Stores, Attractions, Entertainment, and Maintenance just to name a few. Having these departments specialize in their trades makes them excel and have increased efficiency. This can also create a sense of entitlement and rivalry between departments, as employees tend to favor and center themselves on their own department. This leaves the employee seeing the closeness of the department rather than the company as a whole.

In the early stages of the Walt Disney Company, in 1946 when Walt Disney was alive, the company was run a little differently. It ” had a different approach even way back when. Perhaps this is unsurprising for a company whose name is built on creativity. Sure, the Big Mouse sits on his throne at the top, distinguished by majestic cursive. But everybody else is put on equal footing, centered on the creation of their product (which comes out right at the end). (Disney, n.d.).The times changed with Federal and States laws organization had to change as well. On top of the company growing to include not thousands, but hundreds of thousands of employees, departments like Human Resources had to grow and develop. Having it specific department allowed skill employees to become the experts of their craft.

Conclusion

In summary, business success is complex and it requires many pieces coming together and working cohesively. Part of a business’ success depends on the organizational structure of the organization. Whether a functional, divisional, or matrix organizational structure is utilized, businesses must determine how to maximize the productivity and increase the revenue. Through examination of several companies, Team A has determined that a functional structure is the most advantageous for a successful organization.

References

Bateman, T., & Snell, S. (2011). Management: leading and collaborating in a competitive world (9th ed.). New York, NY: McGraw-Hill.

Business Dictionary. (2014). Matrix organization. Retrieved from http://www.businessdictionary.com/definition/matrix-organization.html.

Davoren, J. (n.d.). Functional structure organization strength & weakness. Houston Chronicle. Retrieved from http://smallbusiness.chron.com/functional-structure-organization-strength-weakness-60111.html

Disney Organizational Chart: Creative Corporate Structure in 1943. (n.d.). Yester. Retrieved from http://yester.ly/business/2013/10/16/disney-organizational-chart/

Gillikin, J. (n.d.). Advantages & disadvantages of divisional organizational structure. Houston Chronicle. Retrieved from http://smallbusiness.chron.com/advantages-disadvantages-divisional-organizational-structure-611.html

Johnson, R. (n.d.). Advantages & disadvantages of matrix organizational structure in business organizations. Houston Chronicle. Retrieved from http://www.smallbusiness.chron.com-disadvantages-matrix-organization-sturcture-business-organization-26350.html