This week’s MBA Mondays from our Strategic Management online MBA course is on the three types of organizational structure: simple, functional and divisional. Important for every business, organizational structure transcends everyday tasks to the entire operational base of the company. If you don’t have a clearly defined structure in place, sooner or later your business will be in trouble because your framework will crumble.
Transcript of the Lesson
Structure refers to the formalized arrangement and interaction between tasks, people and resources in an organization – and don’t forget technology. It’s most often seen as ‘Org. Chart’. Now a very simple organizational structure, this is more operationally based and comes from entrepreneurship, is where you got an owner and a few employees with some sort of tasks and responsibilities underneath it. It tends to be pretty direct supervision and pretty informal, so that’s the simplest organizational structure. Operationally based, think of your typical entrepreneur
It can be very demanding on the owner-manager; it’s like their wearing a twirly hat. Their IT, their business development, their sales, their delivery. More businesses in this country are this type – and around the world – so simple organizational structure.
Now we’ve got the functional organization. This is where you move beyond just a few people. You’ve got one person on top and usually a function, HR, IT, admin, finance, operations. There’s up top boxes underneath and there’s reporting relationships: the functional organization. Here’s an example: eleven point two, You’ve got a CEO; it’s a process-oriented functional structure.
The third type is the divisional structure, and this is where there’s a central corporate office, but where each operating division has its own functional specialists. A lot of decision making can go much quicker than taking everything up to the head office. It can also help when you’re talking about international, but each division usually has its own profit responsibility rather than up top. So, for instance, you might have the CEO and they’ll have an Americas division, a Europe division and Asia division.
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