An organizational structure defines the scope of acceptable behavior within an
organization, its lines of authority and accountability, and to some extent the organization's relationship with its external environment. More specifically, it shows the pattern or arrangement of jobs and groups of jobs within an organization and yet it is more than an organizational chart. The organizational structure pertains to both reporting and operational relationships, provided they have some degree of permanence. Centralization Although there are many types of organizational structures developed to meet each organization's needs, all of them provide a hierarchy that reports to a centralized location and group of executives. The highest ranking member of an organizational chart is one or several top executives referred to as the president, chief executive officer or chief operating officer. Job Descriptions When an organizational structure is designed, job descriptions can be developed to not only meet an organizations goals, but allow for organizational and employee growth. Internal equity and employee retention are a key to successful operations. Recruitment is also one of the highest investments for organizations, so ensuring employees have promotional opportunities and job security can assist in reducing recruitment costs Salary Organizational structure is also a fundamental core to create salary structures for an organization. Once the structure is established, salary ranges can be created for each job in the organization. In most cases, each job is aligned to a salary grade, and each grade has a specified salary range. This allows an organization to meet its financial goals and ensures salaries are distributed fairly within financial budgets. Expansion If an organization expands, the organizational structure allows room for growth. This can include adding additional layers of management, new divisions, expanding one or several functional areas or appointing additional top executives. When the structure is reorganized for expansion, it provides the foundation to edit salaries and job descriptions quickly and efficiently with minimal disruption to an organization's operations.
Types Although there is an almost infinite variety of structural forms, certain basic types predominate in modern complex organizations. The conglomerate structure is a variant of divisional structure and is thus not depicted as a fourth structure. Generally speaking, each structure tends to support some corporate strategies over others:
1. Simple structure has no functional or product categories and is appropriate for a
small,entrepreneur-dominated company with one or two product lines that operates in a reasonablysmall, easily identifiable market niche. Employees tend to be generalists and jacksof-all-trades. In terms of stages of development, this is aStage I company. 2. Functional structure is appropriate for a medium-sized firm with several product linesin one industry. Employees tend to be specialists in the business functions that are importantto that industry, such as manufacturing, marketing, finance, and human resources. Interms of stages of development, this is a Stage II company. 3. Divisional structure is appropriate for a large corporation with many product lines in severalrelated industries. Employees tend to be functional specialists organized according toproduct/market distinctions. General Motors, for example, groups its various auto linesinto the separate divisions of Saturn, Chevrolet, Pontiac, Buick, and Cadillac. Managementattempts to find some synergy among divisional activities through the use of committeesand horizontal linkages. In terms of stages of development, this is a Stage III company. 4. Strategic business units (SBUs) are a modification of the divisional structure. Strategicbusiness units are divisions or groups of divisions composed of independent productmarketsegments that are given primary responsibility and authority for the managementof their own functional areas. An SBU may be of any size or level, but it must have: 1. a unique mission 2. identifiable competitors 3. an external market focus, and 4. controlof its business functions The idea is to decentralize on the basis of strategic elements rather than on the basis of size, product characteristics, or span of control and to create horizontal linkages among units previously kept separate. For example, rather than organize products on the basis of packaging technology like frozen foods, canned foods, and bagged foods, General Foods organized its products into SBUs on the basis of consumer oriented menu segments: breakfast food, beverage, main meal, dessert, and pet foods. In terms of stages of development, this is also a Stage III company. 5. Conglomerate structure is appropriate for a large corporation with many product linesin several unrelated industries. A variant of the divisional structure, the conglomeratestructure (sometimes called a holding company) is typically an assemblage of legally independentfirms (subsidiaries) operating under one corporate umbrella but controlledthrough the subsidiaries boards of directors. The unrelated nature of the subsidiaryprevents any attempt at gaining synergy among them. In terms of stages of development, this is also a Stage III company.
If the current basic structure of a corporation does not easily support a strategy under consideration,top management must decide whether the proposed strategy is feasible or whetherthe structure should be changed to a more advanced structure such as a matrix or network.
Application
Simple Structure: A sole proprietorship has a simple organizational structure; it is are
owned and operated by a single individual who has the final say about strategic, financial and marketing matters. Even if a sole proprietor hires employees, a sole proprietorship is, in effect, a benevolent dictatorship. The business owner does not have to answer to anyone regarding decisions about business operations. He only needs to keep business operations safe and legal and run a business that is profitable enough to meet its financial obligations.
Fuctional Structure: The functional structure feature of Starbucks Coffees
organizational structure refers to grouping based on business function. For example, the company has an HR department, a finance department and a marketing department. These departments are most pronounced at the top levels of Starbucks Coffees organizational structure, such as at the corporate headquarters. This feature relates with hierarchy in the organizational structure of Starbucks. For instance, the corporate HR department implements policies applicable to all Starbucks cafs. The functional structure feature of the firms organizational structure facilitates top-down monitoring and control, with the CEO at the top.
Divisional Structure: For an organization as big as Coca-Cola, it is vital that the
methods they adopt for the division of work among members of the organization are effective and successful. They have achieved this through global and local strategies. The division of labor can be unique in many organizations. It has been coined a production process in which a worker or group of workers are assigned a specialized task in order to increase efficiency. This is the case for the Coca Cola Company. Primarily the company has a very tall hierarchy in place and subordinates that are then divided up by regions. The Coca Cola Company being a truly global organization uses the design of division of work by location. Each area/region has a certain amount of subordinates designated to that specific area; however, the number of employees delegated to one region may be different to another. By dividing its employees up according to geographic location, the company benefits on many levels. For example, being closer to a certain market allows the teams involved to work accordingly with regards to advertising campaigns, meeting the tastes of consumers of that region etc. Each region is then sub divided e.g. Europe divided up in to North West and South East, Nordic and Baltic.
Strategic Business Units: P&Gs structure has removed many of the traditional overlaps and inefficiencies that exist in many large companies.
Global Business Units (GBUs) focus solely on consumers, brands and
competitors around the world. They are responsible for the innovation pipeline, profitability and shareholder returns from their businesses.
SBUs make you Organized The first principle of time management is to get organized. Similarly, one of the first things you gotta do is to see your organization clearly. And that can happen only if you are organized. If one of your marketing managers is handling 34 different products, then definitely he is gonna get confused with operating all of them. The strategies might be hazy, there will be no time for creativity or innovation and all the time will be spent in just handling the existing work rather then expansion. Thus the first thing SBUs do is they help you get organized.
Micro manage Naturally once you are organized, you can micro manage things. Just take an example of large companies like HUL and P&G (the best examples of multi product organizations). They have at least 30 different products at all times. Each of them requiring separate manpower, strategies, expenses and returns. Thus this needs micro managing of the highest aspect. With SBUs another factor which is very important is FOCUS. Micro managing helps you focus on each and every product separately.
Conglomerate Structure: A conglomerate is a corporation that is made up of a
number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately.
The first and foremost advantage of conglomerate structure is that it helps the company in diversification hence a company is less vulnerable to losses due to decline in sales in one sector or industry.
It is also helpful when the company has excess cash but does not have enough opportunities for growth investing in the same industry and hence buying a company outside of industry is best bet for such companies which are having excess cash as it results in good utilization of cash rather than company sitting on idle cash. It increases the customer base of the company and hence company can cross- sell its products to the new customer base which in turn leads to increase in the sales of its core products leading to higher profits for the company.
