5 Focuses of Organizational Structure – Strengths and Weaknesses

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A look at the basic ways to structure an organization with their respective strengths and weaknesses
Source: "TAOS: Thinking About Organization Structure" by Roger T. Sobkowiak
| visit original source   Subject: Organizational Behavior

5 Focuses of Organizational Structure – Strengths and Weaknesses

1. Functional Structure

Strengths

  • Easier to manage work within a group
  • Contains people who “speak the same language” and nurtures technical expertise, attracts and develops experts
  • Lower labor costs
  • Workload can be balanced upon demand

Weaknesses

  • Coordination and communication between departments may be slower and less accurate
  • Individual department managers have limited decision making authority
  • Different departments have different priorities; resolving conflicts may be costly; customers’ interests could be overlooked

2. Product or Service-Based Structure

Strengths

  • Responsibility for each product can be pinpointed at the division level
  • Focus on one product can produce higher quality “state-of-the-art” output
  • Team spirit develops around each product line
  • Competition among divisions can boost business
  • Encourages independent decision making
  • Quicker response to customer request

Weaknesses

  • Less sharing of resources across divisions
  • More duplication of effort resulting in higher costs
  • Customers who want more than one product/service will have to work with more than one division
  • Company may be slow to recognize that a product should be changed, dropped or added
  • Could be stifled by one product focus

3. Customer or Geography-Based Structure

Strengths

  • Unique needs of each type of customer are well served
  • Focus on customers’ needs and preferences
  • Unprofitable product lines more likely to be dropped

Weaknesses

  • May be less sharing of resources across division/departmental boundaries
  • More duplication of effort and infrastructure resulting in higher costs
  • Internal systems may evolve in different ways to serve different customer segments

4. Business Process Team Structure

Strengths

  • Focus on organization is outward to customer
  • Reduces number of levels of management – “flatten organizations” (reduced management cost; less need for coordination)
  • Time and money saved due to reduced need to pass information up and down the hierarchy and between departments
  • Promotes self-management by employees (greater job satisfaction because of more involvement)
  • Broadens individuals’ knowledge and skill bases
  • Faster decision making, reduced cycle time and improved responsiveness to customers

Weaknesses

  • Involves major transformation of the organization (difficult, timely and costly change; new systems required for virtually everything)
  • Company may need to retain functional expertise if not sufficient within each process
  • May require major and costly training initiative

5. Matrix (Hybrid) Structure (contains more than one focus; has two or more bosses)

Strengths

  • Enables organization to use its resources efficiently (provides flexibility to assign staff to project requirements and reassign as needed)
  • Takes full advantage of the use of teams (maintaining in-depth technical expertise in critical functions)
  • Provides individuals an opportunity to work with different skills and expertise
  • Requires managers to cooperate with one another and moderates their power over subordinates

Weaknesses

  • Multiple bosses may result in confusion
  • Slows down decision making
  • Conflicting demands from bosses leads to personal stress and reduced work quality
  • Power struggle between managers regarding resources
  • Can disrupt the work and get in the way of customer service
  • Subordinates may play one boss against another

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