8.3 Common Organizational Designs

In making organizational design decisions, managers have some common structural designs from which to choose; traditional organization designs or contemporary designs.

Traditional Organizational Designs

Simple Structure

It is an organizational design with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization.

This structure is more commonly used by small businesses in which the owner and manager are one and the same.

Functional Structure

It is an organizational design that groups similar or related occupational specialists together.

It is functional departmentalization applied to the entire organization.

8.3 Common Organizational Designs

Divisional Structure

It is an organizational structure made up of separate business units or divisions.

Each unit or division has limited autonomy, with a division manager responsible for performance and who has strategic and operational authority over his unit.

The parent corporation typically acts as an external overseer to coordinate and control the various divisions, and often provides support services such as financial and legal.

Contemporary Organizational Designs

Team Structure

In a team structure, the entire organization is made up of work teams that perform the organization's work.

Employee empowerment is crucial in a team structure because there is no line of managerial authority from top to bottom.

In large organizations, team structure complements what is typically a functional or divisional structure.

This allows the organization to have the efficiency of a bureaucracy while providing the flexibility that teams provide.

8.3 Common Organizational Designs

Matrix and Project Structures

It is an organizational structure that assigns specialists from different functional departments to work on one or more projects being led by project managers.

It superimposes a divisional structure over a functional structure in order to combine the efficiency of the functional approach with the flexibility and responsiveness to change of the divisional approach.

Each employee reports to two bosses, a functional manager and a product manager or project manager.

The advantages of this structure include efficient utilization of scarce, expensive specialist, flexibility that facilitates starting new projects and ventures quickly, and development of cross-functional skills by employees.

However, employees may be frustrated and confused as the result of dual chain of command, there may be conflicting deadlines and priorities, and too much time may be spent on coordinating decisions in meetings.

8.3 Common Organizational Designs

The Boundary less Organization

It is an organization whose design is not defined by or limited to the horizontal, vertical or external boundaries imposed by a predefined structure.

The horizontal boundaries are those imposed by work specialization and departmentalization.

The vertical boundaries are those that separate employees into organizational levels and hierarchies.

The external boundaries are those that separate the organization from its customers, suppliers, and other stakeholders.

To minimize or eliminate these boundaries, managers might use virtual or network structural designs.

Virtual organization: An organization that consist of a small core of full-time employees and that hires outside specialists temporarily as needed to work on projects.

Network organization: An organization that uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work processes. It is also called a modular organization, especially in manufacturing organizations.