Types of Organizational Hierarchy
Management organizes its resources --- both economic and human --- in structures that better enable it to respond to changing circumstances and to seize rising opportunities. No organizational structure can be considered best, as each structure has its own advantages gained at the cost of its disadvantages. For example, the project structure permits greater focus on each individual project at the cost of managerial redundancies. It's fairly common for businesses to adopt portions of different structures.
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Function
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Function organizational structure is one of the most common type of organizational hierarchies. Under this system, a business is organized into departments based on the nature of the duties that the employees perform. For example, such a business might have a human resources department, a production department and an accounting department. This structure concentrates on expertise at the cost of making coordinating for projects more difficult.
Product
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Product organizational structure organizes the business's employees in accordance with the product that they're assigned to. For example, a motor vehicle company might organize itself so that there's a department that handles each of its brand names and their associated vehicles. Product organizational structure enables better coordination on specific products but at the cost of a dispersal of expertise in the more technical functions.
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Geographic
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Geographic organizational structure divides a business into segments based on the geographic location on which they're expected to concentrate. For example, an international business might have Asia and Europe divisions in addition to its North American division, while a business set in the United States might have a segment based in New England, another in the Midwest and one more for the South. Geographic structure is often combined with other organizational structures. The advantage of this structure is that regional departments are better able to respond to changes in those regions; its disadvantage, however, is that each regional department needs more staff and resources to operate independently of the others. For example, instead of one consolidated human resources department, each regional department needs its own human resources sub-department.
Matrix
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The matrix organizational structure is a combination of the function and project structures. Each employee in a matrix structure answers to two managers: one from a functional department and one who heads the project. Matrix structures enable better responsiveness to changing situations and a concentration of expertise but at the cost of redundant management tiers.
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References
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