Types of Organizational Form or Structure

There are a number of structures available for a new business.

For an organization to be effective, profitable and successful, it must have a structure. A company structure defines the hierarchy of authority within the business as well as clarifies the roles and responsibilities of each department. There are a number of different forms of organizational structure available; the benefits and drawbacks of each must be considered, when starting a new business, to ensure you have chosen the right structure for your firm.

Functional

A functional organization is structured in such a way that different areas are formed, each with their own area of expertise. Examples of these functional areas include marketing, finance, purchasing and technical. These areas rarely interact and function independently. Problems arise when areas do not communicate with one another in instances where they are required to cooperate to meet a business objective.

Divisional

A divisional organization is commonly found in large companies. It is characterized by different functions being carried out in different locations, such as design, manufacturing, assembly and sales. Each division is self-contained and is responsible for standard functions, such as accounting and marketing. All divisions work towards objectives and targets set by the head office, where senior management normally resides.

Matrix

A matrix structure is a combination of the functional and divisional arrangements, often used for specific projects where expertise from a number of different fields is required. Key personnel from various sectors of the company, such as commercial, technical, finance and marketing, are placed together to work as a team to achieve an objective. This can be problematic in that a lot of time may be devoted to a project if a team struggles to contact an individual when a problem arises.

References

• HR Management Guide: Organizational Structure
• Edraw Soft: Understand Organizational Chart