Organizational structure is a formal interaction and coordination pattern formulated by an organization’s management to link different tasks within the organization as performed by different individuals and teams within the organization to achieve organizational goals and objectives (Stacey, 2003). This definition of organizational structure indicates that there exists a different type of structures for different organizations depending on the views of the management teams which designs each structure. Each of these organizational structures affects the organization’s management in different ways.
One of the organizational structures is the functional structure. In this structure, the organization’s management is divided according to the role played by each manager and each manager is assigned a department that deals with his roles.
Functional Organizational Structure
The functional structure enables the chief executive to be in closely in touch with the operations of all departments. The structure also simplifies the control mechanisms within the organization because each department has a manager who controls that department’s operations (Stacey, 2003). Clear definition of responsibilities is also enhanced. Middle and senior management levels in the functional structure are also composed of specialists who run various departments at different levels depending on their knowledge and skills.
However, this structure also affects organizations’ management negatively. First, the top-level management in such an organizational structure is often over-burdened with routine issues. Top managers may also neglect organizations’ strategies. Furthermore, it is difficult to adapt to diversity in a functional organizational structure. There are also difficulties experienced in coordinating functions within the organization.
Multidivisional Structure
The second organizational structure is the multidivisional structure whereby management is outlined in form of divisions.
Each division concentrates certain operations on a given business area such as product or market. This results in effective measurement of performance per unit, easy removal and addition of units, managers’ attention to organizations’ strategy and enhanced managerial development.
However, this kind of structure may result in mix-up of responsibilities, disagreements between departments and ineffective cooperation (Stacey, 2003). It is also a costly organizational structure for the organization’s management and divisions may grow too large that it becomes difficult to manage.
Holding Company Structure
Holding company structure is also another organizational structure. It is often adopted by companies which own other subsidiary companies (Stacey, 2003). The parent company controls the other companies as shown in the figure below.
This structure enables the organization’s management to access cheaper finance for individual businesses and offset individual business losses. It also enables the parent company to spread risk through diversification in a portfolio of businesses. However, the structure may lead to risks for the individual business of divestments by the holding company (Stacey, 2003). Individual businesses may also lack skills to run their businesses.
Virtual Organizations
Finally, virtual organizations lack formal organizational structure and geographical proximity. They only rely on partnerships, networking and collaborations. This form of organizational structure is characterized by technology, opportunism, trust, excellence and no borders. From these features, it can be noted that managers are not restricted by formalities but derive their decisions from trust and opportunism (Stacey, 2003). They use appropriate technologies depending on their own beliefs and take advantage of the opportunities prevalent in the market.
