Organizational Structures and Corporate Cultures

This text discusses the internal factors that affect how organizational structures are designed. These structures are important to managers because they establish lines of formal authority and configure other reporting arrangements. One thing to remember is that the industry type influences the chosen structure. The text also considers the system approach and examines how the internal dimensions of the firm, such as leadership and culture, change in response to the external business environment. Note that the organizational alignment is not set in stone permanently. It will change in response to the external business environment from time to time.

Organizational Designs and Structures

Divisional Organization Structure

Divisional structures are, in effect, many functional departments grouped under a division head. Each functional group in a division has its own marketing, sales, accounting, manufacturing, and production team. This structure resembles a product structure that also has profit centers. These smaller functional areas or departments can also be grouped by different markets, geographies, products, services, or other whatever is required by the company's business. The market-based structure is ideal for an organization that has products or services that are unique to specific market segments and is particularly effective if that organization has advanced knowledge of those segments.

The advantages of a divisional structure include the following: each specialty area can be more focused on the business segment and budget that it manages; everyone can more easily know their responsibilities and accountability expectations; customer contact and service can be quicker; and coordination within a divisional grouping is easier, since all the functions are accessible. The divisional structure is also helpful for large companies since decentralized decision-making means that headquarters does not have to micromanage all the divisions. The disadvantages of this structure from a headquarters perspective are that divisions can easily become isolated and insular from one another and that different systems, such as accounting, finance, sales, and so on, may suffer from poor and infrequent communication and coordination of enterprise mission, direction, and values. Moreover, incompatibility of systems (technology, accounting, advertising, budgets) can occur, which creates a strain on company strategic goals and objectives.