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Fundamentals of Organizational Structure

Fundamentals of Organizational Structure. Organization Structure. Three Components Formal reporting relationships Grouping of people and departments Design of systems to ensure effective communication, coordination, and integration. Linkages. Vertical Control Centralized decision-making

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Fundamentals of Organizational Structure

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  1. Fundamentals of Organizational Structure

  2. Organization Structure • Three Components • Formal reporting relationships • Grouping of people and departments • Design of systems to ensure effective communication, coordination, and integration

  3. Linkages • Vertical • Control • Centralized decision-making • How achieved: • Hierarchical referral • Rules and plans • Vertical Information Systems

  4. Linkages • Horizontal • Learning • Decentralized decision-making • How achieved: • Information systems • Direct contact • Task forces • Integrator • Teams

  5. Organizational Structure • Required Work Activities • Reporting Relationships • Departmental Grouping Options • Functional • Divisional • Multifocused • Horizontal • Modular

  6. Functional Structure CEO Finance Marketing Engineering

  7. Divisional Structure • AKA Product Structure • Decentralized decision-making • Strengths • Weaknesses

  8. Divisional Structure CEO Product One Product Two Product Three

  9. Divisional Structure CEO Soft Drinks Aquafina Gatorade

  10. Geographical Structure • Designed according to where product will be offered

  11. Geographic Structure CEO United States Asia Europe

  12. Matrix Structure • Combines functional and divisional structure • Conditions • Need to share scarce resources • Two critical outputs: • In-depth knowledge and new products • Complex and uncertain domain • Who’s in charge? • Strengths • Weaknesses

  13. Horizontal Structure • Reengineering • Faster and better service for customers • Organized around processes and teams • Strengths • Weaknesses

  14. Modular Structure • Subcontracts processes • Manages them from a central hub • Business focuses only on core competency • Strengths • Weaknesses

  15. Hybrid Structure • Centralized functional structure for stable products; other products may have self-contained departments • Certain departments work through entire organization (functional), but processes are focused in other areas (horizontal).

  16. Applications • Have scarce resources and need efficiency? • Need inter-functional coordination, innovation, and learning?

  17. What Causes Problems? • Decision-making is delayed • Non-responsiveness to environmental changes • Too much conflict/ “Turf wars”

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