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Organizational Structure

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Designing Organizational Structure


Organizing
The process by which managers establish
working relationships among employees to
achieve goals.

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Departmentalization by Type
Functional

Product

Grouping jobs by
functions performed

Grouping jobs by
product line

Geographical

Customer

Grouping jobs on the


basis of territory or
geography

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Grouping jobs by type


of customer and needs

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Grouping Jobs into Functions


Function
Groups of people, working together, who
possess similar skills or use the same kind
of knowledge, tools, or techniques to
perform their jobs

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Functional Departmentalization

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Functional Departmentalization

Advantages
Efficiencies from putting together people with common
skills and knowledge,
Good coordination within functional area

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Functional Departmentalization

Advantages
Efficiencies from putting together people with common
skills and knowledge,
Good coordination within functional area
Disadvantages
Poor communication across functional areas
Less focus on organizational goals

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Geographical Departmentalization

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Geographical Departmentalization

Advantages
More effective handling of specific regional
issues that arise
Serve needs of unique geographic markets better

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Geographical Departmentalization

Advantages
More effective handling of specific regional
issues that arise
Serve needs of unique geographic markets better
Disadvantages
Duplication of functions

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Ex. Of Organization by
Geography
Hewlett-Packards Headquarters
Worldwide
Hewlett Packard

Americas
Houston, Texas

Europe, Middle East, Africa


Geneva, Switzerland

Asia Pacific
Hong Kong

Product Departmentalization

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Product Departmentalization

+ Allows specialization in particular products and services


+ Managers can become experts in their industry
+ Closer to customers

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Product Departmentalization

+ Allows specialization in particular products and services


+ Managers can become experts in their industry
+ Closer to customers
Duplication of functions
Limited view of organizational goals
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An Example of Organization by
Product

Hewlett Packard

Imaging and
Printing Group

Personal
Systems Group

Enterprise
Systems Group

HP Services

HP Financial
Services

Customer Departmentalization

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Customer Departmentalization

+ Customers needs and problems can be met by specialists

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Customer Departmentalization

+ Customers needs and problems can be met by specialists


- Duplication of functions
- Limited view of organizational goals

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Removing External Boundaries


Virtual Organization
An organization that consists of a small core of full-time
employees and that temporarily hires specialists to work
on opportunities that arise.

Network Organization
A small core organization that outsources some of its
major business functions (e.g., manufacturing) in order to
concentrate what it does best.

Modular Organization
A manufacturing organization that uses outside suppliers
to provide product components for its final assembly
operations.
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Example of Network Structure

Interviewing
Company

Coding & Data


Tabulation Firm

Marketing Research
Consultants

Printing Company

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