The different organization structures

Written by  Thursday, 14 April 2016 11:56

There are four common organizational structures, which can be adopted by any company. They include divisional, functional, entrepreneurial and matrix structures.

Divisional Structure

Typically, this structure is applied in large corporations operating in a wider geographic site or which has separate smaller firms under the umbrella organization to serve different types of market or product areas (Gore, 1994).  For instance, the current Tecumseh Products Company was a divisional entity with a small compressor department, engine division, and parts department in each geographic location to manage particular needs.

The functional structure

A functional framework is set up so that each section of the company is arranged according to its objective. In this type of company, for example, there may be a marketing division, a product sales division and a manufacturing division. The functional framework is effective for small companies in which each division can depend on the knowledge and talent of its employees and assist itself. However, one of the disadvantages of this framework is that the synchronization and interaction between divisions can be limited by the business limitations of having the various divisions working independently.

Matrix structure

This is the major organizational structure characterized by a hybrid of functional and divisional structures. Large multinational corporations are typically known to use this structure as it serves the benefits of divisional and functional structures to prevail in a company. This leads to power struggles because most company areas end up with dual management; a divisional manager and a functional managers covering a same managerial domain and working at the same level (Miles & Snow, 1999).

Two positive attributes

From a specialization perspective, it is obvious that a matrix company allows workers to specialize in a particular area that they can succeed at. In regards to the depth of expertise, it is obvious that a matrix company is in a continuing contact with their peers in other functional models through joint venture groups, which provides the workers with the opportunity to create a wide skill set that they would otherwise create, in a functional business framework. In regards to interaction, the matrix company helps the smooth flow of information and resources between numerous functional areas, which results in cooperation which allows a job team to handle more complicated goals (Gore, 1994).  

Two negative attributes

Despite the positive attributes, there are a few negative drawbacks to a matrix structure. First, this structure is characterized by an internal complexity that accrues from staff confusion about who is the immediate manager. Also, the structure is costly to maintain. A matric company demands double management which leads to increased overhead expenses. As such, the competition for resources is likely to precipitate internal conflicts.

General Systems Thinking and Boundary-Less Organizations

General Systems Thinking is a critical thinking approach which involves analyzing the connections between the system areas to comprehend a scenario for improved decision-making. This approach is the primary departure from the old way of business decision-making in which the system would be broken into parts and the areas analyzed independently. Followers of system thinking believe that the old way is insufficient for the current dynamic universe, where there are numerous communications between the system parts, developing the truth of a scenario. According to this theory, if we analyze the communications of the areas in a process, we will see bigger styles appear. By seeing the trends, we can begin to comprehend how it works. If the design is good for the company, we could create choices that strengthen it; but if the trend is bad for the company, we could adopt choices that change the trend.

Boundary-Less Organizations

External boundaries exist to separate an organization from its customers and suppliers while internal boundaries serve demarcations to departments. In boundaryless organizations, this rigidity is eliminated with the aim of developing greater responsiveness and flexibility to change and promote free exchange of ideas and information. It comprises cross-functional and self-managing teams organized around the primary business processes (Gore, 1994).  These teams are made up of workers, customers, and suppliers from various functional units. Under this organization, workers no more work in isolation as they work as part of the team on quality management, company-wide initiatives and supply chain management. By managing and coordinating their own projects, employees can develop a sense of pride in their ability to meet organizational goals thus promoting a powerful work ethic.

Virtual and traditional teams

A virtual team is a group of people working across space, time and organizational borders with connections empowered by a multitude of communication technologies. According to Johnson & IGI Global (2001), “a virtual team is a group of geographically, organizationally and time dispersed workers brought together by information and telecommunication technologies to accomplish one or more organizational tasks.”

Two positive attributes

Cost saving. Organizations are banking on cost saving, which is the greatest positive attribute associated with virtual teams. Organizations can eliminate big expenses on office spaces, real estate, utility bills like water, electricity, gas, as well as executive travels. Most companies are currently outsourcing their functions to low-cost locations. This results in a decreased production cost because of the reduced cost of raw materials, operational costs and lower wages of workers in these geographic areas.

Leverage on international expertise. By using virtual teams, organizations can seek talent beyond their home country. Therefore, they can draw together the specialists and experts from all other the world to perform on their projects.

Two negative attributes

Technological costs. For virtual teams to work in a successful manner, they rely on the support of multiple communication technologies like emails, video conferencing, instant messaging among others. One device cannot offer the utter support required. Installation and maintenance of these tools is extremely costly (Johnson & IGI Global. 2001).

Conflicts and lack of collaboration. The virtual teams are composed of people from diverse cultural backdrops. This cultural difference is attributable to conflicts. For instance, an American employee could draft a direct email describing a bad scenario which could be perceived as impolite by a Japanese team member. The result would be a conflict, challenges in collaboration and mistrust which are crucial for the effective functioning of any virtual team (Miles & Snow, 1999).

Traditional Teams

A traditional team is made up of two or more individuals interacting constantly and coordinating their work to achieve a shared goal. According to management experts, a traditional team meets physically in one geographic location and tends to communicate on a face-to-face basis.

Two positive attributes

Human communication. People are collocated in a hallway thus, they easily interact one-on-one while walking down the hall or in groups. In some case, chance hallway communications can produce great directions.

Facilities. Costs are reduced as facilities are centralized and shared. They include office space like machines, secretarial support, local telephone access and meeting areas.

Two negative attributes

Travelling costs. Commuting to and from the meeting site creates a built-in every day that wastes time. Moreover, people can be deterred from going back to the office on weekends or weeknights to handle small tasks.

Attracting talent is expensive. Based on their experience, experts tend to be mature and settled in some places. Shifting them together with their families is prohibitive as far as expenses and quality of life are concerned.

Shareholders and Stakeholders

Among the most vital distinctions when talking about business ethics and practices is that between shareholders and stakeholders. Though the two concepts sound interchangeable, they are differentiated with attention for stakeholders becoming key for consideration for the highly socially oriented business models.


Shareholders are individuals who have invested in a company or organization by purchasing shares of that company, and now presumably have an economical interest in that organization's success. Then, they are investors in an organization, and can be anyone from mega-investors hoping to impact those things of the organization they are making an investment into inactive investors who are putting some cash into an organization as they plan for retirement (Guillot, 2006). Therefore, shareholders are very interested in the economical assessment of an organization or company, as that economical assessment directly impacts that shareholder's investment. They would prefer the organization take activities that will improve its stock price, improve dividends and take activities that improve their own economical roles.


Stakeholders are people invested in an organization, but not in the conventional financial angle. Stakeholders can be seen as anyone who has a share in that organization's success for a number of reasons, that normally consist of stock values but also normally consist of clients that depend on that organization's services; neighborhoods that depend on that organization to hire its members; providers that depend on the a organization to contract its services; and workers, who depend on the organization to provide them with stable income and gainful career.


Always, shareholders tend to be stakeholders in an organization, because they are investing on a financial basis in an organization and have a share in that organization's achievements. However, Stakeholders, however, are not always shareholders at all. In the current business atmosphere, employees, customers and community members (all stakeholders) hardly hold stock in an organization. This leads to a conflict of interest at times between stakeholders and shareholders of an organization. A group of shareholders could push an organization to use shortsighted company techniques, hoping of increase dividends at any given time but compromising an organization's productivity in long run. Then, the shareholders could dispose their stocks in that organization for income, and shift to their next investment. On the other hand, Stakeholders, are hooked to the organization for long-term achievements, and when that organization scrambles or has to lay off employees, the stakeholders are likely to suffer.


Both shareholders and stakeholders make significant contributions to organizations, both small and large. Though sometimes they conflict due to differing goals, the two groups must bargain among themselves for the appropriate balance of the contributions they should make and inducement they should receive. For any organization to remain viable, it should at the minimum fulfill the interests of all groups that are involved in the organization. By minimally meeting the interests of stakeholders and shareholders, an organization can influence the relative power of these groups to determine what criteria they will use to judge the company’s performance.

Organizations need to coordinate all its activities and functions. They require proper design to handle the grouping of activities, effective division of job and controlling organizational work. Organizational structures help determine the grouping of activities and work allocation based on the goals and needs. The managers must delegate all the activities to realize great professionalism and efficiency in the tasks. This essay has looked at the three major organizational structures which are divisional, functional and matrix. Any organization can choose either one of these structures.  


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