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CHAPTER 6

Forms of Organizational Structure

Learning Objectives
After reading this chapter, you should be able to discuss the factors that influence a firms organizational structure. describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy. explain the differences among functional, divisional, matrix, and international organizational structures. describe the informal organization and discuss intrapreneuring.

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Forms of Organizational Structure


Functional Organization
Divisional Organization International Organization Matrix Organization
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Basic Forms
Functional structure

Divisional structure
Matrix structure International structure

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Functional Structure
Mostly practiced by small to medium-size firms. Such organizations are usually structured around

basic business functions such as marketing, operations, finance The benefits of this approach: specialization within functional areas smoother coordination among them Functional organization may foster centralization and makes accountability more difficult

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Divisional Structure
Organizational structure in which corporate divisions

operate as autonomous businesses under the larger corporate umbrella Relies on product departmentalization Structured around several divisions departments that resemble separate businesses in that they produce and market their own products

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Divisional Structure

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Matrix Structure
Organizational structure created by

superimposing one form of structure onto another It is organized along two dimensions, such as combining a functional and a divisional structure

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International Structure
Developed in response to the need to

manufacture, purchase, and sell in global markets

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Informal Organization
Network, unrelated to the firms formal authority

structure, of everyday social interactions among company employees Negative reinforce office politics that put the interests of individuals ahead of those of the firm Can cause harm due to distorted or inaccurate information communicated without management input or review

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3 Elements of Informal Organization


Informal groups

Organizational grapevine
Intrapreneuring

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Informal groups
Informal groups

Groups of people who decide to interact among

themselves
Positive impact on the company if they work together to

support the organization Negative impact on the company if they work together against the organizations interests or dong doing something irrelevant to the organization

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Organizational Grapevine
An informal communication network that can run

through an organization How can manager eliminate this: Maintaining open communication and responding vigorously to inaccurate information Use the key person in grapevine to sound out employee reactions to new ideas Manager may get valuable information from the grapevine and use it to improve decision making

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Intrapreneuring
Process of creating and maintaining the innovation

and flexibility of a small-business environment within the confines of a large organization Experienced managers recognize that the informal organization exists whether they want it or not Managers know how to use the informal organization to reinforce the formal organization The energy of the informal organization can be harnessed to improve productivity

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