Organization Structure can be classified into a limited number of standard types. The type that is most suitable for a given firm will depend on the size of a firm and complexity as well as its strategy. The four basic types are the simple structurr ,the functional structure, the multidivisional structure and the matrix structure.
a) Simple structure :
A simple structure is one in which a central executive handles all the major decisions and governs the operations of the organizations with the help of a small staff . Simple structures are also known as line and staff structures or flat structures since there are few level of hierarchy.
Advantages of simple structure :
- It is simple to operate.
- It has low administrative costs
- It enables better coordination and control
- It enables the firm to be adapted to the changing circumstances
- It reflects managements full knowledge of the operating core and its processes.
Disadvantages of Simple structure :
- It has less formalization which is not advantageous for the firm in a tight situation.
- It lacks sophisticated support system
- It is risky as it depends on the expertise of one person.
b) Functional Structure
A functional structure is one that is organized along functional lines, where each functional heads supervises its department who reports to the CEO and a corporate staff. This allows functional heads to focus on their area of responsibility and ensures that all the activities are coordinated integrated directed by CEO and top executives.Functional structures are also known as department structures or unitary structures.
Advantages of Functional Structure :
- It allows greater task specialization which promotes learning.
- It avoids duplication and enables economies of scale.
- It suits centralized businesses.
Disadvantages of functional structure:
- It creates vertical barriers to flow of information which limits the opportunities for cross function cooperation and coordination.
- Communication problems may arise between different problems as each have their own jargon.
- It is not suitable for those firms which has more than one business.
c) Multidivisional structure :
A Multidivisional structure is a decentralized structure consisting of the division of business along product,customer group or geographic lines each with its own revenues, expenditures and capital asset purchase programmes and therefore each with its own profit and loss responsibility. Divisional managers oversees day to day operations of its division while corporate executives allocates resources , provides support functions and monitors divisional activities. Multidivisional structures are also called divisional structures.
Advantages of Multidivisional structure:
- It reduces the potential for information overloads and improves the quality of decision making in each domain.
- It reduces the cost of coordinating divisionwise activities while ennhancing corporate executives ability to control diverse and complex operation.
- It enables to align divisional goals with the overall firms goal.
- It enables to escalate productivity by encouraging competition for resources among the divisions.
Disadvantages of divisionalized structure:
- It creates conflict among the divisions and encourages ill practice among divisional individuals .
- It inhibits cross business collaboration and cross business synergies .
d) Matrix structures :
A matriix structure is a structure that combines two or more organizational forms ,with multiple reporting relationships . It is used to foster cross unit collaboration. Matrix structure is also known as composite structures or combination structures.
Advantages of matrix structure :
- It enables greater flexibility of people, workflow and tasks.
- It enables motivation and employee development.
- Bureaucratic obstacles are removed and department specialisms become less powerful.
- It lowers costs enabling the economies of scale.
Disadvantages of matrix structure:
- It leads to slower decision making due to added complexity .
- Dual authority threatens a conflict between functional managers and product/area/project managers.
- Individuals may suffer stress from conflicting demands or ambiguous rules.