Each participating company contributes what it does best. (ii) It focuses individual attention on each product line. That lessens their effectiveness and ultimately is costly to the employer. Departments can work together on a developmental plan to help encourage the training of managerial candidates within any department. Importance At the end of the project, if he leaves the organization, his know-how will be lost as well. Recently, in telecommunication sector in India, many virtual organizations have been created to provide different services. This form has been used by several U.S. multinational corporations whose manufacturing operations require low-cost labour that can best be utilized by contracting with foreign suppliers. In an SMB, the C-Suite might involve just one person. It can improve employee retention. A large manufacturing firm with multiple factories is likely to have a different organizational structure than a financial services firm with only one office. Whenever these conditions exist, use of matrix structure is beneficial. Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. iv. v. In order to develop multi skills among employees, emphasis is put on horizontal transfer, just as is the case with job rotation. Organizational structures also can be created with some flexibility to add new departments or employees so as not to burden one manager in the company. It facilitates product expansion and diversification. This structure works well for small organizations, but what happens if a company experiences high levels of growth over a short period? Every resource belongs to a function and he has a functional manager. iv. It isn’t scalable. For example, in an insurance company, departmentation may be achieved on the basis of these functions, viz., underwriting agency, claims adjustment and administration. It needs no specialized knowledge for them to understand that there are several departments, each performing a separate function, and all departments must work in unison to achieve an organization’s goals. Training: A good organizational structure makes employee training easier to administer, and it also … It could result in interdepartmental conflicts or lack of coordination between the functions. ii. 1. Here are some of the additional flat organization structure advantages and disadvantages to think about. In this system, an individual’s performance is appraised by his superior, peers, subordinates, and outsiders interacting with him. However, virtual organisations may suffer from two problems. The span of control becomes too large at top levels. If both these types of companies put their efforts jointly to undertake any project, their combined strengths could lead to much better results than what individual companies could have achieved separately. Network structure is created around a central organisation that relies on other organisations to perform manufacturing, distribution, financing and other crucial business functions on a contract basis. For example, if an organization emphasises product innovation and development in its strategy, its research and development may be given very high status. Informal communication plays a bigger role. It is also called network structure. There is less miscommunication. Entrepreneurial structure is quite simple in nature (that is why it is also called as simple structure) and is suitable for small organizations in which the entrepreneurs also work as chief executives. For instance, a big automobile servicing enterprise may organise its departments as follows – heavy vehicle servicing division, car servicing division, and scooter servicing division. iii. iii. The different organisational structures described above have their own advantages and disadvantages. Because the flat organizational structure is essentially a “bottom up” type of hierarchy, there is tremendous reliance on the expertise of the front-line staff. ii. Virtual organisations have been created by large companies such as IBM, Apple, Ford etc. iii. Almost all small scale industrial units or small organisations use simple structure. The addition of specialized staff departments to a functional design may enable an organization to lead effectively with same degree of environment uncertainty and dynamism. ii. Do you want to earn money just by sharing this article? While the type of organizational structure usually depends on the company's size and operations, a few universal benefits exist from the structures. Thus, the process of functional differentiation may continue through successive levels in the hierarchy. Confused customers become unhappy customers and that can change their brand loyalty. Coordination and control take place through reciprocal adjustments among the members. For instance, in an industrial enterprise, the major functions like production, finance, marketing and personnel may be grouped into different departments. There is a certain “responsibility” that comes when the C-Suite sends out an email asking for a job to be completed or feedback to be offered. It also involves a chance to pursue their passions and this business structure can make that happen. Under this, each major product or product line is organised as a separate division. Functional structure is generally found in organisations in which, single product/services is offered. They plan, control, and improve their own work processes. The concept of virtual organization/corporation, also known as networked organization or modular organization along with virtual team and office has entered management field very recently. Some of the types and classification of organisation structure are:-, 1. Multi-product organizations use this as basis for divisionalisation. Matrix organizations enable better coordination, better horizontal and vertical dissemination of information. Divisional managers can concentrate on responsible area and can improve performance. Organizational structures can help companies streamline business operations.