Types of organization structures advantages and disadvantages
Organizations differ in terms of structure, the products and/or services offered and customers. a. Evaluate the advantages and disadvantages of two types of organization structures, including the reasons underpinning them. (AC 1.1) b. Analyze connections between organizational strategy, products, services and customers. (AC 1.2)
Sample Solution
Two main organizational structures are functional and divisional, each with its advantages and disadvantages. Functional organization structure groups employees by their specialized skills or the type of tasks they perform (Kinicki & Fugate, 2016). This allows for a wide range of knowledge and expertise to be housed within one area, leading to better coordination between specialists as well as more efficient use of resources (Gomez-Mejia et al., 2018). Additionally, decisions can move quickly through the hierarchy since fewer people need to be consulted in order for them to be implemented (Mondy & Noe, 2019). However, this structure can lead to siloed operations where departments prioritize their own interests over what’s best for the whole company (Ramanathan et al., 2014; Gomez-Mejia et al., 2018), thus hampering innovation.
On the other hand, divisional organization structures divide the business into individual units that make their own independent decisions but report on performance up a corporate ladder (Kinicki & Fugate, 2016). Each unit has its own leadership team which gives it autonomy while staying aligned with overall corporate strategy (Mondy & Noe, 2019). This decentralized approach encourages quicker decision making and greater creativity since teams are empowered and have more freedom in how they operate. Furthermore, it makes adaptation easier given that different units can respond differently depending on local market conditions or customers’ needs (Gomez-Mejia et al., 2018). Nevertheless, conflict might arise within divisions when there is competition for resources resulting in an unstable environment that could impact customer satisfaction levels negatively if not managed properly (Ramanathan et al., 2014; Mondy & Noe 2019).
To conclude, both functional and divisional organizations offer unique benefits in terms of speed of decision execution and agility respectively. The choice should depend on factors like size of business operations or degree of product/service innovation required.
