The capacity of the management structure to resolve evolving environmental conditions is a factor for the effective execution of company strategic strategies, policies and value statements. Several models of organisation, based on the type, size and geographical coverage of the given organization, were devised for suite management needs. The organization’s efficiency depends on many factors, but it is counterproductive to the choice of organizational structure for effective transactions. This paper will focus on a discussion and critic of two competing business structure formats, appropriateness and a comparison of the given models.
Divisional Organisational Structure
Diversification has allowed corporations over time to reduce their business risk emanating from market shifts that bring forth various undesired outcomes. Divisional organisational structures are being adopted to cater for variety adopted by businesses in terms of product, service groups, markets or geographical segments. A devolved organisational structure allows a business to design activities and the human resource component to comprise of autonomous units with independent production, accounting, and motivational, sales and marketing models. A company ought to avoid unnecessary expenses, conflicts of interest and deconstructive company politics. In the case where a company’s activities and business units are distinct, evading clustering decision-making at the managerial headquarters enhances fast service delivery and resilience at the face of unforeseen occurrence. Globally, divisional organisational structures appear as a popular model coming in the second position amongst other models (Groenewegen 2017, p. 88).Several multinational firms operating across the globe are adopting divisional organisational structures due to its convenience in enhancing the design of consumer-specific product delivery. Micro-managing businesses allow for bureaucracy, slow decision making and costs.
Performance is a priority in any given business and in that case, divisional organisational structure is appropriate in institutions where accountability is treasured. With an organisation comprising of numerous market, product and consumer group segments, the contribution of each divisional unit ought to be determined for decision-making. Competition, speed and localized decisions are possible through divisional organisational models in that, the various managers can respond to local market shifts very fast and remain competitive (Casson, 2016). Divisional organisational structure based on its ability to address local managerial requirements is appropriate for diversified organisations. Shortcomings are imminent in every organisational model available. Eradication of duplication of functions and the gearing of all the business activities towards a single direction is paramount in the attainment of organisational success. Divisional organisational structure allows for the formation of local and autonomous business management units thus duplicating the same model provided the headquarters. Also, divisional organisational structures in most cases lead to rivalries among the functional groups. Clustering of business activities presents an opportunity to enhance efficiency through consolidation of expertise and the attainment of the economies of scale as a result of the integrated purchases, production, costing and distribution mediums.
An example of the application of divisional organizational structure is seen in the Coca-Cola Company. Coca-Cola Company has designed its business units to comprise of managerial divisions in Eurasia and Africa, Europe, Latin America, North America and pacific. The given divisions are also split further as seen in the case of Latin America which comprises of Brazil, Latin Center, Mexico and South Latin. Coca-Cola has been able to maintain a global market leadership in the beverage industry due to its divisional organisational structure (Coca-Cola Company, 2017). The company brands including its crown jewel Coke, Fanta which include of Orange, Pineapple Citrus and Black-current, Sprite and the newly introduced Sugar-Free Coke has addressed the various customer needs with a distinct management team for each product and region.
Matrix organisational Structure
Nature of business activities in an organisation dictates how various supervisory units and the utilization of expertise across functional areas occur. Projects in business include both short term and long term undertakings that are defined to use definite time, capital, technological and human resources. In most instances, project based business organisations use project teams in its functional units as opposed to permanent staff. Matrix organisational structure is quite appropriate for the project based business ventures (Casson, 2016). Personnel from the different departments are brought together into functional teams that work towards attaining a given definite project. Prudence is depicted in the application of a matrix organisational structure in that the organisation employs personnel with the various personnel relevant to the nature of business projects specialised. Personnel are permanently assigned to specific departments but remain mobile from one project team to another as the situation demand. Organisations strive to attain optimal functioning and utilisation of resources. Managers of businesses ought to be able to perform across different functional units with varying teams within the same business line. In a matrix structure, managers remain mobile allowing the business to optimally use the human resources available without incurring extra costs in the undertaking of various projects. Incorporation of inputs and the consolidation of efforts in a project team is always bound to bring forth success (Ács, 2017).
Information is paramount in the management of business, stipulation of strategic plans, anticipation of challenges and the utilisation of opportunities emanating from market fluctuations. Matrix organisational structure allows for efficient exchange of information between the project team members, team leadership and the departmental heads. Smooth undertaking of projects requires consistent passage of information among departments to allow prompt decision making. The various project teams in a matrix structure are always highly motivated due to the consultative problem-solving required in team management. The managers who are always mobile face new team members for every given project. The functionality of any given group rests on its cohesiveness which thus requires the managers to ensure that democratic leadership style is adopted to guarantee the commitment of the team members drawn from various departments. However, matrix organisational structure is complex to adopt (Hanlon 2016, p. 102). The sharing of employees across different departments with more than one supervising manager upon which employees report to at any given time creates internal management challenges. Employee turnover in matrix organisational structures result due to dual communication and authority systems. Also, internal conflict in matrix structures is imminent as managers try to remain competitive thus failing to embrace collaborative working formats based on shared work force. Extra expenses due to double management increase overhead costs in the management of organisations.
Tullow Oil Inc. is an example of a multinational corporation adopting a matrix organisational structure. Tullow Oil Inc. which specialises in exploring and monetising oil in South America and Africa operates in 25 countries with over 150 oil exploration licenses has 67 active oil production fields. The operations of Tullow Oil Inc are project-based in that, explorations in prospected oil fields are undertaken by teams formed from the corporation’s human resource structure (Tullow Oil Inc., 2017). In some instances, prospected oil fields produce little or no oil deposits leading to the closure of the project and the dissolution of the team. The success of the company has been vested on the efficiency of the teams in the exploration of the oil fields and the feasibility projections of the oil deposits. Oil deposits in the various fields are always finite and thus, upon the successful exploration, the teams are dissolved and new ones are formed for other oil field projects.
Comparison of Matrix and Divisional organisational Structures
Selection of an organisational structure is primarily based on the convenience of the model in addressing the business and human resource needs of the given company. In the case of a matrix and a divisional organisational structure, the choice of any of the given models is based on the nature of operations undertaken by the business as opposed to a cost-benefit analysis. Both structures present an array of advantages and disadvantages. It is upon the given business management steering units to streamline the structural systems of the business to reduce the demerits of the adopted organisational model since the two models are business-specific and not inter-changeable (Schein 2017, p. 57). Businesses which undertake project-based operations should use a matrix model while firms with broad and diversified market and product segments ought to adopt a divisional business model to ensure success.
Management theories on organisational structures seek to device convenient ways upon which businesses can enhance growth, stability and competitiveness. The design of the various organisational structures are specific to the operations of a business thus creating little space for companies to change from one model to another. Matrix and divisional organisational structures are appropriate to businesses based on the diversification process and the time limit of the given business projects. The cost implications of the various organisational structures are as a result of the underlying resources utilization. Economies of scale and the overhead costs considerations ought to be considered in the implementation of an organisational structure (Wernerfelt 2016, p. 32). In the case of divisional management models, overcoming the disadvantage resulting from foregoing the economies of scale can be done through a centralized procurement system. The internal managerial complexities that are imminent in a matrix system can be addressed by allowing absolute authority on the team managers during projects to prevent double communication and authority systems that could lead to demoralisation of employees. With regard to the aspects of organisational structures, appropriateness and strategy is important in ensuring smooth implementation of policies, strategic plans and the attainment of set goals.
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