By Alexis Writing Updated February 12, 2019
Organizations are set up in specific ways to accomplish different goals, and the structure of an organization can help or hinder its progress toward accomplishing these goals. Organizations large and small can achieve higher sales and other profit by properly matching their needs with the structure they use to operate. There are three main types of organizational structure: functional structure, divisional structure and a blend of the two, called matrix structure.
Functional Structure of an Organization
Functional structure is set up so that each portion of the organization is grouped according to its purpose. In this type of organization, for example, there may be a marketing department, a sales department and a production department. The functional structure works very well for small businesses in which each department can rely on the talent and knowledge of its workers and support itself.
However, one of the drawbacks to a functional structure is that the coordination and communication between departments can be restricted by the organizational boundaries of having the various departments working separately.
Divisional Structure of an Organization
Divisional structure typically is used in larger companies that operate in a wide geographic area or that have separate smaller organizations within the umbrella group to cover different types of products or market areas. For example, the now-defunct Tec*mseh Products Company was organized divisionally – with a small engine division, a compressor division, a parts division and divisions for each geographic area to handle specific needs.
The benefit of this structure is that needs can be met more rapidly and more specifically, as each division can operate more or less independently for the other divisions in the company. However, a divisional arrangement can also be cumbersome, as communication is inhibited because employees in different divisions are not working together. Divisional structure is costly because of its size and scope. Small businesses can use a divisional structure on a smaller scale, having different offices in different parts of the city, for example, or assigning different sales teams to handle different geographic areas.
Matrix Structure of an Organization
The third main type of organizational structure, called the matrix structure, is a hybrid of divisional and functional structure. Typically used in large multinational companies, the matrix structure allows for the benefits of functional and divisional structures to exist in one organization. This can create power struggles because most areas of the company will have a dual management – a functional manager and a product or divisional manager working at the same level and covering some of the same managerial territory.
