Lesson 11 The Basics of Organizational Design

Lesson Introduction

Organizational Design

The organizational design of a company is extremely important in business communications because it changes the environment and the manner in which things are communicated. If a person outside of a company is able to discern the organizational design of the company they are trying to communicate with then they are more capable of making informed decisions on the best way to approach the company they are wanting to initiate communications with. It is important to remember that every company has its own “corporate culture” and the culture within a company can have a huge impact upon business communications within the company as well as outside of the company. Knowing the structure and organization of a company not only helps others to understand how the company works but also how the company communicates. Being aware of how a company communicates will help to ensure that business communications are successful.

1) “Functional Organization”

-Reduces duplication of activities -Encourages technical expertise -Creates narrow perspectives -Difficult to coordinate

2) “Divisional Organization”

-Improves decision making -Fixes accountability for performance -Increases coordination of functions -Hard to allocate corporate staff support -Loses some economies of scale -Fosters rivalry among divisions

3) “Matrix Structures”

-Reinforces & broadens technical excellence -Facilitates efficient use of resources -Balances conflicting objectives of the organization -Increases power conflicts -Increases confusion & stress for 2-boss employees -Impedes decision making

4) “Lateral Relations”

-Dotted-line supervision -Liaison roles -Temporary task forces -Permanent teams -Integrating managers

Organizational Designs

Functional- organizational units are created on the basis of specialty functions (production finance, marketing, etc). Strengths: specialization and all the strengths tied to specialization. Weaknesses: slow response to change because of coordination and decision making problems, difficulty with the wide-system view.

Divisional- evolve over time from a functional organization, are general decentralized organizations, a good example is the Chevrolet division of General Motors (GM). Is used in large organizations to provide better response to environmental change than the large whole could. Weaknesses: can lose well-focused technical specialization and in-depth technical development. May lose economies of scale from larger functional organization. Focus may be on the goals of the division rather than on the goals of the entire company.

Hybrid- a combination of a functional and divisional organization with the hope of gaining advantages of each and getting rid of the weaknesses of each type of organization when it stands by itself. Strengths: can be very adaptable to differences in products, customers, and changes in environment. Can provide efficient use of expensive shared resources and work well with economies of scale. Weaknesses: difficult to get uniform application of organizational policies with decentralized and duplicated functions. Integration is difficult. Potential for high administrative costs and communication and managerial difficulties.

Matrix- an organic design alternative that includes both vertical and horizontal lines of authority. It will use functional and divisional chains of command simultaneously in the same parts of the organization. It has dual lines of authority. The functional hierarchy runs vertical. The divisional hierarchy runs laterally. Is used when there is environmental pressure for both functional and departmentalization and divisional departmentalization. Strengths: more efficient use of resources than a single hierarchy, adaptable to a changing environment, allows development of both specific and general skills, expertise available to all divisions. Weaknesses: dual chain of command can be confusing, high conflict between the two sides of the matrix, many meetings are necessary to coordinate activities, need for human relations training, power domination by one side of the matrix may occur.