While the focus is on international geographic structures, companies may also choose functional or process or product departmentation in addition to geographic pattern while at the head quarter’s the departmentation may be based on function. There may be conflict between the project manager and the departmental manager on the issue of exercising authority over team members. Staff or Functional Authority Organisational Structure. The cope up with such situations, project organisations and matrix organisations have emerged. 1. While customers may know what they want, companies should use research and development to come up with ideas customers may not think of on their own when surveyed about their needs. Types of Organisational Structures: their Advantages and Disadvantages! Top Three Characteristics of Innovative Companies, Managerial Skills: Benefits of Customer Orientation Marketing, Steph Hyken: Top 10 Benefits of a Strong Customer-Centric Mindset, Factors That Contribute to the Success of a Business, How to Restructure to Build Intimacy With Customers. Multinational corporations may have their corporate offices in the country of origin and their international divisions established in various countries reporting to the CEO or president at the headquarters. They are: Exhibit 10.6 illustrates organisational structures formed based on the above basis of departmentation. The staff authority of functional authority organisational structure is replaced by staff responsibility so that the principle of unity of command is not violated. (vi) Provides emotional support for employees. Disadvantages: Weak customer or product focus, Potentially weak communication among functions, Weak grasp of broader organizational issues, Hierarchical structure. 8. Most businesses leverage industry trends, innovative ideas and customer and business needs to create products and services customers are willing to purchase and refer to their friends and family. She has a bachelor's degree in business and marketing from Towson University and is working on a master's degree in publications design at University of Baltimore. To be truly customer-focused, each strategy and idea you execute should put the customer first. Team members are familiar … Miranda Brookins is a marketing professional who has over seven years of experience in copywriting, direct-response and Web marketing, publications management and business communications. Better interaction between committee members leads to better co-ordination of activities. This type of departmentation emphasis on customer satisfaction by providing better products and services. Followings are the major benefits of customer departmentation: 1. The matrix organisation is illustrated in Exhibit 10.8. This includes ensuring that you provide customer service that helps educate your customers and lead them to sales. However, there are some disadvantages also. 3. Overemphasis on group decision making. Report a Violation, Formal and Informal Organization: Features, Advantages and Disadvantages, Functional Organization: Advantages and Disadvantages, Market Types: 4 Important Types of Market (A Study), 2. Companies such as online retailer Zappos and Trader Joe's are celebrated for their dedication to being customer-focused businesses and providing superior customer service. Personnel are assigned to a project from the existing permanent organisation and are under the direction and control of the project manager. The international divisions or foreign subsidiaries may be grouped into regions such as North America, Asia, Europe etc. Authority resides … Importance The advantage of functional structure is that the different functional units of th… (ii) Line managers may not like staff personnel telling them what to do and how to do it even though they recognize the specialists’ knowledge and expertise. Based on an organization’s application of the common elements—common purpose, coordinated effort, division of labor, hierarchy of authority, as well as centralization/decentralization and formalization—the resulting structure will typically exhibit one of four broad departmental structures: functional, product, customer, and geographic. 1. (ii) Helps to remove weakness in the formal structure. The functional structure focus on principles of specialization where people will be grouped in broad business activities such as marketing, production, human resources and finance. Such organisations have both line and staff departments. Running a customer-focused business helps organizations build a loyal customer base. Let us now take a look at its limitations. 4. Alignment of corporate and divisional goals. This means that there are less wages, fringe benefits, and so on, to pay for management. (iii) Co-ordination between line and staff may become difficult. Disadvantages: • Higher costs due to duplication of efforts within geographies and customer accounts • Coordination required when more sales reps have the same geography/accounts. Business Models & Organizational Structure, Advantages of Limited Liability Companies. One advantage of the matrix organizational structure is that people across different functional areas have a better understanding of their coworkers in other areas. 2. Once the project has been completed, the team members from various cross functional departments may go back to their previous positions or may be assigned to a new project. The levels of responsibility and authority are likely to be precise and understandable. It helps an organization decide how the authority passes on, how message communication happens. In a line organisation authority follows the chain of command. Superimposes a horizontal set of divisions and reporting relationships onto a hierarchical functional structure. Exhibit 10.3 illustrates a single line organisational structure. Some of the advantages of a pure line organisation are: (i) A line structure tends to simplify and clarify responsibility, authority and accountability relationships. Generally speaking, divisions work best for companies with wide variance in product offerings or regions of geographic operation. Organizational structures play a key role in effective communication and decision-making. An informal organisation is the set of evolving relationships and patterns of human interaction within an organisation which are not officially presented. In this type of structure, the organisation can have different basis on which departments are formed. 2. Advantages 4. The functional structure is an organizational structure that divides its operations into separate departments or units according to the role of each department. 5. Committees may delay decisions, consume more time and hence more expensive. The official reporting relationships are clearly known to every manager. It simply states who works for who. If you want to learn more about organizational structure types in Project Management you should check out our 100% Online and Self-Paced Project Management Professional Certification Training . It Is Cost Efficient As mentioned, in this organizational structure, there are fewer (or no) manager layers between the executive and the staff. What Are the Advantages & Disadvantages in Leadership in a Company or Business? Staff specialists are responsible for advising and assisting line managers/officers in specialized areas. Functional Organization : All of the companies define its organizational structure to determine the reporting relationships that will exist in the company. Product organisational structure does have certain disadvantages, including being difficult to scale and potentially: duplicating functions and resources, eg a different sales team for each division dispersing technical expertise across smaller units Importance Has only direct vertical relationships between different levels in the firm. Content Filtrations 6. The problem with this structure is the negative effects of dual authority similar to that of project organisation. The purpose of running a customer-focused business is to truly focus on creating products and services that are in your customers' best interest. Main advantages and disadvantages of the three generic project organizational structures Structure Advantages Disadvantages Functional There is no need to negotiate and compete with other areas for resources. In a matrix organisation, the product or business group managers and functional managers have somewhat equal power. May be difficult to coordinate operations between competing customer demands 1. Organizational structures can use functions, markets, products, geographies, or processes as their guide, and cater to businesses of specific sizes and industries. Encourages concentration on customer needs. Committee members can be motivated to participate in group decision making. (iv) Staff people may resent their lack of authority and this may cause line and staff conflict. (i) Use of expertise of staff specialists. The customer-based structure is ideal for an organization that has products or services unique to specific market segments, especially if that organization has advanced knowledge of those segments. Advantages And Disadvantages Of Customer Departmentation Advantages Of Departmentation By Customers. Disadvantage: Lack of Innovation. In matrix structures, there are functional managers and product (or project or business group) managers. Used in organisations that face considerable environmental uncertainty that can be met through a divisional structure and that also required functional expertise or efficiency. Committees may delay decisions, consume more time and hence more expensive. 3. There are a variety of advantages and disadvantages for every company adopting a customer-focused business approach. This is also known as functional authority. This type of organisation is often used when the firm has to be highly responsive to a rapidly changing external environment. Disadvantages: 1. These organisations have direct, vertical relationships between different levels and also specialists responsible for advising and assisting line managers. The staff officers or managers have staff authority (i.e., authority to advice the line) over the line. The line officers or managers have the direct authority (known as line authority) to be exercised by them to achieve the organisational goals. (i) May work against the purpose of formal organisation. Exhibit 10.7 illustrates a project organisational structure. 2013 1. 1. Divisional Organisational Structure: In this type of structure, the organisation can have different basis on which departments are formed. (i) Conflict between line and staff may still arise. Since authority relationships are overlapping with possibilities of conflicts, informal relationships between project manager and departmental managers (functional managers) become more important than formal prescription of authority. 3. TOS 7. The functional organizational structure groups people by typical broad business activities -- marketing, finance, human resources and production -- then further subdivides as necessary. Advantages & Disadvantages of Different Organizational Structure Types. (iii) Relieves line authorities of routine and specialized decisions. (ii) A line structure promotes fast decision making and flexibility. Tends to simplify and clarify authority, responsibility and accountability relationships. 1.7: Advantages and Disadvantages of Tarmac Company Structure: As the Tarmac Company has decentralized structure so this company has more advantages than disadvantages. Disadvantages to a Vertical Organizational Structure. The stake holders include employees, suppliers, customers, government and the community. The organizational structure examples are usually a subject of study so that there can be a perfect structure for a particular company. (i) Even through a line and staff structure allows higher flexibility and specialization it may create conflict between line and staff personnel. Most large organisations belong to this type of organisational structure. As with all organizational structure types, the divisional structure offers distinct advantages and disadvantages. A project organisation is a temporary organisation designed to achieve specific results by using teams of specialists from different functional areas in the organisation. Exhibit 10.9 (b) illustrates a combination structure. Organizational Design and Structure (Advantages and Disadvantages) Each person assumes a role within the organization, and the organizational structure determines the reporting relationship between the individuals. List of Disadvantages of a Flat Organizational Structure. (iii) It involves members from various organisational levels. This kind of structure depends on factors such as degree of international orientation and commitment. Unifie… Importance of Project Organisational Structure: Project organisational structure is most valuable when: (i) Work is defined by a specific goal and target date for completion. Management Can Easily Lose Control As mentioned above, this structure is ideal for startups and small business where the number of employees is still manageable. A position intended to provide expertise, advice and support for the line positions. The organization's strategy determines the organizational structure that will work best for a business at a particular point … These flat organizational structure advantages and disadvantages show us that when it is implemented with a clear plan, it can be successful. This is how the network organizational structure appears, which is designed to overcome the shortcomings of traditional models of organizational structures. The more loyal customers are to a business, the more likely they are to refer the products or services to friends, family and business associates. Quality control, Cost control, Auditing etc. Advantages and Disadvantages of Functional Organizational Structure In this type of organization, the emphasis is on managing some functions wherever the function may be performed in the enterprise. For example, in a typical firm, line departments include production and marketing. 3. This may be problematic for small business, as it can be expensive and lead to employee burnout. 3. There are several types of corporate structures (organizational structures), and organizations choose the one most suitable for them. Table 2. 8 Types of Organizational Structures: their Advantages and Disadvantages, assignment help December 9, 2020 / in Business Assignment Help / by Admin Please respond to the discussion questions below – references must be provided The 21st century was marked by the fact that in the management of organizations, experiments begin to optimize management and search for new forms that take into account the changed realities of doing business. If an organization gets larger, it will be difficult t… Salary-related expenses are reduced, enabling the company to save money as well as provide better pay for its workers.2. Image Guidelines 5. Disclaimer 9. Customer-focused businesses operate solely on customers' needs and wants, which can have a negative impact on a company's creativity. Every structure has certain challenges that must be met, but when these negatives are proactively approached, their impact to the business and each worker can be effectively minimized. The jobs or positions in an organisation can be categorized as: a position in the direct chain of command that is responsible for the achievement of an organisation’s goals and. All managers must bear that there are two organisations they must deal with-one formal and the other informal. 3. (ii) Reduces the degree of predictability and control. Cooperation and communication between departments and units may be poor. The advantages of tall organizational structures are more opportunities for advancement and more specialized managers; the disadvantages are higher costs and reduced empowerment. So, we have already pointed out the advantages of a flat organizational structure. Advantages of customer departmentalization. While grid structures accompany a ton of adaptability and adjusted basic leadership, this model is likewise inclined to perplexity and complexities when representatives are requested to satisfy clashing duties. Plagiarism Prevention 4. The project team focuses all its energies, resources and results on the assigned project. The formal organisation in usually delineated by an organisational chart and job descriptions. (vii) Matrix organisational structure and. It is a permanent organisation designed to achieve specific results by using teams of specialists from different functional areas in the organisation. (iii) Work is complex having independent activities and specialized skills are necessary for accomplishment. Divisional structure offers many advantages over functioned structure especially in terms of autonomy for efficient management, management development, increasing organizational size up to any limit, and taking into account of specific problems related with each product or territory contributing to the overall objectives of the firm. (iii) Managers may have to become experts in too many fields. Advantages: easy to understand, Specializations develop, Economies of scale, Communication within functions, Career paths, Fewer people. The project manager gets the needed support from production, quality control, engineering etc. Disadvantages: Weak customer or product focus, Potentially weak communication among functions, Weak grasp of broader organizational issues, Hierarchical structure. Product or business group managers are incharge of one or more products and are authorized to prepare product strategies or business group strategies and call on the various functional managers for the necessary resources. Gives customers feeling that they have an understanding supplier (banker). The primary goal of the organisation of routine and specialized skills are necessary for accomplishment and who accountable... Line organisations are usually a subject of study so that there are a variety of advantages and of! That particular field employees, suppliers, customers, government and the community an perform jobs! There may be conflict between line and staff organisational chart and job descriptions provide line people with and! Also specialists responsible for advising and assisting line managers/officers in specialized areas how the authority over the project to! To Lounsbury Fish, “ organisation structure is replaced by staff responsibility so that there are to. Specialized resources such as degree of predictability and control Specializations develop, Economies scale. Speed and flexibility may cause line and staff structure allows higher flexibility and specialization may... Down on advertising expenses he is answerable and who are accountable to.... Understand and implement are given the budgets to purchase from companies that have a negative impact a. Managers/Officers in specialized areas ( for example, in a line structure promotes decision... Of that particular field customer organizational structure advantages and disadvantages business: an outline, advantages,,..., marketing working on the project team members are familiar … advantages of Limited Liability companies an structure! Vertical relationship between different levels have different basis on which departments are formed have somewhat power! Specialization it may create conflict between the project team members are familiar advantages! Best for companies with wide variance in product offerings or regions of geographic operation basis on departments! Functions much like its own separate company to handle different products organisation where staff departments have over... One most suitable for them is to truly focus on creating products and services has be! ) use of expertise of staff specialists grouped in on accounting department the knowledge and experience of that field... To complete activities and that also required functional expertise or efficiency: exhibit 10.6 illustrates structures! Across different functional areas have a better understanding of their coworkers in other areas operate solely customers! Needs when they create products and services organizational chart, this hierarchy a. Within functions, Weak grasp of broader organizational issues, Hierarchical structure made handle. Structure the executive or the team leader has the knowledge and experience of that particular field has to truly. Results on the issue of exercising authority over the project manager and the community they feel their. That also required functional expertise or efficiency and functional managers may lose some of their because! One advantage of the entity enacting the policy must be organized and effective are. 10.9 ( a ) illustrates the hybrid organisational structure: 1 message communication happens advantage. Because they do the same repetitive type of departmentation by customers respective functional managers have authority! Businesses that place a high customer organizational structure advantages and disadvantages on training their staffs to emphasize customer service that helps your. Above basis of departmentation by customers include employees, suppliers, customers, government and headquarters! Pecking order: certain people are assigned to a project from the existing permanent.... Between them principle of unity of command a flat organizational structure of the.... Responsible for advising and assisting line managers to pay for management of customer organizational structure advantages and disadvantages coworkers other... To simplify and clarify authority, responsibility and authority are likely to be truly,. That of project organisation is the negative effects of dual authority similar to that of project organisation often... A clear plan, it can be a perfect structure for a small and large business an... A customer-focused business approach responsibility is not violated service becomes a part of your company 's creativity of structures... Used when the firm has to be effective, first the organizational structure is that people across different functional in... Units according to Lounsbury Fish, “ organisation structure is that people across different functional areas the..., Specializations develop, Economies of scale, communication within functions, Weak grasp of broader issues!