Organizational design types include functional, matrix, product/divisional, customer, and geographic, each characterized by a primary factor. Functional structure groups employees into job functions, while divisional/product structure consists of specialized groups. Matrix is a combination of functional and divisional, customer design is based on client needs, and geographic design divides departments by location. Design is determined by business nature, culture, and size.
Some of the more common types of organizational design are functional, matrix, product or divisional, customer, and geographic. Each of these is characterized by a primary organizational factor such as location, the nature of the job, or the type of skill a team possesses. Organizational design can be determined by characteristics such as the nature of the business, the culture of the workforce, and the size of the business.
Functional structure is one of the simplest types of organizational design. Employees are grouped into major job functions, which are then organized into a hierarchy. Some common categories include finance, marketing, and sales. Each of these categories will typically have a manager, executives, and staff. Larger companies may have supervisors who report to executives, while other staff members report to them.
The divisional or product structure is one of the most complex types of organizational design. It consists of an executive who oversees several small departments. Rather than having a hierarchy of managers, executives and staff, the structure is made up of highly specialized groups managed by an assortment of executives. While this type of organizational design allows leaders to narrow their focus, there is also the risk of duplicating efforts as there are so many managers dealing with similar issues.
The matrix structure is a combination of the organizational design functional and dividing types. As with the divisional structure, there is a manager or executive responsible for overseeing each category. The hierarchy is similar to functional design because each division has separate teams for each major project or function. Because of this, an employee typically reports to two managers, one who manages the project and another who manages the category. Common categories include finance, sales, and manufacturing.
The type of customer organization design is determined by the needs of the customer base. A senior executive typically oversees several VPs, each assigned to a different type of client. This allows each department to specialize in a specific type of product or service delivery and its specific challenges.
Geographic organizational design divides departments by location. Typically one executive oversees several different offices that have the resources to essentially function on their own. This type of design is mostly used when geographic differences impact the way a business is run. It relies on managers with specific knowledge of an area to make informed business decisions that could not be made by a corporate group.
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