Importance of Organisational Structure in Strategy Implementation

Functional structures:

• Focused on functions, departments and main activities.

Advantages:

• Increased productivity:

  • People in a functional structure setting have specialised skills that allow them to work more quickly and efficiently than those who may be unfamiliar with specific subjects, which leads to greater productivity. Employees within this system of hierarchy who demonstrate high levels of productivity often receive promotions to other positions

• Skills development:

  • Within each team, experienced managers have the chance to teach their team members the same skills they possess, resulting in an enhanced skill set for all involved

• Clarity:

  • Anytime within the company needs high-level information related to marketing, human resources, customer service or operations, they know where to go. The hierarchal nature of the functional structure clarifies the specific roles and responsibilities of every person within a department

• Minimised cost of operation:

  • By organising employees according to business functions, departments can reduce the chance for multiple departments to be individuals with the right skills. It also saves money because work gets performed more efficiently

Disadvantages:

• Hindered decision-making:

  • Formal organisational structures typically require employees to seek approval from management and other authority figures before making decisions. When management is unavailable for feedback

• Competition between departments:

  • As employees within each department work together, they begin to operate as a team focused on achieving specific goals. While this goal-oriented mindset is typically positive, it may prompt competition between departments.

• Narrow scope:

  • Without extra guidance and information from managers, employees within departments may work with limited knowledge of how their roles relate to the company's objectives. They may also not understand how their work relates to other departments. 

Product:

• The systematic arrangement of a product's components and sub-components—as they relate to one another and the final product. This includes the physical and logical parts and assemblies that make up the product, as well as the documentation and information that support it throughout its lifecycle.

Advantages:

• Improve communications between different functional experts within each product division.

• Allows a business to adapt different products more easily in response to customer needs.

• Allows each division to focus on its own customers.

• Monitor product performance- the business can monitor the performance and profits for each product unit.

Disadvantages:

• There can be wasteful duplication of management functions (marketing, finance, etc) for each product division.

• There may be wasteful competition for the same customers between different product divisions.

• Poor communication between the product units may result in the business missing opportunities in the market.

Regional:

• The arrangement and organisation of various elements within a specific area or territory impact how political power is distributed and exercised

Advantages:

• Local Managers provide local consumers with products that satisfy their needs. This helps to increase customer loyalty.

• Friendly Competition- There is a friendly competition between the geographic units. Each unit tries to outdo the others in terms of increasing sales and reducing costs. This helps to increase profits for the entire business.

• Promotion- Managers in geographic units make decisions on behalf of the business in their region. This helps them to prepare for future promotion opportunities.

Disadvantage:

• Duplication of work- There may be duplicate departments working in different geographic areas, with employees doing the same job.This increases business costs.

• Conflict between management- Decisions made my senior management for the entire business can have a negative effect on local areas.

• Communication may be poor between the different geographic areas. The development of new products/processes may not be shared, which can result in organisational inefficiency.

Matrix:

• In a matrix structure, individuals work across teams and projects as well as within their own department or function.

• For example, a project or task team established to develop a new product might include engineers and design specialists as well as those with marketing, financial, personnel and production skills.

  • These teams can be temporary or permanent depending on the tasks they are asked to complete. Each team member can find himself/herself with two managers - their normal functional manager as well as the team leader of the project.

Advantages:

• Can help to break down traditional department barriers, improving communication across the entire organisation

• Can allow individuals to use particular skills within a variety of contexts

• Avoid the need for several departments to meet regularly, reducing costs and improving coordination

• Likely to result in greater motivation among the team members

• Encourages cross-fertilisation of ideas across departments – e.g. helping to share good practice and ideas

• A good way of sharing resources across departments – which can make a project more cost-effective

Disadvantages:

• Members of project teams may have divided loyalties as they report to two line managers. Equally, this scenario can put project team members under heavy pressure of work.

• There may not be a clear line of accountability for project teams given the complex nature of matrix structures.

• Difficult to coordinate

• It takes time for matrix team members to get used to working in this kind of structure

• Team members may neglect their functional responsibilities

It is important to remember that a matrix structure often sites alongside a traditional functional structure – it is not necessarily a replacement.