Organizational structures: Functional and product There are many different ways of structuring an organization, among them is organization structuresby product and by function. Businesses are structured for many reasons, among them is that they must organize what they do and also by organizing the business it makes it easier to know what part of business does what (Biz/ed 2006).
Structuring by product is done by breaking down the organization according to the different products made. In this structure people are grouped according to the products they make. Examples of such companies can be BIC which is divided into three main divisions: lighters, pens and razors, and Hewlett Packard that is divided into five main divisions: image and printing group, personal system group, enterprise group, HP services and finally HP financial services (Biz/ed 2006 and Business case studies 2014).
Each business structure has its advantages and disadvantages. Among the advantages of product structured business includes specialization, accountability and clarity. Specialization allows every division to focus and concentrate on one line of product that is its own work. Accountability is an advantage because the structure makes it clear who is responsible for that department. Clarity plays in where everybody knows not just their role but also the roles of others. On the other side organization structure by product has down sides. Among the downsides are communication, rigidity and coordination. Such a structure encourages closed communication that may lead to lack of focus. Due to the fact that departments are divided upon what they do, some may end up becoming resistant to change. This structure also makes coordination difficult as there is a big gap between the top and the bottom which may make coordination take too long (Biz/ed 2006).
Structuring by function is simply done by dividing the organization into departments with similar specializations such as marketing, finance and accounts, human resources, and many others. The marketing department for instance will have marketers who are charged the responsibility to market the company’s products. This type of structure best suits companies that make standard goods and services in large quantities at prices that are considered low. Another characteristic is that they have a large degree of formalization that leads to reliance by each function on standardized way (Businessmate. org 2010 and). An example of a business with functional structure is ABC which has its departments divided into accounting department, corporate department, engineering department, facilities department, human resources department, investor relations department, legal department, production department, public relations department, purchasing department, and sales and marketing department. the other example is the Internet Service Provider (ISP) which is divided into sales department, customer service department, engineering department, accounting department, and administration department (Accounting tool 2014).
This kind of structure has its strengths and weaknesses just like any other. Advantages include efficiencies and specialization, promotions, chain of command, and training. The company experiences efficiencies as employees are specialized in their areas of expertise. The chain of command being clear leads to everyone knowing the kind of decisions they are allowed to, make and those they are not to. This system also makes it easier to monitor employees and set promotional paths for them and it is also easier to monitor their progress and update their training. On the down side rigidity can be experienced with communication making the organization rigid and slow. Communication between departments is difficult as every departmental decision is distinct. Every departments view becomes narrow and limited making it hard to see the big picture leading to inefficiency towards the common goal (businessmate. org 2014).
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Biz/ed (2006) Organization Structures, [online] available: BTEC business. http//www. bized. co. uk/ sites/bized/files/docs [28 May 2014]
Businessmate. org (2010) What Is A Functional Organizational Structure? [Online] available: http://www. businessmate. org/Article. php? ArtikelId= 184 [28 May 2014].
Business Case studies (2014) Structures Of Organizations. [Online] available: http://businesscasestudies. co. uk/business-theory/strategy/structure-of-organisations. html#axzz330uPfdk9 [28 May 2014].