ORGANIZATIONAL STRUCTURE

It has already been emphasized in class that an organizations structure depends primarily on the
organizations goals and objectives and the strategy it adopts. It is the basic framework defining the
roles, responsibilities and power in the system.
We have seen the various types of structures namely, centralized, flat, functional, matrix and
divisional. Let us classify some of known firms into these heads.
Basecamp (37signals)
Ive always kept hierarchy to a minimum. Then an employee said, Promote me, and I was forced to
re-evaluate my organizational structure. Fried, CEO Basecamp
37signals is a small Chicago based software company that follows flat structure. It does not favor
vertical ambition but rather revere horizontal ambition wherein employees are given full freedom to
expand their knowledge and expertise in different fields. The CEO Jason Fried says, Instead of
rewarding high performers with managerial responsibilitieswhich often drives people further away
from the job they are actually good atwe reward with responsibilities closer to the work.
The company has stopped all other products except Basecamp, and has changed its name to it. The
organization structure remains to be flat.
Centralized structure has the top management with the decision making power which supervises and
exercises control over the departments. Whereas in a decentralized structure, the decision making
power is distributed among different departments which may have different degrees of freedom.
Flat structure: It is usually adopted by small companies (like entrepreneurial start-ups) where there
are fewer levels of management and low departmentalization. They is generally little formalization and
have wide spans of control. An advantage of using a flat organizational structure for management is
that decisions can be made relatively quickly.
Example: 37signals
Ive always kept hierarchy to a minimum. Then an employee said, Promote me, and I was forced to
re-evaluate my organizational structure.
37signals is a small Chicago based software company that follows flat structure. It does not favour
vertical ambition but rather revere horizontal ambition wherein employees are given full freedom to
expand their knowledge and expertise in different fields.
Functional structure: Here each portion of the organization is grouped according to its function for
example there may be a marketing department, a sales department and a production department.
This organizing of specialization leads to operational efficiency where employees become specialists
within their own realm of expertise. However, one of the drawbacks to a functional structure is that the
coordination and communication between departments can be restricted by the organizational
boundaries of having the various departments working separately.
Example: McDonalds Corporate organizational structure is functional. Each department has a
specialized task and all report to the CEO. The structure consists of the CEO on the top, followed by
the chairman of the board to the board of directors. CFO follows next and next is the COO, Human
resource, legal and secretary, operations, supply chain and franchising and finally the presidents of
different regions. There is a large degree of formalization and standardized ways of operations.
Matrix structure: It is a combination of two or more structures, usually divisional and functional. Here
an employee has more than one boss to report to ie. Here the reporting relationships are set up as a
grid or matrix rather than in the traditional hierarchy seen in other organizational structures (both
horizontal and vertical flow of information). Employees generally have a dual reporting relationship:
functional as well as the project manager.
Example: Starbucks

Starbucks is known for its great customer experience and the company has utilized the matrix
organizational structure in their benefit to better serve their customers. This structure groups
employees by both function and product thereby enabling them to create products that tailor to
specific regions and customers.
Divisional structure: A single company consists of separate, semi-autonomous units, each with its
own set of goals. This structure enables managers to supervise and focus on their respective division
and be accountable for its success or failure. Also, narrow focus allows the companies to perform
effectively as they pinpoint specific areas which need to be changed and adjusted. This structure is
generally adopted by larger companies that operate in a wide geographic area or that have separate
smaller organizations within the umbrella group that cater to different types of products or market
areas.
Example: Walmart
Walmarts divisional structure is divided into three categories: product, market, and geographic.
Product Structure: Product structure groups employees which are based upon specific products
produced by Wal-Mart. An example of this would be producing three distinct products, "product a",
"product b", and "product c" and having a separate division for each these products.
Market Structure: Market structure groups employees together based upon specific markets in which
it competes. At Walmart also a form of market structure is used. It sells products to individual
consumers and business customers. The sales and customer service departments are organized
using market structure. Consumer sales and consumer customer service function together while
corporate sales and corporate customer service worked together.
Geographic Structure: Geographic structure groups employees together based upon specific
geographic location. This is often used by Walmart as it operates in many areas throughout the
United States or in both the U.S. and overseas.

References:
http://en.wikipedia.org/wiki/Organizational_structure
https://www.inkling.com/read/management-angelo-kinicki-brian-williams-5th/chapter-8/8-5-basictypes-of
http://www.inc.com/magazine/20110401/jason-fried-why-i-run-a-flat-company.html
http://prabhmrkt.wordpress.com/2012/07/10/organizational-structure-starbucks-re-organizesstructure-and-continues-to-grow/