An organizational structure is a composition that specifies a company’s hierarchical structure. There are various kinds of conformations that organizations can choose to build their business around. The organizational structure exemplifies the way in which control and business affairs have been appointed within the organization. Organizational structure encompasses the design of an organization though people positioning and responsibilities in order for organizational goals can be reached. Some of the time, a formal structure is not necessary due to a small informal business setting.
In large organization responsibilities must be distributed. Hence, the reason that policies and procedures are established that assign responsibilities for numerous positions. The determination of these organizational functions (such as marketing, finance, human resources, and operations) influence and determine the organizational structure of your an organization. The three main types of organizational structures are functional structure, divisional structure, and matrix structure.
The structure that an organization is based around also is contingent on the enormity of the company.
Divisional structure separates the faculty based on the commodity and customer demand verses geographical location. For example, each area within the organization is accountable for certain divisions. Each division has individual support systems such as finance department, marketing department, warehouse department, and maintenance department. Divisional structure is grants flexibility and is a decentralized structure. Divisional structure also grants quick adaptability to geographical changes. Divisional structure embellishes advancements in the market and industry and allows for various plans of action. However, this structure causes replication of resources due to each unit having the necessity of every resource.
PepsiCo’s Organizational Design
An example of an organization design around divisional structure is PepsiCo. PepsiCo is a flexible company that is constantly looking for new innovations and consistently adapts to the geographical market. PepsiCo has a decentralized organizational structure. The functional determinations are made in individual units with corporate control and direction. PepsiCo has one CEO and three division presidents. The company’s hierarchical structure continues as each division is broken down into market units. Each market unit has a director. Furthermore each market unit is divided into regional units, then down the chain to sales units. Each unit has its own resources, such as marketing, finance, human resources, and operations departments. PepsiCo determines responsibilities by departmentalization.
Departmentalization is a conglomeration of common duties and characterization of tasks. The influences of departmentalization are function, product, geographic, process and customer. PepsiCo maintains a span of control by making sure of correct distribution of responsibility among employees and task obligations are accounted for. For example, units are tasked with weekly, monthly, quarterly, and yearly forecast for sales, operations, overhead, and labor. Reports are sent weekly to account for these actions. Human resources departments are in each division to ensure control over the organization. There are guidelines and procedures in place to ensure the rules are being followed across the globe. Formalization sets the standard for the administered responsibility.
Each unit at PepsiCo has management teams in place to ensure control of task performances. For example, a if a location has been tasked with a 1,000 case distribution for week one in the period and the sales teams are severely falling short on sales, management will step in to centralize the issue, reiterate the method of actions, and ensure the actions are conducted in a certain manner to achieve results. PepsiCo is multinational organization made up of three units which are PepsiCo Americas Foods, PepsiCo Americas Beverages and PepsiCo International. This structure allows the organization to focus on manifesting international markets, which will grant independence revenues, enabling focus on better product advancement. The organization is spread across the globe. However, the control is local, unlike a matrix structure that is located only in a single area (PepsiCo 2012).
A matrix structure formalizes line teams as well as the typical divisional hierarchy. The matrix structure is a hybrid between the functional and divisional structure, effectively creating independent business units for each product or service created or each unique market targeted.
The matrix-structured organization is a project-based business that divides individual groups based on functional specializations. Variation of the matrix structure divides the authority by both functional and project areas. The functional manager heads up the functional areas of the organization. The project supervisor oversees the assigned project. This allows for management to focus on areas of proficiency. Companies such as General Motors has based its organization around the matrix structure due to the ability to specialize in specific areas, and organizational communication through other fields.
General Motors believes the differentiation of ideas creates innovational determinations. The matrix structure also allows the human resources department to be shared throughout the organization. General Motors is made up of one main chief information officer (CIO) and several divisional CIOs that control the functionalities in the organization. General Motors also has process information officers that work in various areas of expertise across the organization. General Motors believes the matrix structure develops global commercialism (Daft 2007).
Functional Structured organizations group tasks according to the target. Functional structured organizations work well for organizations that have a need for departments to rely on expertise of its faculty. A major disadvantage to a functional structured organization is the communication boundaries due to variation in departments that work individually. One company that a functional structure works well is Wal-Mart. Wal-Mart is one of America’s largest retailers. Wal-Mart is designed by a functional structure. Wal-Mart’s target market is a consumer with median incomes. Wal-Mart has a limited amount of functions in specialized areas with in the organization.
Wal-Mart does not produce its goods, but has enough buying power to supply the demanded products. The organizational structure and large size enables the buying power to purchase goods at low prices. This buying power enables Wal-Mart to offer its target market lower prices creating a competitive edge over other retailers. A functional structured organization; such as Wal-Mart have a chief executive officer, limited executive staff, and department heads in domineering areas of expertise such as accounting, marketing, human resources and warehouse. Wal-Mart’s headquarters and executive staff is made up of a Chief of Executive Officer, Chairman of the Board and Board of Directors, with supporting committees.
Determining an organizations structural design that will be the most effective for a specific company has great significance on organizational success. Using an unsuitable design structure can be consequential in communication, product development, customer service, and countless situations of other organizational issues. Organizational structure can determine the successful outcome of the organization.
Bateman, T. S., & Snell, S. A. (2011). Management: Leading & Collaborating in a Competitive World (ninth ed.). New York, NY: McGrall Hill. Retrieved May 7, 2012
(2012). PepsiCo. Retrieved May 7, 2012, from www.pepsico.com
Daft, Richard (2007). Organizational Theory and Design (ninth ed.). Manson, OH: Thompson Higher Education. Retrieved May 7, 2012.