Name one strength and one weakness of each of the traditional business organization forms

ABOUT THIS CONTENT

A look at the basic ways to structure an organization with their respective strengths and weaknesses

• 5 Focuses of Organizational Structure – Strengths and Weaknesses
  • 1. Functional Structure
  • 2. Product or Service-Based Structure
  • 3. Customer or Geography-Based Structure
  • 4. Business Process Team Structure
  • 5. Matrix (Hybrid) Structure (contains more than one focus; has two or more bosses)

1. Functional Structure

Strengths

• Easier to manage work within a group
• Contains people who “speak the same language” and nurtures technical expertise, attracts and develops experts
• Lower labor costs
• Workload can be balanced upon demand

Weaknesses

• Coordination and communication between departments may be slower and less accurate
• Individual department managers have limited decision making authority
• Different departments have different priorities; resolving conflicts may be costly; customers’ interests could be overlooked

2. Product or Service-Based Structure

Strengths

• Responsibility for each product can be pinpointed at the division level
• Focus on one product can produce higher quality “state-of-the-art” output
• Team spirit develops around each product line
• Competition among divisions can boost business
• Encourages independent decision making
• Quicker response to customer request

Weaknesses

• Less sharing of resources across divisions
• More duplication of effort resulting in higher costs
• Customers who want more than one product/service will have to work with more than one division
• Company may be slow to recognize that a product should be changed, dropped or added
• Could be stifled by one product focus

3. Customer or Geography-Based Structure

Strengths

• Unique needs of each type of customer are well served
• Focus on customers’ needs and preferences
• Unprofitable product lines more likely to be dropped

Weaknesses

• May be less sharing of resources across division/departmental boundaries
• More duplication of effort and infrastructure resulting in higher costs
• Internal systems may evolve in different ways to serve different customer segments

4. Business Process Team Structure

Strengths

• Focus on organization is outward to customer
• Reduces number of levels of management – “flatten organizations” (reduced management cost; less need for coordination)
• Time and money saved due to reduced need to pass information up and down the hierarchy and between departments
• Promotes self-management by employees (greater job satisfaction because of more involvement)
• Broadens individuals’ knowledge and skill bases
• Faster decision making, reduced cycle time and improved responsiveness to customers

Weaknesses

• Involves major transformation of the organization (difficult, timely and costly change; new systems required for virtually everything)
• Company may need to retain functional expertise if not sufficient within each process
• May require major and costly training initiative

5. Matrix (Hybrid) Structure (contains more than one focus; has two or more bosses)

Strengths

• Enables organization to use its resources efficiently (provides flexibility to assign staff to project requirements and reassign as needed)
• Takes full advantage of the use of teams (maintaining in-depth technical expertise in critical functions)
• Provides individuals an opportunity to work with different skills and expertise
• Requires managers to cooperate with one another and moderates their power over subordinates

Weaknesses

• Multiple bosses may result in confusion
• Slows down decision making
• Conflicting demands from bosses leads to personal stress and reduced work quality
• Power struggle between managers regarding resources
• Can disrupt the work and get in the way of customer service
• Subordinates may play one boss against another