Models of Organizational Structure

Models of organizational structure can include functional and product orientations.
Companies select models of organizational structure depending on their size, marketing strategy and industry. For example, extremely small companies often use flat organizational structures because they have fewer levels of management. Models of organizational structure can also be high, or composed of many management levels. Companies often choose their model of organizational structure based on which one better helps facilitate communication and project completion.

Department Organizational Structure

A department or functional organizational structure divides the company into departments or functional areas. For example, the CEO (chief executive officer) or president is usually at the top of the organization, followed by multiple vice presidents of functional areas like marketing, advertising, finance and research and development. Department directors usually report to specific vice presidents, and department managers report to these directors. Support people like clerical workers, clerks and coordinators, in turn, report to department managers. The advantage of a department organizational structure is it groups people by skills and knowledge, harnessing expertise where it is most useful. A disadvantage is that this structure can greatly narrow a worker's scope of responsibility, according to referenceforbusiness.com. This narrower scope of responsibility can be detrimental to employees' motivation, especially those who are highly goal oriented.

sample of organizational structure

Product Organizational Structure

Companies that use a product organizational structure model divide various tasks and responsibilities by product type. Retail or department stores often use this model. For example, a vice president may hold the title of vice president of housewares, with directors and managers of housewares lower down in the organization. One advantage of the product organizational structure is it greatly enhances product knowledge and expertise in a company. However, this structure can create a duplication of resources. For example, each product category will have a marketing or advertising manager. The responsibilities of these people may overlap, leading to confusion with regard to decision making.

Regional Organizational Structure

Some companies use a regional or geographical organizational structure, preferring to duplicate various departments or functional areas across regions. For example, a small consumer products company may employ marketing managers in the east, central, west and southern regions of the country. This model works best when a company needs to focus on more localized strategies. Competition may be unique in each region. Additionally, customer demands may vary, with people in various regions preferring different flavors or features.

Matrix Organizational Structure

The matrix organizational structure is a combination of at least two types of structure. Often these structures are combined for special projects. For example, a food company may combine a functional and product organizational structure to test the introduction of a new brand of soup. The matrix structure may be used for several years and then dissolved after the product has been introduced and is selling. An advantage of the matrix structure is it places employees where they are needed the most. A disadvantage is it can create dual reporting, with employees having more than one manager.