The Main Types of Organizational Management

The organizational structure of management is an ordered set of interrelated elements that promote a proper work of an organization, supporting each other’s development and functioning as a whole. Organizational management structure is aimed at establishing a clear link between the individual parts of the organization and specifying one’s rights and responsibilities. Nowadays, firms often focus on several vectors of activity. This allows companies to withdraw from activities that are currently uncompetitive at any time. Therefore, companies try to choose the best organizational structure.

Functional Organizational Structure

Functional structure assumes that each control body specializes in performing certain functions at all levels of governing (Ashkenas, Ulrich, Jick, & Kerr, 2015). Implementation guidance for each functional authority within its competence is necessary for the production units. Decisions on general issues are made collectively. Functional specialization of personnel management greatly increases its effectiveness since instead of all-round managers who need to understand all the functions, there is headquarters of highly qualified specialists. The structure aims to perform repetitive routine tasks that do not require rapid decision-making. It is used in the management of mass organizations or in businesses with mass type of production, as well as in the economic mechanism of cost type, when the production is the least susceptible to scientific and technological progress.

The main advantages of the functional structure are high expertise of specialists responsible for the implementation of specific functions, the release of line managers from addressing many specific issues and empowerment of the operational management of production, the use of the experienced consultants, reduction in the need for broad specialists, low risk of wrong decisions and low risk of duplication in the implementation of management functions (Ashkenas et al., 2015).

The disadvantages of the functional structure are difficulties of maintaining permanent relationships between the various functional services, long-term decision-making procedure, lack of understanding and unity of action between the functional services, reduction of personal responsibility for the outcome, the complexity of the monitoring of the process as a whole and in individual projects (Ashkenas et al., 2015). Therefore, this organizational structure should be used with a defined purpose that best fits it.

Divisional Organizational Structure

Divisional organizational structure requires sufficiently broad autonomy for some units called battalions. Divisions can deal with the release of a certain type of product, and work in a particular area or on a particular market. Divisional structure creates conditions for the use of partial decentralization of the decision-making process within a single enterprise. The idea of ​​divisional structure is very closely related with the concept of creating stand-alone business units, which are independent profit centers (investment centers) (Ashkenas et al., 2015).

Historically, the divisional structure appeared in large conglomerates. Their emergence and further development have been impacted the most by three factors. The first factor was prevailing at the time of the appearance of the theory of “scientific management” (essentially, mechanistic approach to organization, theoretically justified by Frederick Taylor in the early 20th century); as a result, allocated divisions often became clones of the parent structure, having the same strengths and weaknesses (Goetsch & Davis, 2016). Then, the ideological victory of financial capitalism over industrial capitalism (the most prominent ideologue of the latter was Mr. Ford – a pioneer in the field of mass production) took place; this was the result of the preferred orientation of business executives to the maximum financial result (Goetsch & Davis, 2016). Lastly, the formation of a consumer society and the increased competition between manufacturers that accompanied this formation occurred; as a result, the company had to expand the bottlenecks associated with centralized decision-making with each division receiving its own decision-making center.

In the structure of the modern enterprise, divisional organizational structure is practiced quite often. Corporate Center (head office), at the same time, becomes a buffer with a smoothing effect on the capital market divisions and the stock market.

Matrix Organizational Structure

The matrix structure is a lattice structure in which the functions of management of an organization are performed by the heads of departments. The projects are implemented by project managers. This structure works on the principle of dual subordination performers: on the one hand, there is subordination to the immediate supervisor of functional services; on the other hand, there is subordination to the project manager, who is vested with the necessary powers in accordance with the planned deadlines of the project. In the organization with such a system, the head of the project has two groups of subordinates: permanent employees of the project team and other employees of the functional departments that obey him/her temporarily while retaining their administrative subordination of line managers of functional departments (Rothaermel, 2016). In the established linear-functional structure, there are the special staff bodies (individual or group of individuals) introduced temporarily or permanently that coordinate the existing horizontal communication on the implementation of the specific program (project) while maintaining the vertical attitude, typical of the structure. The bulk of the workers engaged in implementation of the program are subordinated to at least two managers responsible for settling different issues.

How It Works

The matrix organizational structure of the company is based on the principle of multiple (often double) submission. From this viewpoint, it is opposite to the linear organizational structure based on man management. At the same time, in practice, large-scale companies practice both multiple submissions and submission to one person or division. Therefore, it is more correct to talk about the interaction of the matrix within the organizational structure. One can differentiate a “strong”, “weak” and a balanced matrix structure. In fact, the “weak matrix” is similar to the functional structure, and the “strong matrix” resembles the project structure (Shim & Siegel, 1999). Only a “balanced matrix” is fully consistent with the principle of multiple submission.

Conclusion

In summary, every company tends to choose the organizational structure that fits best the type of management and type of production. The stable forms are functional and divisional. There is often a need to move towards more flexible structures, which could relatively easily change their shape to adapt to the new conditions. There are structures formed on a temporary basis that are used until the problem is solved or until the goal is achieved. An example of the flexible structure is a matrix form of organizational management. In divisional structure, the key figures in the management of organizations are not functional department heads, but the managers, and heads of production units. Besides, on the enterprises there can be created new production units that have a certain autonomy for the implementation of operational activities.