Different ways of organizing a company
The need for a solid structure within all business entities is absolutely fundamental.
Organizational structure concerns who reports to whom in the company and how different elements are grouped together.
Depending on their size and needs there are several organizational structures companies can choose from. And nowadays many firms are opting for a kind of hybrid of all of them.
The most recognizable set up is called the functional structure where a fairly traditional chain (incorporating senior management, middle management and junior management) is put in place. The main benefit of this system is clear lines of communication from top to bottom but it is generally accepted that it can also be a bureaucratic set up which does not favour speedy decision-making.
More and more companies are organizing themselves along product lines where companies have separate divisions according to the product that is being worked on. In this case the focus is always on the product and how it can be improved.
The importance for multinational companies of a good geographic structure could be seen when one electrical products manufacturer produced an innovative rice cooker which made perfect rice – according to western standards. When they try to sell it on the Asian market the product flopped because there were no country managers informing them of the changes that would need to be made in order to satisfy this more demanding market.
The matrix structure first evolved during a project developed by NASA when they needed to pool together different skills from a variety of functional areas. Essentially the matrix structure organizes a business into project teams, led by project leaders, to carry out certain objectives. Training is vitally important here in order to avoid conflict between the various members of the teams.
Microsoft is a good example of a company that is structured along product lines. In Ireland, where 1 000 employees work on localization of the software for all Microsoft’s markets, the company is split up into seven business units. Each unit controls the localization of their specific products while working closely with the designers Microsoft’s Seattle Headquarters.