The biggest advantage to a virtual network approach is

(minimum of 500–600 words). Be sure to incorporate your weekly readings, citing your sources using proper APA guidelines (including in-text citations and references).

1. Compare and contrast each of the five organizational structures from your reading (functional, divisional, matrix, team-based, and virtual network).

2. If you were to choose one structure in which to work which would you choose and why?

3. Compare the organizational structures of Google and Wal-Mart.

4. Explain what types of control processes might be found in each of the organizational structures.

5. Describe what types of quality management processes might be found in each of the organizational structures.

Notes from readings

In a functional structure , also called a U-form (unitary structure), activities are grouped together by common function from the bottom to the top of the organization.33 The functional structure groups positions into departments based on similar skills, expertise, work activities, and resource use. A functional structure can be thought of as departmentalization by organizational resources because each type of functional activity—accounting, human resources, engineering, and manufacturing—represents specific resources for performing the organization's task. People, facilities, and other resources representing a common function are grouped into a single department. One example is Blue Bell Creameries, which relies on in-depth expertise in its various functional departments to produce high-quality ice cream for a limited regional market. The quality control department, for example, tests all incoming ingredients and ensures that only the best go into Blue Bell's ice cream. Quality inspectors also test outgoing products and, because of their years of experience, can detect the slightest deviation from expected quality. Blue Bell also has functional departments such as sales, production, maintenance, distribution, research and development, and finance.34

The functional structure is a strong vertical design. Information flows up and down the vertical hierarchy, and the chain of command converges at the top of the organization. In a functional structure, people within a department communicate primarily with others in the same department to coordinate work and accomplish tasks or implement decisions that are passed down the hierarchy. Managers and employees are compatible because of similar training and expertise. Typically, rules and procedures govern the duties and responsibilities of each employee, and employees at lower hierarchical levels accept the right of those higher in the hierarchy to make decisions and issue orders.

Functional Advantages and Disadvantages

Grouping employees by common task permits economies of scale and efficient resource use. For example, at American Airlines, all information technology people work in the same large department. They have the expertise and skills to handle almost any issue related to information technology for the organization. Large, functionally based departments enhance the development of in-depth skills because people work on a variety of related problems and are associated with other experts within their own department. Because the chain of command converges at the top, the functional structure also offers a way to centralize decision making and provide unified direction from top managers. The primary disadvantages reflect barriers that exist across departments. Because people are separated into distinct departments, communication and coordination across functions are often poor, causing a slow response to environmental changes. Innovation and change require involvement of several departments. Another problem is that decisions involving more than one department may pile up at the top of the organization and be delayed.

In contrast to the functional approach, in which people are grouped by common skills and resources, the divisional structure occurs when departments are grouped together based on similar organizational outputs. With a divisional structure, also called an M-form (multidivisional) or a decentralized form, separate divisions can be organized with responsibility for individual products, services, product groups, major projects or programs, divisions, businesses, or profit centers. 35 The divisional structure is also sometimes called a product structure, program structure, or selfcontained unit structure. Each of these terms means essentially the same thing: Diverse departments are brought together to produce a single organizational output, whether it is a product, a program, or service to a single customer.

A maker of products used for the prevention, diagnosis, and treatment of diseases, the health science company Nordion Inc. recently split into two new business units: one called Targeted Therapies and the other Specialty Isotopes. Nordion's CEO Steve West explained that the new divisional structure is strategically designed to “take into account the unique product life cycles and the needs of our customers in each of our businesses.” Based in Ottawa, Ontario, Canada, Nordion does business in 60 countries around the world.

   Most large corporations have separate divisions that perform different tasks, use different technologies, or serve different customers. When a huge organization produces products for different markets, the divisional structure works because each division is an autonomous business. For example, Walmart uses divisions for Wal-Mart Stores, Sam's Club (U.S.), and International Stores. Each of these large divisions is further subdivided into smaller geographical divisions to better serve customers in different regions.36

The primary difference between divisional and functional structures is that in a divisional structure, the chain of command from each function converges lower in the hierarchy. In a divisional structure, differences of opinion among R&D, marketing, manufacturing, and finance would be resolved at the divisional level rather than by the president. Thus, the divisional structure encourages decentralization. Decision making is pushed down at least one level in the hierarchy, freeing the president and other top managers for strategic planning.

Geographic- or Customer-Based Divisions

An alternative for assigning divisional responsibility is to group company activities by geographic region or customer group. For example, the Internal Revenue Service (IRS) shifted to a structure focused on four distinct taxpayer (customer) groups: individuals, small businesses, corporations, and nonprofit or government agencies.37 A global geographic structure is illustrated in Exhibit 10.5. In a geographic-based structure, all functions in a specific country or region report to the same division manager. The structure focuses company activities on local market conditions. Competitive advantage may come from the production or sale of a product or service adapted to a given country or region. Walt Disney Company CEO Bob Iger reorganized the Disney Channel into geographic divisions because what appeals to people in different countries varies. Studio executives in Burbank, California, were miffed at the reorganization, but it has paid off. Iger learned that the Number 1 program on Italy's Disney Channel was one he had never heard of—“Il Mondo di Patty,” an inexpensive, telenovela-style show about an Argentine girl. “It's important that Disney's products are presented in ways that are culturally relevant,” Iger said about the geographic reorganization.38 Large nonprofit organizations such as the National Council of YMCAs, Habitat for Humanity International, and the Girl Scouts of the USA also frequently use a type of geographical structure, with a central headquarters and semiautonomous local units.39

Divisional Advantages and Disadvantages

By dividing employees and resources along divisional lines, the organization will be flexible and responsive to change because each unit is small and tuned in to its environment. By having employees working on a single product line, the concern for customers' needs is high. Coordination across functional departments is better because employees are grouped together in a single location and committed to one product line. Great coordination exists within divisions; however, coordination

across divisions is often poor. Problems occurred at Hewlett-Packard (HP), for example, when autonomous divisions went in opposite directions. The software produced in one division did not fit the hardware produced in another. Thus, the divisional structure was realigned to establish adequate coordination across divisions. Another major disadvantage is duplication of resources and the high cost of running separate divisions. Instead of a single research department in which all research people use a single facility, each division may have its own research facility. The organization loses efficiency and economies of scale. In addition, the small size of departments within each division may result in a lack of technical specialization, expertise, and training.

MATRIX APPROACH

What It Is

The matrix approach combines aspects of both functional and divisional structures simultaneously, in the same part of the organization. The matrix structure evolved as a way to improve horizontal coordination and information sharing.40 One unique feature of the matrix is that it has dual lines of authority. In Exhibit 10.6, the functional hierarchy of authority runs vertically, and the divisional hierarchy of authority runs horizontally. The vertical structure provides traditional control within functional departments, and the horizontal structure provides coordination across departments. The U.S. operation of Starbucks, for example, uses geographic divisions for Western/Pacific, Northwest/Mountain, Southeast/ Plains, and Northeast/Atlantic. Functional departments including finance, marketing, and so forth are centralized and operate as their own vertical units, as well as supporting the horizontal divisions.41 The matrix structure therefore supports a formal chain of command for both functional (vertical) and divisional (horizontal) relationships. As a result of this dual structure, some employees actually report to two supervisors simultaneously.

How It Works

The dual lines of authority make the matrix unique. To see how the matrix works, consider the global matrix structure illustrated in Exhibit 10.7. The two lines of authority are geographic and product. The geographic boss in Germany coordinates all subsidiaries in Germany, and the plastics products boss coordinates the manufacturing and sale of plastics products around the world. Managers of local subsidiary companies in Germany would report to two superiors, both the country boss and the product boss. The dual authority structure violates the unity-of-command concept described earlier in this chapter, but that is necessary to give equal emphasis to both functional and divisional lines of authority. Dual lines of authority can be confusing, but after managers learn to use this structure, the matrix provides excellent coordination simultaneously for each geographic region and each product line.