Principles of Management MGT121 Chapter 6: The Fundamentals of Organizing
Dept. type
Functional
Grouped by
Basic
functions like
sales and
finance (the
core activities
the company
carries out)
Advantages
1) Simple, obvious and logical
2) Efficient
a) less duplication of effort
b) Employees become proficient doing
same job
3a) Managers specialize
3b) Simplified recruiting and training
4) tighter control
Divisional:
Product
Customer
Market
Geographic
Products or
product lines
Specific
groups of
customers
Specific
marketing
channels
Territories
1) responsibility for all functions
promotes quick decisions and
flexibility, better service
2) easier to judge performance
3) Motivating to have full responsibility
4) better “generalist” training grounds;
develops general managers
5) shifts management burden from top
to divisional management
Dept. type
Matrix
organization
Grouped by
2 ways; employees permanently attached
to one dept but also simultaneously have
ongoing assignments in which they report
to project, customer, product or geographic
unit heads
Disadvantages
1a) responsibility for coordination
and performance rests on 1
person
1b) coordination and decisionmaking complex
1c) reduces attention paid to
certain products, customer,
markets or areas
2) results in specialized managers
1) cause duplication of effort
2) may diminish top
management’s control
3) requires more “generalist”
managers
4) can breed
compartmentalization
Advantages
1) stability & flexibility
2) use expertise when
needed
Marketing channel
Line, staff, functional authority
Most firms, especially larger ones, are structural hybrids. What does this mean?
Span of control
Tall vs. flat organization
Centralized vs. decentralized organization
Horizontal corporation
Additional information
 Can group service businesses
functionally: Bank – operations,
control, loans
 Can group a company by
managerial functions: planning,
control, administration
 Can group a company by
technological functions – plating,
welding, assembling
 Head of a division usually has
functional departments reporting to
him/her
 Product divisions often selfcontained
Disadvantages
1) confusion
2) power struggles and conflicts
3) lost time (meetings, etc.)
4) excessive overhead (more
managers, support staff)
Additional info
 NASA,
accounting firms
for example