MANAGEMENT:
A GLOBAL AND ENTREPRENEURIAL PERSPECTIVE
by Weihrich, Cannice, and Koontz
Chapter
8
Organization Structure: Departmentation
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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After studying this chapter, you should
understand:
1. The basic patterns of traditional
departmentation and their advantages and
disadvantages.
2. Matrix organizations.
3. Strategic business units.
4. Organization structures for global enterprises.
5. The virtual and boundaryless organizations.
6. That there is no single best pattern of
departmentation.
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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Departmentation by Enterprise
Function
• Most widely employed basis for organizing activities
and is present in almost every enterprise at some
level in the organization structure.
• No generally accepted terminology for functional
departments: A manufacturing enterprise employs the
terms “production,” “sales,” and “finance;” a
wholesaler is concerned with such activities as
“buying,” “selling,” and “finance;” and a railroad is
involved with “operations,” “traffic,” and “finance.”
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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Fig. 8-1
Departmentation by
Enterprise Function
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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Departmentation by Territory or
Geography
• Rather common in enterprises that
operate over wide geographic areas.
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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Fig. 8-2 Departmentation by Territory
or Geography
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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Fig. 8-3 Departmentation by
Customers
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Fig. 8-4 Departmentation
by Product
© 2008 Weihrich and Cannice
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Matrix Organization
• The combining of functional and project
or product patterns of departmentation
in the same organization structure.
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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Fig. 8-5 Matrix Organization (in
engineering)
© 2008 Weihrich and Cannice
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Guidelines for Making Matrix
Management Effective
1. Define the objectives of the project or task.
2. Clarify the roles, authority, and responsibilities of managers
and team members.
3. Ensure that influence is based on knowledge and
information, rather than on rank.
4. Balance the power of functional and project managers.
5. Select an experienced manager for the project who can
provide leadership.
6. Undertake organization and team development.
7. Install appropriate cost, time, and quality controls that report
deviations from standards in a timely manner.
8. Reward project managers and team members fairly.
© 2008 Weihrich and Cannice
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Strategic Business Units (SBUs)
• Distinct little businesses set up as units
in a larger company to ensure that a
certain product or product line is
promoted and handled as though it
were an independent business.
© 2008 Weihrich and Cannice
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Fig. 8-6 Strategic Business Units
© 2008 Weihrich and Cannice
Chapter 8. Organizational Structure: Departmentation
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Organization Structures for the Global
Environment
• Organization structures differ greatly for
enterprises operating in the global
environment.
• The kind of structure depends on a
variety of factors, such as the degree of
international orientation and
commitment.
© 2008 Weihrich and Cannice
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The Virtual Organization
• A rather loose concept of a group of
independent firms or people that are
connected often through information
technology.
• These firms may be suppliers,
customers, and even competing
companies.
© 2008 Weihrich and Cannice
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Boundaryless Organization
• Jack Welch, former CEO at GE (General
Electric), stated his vision for the company as
a boundaryless company, an “open, antiparochial environment, friendly toward the
seeking and sharing of new ideas, regardless
of their origin.”
• The purpose was to remove barriers between
the various departments as well as between
domestic and international operations.
© 2008 Weihrich and Cannice
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Choosing the Pattern of
Departmentation
• There is no one best way of departmentation that is
applicable to all organizations and all situations.
• Managers must determine what is best by looking at
the situation they face.
– The jobs to be done and the way they should be
done
– The people involved and their personalities
– The technology employed in the department
– The users being served
– Other internal and external environmental factors
in the situation
© 2008 Weihrich and Cannice
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KEY IDEAS AND CONCEPTS FOR REVIEW
• Departmentation by
enterprise function
• Departmentation by
territory or geography
• Departmentation by
customer group
• Departmentation by
product
© 2008 Weihrich and Cannice
• Matrix organization (or
grid, or project, or
product)
• Strategic business unit
• Organization structures
for global enterprises
• Virtual organization
• Boundaryless
organization
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