Question

Compare and contrast the functional, conglomerate, and divisional forms of organization design structure. What are the advantages and disadvantages of these forms of structure? Use diagrams if they will clarify your explanation.

Answer 1

Functional Organizational Structure

It is the most common form of organizational structure. In a functional structure, the various departments in the organization are grouped according to their special functions such as finance, marketing, IT etc. Each department has a specific manager and this form of departmentalization increases the efficiency of the organization.

Advantages

• It is a better option for small businesses that focus on a single product or service.
• The clarity in specific tasks allows for better focus among the employees.
• It increases the efficiency of operations within the division.

Disadvantages

• It can lead to poor communication between departments and also give rise to conflicts.
• The structure and standardized functions might slow the decision-making process.

Divisional Organizational Structure

Divisional structures segregate the different functions of the organization into the product or geographical divisions which help in decentralizing the decision-making process. Each division possesses the required resources to carry out organizational functions. For example, each division can have its own finance and marketing departments.

Advantages

• It is suitable for companies that provide different varieties of products.
• The various subsidiaries benefit greatly from the brand value of the parent company.
• The failure of one division doesn’t necessarily impact the other divisions.

Disadvantages

• It might increase the rate of redundancies between divisions.
• It might lead to an increase in tax implications.
• Each division might prioritize its own goal rather than focusing on the larger goal of the organization.

Conglomerate organizational structure

Also known as matrix structure, it is an amalgam of different organizational structures. It consists of a dual chain of command where the employees might have two bosses. Companies are split into specialization departments which are further split into projects and products. It is a highly complex structure and hence demands a lot of planning to be implemented successfully.

Advantages

• The blend of functional and divisional organization leads to faster communication which increases productivity.
• Team members are a part of the decision-making process.
• Increase in the involvement of managers enables faster identification and rectification of problems.

Disadvantages

• Due to different authorities, it might prove confusing for the employees to identify the chain of command.
• It requires multiple sets of managers which increases the overhead cost.
• The increased workload can prove to be exhausting and taxing for employees.