Departmentalization

Another fundamental characteristic of organization structure is departmentalization, which is the basis

for grouping positions into departments and departments into the total organization. Manager make
choices about how to use the chain of command to group people together to perform their work. Five
approaches to structural design reflect different uses of the chain of command in departmentalization.

VERTICAL FUNCTIONAL APPROACH

What It Is

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. The function 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.

How Is Works

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. 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 Disadventages

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 issues related to information technology for the
organization. The primary disadvantages reflect barriers that exist across departments.

DIVISIONAL APPROACH

What It Is

In contact 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
output. With a divisional structure, also called an M-form (multi-divisional) 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.
Divisional Advantages and Disadvantages

By dividing employees and resource 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 need is high.

MATRIX APPROACH

What It Is

The matrix approach combine 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.