The difference between functional organization and divisional organizations mainly depends on the way they are structured. An organization that has a management structure of sharing functions is called functional organization. If the tasks are segregated according to separate divisions or product categories, such organizations are divisional organizations.
Employees report to their line manager (also known as functional manager) on their routine tasks and simultaneously report to the project manager on specific project tasks. Such approach allows balancing employees’ time and knowledge between routine tasks and project work. However, a matrix organizational structure has both advantages and disadvantages. The main advantages of this structure are efficiency, strong project focus, easier post-project transition and flexible use of organizational resources. The drawbacks of the structure include potential conflict between function and project managers, infighting for resources, stressful work environment and slow decision-making.
Also, the performance-based divisions have the advantage of enabling the company in implementing strategies based on market performance similarities and related indicators. For example, the firm applies similar strategies for all lead markets.
The matrix structure allows the functional and divisional structures to exist within one organization. Organizations divide themselves by both function and division, gaining the benefits of both.
The matrix organizational structure brings the employees and managers together to work on a specific goal which makes it atypical. This structure is a combination of the functional and projectized structures. The former divides departments within a company by the functions performed, while the latter divides them by products, customers or geographical location. Hierarchy typically prevents lower levels of the structure to flexibly respond to current business needs and market demands. For example, the company’s product-based divisions must wait for directives from the CEO or other top executives to proceed in implementing changes that address trends in the market for consumer electronics.
McDonald’s Corporation has a global hierarchy to cover all its operations worldwide. This feature of the organizational structure emphasizes corporate control in the context of managerial control and direction. For example, McDonald’s CEO directs the activities of all business areas through this structural characteristic. Mandates and directives are passed from the CEO down to middle managers, and to the restaurant managers and personnel in company-owned operations and among franchisees.
In this structural feature, the company’s top leaders address business needs in terms of business function areas. An advantage of the hierarchy in McDonald’s corporate structure is its support for monitoring and control of global operations.
The matrix organizational structure came about as a business response to the rise of large-scale projects. They needed fast-track technology applications and required the ability to process great amounts of data in an efficient manner.
What Are the Benefits of Organizational Structure?
Learn about three types of matrix structures assigning different powers to functional and project managers. A bird’s-eye view of Apple’s organizational structure shows considerable hierarchy. However, under Tim Cook’s leadership, this hierarchy in Apple’s corporate structure has slightly changed.
Apple Inc.’s weak functional matrix refers to the collaborative interactions among various components of the business. In a weak functional matrix, top management determines project direction, while project heads have limited authority and control. For example, the corporate structure allows hardware teams to collaborate with software teams. In this way, the company facilitates information dissemination that is necessary for innovation processes. This structural feature contributes to effective and rapid innovation processes, which are a major business strength shown in the SWOT analysis of Apple Inc.
- In a weak functional matrix, top management determines project direction, while project heads have limited authority and control.
- Apple Inc.’s weak functional matrix refers to the collaborative interactions among various components of the business.
- For example, the corporate structure allows hardware teams to collaborate with software teams.
A worker belongs to a department, reporting to its manager, and also works for a specific divisional team or unit organized around a product or market, reporting to another supervisor. Matrix organizations are adaptable to changes in the business environment, but the drawback is that dual management can cause divisional and functional power struggles. A matrix organization is a hybrid organizational structure that combines two chains of command.
Why is divisional structure important?
The divisional organizational structure organizes the activities of a business around geographical, market, or product and service groups. Thus, a company organized on divisional lines could have operating groups for the United States or Europe, or for commercial customers, or for the green widget product line.
McDonald’s Organizational Structure & Its Characteristics – An Analysis
Through this characteristic of the organizational structure, the company maintains strong innovation processes that support brand development and the use of premium-pricing strategies. In this type of an organization structure, inefficiencies in one division do not affect the other divisions unlike in a functional structure since the divisions remain separate. Further, the divisional managers have significant autonomy to be responsive to customer demand without much influence from top management from the parent company. Divisional structures are very costly to operate since cost benefits available to functional structures through shared services are not enjoyed. Tax implications and additional regulations are also applicable to companies that operate in multiple countries.
Nowadays, many organizations have to continuously implement new projects to remain competitive in the marketplace, while simultaneously taking care of the existing product line and customers. An organization that combines daily operations and project delivery has to find an optimal balance in allocating its limited resources – especially people – to fulfil all its goals. An appropriate organizational structure allows the organization to define responsibility for project delivery and integrate the project outcomes into the operations. While there are several structures suitable for project delivery, in this lesson we will focus on a matrix organization.
The organization structure should be carefully chosen and this will depend on the nature of the business and the preference of the top management. Properly managed organizational structures can result in higher employee motivation and reduced costs.
Key Difference – Functional vs Divisional Structure
Thus, the company’s organizational structure is now less rigid, but still has a spoke-and-wheel hierarchy where Tim Cook is at the center. The upper tier (innermost tier in the spoke-and-wheel circle) of the corporate structure has function-based grouping, which is an element derived from the functional type of organizational structure. Senior vice presidents who report to Tim Cook handle business functions. For example, Apple has a senior vice president for retail, and a senior vice president for worldwide marketing.
However, a disadvantage of McDonald’s organizational structure is that it tends to generalize strategies for the performance-based divisions. Thus, McDonald’s could improve its corporate structure by changing or adjusting how these performance-based divisions are used in strategic implementation. Get automated, in-depth reporting.When dealing with projects of immense size and complexity, a matrix organizational structure can give you an advantage, but only if you and your team are equipped with powerful tools. ProjectManager.com is a cloud-based software that is built to manage projects of all sizes and levels of complexity. Its real-time data keeps managers updated and gives teams a collaborative platform.
The company now has more collaboration among different parts of the organization, such as software teams and hardware teams. Apple’s vice presidents have more autonomy, which was limited and minimal under Jobs.
However, Tim Cook has already made slight improvements by increasing collaboration among different parts of the firm. Still, Apple’s organizational structure does not support rapid changes because everything must go through Tim Cook and the top management.
What is the difference between Functional Structure and Divisional Structure?
This feature of McDonald’s corporate structure is typical of most global business organizations. Matrix organizational structure allows balancing daily operations with project delivery within an organization.