Definition, Advantages, Disadvantages, Example, Explanation môn Principle of Management | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

Definition, Advantages, Disadvantages, Example, Explanation
Chap 11: Organization Structures and Designs
- Organizing as a Management Function:
Definition: The process of arranging resources and activities in a structured
way to achieve the goals of an organization. It involves defining roles,
responsibilities, authority, and relationships to ensure efficient coordination and use of resources.
Key Elements of Organizing:
1. Division of Work: Breaking down tasks into manageable activities and
assigning them to individuals or teams.
2. Departmentalization: Grouping related tasks into departments or units
(e.g., marketing, finance, operations).
3. Delegation of Authority: Assigning responsibility and giving the necessary
authority to individuals so they can perform their duties.
4. Coordination: Ensuring that different departments and individuals work in harmony toward common goals.
5. Resource Allocation: Assigning appropriate resources (human, financial, material) where needed.
6. Establishing a Hierarchy: Creating a clear chain of command, showing who reports to whom. Purpose:
To create a structure that enables people to work effectively.
To improve communication, accountability, and efficiency.
To align efforts across the organization. Example:
In a business, after setting objectives (planning), the manager must organize by:
Hiring staff (human resources),
Assigning specific duties (job roles),
Setting up departments (organizational structure),
And ensuring everyone knows their responsibilities and to whom they report.
In short, organizing turns plans into action by creating a framework where
tasks can be carried out efficiently and effectively.
-Organization Structure:
Definition: The formal system that defines how tasks, roles, responsibilities,
authority, and communication are organized and coordinated within an
organization. It outlines who reports to whom, how decisions are made, and
how work flows between different parts of the organization.
A well-designed organizational structure helps:
Clarify job roles and hierarchy
Improve coordination and communication
Support strategic goals and efficiency
- The difference between formal and informal structures: 1. Formal Structure
Definition: A formal structure is the official, predefined organizational framework
that outlines roles, responsibilities, authority, and relationships. It is intentionally
designed by management to achieve specific goals. Characteristics:
Clearly defined hierarchy and job roles
Documented rules, policies, and procedures
Created through organizational planning
Shown in organizational charts
Guides how tasks and responsibilities are distributed Example:
An organizational chart showing a CEO at the top, followed by department heads
(e.g., Marketing, HR), and employees under each department. 2. Informal Structure
Definition: An informal structure is the unofficial network of relationships and
social interactions that develop naturally among employees within an organization. Characteristics:
Not defined by the organization’s official documents
Based on personal relationships, social groups, or common interests Flexible and spontaneous
Can support or undermine formal structure
Influences communication and morale Example:
A group of employees from different departments who regularly have lunch
together and share information informally. Key Differences: Feature Formal Structure Informal Structure
Basis Organizational planning Social and personal interactions
Purpose Achieve official organizational Satisfy social and goals emotional needs
Authority Defined roles and hierarchy No official authority
Communication Follows official channels Uses informal, often faster channels
Stability More stable and controlled Dynamic and flexible
Documentation Documented (e.g., org chart) Undocumented Conclusion:
Both structures are important. The formal structure provides order and
accountability, while the informal structure fosters teamwork, communication, and
morale. Effective managers recognize and balance both to enhance performance and workplace culture.
- Discuss the potential advantages and disadvantages of informal
structures in organizations:
Advantages of Informal Structures:
1. Improved Communication: Informal networks often allow for faster, more
open communication than formal channels, helping spread information quickly.
2. Enhanced Teamwork and Morale: Friendships and social bonds formed
through informal structures can increase job satisfaction, collaboration, and overall morale.
3. Flexibility: Unlike rigid formal structures, informal groups can adapt
quickly to changes, helping teams solve problems creatively and efficiently.
4. Support System: They provide emotional support and a sense of belonging,
which can reduce stress and improve employee well-being.
5. Filling Gaps: Informal networks can help get things done when formal
systems are slow or ineffective, offering practical workarounds.
Disadvantages of Informal Structures:
1. Spread of Misinformation: Because informal communication is often
undocumented, it can lead to rumors, misunderstandings, or distorted information.
2. Resistance to Change: Strong informal groups may resist management
decisions or changes, creating conflicts or slowing down implementation.
3. Exclusion and Cliques: Informal networks can sometimes lead to
favoritism, exclusion, or the formation of cliques that harm team unity and fairness.
4. Undermining Authority: If informal leaders become more influential than
formal ones, it can weaken official authority and disrupt the chain of command.
5. Lack of Accountability: Since informal roles are unofficial, there is no
formal accountability, which can lead to a lack of responsibility or coordination. Conclusion:
While informal structures can enhance communication, morale, and flexibility,
they must be managed carefully to avoid conflicts, misinformation, or
resistance. Effective leaders recognize their influence and seek to align informal
networks with organizational goals.
- Traditional Organizational Structures:
Definition: Traditional organizational structures refer to the conventional ways
of arranging authority, responsibilities, and communication within an
organization. These structures are typically hierarchical, clearly defined, and
centralized, where decision-making flows from the top down. Key Characteristics: Clear chain of command
Fixed roles and responsibilities
Emphasis on authority and control
Formal communication channels Centralized decision-making
Common Types of Traditional Structures:
1. Line Structure: Direct, vertical relationships between different levels (e.g., military-style).
2. Line and Staff Structure: Adds specialized support staff (e.g., HR, legal) to a basic line structure.
3. Functional Structure: Divides the organization by functions (e.g.,
marketing, finance, production). Example:
A company with a CEO at the top, followed by managers of departments like
sales, HR, and finance, each with clearly defined roles and a structured reporting system. Conclusion:
Traditional organizational structures provide stability, order, and clear authority,
making them effective for well-established or routine operations. However, they
can be rigid and slow to adapt to change in dynamic environments.
- The differences between functional, divisional, and matrix structures: 1. Functional Structure
Definition: An organization is divided based on specialized functions or
departments such as marketing, finance, operations, and human resources. Key Features:
Employees are grouped by expertise.
Each department has its own head who reports to top management.
Clear lines of authority within each function. Advantages:
High specialization and efficiency.
Clear career paths within departments.
Simplified management and supervision. Disadvantages:
Limited communication across departments.
Slow response to external changes.
Can create silos or lack of coordination. 2. Divisional Structure
Definition: The organization is divided into semi-autonomous units or divisions
based on products, services, customers, or geographic regions. Key Features:
Each division operates like a separate business unit.
Each has its own functional departments (e.g., HR, marketing).
Greater focus on specific markets or products. Advantages:
Flexibility and responsiveness to market needs.
Easier performance tracking by division.
Encourages innovation within divisions. Disadvantages:
Duplication of resources across divisions.
Risk of competition or conflict between divisions. Higher operational costs. 3. Matrix Structure Definition:
A hybrid structure that combines elements of both functional and divisional
structures. Employees report to two managers: one functional and one project or product manager. Key Features:
Dual authority system (e.g., marketing manager and product manager).
Promotes collaboration across departments.
Used in complex or project-based environments. Advantages:
Efficient use of resources and talent.
Encourages teamwork and flexible thinking.
Better coordination across functions and projects. Disadvantages:
Confusion due to dual reporting.
Higher potential for conflict between managers.
Requires strong communication and conflict resolution skills. Comparison Table: Feature Functional Divisional
Structure Matrix Structure Structure Products, Combination of Basis of Functions regions, or function and Division (e.g., HR, IT) customers product/project
Authority Single chain of Separate chains Dual (functional & command per division project) Flexibility Low Moderate High Efficient Resource Duplication within across divisions Shared across projects Use functions Complexity Low Medium High Conclusion:
Each structure has its own purpose. Functional is best for efficiency and
specialization, divisional is ideal for large companies with diverse products or
markets, and matrix suits dynamic, project-driven environments where
collaboration is essential. The choice depends on an organization’s size, goals, and industry. - Funtional Structure: Advantages:
1. Specialization and Expertise
Explanation: Employees are grouped by specific functions (e.g., marketing,
finance, HR), allowing them to focus on their area of expertise and develop deep knowledge and skills.
Example: In a bank, the finance department handles all accounting, while the
marketing team focuses solely on customer outreach. This specialization
improves both accuracy and professionalism.
2. Efficiency and Economies of Scale
Explanation: Tasks are standardized within departments, which improves
operational efficiency and reduces duplication of work and resources.
Example: In a manufacturing company, the procurement department buys
materials for all departments at once, leading to bulk discounts and streamlined logistics.
3. Clear Chain of Command
Explanation: Each employee reports to one supervisor, making roles,
responsibilities, and reporting relationships clear.
Example: In a hospital, nurses in the emergency department report to the ER
head nurse, who reports to a medical director. This helps avoid confusion in critical situations.
4. Focused Career Development
Explanation: Employees can build careers within their functional area, with
clear paths for promotion and development.
Example: In a tech firm, a junior software developer can move up to senior
developer, then to technical lead, all within the engineering department.
5. Improved Supervision and Performance Evaluation
Explanation: Managers are experts in the same field as their team, so they can
better train, guide, and assess employees.
Example: A sales manager in a retail chain can coach their team on closing
techniques and track sales KPIs more effectively. Disadvantages:
1. Poor Interdepartmental Communication
Explanation: Departments may become isolated (“silos”) and fail to share
information or collaborate effectively.
Example: In a pharmaceutical company, the R&D team may not update the
marketing team on product changes, causing misinformation in advertising.
2. Slow Decision-Making Across Departments
Explanation: Cross-functional coordination may take longer since issues must
go through multiple layers of management.
Example: A clothing brand might delay a new product launch because the
design, production, and marketing departments are not aligned on timelines.
3. Lack of Accountability for Overall Outcomes
Explanation: Each department focuses only on its own goals, and no one is
responsible for the overall product or service performance.
Example: In a hotel, the housekeeping team ensures clean rooms, and the front
desk ensures smooth check-ins, but if a guest has a bad overall experience, no
single department is held fully accountable.
4. Inflexibility and Resistance to Change
Explanation: Departments may become too focused on routine tasks and resist
innovations that require cooperation or new methods.
Example: In a government agency, the finance department may resist adopting
a new digital payment system proposed by IT because it disrupts their traditional process.
5. Overemphasis on Department Goals
Explanation: Departments may prioritize their success over the organization's
broader goals, causing misalignment.
Example: In an automobile company, the engineering team may design high-
tech features that increase production costs, while the finance team wants to cut
costs, causing internal conflict. - Divisional Structure: Advantages:
1. Focus on Specific Products, Customers, or Regions
Explanation: Each division specializes in one product line, market, or
geographic area, improving customer focus.
Example: Samsung has separate divisions for mobile devices, home appliances,
and semiconductors—each focused on a specific product market.
2. Faster Decision-Making
Explanation: Divisions operate semi-independently, allowing them to make
quick decisions without waiting for approval from headquarters.
Example: In Toyota, the North American division can adjust pricing or
marketing strategies to local market conditions without needing direct approval from Japan.
3. Improved Accountability
Explanation: Since each division has its own budget and goals, managers can
be held responsible for their unit’s performance.
Example: In Unilever, the personal care division is held accountable for its
own sales targets and profitability, separate from the food division.
4. Encourages Innovation
Explanation: Divisions have the freedom to develop new ideas, products, or
processes that meet their specific market needs.
Example: Amazon’s Kindle division had the independence to innovate and
launch e-readers as a new business within the larger company.
5. Better Coordination Within Divisions
Explanation: Since all functions (marketing, HR, R&D, etc.) exist within a
division, teamwork is more focused and cohesive.
Example: A retail chain like Zara may have regional divisions that handle
design, inventory, and sales together to match local trends more effectively. Disadvantages:
1. Duplication of Resources
Explanation: Each division may have its own departments, leading to
redundancy and higher operating costs.
Example: If Coca-Cola’s beverage division and snack division each have their
own marketing team, it can result in unnecessary duplication.
2. Internal Competition Between Divisions
Explanation: Divisions may compete for resources or market recognition, hurting overall company unity.
Example: At Procter & Gamble (P&G), the beauty and grooming divisions
might compete over advertising budgets, even though they share the same customers.
3. Inconsistent Company Image
Explanation: Autonomy can lead to divisions using different branding or
processes, confusing customers.
Example: If Hilton Hotels’ divisions in Asia and Europe offer different service
levels, it could weaken the brand’s global identity.
4. Harder to Share Best Practices
Explanation: Divisions working independently may not communicate well,
leading to missed opportunities to improve.
Example: If the Africa division of Nestlé finds a successful low-cost
distribution method, the South America division might not benefit due to poor knowledge sharing.
5. Division Goals May Override Company Goals
Explanation: Division leaders may focus on their own success instead of the company’s overall vision.
Example: If the electronics division of Sony pushes a risky product to boost its
own sales, it could harm the company’s brand or financial stability. - Matrix Structure: Advantages:
1. Efficient Use of Resources
Reason: Employees are shared across projects and departments, reducing
duplication and maximizing talent use.
Example: In an engineering firm, a mechanical engineer can work on multiple
projects at the same time (e.g., Product A and Product B) instead of being assigned to just one.
2. Enhanced Collaboration Across Functions
Reason: Employees from different departments (e.g., marketing, finance,
R&D) work together on the same project, improving cross-functional cooperation.
Example: In a pharmaceutical company, marketing, regulatory affairs, and
R&D all work together on a new drug launch, leading to a more unified and timely approach.
3. Flexibility and Fast Adaptation to Change
Reason: Teams can be quickly reconfigured based on project needs or market
shifts without restructuring the whole organization.
Example: A software company can quickly form a project team to respond to a
competitor’s app release without disrupting existing departments.
4. Better Project Focus with Functional Support
Reason: Employees receive direction both from a project manager (for task
delivery) and a functional manager (for skills and development), balancing both
short-term and long-term goals.
Example: A designer in a car manufacturing firm gets creative direction from
the project lead on a new car model, while still being mentored by the head of design for career growth.
5. Encourages Knowledge Sharing and Innovation
Reason: Employees interact with people from different departments and
projects, which encourages fresh ideas and knowledge transfer.
Example: At Google, employees often work across departments and on
different innovation projects, fostering creativity and learning. Disadvantages:
1. Confusion Due to Dual Reporting Lines
Reason: Employees report to both a functional manager and a project manager,
which can create conflicting instructions and uncertainty.
Example: A software developer may be told by the project manager to
prioritize a deadline, while the functional manager asks them to attend a skills
workshop—causing stress and indecision.
2. Power Struggles Between Managers
Reason: Project and functional managers may compete for control over
employees, budgets, or resources.
Example: In a construction company, the finance manager wants strict cost
control, but the project manager wants to spend more for higher quality— leading to tension.
3. High Coordination Costs and Complexity
Reason: Managing dual lines of authority requires frequent meetings, status
updates, and coordination tools, which can be time-consuming.
Example: At a multinational consultancy, project teams spend significant time
aligning with both client needs and internal departmental expectations.
4. Employee Stress and Role Conflict
Reason: Working under two bosses with different priorities can create workload pressure and burnout.
Example: An employee in a defense technology firm might struggle to meet
both R&D targets and project delivery timelines, leading to job dissatisfaction.
5. Requires Strong Leadership and Communication
Reason: Without clear communication and collaboration between managers, the structure can break down.
Example: In a media agency, if project leads and creative department heads
don’t regularly sync, campaign quality or deadlines can suffer.
- Charts to show how each type of traditional structure could be
used in organizations familiar: Funtional Structure: CEO |
---------------------------------------------------------------- | | | |
Marketing Operations Finance HR Department
Department Department Department Divisional Structure: CEO |
------------------------------------------------ | | |
Division A Division B Division C
(Mobile Devices) (Home Appliances) (TV & Display) | | |
Mktg, Fin, HR Mktg, Fin, HR Mktg, Fin, HR Max Structure:
Functional Heads (Vertical)
-------------------------------------------------------- | | | |
Eng. Head HR Head Fin. Head Mktg. Head | | | |
--------------------------------------------------------- | | Project A Project B
(Horizontal teams across functions)
- The type of horizontal organization structures: 1. Team Structure
Definition: A team structure organizes employees into cross-functional,
collaborative teams that work toward common goals. Teams are often
empowered to make decisions and solve problems independently. Key Features:
Cross-functional teams (e.g., marketing, design, finance working together)
Decentralized decision-making
High flexibility and fast execution
Focus on collaboration and shared responsibility
Example: A tech startup creating an app might have a small team of
developers, designers, and marketers all working together as one unit to deliver the product. 2. Network Structure
Definition: A network structure consists of a central core organization that
coordinates with external entities like contractors, freelancers, subsidiaries, or
partner firms to deliver products and services. Key Features:
Outsourcing of non-core activities
High flexibility and scalability Cost efficiency
Emphasis on partnerships and alliances
Example: A global clothing brand might do in-house product design, but
outsource manufacturing to factories in Asia and logistics to third-party companies.
3. Boundaryless Structure
Definition: A boundaryless organization eliminates traditional barriers — both
internal (between departments) and external (between the organization and its partners or customers). Key Features: No rigid hierarchy
Fluid communication and roles
Collaboration across departments, levels, and even organizations
Encourages innovation and responsiveness
Types of boundaries removed:
Vertical (hierarchical levels)
Horizontal (departmental silos)
External (between organization and customers or partners)
Geographical (across locations)
Example: A company like General Electric (GE), under Jack Welch, promoted
boundaryless culture by breaking down silos and encouraging open
communication and collaboration across all levels and units. - Network Structure:
Definition: An organizational design in which a central company (or core
business unit) collaborates with various external entities, such as
subcontractors, freelancers, suppliers, or partner organizations, to perform key
business functions. Instead of handling everything in-house, the organization
focuses on its core competencies and outsources other activities. Key Characteristics: Decentralized and flexible
High reliance on technology and communication tools
Core firm coordinates and manages relationships with partners
Lower fixed costs due to outsourcing
Example: A shoe brand might design its products internally but outsource:
Manufacturing to factories overseas
Logistics to shipping companies
Marketing to a digital agency
This allows the company to stay lean while scaling quickly. Benefits:
Greater flexibility and responsiveness Reduced overhead costs
Access to specialized expertise Challenges:
Less control over quality and timelines
Dependence on external partners
Requires strong communication and coordination - Horizontal Structure: DDDDD DDDDD:
A horizontal structure (also known as a flat
structure) is an organizational design with few or no levels of middle
management between staff and executives. It emphasizes teamwork, open
communication, and decentralized decision-making, giving employees more
autonomy and involvement in the organization’s operations. Key Features: Few hierarchical levels
Wide spans of control (managers supervise more employees)
Emphasis on collaboration rather than strict authority
Faster communication and decision-making
Employees often take on multiple roles
Example: A tech startup with 15 employees where everyone reports directly to
the CEO, and teams work together informally without rigid departmental divisions. Advantages:
Greater employee empowerment and motivation
Faster decision-making and adaptability
Improved communication and innovation Disadvantages:
Can lead to confusion in roles/responsibilities
Not scalable for large organizations
Requires highly skilled, self-directed employees
-Illustration and explanation of how a new r
etail venture could use a
network structure to organize its operations: [Core Company] (Brand Owner) |
------------------------------------------------------------------------- | | | |
Product Design Marketing & E-Commerce Tech Customer Service
(In-house) Branding Agency (Outsourced) (Call Center) | | |
[Freelance Designers] [Web Developers] [Third-Party Vendor] | [Influencers/PR Firm] |
------------------------------------------------------------ | | |
Manufacturing Partner Logistics Provider Retail Distributors
(Overseas Factory) (Shipping Company) (Online & Offline)
How It Works in Practice:
1. Core Company (Brand Owner):
oFocuses on strategy, vision, and product oversight.
oKeeps control over branding, product direction, and quality checks.
2. Product Design (In-House):
oDesigns products internally, but may collaborate with freelance designers.
3. Marketing & Branding:
oOutsources marketing to a specialized agency.
oCollaborates with influencers, social media managers, or a PR firm.
4. E-Commerce & Technology:
oHires an external agency to build and maintain the online store. 5. Customer Service:
oContracts a third-party call center to handle inquiries and returns.
6. Manufacturing Partner: