Four traditional organization designs are functional, geographic, product, and network.
Functional design involves the creation of positions, teams, and departments on the basis of specialized activities. Advantages include clear identification and assignment of responsibilities, and ease of understanding. People doing similar tasks and facing similar problems work together in a functional design. This increases the opportunity for communication and mutual support. A disadvantage is that it fosters a limited point of view that focuses on a narrow set of tasks. Employees tend to lose sight of the organization as a whole. Coordination across functional departments often becomes difficult as the organization increases the number of geographic areas served and the range of goods or services provided.
Geographic design involves establishing an organization's primary units geographically while retaining significant aspects of functional design. Advantages include direct contact with customers and ability to adapt to their needs. It also can reduce costs by locating unique resources (e.g., manufacturing, distribution) closer to customers. However, it increases control and coordination problems because of duplication of functions.
Product design involves the establishment of self-contained units, each capable of developing, producing, marketing, and distributing its own goods or services. The main advantage is that it reduces the information overload that managers face in a purely functional organization design. However, product designs usually incorporate features of functional and place designs into the organization of each product division.
The network design is organized by division on the basis of the product or geographic market in which the goods or services are sold. This design eases problems of coordination by focusing expertise and knowledge on specific goods or services. A disadvantage of the M-form is that a firm must have a large number of managerial personnel to oversee all the product lines. Another disadvantage is the higher cost that results from the duplication of various functions by the divisions.
Functional design involves the creation of positions, teams, and departments on the basis of specialized activities. Advantages include clear identification and assignment of responsibilities, and ease of understanding. People doing similar tasks and facing similar problems work together in a functional design. This increases the opportunity for communication and mutual support. A disadvantage is that it fosters a limited point of view that focuses on a narrow set of tasks. Employees tend to lose sight of the organization as a whole. Coordination across functional departments often becomes difficult as the organization increases the number of geographic areas served and the range of goods or services provided.
Geographic design involves establishing an organization's primary units geographically while retaining significant aspects of functional design. Advantages include direct contact with customers and ability to adapt to their needs. It also can reduce costs by locating unique resources (e.g., manufacturing, distribution) closer to customers. However, it increases control and coordination problems because of duplication of functions.
Product design involves the establishment of self-contained units, each capable of developing, producing, marketing, and distributing its own goods or services. The main advantage is that it reduces the information overload that managers face in a purely functional organization design. However, product designs usually incorporate features of functional and place designs into the organization of each product division.
The network design is organized by division on the basis of the product or geographic market in which the goods or services are sold. This design eases problems of coordination by focusing expertise and knowledge on specific goods or services. A disadvantage of the M-form is that a firm must have a large number of managerial personnel to oversee all the product lines. Another disadvantage is the higher cost that results from the duplication of various functions by the divisions.