Functional organizational structure

Credit Human Bank Product

investment Finance Marketing Sales
Managemnt Resources Mnagament

 HSBC Bank applies a functional organizational structure which is grouped by

functions ,credit management ,finance ,information technology ,legal issues ,human

resources ,etc

 The characteristics of such structure are as follows : the structure emphasizes on

specialization rathar than creativity and innovation allowing economies of scale as same

specializations and activities are grouped together generating cost savings ,the of this

structure is the departmental objectives rathar than the organizational objectives ,this

structure lakes coordination between different functions with less focus on the overall

organizational goals and objectives, giving less empowerment and decision making

opportunities to employees .
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 This structure has vertical information sharing rathar than the horizontal information

sharing, vertical sharing is done through hierarchical referral according to the regular

chain of command to decide who reports to whom, too many rules and procedures are

available. Horizontal information sharing is minimum and is solved using many methods

including the liaison role as each department has person on permanent basis who acts as

the networker and makes the linkage across departments,also information system (the

bank system) allows the information sharing both horizontally and vertically, task force is

another tool where cross functional teams are formed in cases or organizational crisis and

problems to help solving them. Also one method to overcome the problems and

disadvantages of the functional structure is using he regular meetings between

departmental heads .

 The firm keeps a vertical (tall )organization structure with too many reporting levels ,due

to narrow span of control which refers to small number of employees reporting to a single

supervisor, this slows down the decision making process from the bottom up to the top

of the organization .The workplace is highly centralized with high formalization referring

to the written rules ,procedures and paperwork ,high level of specialization where each

employee perform limited number of tasks leading to high technical expertise

Divisional Organization Structure (Product Based)

 Juhayna Egypt is following a product based organization structure where activities are

grouped by products where each division includes its own functional activities ,the

product manager plays the role of full time integrator who integrates all functional

activities under his authority .In the product based structure the focus is on the

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 organizational objectives rathar than the functional objectives ,giving the employees

higher degree of horizontal coordination and teamwork ,more innovation and creativity as

well as empowerment chances are provided in a decentralized organizational structure

this positively affects the firm’s ability to respond to environmental changes. This

structure doesn’t allow economies of scale resulting in higher costs ,there is less focus on

technical experience .This structure allows a very high level of horizontal coordination

due to the role of full time integrator played by the product manager.

 Juhayna keeps a horizontal structure with wide span of control with large number of

employees reporting to their immediate supervisor ,keeping a decentralized structure with

high decision making opportunities given to the lower levels allowing creativity and

innovation ,moderate level of formalization and paper work is kept across the

organization as well as low level of specialization as the number of tasks performed by

employees is large with less emphasis on the technical experience and more of the

product goals and objectives

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 President

Yougurt
Milk Juices
/Cream/Cheese

Marketing Marketiing Marketing

Finance Finance Finance

HR HR HR

Manufacturing Manufacturing Manufacturing

Pharco Geographic structure

 Pharco the pharmaceutical firm follows a geographical based structure . This structure

organizes the firm by markets served by the firm where each region or geographical

location include its own functional activities ,with the major benefit is customization the

products and services based on the different customer needs of each geographical

location .Similar to the divisional product based structure it enables high level of

horizontal communication and coordination across the firm as the regional manager plays

the role of full time integrator. In this structure the focus is on the organizational

objectives rathar than the functional objectives ,giving the employees higher degree of

horizontal coordination and teamwork ,more innovation and creativity as well as

empowerment chances are provided in a decentralized organizational structure this

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 positively affects the firm’s ability to respond to environmental changes. This structure

doesn’t allow economies of scale resulting in higher costs ,there is less focus on technical

experience .This structure allows a very high level of horizontal coordination due to the

role of full time integrator played by the product manager.

 Juhayna keeps a horizontal structure with wide span of control with large number of

employees reporting to their immediate supervisor ,keeping a decentralized structure with

high decision making opportunities given to the lower levels allowing creativity and

innovation ,moderate level of formalization and paper work is kept across the

organization as well as low level of specialization as the number of tasks performed by

employees is large with less emphasis on the technical experience and more of the

product goals and objectives

CEO

Cairo Alex Upper Canal

&Giza &Delta Egypt &Sinai

HR Sales Finance HR Sales Finance

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IKEA Matrix Structure

FACILITY
MANAGER

DUTY FINANCE MARKETING

HR Manager SALES Manager
MANAGER Manager Manager

BATHROOM
Product HR FINANCE SALES MARKETING
Manager

LIVING ROOM
Product HR FINANCE SALES MARKETING
Manager

KITCHEN
Product HR FINANCE SALES MARKETING
Mnagaer

TEXTILES
Product HR FINANCE SALES MARKETING
Manager

BABY
Product HR FINANCE SALES MARKETING
Manager

 The firm has the following product categories

1. Bathroom

2. Baby

3. Living room

4. Kitchen

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 5. Textiles

 The matrix organizational structure has a product based structure over a

functional structure in order to combine the efficiency of the functional approach
with the flexibility and responsiveness to change of the divisional approach. Each
employee in a matrix unit reports to two bosses – a functional manager and a
product or project manager. This means that there are dual lines of authority in the
matrix organization.
 As seen in figure, there is a vertical chain of command for the functions of,
finance, marketing, sales and human resources . There is a horizontal chain of
command for the product types .
 The firm have chosen not to keep a balanced matrix structure because a balanced
structure would result in conflict of power between functional managers and
divisional managers ,that’s why the firm had chosen that structure would be more
product based with main authority goes to product managers while functional
managers assist the product managers to get objectives done
Advantages

1. Sharing Resources: This structure facilitates the proper sharing and utilization of highly

specialized staff, equipment and resources.

2. Flexibility: Matrix structure fosters flexibility throughout eh organization. Various skills

can be brought together in this type of organization.

3. Effective Control: The main responsibility of the product manager is to maintain

coordination among interrelated factors of a particular project. He has to communicate

both with the horizontal and vertical authorities so that the project work can be run

smoothly. Similarly, functional managers are responsible for providing technical

and administrative guidance to projects. This leads to a better and more effective control

over regular operation.

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 4. Strategic Thinking: This structure encourages delegation of authority to product

managers.

 IKEA keeps horizontal information linkage through the following methods

1. Regular meetings that are held between departments
2. Full integrator position of product manager example
3. Task forces are composed from multiple department to deal with major problems and
crisis facing the firm
 IKEA keeps vertical information linkage through the hierarchy of authority

1. Strict rules to deal with programmed situation

2. Periodic reports

3. Unsolved problems are raised up to higher managerial levels

4. Using budgets and standards

 IKEA is a horizontal organization with high decentralization due to the high level of
empowerment provided to lower levels of management ,formalization referring to written
rule has a moderate level ,specialization is low as the number of tasks per employee are
large ,

Mechanistic (HSBC )Vs Organic (IKEA)

HSBC keeps a mechanistic organization as a machine like organization due to the following

reasons

1. Keeping high formalization with too many rules ,regulation and written procedures to be

followed by the organization members

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 2. High level of specialization as the number of tasks per employee are limited with focus

on technical experience

3. High level of centralization as decision making is mainly in hands of top management

,with very minimum decision making opportunities given to lower levels

4. Strict hierarchy of authority with narrow span of control as limited number of members

report to the same manager or supervisor

5. An efficiency organization looking for cost minimization rather than learning and

innovation

6. High degree of vertical communication across the organization rathar than horizontal

communication

IKEA keeps an organic structure with loose and adaptive and less rigid structure due to

the following reasons

1. Keeping moderate to low formalization with respect to written rules ,paperwork and

procedures

2. Keeping low specialization as employees are trained to perform many tasks

3. Keeping low centralization in a decentralized workplace where problem solving and

decision making chances are given to lower levels to speed up the decision making

process

4. Wide span of control with large number reporting to the same manager or supervisor

allowing horizontal communication

5. A learning organization looking for innovative customer solutions ,and creativity rathar

than efficiency and cost control

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6. High degree of horizontal communication and coordination between the organization

units ,this adds flexibility and fast response to changes in the environment and problems

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