Are You Organised?

Despite being considered a rather dry topic, organisational structure is a perennial issue. Organisations are structured in a variety of ways, dependant on their objectives. Let us look at an imaginary multinational company named Jet, which specialises in electronics. It can be structured in several different ways:

1. by function – the business is arranged according to what each section or department does (e.g. Production, Sales, Marketing, Accounts, IT, etc.)

2. by product or activity (e.g. Jet Business Electronics, Jet Consumer Electronics, Jet Domestic Appliances and Personal Care, etc.)

3. by area – geographical or regional structure (e.g. Jet Americas, Jet Europe, Middle East and Africa, and Jet Asia Pacific, etc.)

A matrix structure is yet another type of organisational structure, which overlays two organisational forms in order to leverage the benefits of both. Some global corporations adopt a matrix structure that combines geographical with product divisions, allowing the company to exploit global economies of scale while better serving local needs. Instead of combining two divisional structures, some matrix structures overlap a functional structure with project teams. Employees are assigned to a cross-functional project team, but they also belong to a permanent functional unit (e.g. sales, marketing) to which they return when a project is completed.

Some specialists, such as Lowell Bryan and Claudia Joyce of McKinsey’s New York office, argue that hierarchical structures force professionals (whom they define as innovators of new business ideas who make big companies competitive) “to search across poorly connected organisational silos to find knowledge and collaborators”, while matrix overlays often burden them with two bosses. They propose a new organisational model that includes vertical structures by establishing one dominant axis of management – product, functional, geographic or some other – and discarding matrix approach that often muddles decision-making authority.

In organisations such as the one presented above, responsibility is passed down the line. At each stage in the chain, one person has a number of direct subordinates who are within their span of control. In tall hierarchical organisation with many levels of management, the number of layers decreases the span of control. In contrast to a tall organisation, a flat hierarchical organisation has only a few or just one layer of management. In the 20th century, as companies grew bigger, tall hierarchical organisations were popular because they could ensure control. However, with the rise of globalisation and widespread use of technology, they began to downsize in the 1990s. This is where various consultancy companies entered the scene, cashing in millions of kunas, euros or pounds for advice on how to reorganise a company.