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The product, called Smarter, dramatically reduced weed growth in potted lands and simultaneously provided important nutrients – all with no chemicals. Smarter raw materials and manufacturing expertise were available in China and India. As the company grew, the managers and board members talked frequently about organization structure. Two schools of thought emerged. One group wanted to import raw materials into the U. S. For manufacturing by WAR and thereby have direct control over manufacturing, marketing, and sales. These functions would be departments within WAR.

The second group wanted to import already manufactured ND packaged products from overseas, outsource marketing to an agency, and hire a horticulture distribution company to handle sales. The second group pushed the concept that no one within the company would ever touch the product. Nor would there be functional departments for manufacturing, marketing, and sales. That discussion of structure within WAR would not have occurred 30 years ago when Robert Duncan published his seminal article, ‘What is the Right Organization Structure? ‘ in Organization Dynamics in 1979.

At that time, organizations were thought to be solidification, and structure defined the porting relationships among internal functional departments. Dunce’s article provided important insights about the conditions under which different internal arrangements would achieve a company’s mission. His insights are still referenced in management textbooks today. The purpose of this article is to present key developments in organization structure and design that have occurred since Dunce’s article and describe when each can be used for greatest effect.

We will briefly review the important structural designs from 30 years ago and then describe key developments since that time. The concepts are organized into three eras, which reflect substantive changes in management thinking from vertical organization to horizontal organizing to open boundaries via outsourcing and partnering.The first era of organizational design probably took hold in the mid-asses, and was dominant until the late asses. In Era 1, the ideal organization was self-contained.

It had clear boundaries between it and suppliers, customers or competitors. Inputs arrived at the organization’s gate, and after a transformation process, left as a completed product or service. Almost everything that was required during the transformation process was supplied internally. Design philosophies from this era emphasized the need to adapt to different environmental and internal contingencies and the ability to control the different parts of the organization 329 through reporting relationships in a vertical chain of command.

The structure of self-contained organizations can be thought of as: (1) the grouping of people into functions or departments; (2) the reporting relationships among people and departments; and (3) the systems to ensure coordination and integration of activities tooth horizontally and vertically. The structures of this era, including functional, division, and matrix designs, rely largely on the vertical hierarchy and chain of command to define departmental groupings and reporting relationships.

Functional In a functional structure, activities are grouped together by common function from the bottom to the top of the organization. Each functional activity – accounting, engineering, human resources, manufacturing, etc. – is grouped into a specific department. Most small companies use this structure, as do many large government organizations ND divisions of large companies. Divisional The divisional structure occurs when departments are grouped together based on organizational outputs. The divisional structure is sometimes called a product structure or profit center.

Most large companies have separate divisions that use different technologies or serve different customers. People within each division have more product focus, accountability, and flexibility than would be the case if they were part of a huge functional structure. For example, United Technologies Corporation (UTC), which is among the 50 largest U. S. Industrial rims, has product divisions for air-conditioning and heating (Carrier), elevators and escalators (Otis), aircraft engines (Pratt & Whitney), helicopters (Scissors), and aerospace (Hamilton Suntanned), among others.

Each division acts like a stand-alone company, doing its own product development, marketing, and finance. 330 Horizontal Overlays and Matrix Few organizations can be successful today with a pure functional structure, because the resulting functional or divisional silos inhibit the amount of coordination needed in a changing competitive environment. Organizations break down silos by using a variety of horizontal linkage mechanisms to improve communication among departments and divisions. These coordination relationships are often drawn on organization charts as dotted lines.

Many organizations use full-time product managers, project managers, or brand managers, to coordinate the work of several departments. The brand manager for Planters Peanuts, for example, serves as an integrator by coordinating the sales, advertising, and distribution for that product. General Motors Corp.. Has brand managers who are integrators responsible for marketing and ales strategies for each of Gem’s new models. Organizations that need even stronger horizontal coordination may evolve to a matrix structure. The matrix combines a vertical structure with an equally strong horizontal overlay.

While the vertical structure provides traditional control within functional departments, the horizontal overlay provides coordination across departments to achieve profit goals. This structure has lines of formal authority along two dimensions, such as functional and product or product and region. Some employees report to two bosses simultaneously. For example, after a regional racketing promotion went $10 million over budget, Nikkei Inc. Managers engineered a matrix structure that assigned dual responsibility by product and region to manage the introduction of new products each year.