(minimum of 500–600 words). Be sure to incorporate your weekly readings, citing your sources using proper APA guidelines (including in-text citations and references). 1. Compare and contrast each of the five organizational structures from your reading (functional, divisional, matrix, team-based, and virtual network). 2. If you were to choose one structure in which to work which would you choose and why? 3. Compare the organizational structures of Google and Wal-Mart.  4. Explain what types of control processes might be found in each of the organizational structures. 5. Describe what types of quality management processes might be found in each of the organizational structures. Notes from readings In a functional structure, also called a U-form (unitary structure), activities are grouped together by common function from the bottom to the top of the organization.33 The functional structure groups positions into departments based on similar skills, expertise, work activities, and resource use. A functional structure can be thought of as departmentalization by organizational resources because each type of functional activity—accounting, human resources, engineering, and manufacturing—represents specific resources for performing the organization's task. People, facilities, and other resources representing a common function are grouped into a single department. One example is Blue Bell Creameries, which relies on in-depth expertise in its various functional departments to produce high-quality ice cream for a limited regional market. The quality control department, for example, tests all incoming ingredients and ensures that only the best go into Blue Bell's ice cream. Quality inspectors also test outgoing products and, because of their years of experience, can detect the slightest deviation from expected quality. Blue Bell also has functional departments such as sales, production, maintenance, distribution, research and development, and finance.34 The functional structure is a strong vertical design. Information flows up and down the vertical hierarchy, and the chain of command converges at the top of the organization. In a functional structure, people within a department communicate primarily with others in the same department to coordinate work and accomplish tasks or implement decisions that are passed down the hierarchy. Managers and employees are compatible because of similar training and expertise. Typically, rules and procedures govern the duties and responsibilities of each employee, and employees at lower hierarchical levels accept the right of those higher in the hierarchy to make decisions and issue orders. Functional Advantages and Disadvantages Grouping employees by common task permits economies of scale and efficient resource use. For example, at American Airlines, all information technology people work in the same large department. They have the expertise and skills to handle almost any issue related to information technology for ...

1. (minimum of 500–600 words). Be sure to incorporate your
weekly readings, citing your sources using proper APA
guidelines (including in-text citations and references).
1. Compare and contrast each of the five organizational
structures from your reading (functional, divisional, matrix,
team-based, and virtual network).
2. If you were to choose one structure in which to work which
would you choose and why?
3. Compare the organizational structures of Google and Wal-
Mart.
4. Explain what types of control processes might be found in
each of the organizational structures.
5. Describe what types of quality management processes might
be found in each of the organizational structures.
Notes from readings
In a functional structure, also called a U-form (unitary
structure), activities are grouped together by common function
from the bottom to the top of the organization.33 The functional
structure groups positions into departments based on similar
skills, expertise, work activities, and resource use. A functional
structure can be thought of as departmentalization by
organizational resources because each type of functional
activity—accounting, human resources, engineering, and
manufacturing—represents specific resources for performing the
organization's task. People, facilities, and other resources
representing a common function are grouped into a single
department. One example is Blue Bell Creameries, which relies
on in-depth expertise in its various functional departments to
produce high-quality ice cream for a limited regional market.
The quality control department, for example, tests all incoming
ingredients and ensures that only the best go into Blue Bell's ice

2. cream. Quality inspectors also test outgoing products and,
because of their years of experience, can detect the slightest
deviation from expected quality. Blue Bell also has functional
departments such as sales, production, maintenance,
distribution, research and development, and finance.34
The functional structure is a strong vertical design. Information
flows up and down the vertical hierarchy, and the chain of
command converges at the top of the organization. In a
functional structure, people within a department communicate
primarily with others in the same department to coordinate work
and accomplish tasks or implement decisions that are passed
down the hierarchy. Managers and employees are compatible
because of similar training and expertise. Typically, rules and
procedures govern the duties and responsibilities of each
employee, and employees at lower hierarchical levels accept the
right of those higher in the hierarchy to make decisions and
issue orders.
Functional Advantages and Disadvantages
Grouping employees by common task permits economies of
scale and efficient resource use. For example, at American
Airlines, all information technology people work in the same
large department. They have the expertise and skills to handle
almost any issue related to information technology for the
organization. Large, functionally based departments enhance the
development of in-depth skills because people work on a variety
of related problems and are associated with other experts within
their own department. Because the chain of command converges
at the top, the functional structure also offers a way to
centralize decision making and provide unified direction from
top managers. The primary disadvantages reflect barriers that
exist across departments. Because people are separated into
distinct departments, communication and coordination across
functions are often poor, causing a slow response to
environmental changes. Innovation and change require
involvement of several departments. Another problem is that

3. decisions involving more than one department may pile up at
the top of the organization and be delayed.
In contrast to the functional approach, in which people are
grouped by common skills and resources, the divisional
structure occurs when departments are grouped together based
on similar organizational outputs. With a divisional structure,
also called an M-form (multidivisional) or a decentralized form,
separate divisions can be organized with responsibility for
individual products, services, product groups, major projects or
programs, divisions, businesses, or profit centers. 35 The
divisional structure is also sometimes called a product structure,
program structure, or selfcontained unit structure. Each of these
terms means essentially the same thing: Diverse departments are
brought together to produce a single organizational output,
whether it is a product, a program, or service to a single
customer.
A maker of products used for the prevention, diagnosis, and
treatment of diseases, the health science company Nordion Inc.
recently split into two new business units: one called Targeted
Therapies and the other Specialty Isotopes. Nordion's CEO
Steve West explained that the new divisional structure is
strategically designed to “take into account the unique product
life cycles and the needs of our customers in each of our
businesses.” Based in Ottawa, Ontario, Canada, Nordion does
business in 60 countries around the world.
Most large corporations have separate divisions that perform
different tasks, use different technologies, or serve different
customers. When a huge organization produces products for
different markets, the divisional structure works because each
division is an autonomous business. For example, Walmart uses
divisions for Wal-Mart Stores, Sam's Club (U.S.), and
International Stores. Each of these large divisions is further
subdivided into smaller geographical divisions to better serve
customers in different regions.36

4. The primary difference between divisional and functional
structures is that in a divisional structure, the chain of command
from each function converges lower in the hierarchy. In a
divisional structure, differences of opinion among R&D,
marketing, manufacturing, and finance would be resolved at the
divisional level rather than by the president. Thus, the
divisional structure encourages decentralization. Decision
making is pushed down at least one level in the hierarchy,
freeing the president and other top managers for strategic
planning.
Geographic- or Customer-Based Divisions
An alternative for assigning divisional responsibility is to group
company activities by geographic region or customer group. For
example, the Internal Revenue Service (IRS) shifted to a
structure focused on four distinct taxpayer (customer) groups:
individuals, small businesses, corporations, and nonprofit or
government agencies.37 A global geographic structure is
illustrated in Exhibit 10.5. In a geographic-based structure, all
functions in a specific country or region report to the same
division manager. The structure focuses company activities on
local market conditions. Competitive advantage may come from
the production or sale of a product or service adapted to a given
country or region. Walt Disney Company CEO Bob Iger
reorganized the Disney Channel into geographic divisions
because what appeals to people in different countries varies.
Studio executives in Burbank, California, were miffed at the
reorganization, but it has paid off. Iger learned that the Number
1 program on Italy's Disney Channel was one he had never
heard of—“Il Mondo di Patty,” an inexpensive, telenovela-style
show about an Argentine girl. “It's important that Disney's
products are presented in ways that are culturally relevant,” Iger
said about the geographic reorganization.38 Large nonprofit
organizations such as the National Council of YMCAs, Habitat
for Humanity International, and the Girl Scouts of the USA also
frequently use a type of geographical structure, with a central

5. headquarters and semiautonomous local units.39
Divisional Advantages and Disadvantages
By dividing employees and resources along divisional lines, the
organization will be flexible and responsive to change because
each unit is small and tuned in to its environment. By having
employees working on a single product line, the concern for
customers' needs is high. Coordination across functional
departments is better because employees are grouped together in
a single location and committed to one product line. Great
coordination exists within divisions; however, coordination
across divisions is often poor. Problems occurred at Hewlett-
Packard (HP), for example, when autonomous divisions went in
opposite directions. The software produced in one division did
not fit the hardware produced in another. Thus, the divisional
structure was realigned to establish adequate coordination
across divisions. Another major disadvantage is duplication of
resources and the high cost of running separate divisions.
Instead of a single research department in which all research
people use a single facility, each division may have its own
research facility. The organization loses efficiency and
economies of scale. In addition, the small size of departments
within each division may result in a lack of technical
specialization, expertise, and training.
MATRIX APPROACH
What It Is
The matrix approach combines aspects of both functional and
divisional structures simultaneously, in the same part of the
organization. The matrix structure evolved as a way to improve
horizontal coordination and information sharing.40 One unique
feature of the matrix is that it has dual lines of authority. In
Exhibit 10.6, the functional hierarchy of authority runs
vertically, and the divisional hierarchy of authority runs
horizontally. The vertical structure provides traditional control
within functional departments, and the horizontal structure
provides coordination across departments. The U.S. operation of

6. Starbucks, for example, uses geographic divisions for
Western/Pacific, Northwest/Mountain, Southeast/ Plains, and
Northeast/Atlantic. Functional departments including finance,
marketing, and so forth are centralized and operate as their own
vertical units, as well as supporting the horizontal divisions.41
The matrix structure therefore supports a formal chain of
command for both functional (vertical) and divisional
(horizontal) relationships. As a result of this dual structure,
some employees actually report to two supervisors
simultaneously.
How It Works
The dual lines of authority make the matrix unique. To see how
the matrix works, consider the global matrix structure
illustrated in Exhibit 10.7. The two lines of authority are
geographic and product. The geographic boss in Germany
coordinates all subsidiaries in Germany, and the plastics
products boss coordinates the manufacturing and sale of plastics
products around the world. Managers of local subsidiary
companies in Germany would report to two superiors, both the
country boss and the product boss. The dual authority structure
violates the unity-of-command concept described earlier in this
chapter, but that is necessary to give equal emphasis to both
functional and divisional lines of authority. Dual lines of
authority can be confusing, but after managers learn to use this
structure, the matrix provides excellent coordination
simultaneously for each geographic region and each product
line.
Matrix Advantages and Disadvantages
The matrix can be highly effective in a complex, rapidly
changing environment in which the organization needs to be
flexible, innovative, and adaptable.42 The conflict and frequent
meetings generated by the matrix allow new issues to be raised
and resolved. The matrix structure makes efficient use of human
resources because specialists can be transferred from one
division to another. A major problem with the matrix is the

7. confusion and frustration caused by the dual chain of
command.43 Matrix bosses and two-boss employees have
difficulty with the dual reporting relationships. The matrix
structure also can generate high conflict because it pits
divisional against functional goals in a domestic structure, or
product line versus country goals in a global structure. Rivalry
between the two sides of the matrix can be exceedingly difficult
for two-boss employees to manage. This problem leads to the
third disadvantage: time lost to meetings and discussions
devoted to resolving this conflict. Often the matrix structure
leads to more discussion than action because different goals and
points of view are being addressed. Managers may spend a great
deal of time coordinating meetings and assignments, which
takes time away from core work activities.
Remember This
6. • Departmentalization is the basis for grouping
individual positions into departments and departments into the
total organization.
7. • Three traditional approaches to departmentalization
are functional, divisional, and matrix.
8. • A functional structure groups employees into
departments based on similar skills, tasks, and use of resources.
• The divisional structure groups employees and
departments based on similar organizational outputs (products
or services), such that each division has a mix of functional
skills and tasks.
9. • An alternative approach to divisional structure is to
group employees and departments based on geographic region
or customer group.
10. • The Disney Channel is structured into geographic
divisions to better address the interests of children and teens in
different parts of the world.
11. • The matrix approach uses both functional and
divisional chains of command simultaneously, in the same part
of the organization.

8. 12. • In a matrix structure, some employees, called two-
boss employees, report to two supervisors simultaneously.
13. • A matrix boss is a functional or product supervisor
responsible for one side of the matrix.
14. • In a matrix structure, the top leader oversees both
the product and the functional chains of command and is
responsible for the entire matrix.
• Each approach to departmentalization has distinct
advantages and disadvantages.
With a team-based structure, the entire organization is made up
of horizontal teams that coordinate their work and work directly
with customers to accomplish the organization's goals. At
Whole Foods Market, a team structure is considered a major
contributor to the company's success. Each Whole Foods store
is made up of eight or so self-directed teams that oversee
departments such as fresh produce, prepared foods, dairy, or
checkout. Teams are responsible for all key operating decisions,
such as product selection, pricing, ordering, hiring, and in-store
promotions, and they are accountable for their performance.
Hospitals and other health care providers face a great need for
coordination because medical care needs to be integrated. For
instance, collaborative care, like this cross-functional team of a
nurse, doctor, and dietitian, helps patients with chronic illnesses
require fewer emergency department visits. Rush University
Medical Center in Chicago started its Virtual Integrated
Practice (VIP) project to give physicians in private practice
access to teams of physicians, dieticians, pharmacists, and
social workers. VIP replicates the collaboration that can occur
in a hospital setting by enabling members to share information
via e-mail, phone, and fax.
Team Advantages and Disadvantages
The team approach breaks down barriers across departments and
improves coordination and cooperation. Team members know
one another's problems and compromise rather than blindly

9. pursue their own goals. The team concept also enables the
organization to adapt more quickly to customer requests and
environmental changes and speeds decision making because
decisions need not go to the top of the hierarchy for approval.
Another big advantage is the morale boost. Employees are
typically enthusiastic about their involvement in bigger projects
rather than narrow departmental tasks. At video games company
Ubisoft, for example, each studio is set up so that teams of
employees and managers work collaboratively to develop new
games. Employees don't make a lot of money, but they're
motivated by the freedom they have to propose new ideas and
put them into action.46
Yet the team approach has disadvantages as well. Employees
may be enthusiastic about team participation, but they may also
experience conflicts and dual loyalties. A cross-functional team
may make different work demands on members than do their
department managers, and members who participate in more
than one team must resolve these conflicts. A large amount of
time is devoted to meetings, thus increasing coordination time.
Unless the organization truly needs teams to coordinate complex
projects and adapt to the environment, it will lose production
efficiency with them. Finally, the team approach may cause too
much decentralization. Senior department managers who
traditionally made decisions might feel left out when a team
moves ahead on its own. Team members often do not see the big
picture of the corporation and may make decisions that are good
for their group but bad for the organization as a whole.
ome organizations take this networking approach to the extreme
to create an innovative structure. The virtual network structure
means that the firm subcontracts most of its major functions to
separate companies and coordinates their activities from a small
headquarters organization. 50 Philip Rosedale runs
LoveMachine from his home and coffee shops around San
Francisco. LoveMachine makes software that lets employees
send Twitter-like messages to say “Thank you,” or “Great job!”

10. When the message is sent, everyone in the company gets a copy,
which builds morale, and the basic software is free to
companies that want to use it. LoveMachine has no full-time
development staff but instead works with a network of
freelancers who bid on jobs such as creating new features,
fixing glitches, and so forth. Rosedale also contracts out payroll
and other administrative tasks.51 How would you feel about
working as a freelance employee for a virtual company? The
Shoptalk describes some pros and cons of “never having to go
to the office.”
How It Works
The organization may be viewed as a central hub surrounded by
a network of outside specialists, sometimes spread all over the
world, as illustrated in Exhibit 10.8. Rather than being housed
under one roof, services such as accounting, design,
manufacturing, and distribution are outsourced to separate
organizations that are connected electronically to the central
office.52 Networked computer systems, collaborative software,
and the Internet enable organizations to exchange data and
information so rapidly and smoothly that a loosely connected
network of suppliers, manufacturers, assemblers, and
distributors can look and act like one seamless company.
Virtual Network Advantages and Disadvantages
The biggest advantages to a virtual network approach are
flexibility and competitiveness on a global scale. The extreme
flexibility of a network approach is illustrated by recent
antigovernment protests and the overthrow of leaders in Tunisia
and Egypt, for instance.57 A far-flung collection of groups that
share a similar mission and goals but are free to act on their
own joined together to mastermind the “Arab Spring” uprisings,
much in the same way terrorist groups have masterminded
attacks against the United States and other countries. “Attack
any single part of it, and the rest carries on largely untouched,”
wrote one journalist about the terrorist network. “It cannot be
decapitated, because the insurgency, for the most part, has no

11. head.”58
Similarly, today's business organizations can benefit from a
flexible network approach that lets them shift resources and
respond quickly. A network organization can draw on resources
and expertise worldwide to achieve the best quality and price
and can sell its products and services worldwide. Flexibility
comes from the ability to hire whatever services are needed and
to change a few months later without constraints from owning
plants, equipment, and facilities. The organization can redefine
itself continually to fit new product and market opportunities.
This structure is perhaps the leanest of all organization forms
because little supervision is required. Large teams of staff
specialists and administrators are not needed. A network
organization may have only two or three levels of hierarchy,
compared with ten or more in traditional organizations.59
One of the major disadvantages is lack of hands-on control.60
Managers do not have all operations under one roof and must
rely on contracts, coordination, negotiation, and electronic
linkages to hold things together. Each partner in the network
necessarily acts in its own self-interest. The weak and
ambiguous boundaries create higher uncertainty and greater
demands on managers for defining shared goals, managing
relationships, keeping people focused and motivated, and
coordinating activities so that everything functions as intended.
Consider, for instance, that production of Boeing's 787
Dreamliner fell two years behind schedule because the
“modules” from various contractors that were supposed to be
snapped together didn't always fit.61 Customer service and
loyalty can also suffer if outsourcing partners fail to perform as
expected.62 The reputation of United Airlines was severely
damaged when the employee assigned by an outsourcing
contractor to supervise an unaccompanied 10-year-old at
Chicago's busy O'Hare Airport didn't show up. The story made
the national news when United's own employees failed to
respond appropriately and the parents couldn't locate their
missing child for nearly an hour.63 Finally, in this type of

12. organization, employee loyalty can weaken. Employees might
feel they can be replaced by contract services. A cohesive
corporate culture is less likely to develop, and turnover tends to
be higher because emotional commitment between organization
and employee is fragile.
15. • Popular contemporary approaches to
departmentalization include team and virtual network structures.
16. • A cross-functional team is a group of employees
from various functional departments that meet as a team to
resolve mutual problems.
17. • Total Attorneys uses cross-functional teams to
improve coordination on software and services projects for
small law firm clients.
18. • A permanent team is a group of employees from all
functional areas permanently assigned to focus on a specific
task or activity.
19. • A team-based structure is one in which the entire
organization is made up of horizontal teams that coordinate
their activities and work directly with customers to accomplish
organizational goals.
20. • Whole Foods Market uses a team-based structure.
21. • With a virtual network structure, the organization
subcontracts most of its major functions to separate companies
and coordinates their activities from a small headquarters
organization.
22. • The modular approach is one in which a
manufacturing company uses outside suppliers to provide large
chunks of a product such as an automobile, which are then
assembled into a final product by a few employees.
• Both the team and the network approach have
distinct advantages and disadvantages.