por The organization systems They represent the structures on which a company is configured. These structures define how each division of a business is made up, the hierarchy of who reports to whom, and how communication flows throughout the organization.
The organizational structure defines how each role works in a company. With a well-defined organizational system, all employees will know what is expected of them and to whom they should report.
A good organizational structure establishes both the hierarchy and the flow of communication in a company. Having a well-defined organization system has many benefits, such as improvements in efficiency, productivity, and decision making.
Businesses should think hard about which system to choose, as each organization has particular requirements. The strengths and weaknesses of each system depend on the type of business being operated, the size of the organization, and other factors.
It is important to consider all types of organization systems before deciding which one is right for a business.
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Types and characteristics of organization systems
functional system
This system features several specialized departments such as finance, sales, and operations. A high-level manager oversees all of these departments.
The reporting flow is clear, as each employee reports to their boss. In addition, the heads of each department report to senior management, which oversees the entire structure.
Since the company is segmented into specialized departments, the employees also specialize. This fosters a path to their growth. However, departments may have trouble communicating with each other.
Since there is little communication between the departments, since they all report upwards, holistic thinking is not generated, except in the upper management. This makes adaptation to change slow.
divisional system
Divide the business into work teams, based on the projects the employees are working on. This system includes many different types of equipment.
In addition, teams are created around specific projects. For example, a pharmaceutical company might have separate teams dedicated to each drug they make.
Each project team is supervised by a manager, exercising a certain level of autonomy within the organization. The divisional organization allows employees to become deeply familiar with the work of their team.
However, divisions are often unaware of what other teams are doing and don’t communicate with each other. Employees may not be able to work effectively across divisions when necessary.
matrix system
It is a combination of the functional system with the divisional system. From the top, the business is configured as a functional system, with a traditional hierarchy and specialized departments.
However, when looking at these departments closely, each is arranged in a divisional system, breaking up into smaller projects and teams.
This system is quite complex and requires a lot of planning, as well as strong communication systems throughout the company. However, it eliminates many problems that have arisen with the purely divisional or functional organization.
Communication can reach the right people, increasing productivity and holistic thinking. In addition, it encourages cross-collaboration. On the downside, this system can quickly become confusing for employees when there are too many managers and it’s unclear who to report to.
flat system
It flattens much of the hierarchy, allowing employees more autonomy in their work. These organizations are divided into temporary teams, although they are having no formal structures.
There is still a certain hierarchy, because there are senior managers to run the operation. However, this system is based on hindering the traditional hierarchical structures.
This increases communication between teams, eliminating communication problems that can occur when messages travel through a hierarchical structure.
Unfortunately, this system is difficult to maintain when the company grows, due to requiring more structured communication systems. Also, employees in this system can feel overwhelmed by doing too many different tasks and not having much room for promotion.
Examples of organization systems
functional system
It has historically been used by the military, universities and government entities. Although this system has become less popular, it is still used by many companies.
How this organizational system is used can be seen in a traditional factory. The factory manager oversees the different departments, which are specialized. Each department has its own manager, who reports directly to the factory manager.
Another example could be a retail store. The general manager oversees operations from the top of the pyramid. Below are different departments such as warehouse, customer service, and marketing. Each has their own supervisor, all reporting to the general manager.
divisional system
It is popular with large multinational corporations. For example, Johnson & Johnson has a divisional structure, where each of the Johnson & Johnson brands operates as its own company, with its own leadership and internal structure. All of them report to the parent company.
Another example is General Electric. The CEO is at the top and then the company is divided into different groups. There are operational groups, such as finance, legal, public relations, and global research. Other teams are dedicated to specific projects, such as aviation, energy, healthcare, etc.
matrix system
It is mainly adopted by large, well-established companies, because it is complex. An example of a parent company is Starbucks. The world’s largest coffee company uses a functional system to divide its business into departments, such as human resources, finance, and marketing.
These departments are located at corporate headquarters, reporting to senior management and creating policies that affect all Starbucks stores in all locations.
On the other hand, Starbucks has autonomous divisions for each geographic region. These regions are the Americas, China, Europe, the Middle East, Russia, and Africa. The Americas region, being the most popular, is divided into four smaller divisions.
Starbucks also has product-based divisions. For example, there is a division for Starbucks cups and another for baked goods. At the lower levels of the organization, Starbucks has teams of employees, especially at the store level.
flat system
It is popular with startups and technology companies. An example is Zappos. In 2013, the CEO of this shoe company announced a new flat management structure, removing the hierarchy from the workplace to encourage collaboration.
The company banned managerial titles. There would no longer be positions or bosses, each employee being responsible for his own work. The company hoped to innovate by eliminating the bureaucracy involved in hierarchy and decision making. However, Zappos is still striving to keep its operation truly flat.
References
Chelsea Levinson (2018). What Are Organizational Systems? Taken from: bizfluent.com.
Susan Kerr (2017). Types of Organizational Systems. Bizfluent. Taken from: bizfluent.com.
Will Kenton (2020). Organizational Structure. Investopedia. Taken from: investopedia.com.
Aimee C. Juárez (2017). Organizational Systems and Characteristics. Bizfluent. Taken from: bizfluent.com.
Douglas Day (2015). The Six Systems of Organizational Effectiveness. Leadership Circle. Taken from: leadershipcircle.com.