inside Institute for Advanced Entrepreneurship (IEA) define organizational structure as “the hierarchical system that makes up an organization, which makes it possible to show the functions and tasks that all members of the institution have to perform, as well as the teams and the professional relationships that they maintain between them”. .
They also warn that there is no better organizational structure than another as it all depends on additional factors such as the type of company, the industry you work in or the team.
Based on this, they provide a brief synopsis of the main advantages and disadvantages of the organizational structures by which the major corporate groups are currently governed, to enable you to “tweak and decide which structure is the one that best suits your institution”. .
According to the IEA, Amazon has a functional structure “where employees are organized by divisions and departments, separated by functions such as marketing, finance, sales, customer management, supply chain, etc.”
Among the advantages of this functional organizational structure model is the fact that it favors the appearance of synergies among the company’s employees, “since they have very similar profiles, know the same concepts and talk about the same terms. Additionally, being able to have a more clearly defined goal per functional area allows employees to better focus on it.”
According to IAE, a functional structure is easier to build “and works very well in slightly stable environments”.
As downsides, they point to the risk of employees being “poorly aligned with the global strategic goals as they don’t stop evaluating the rest of the departments due to the poor, even virtually non-existent, communication between departments”.
A division structure would be a structure in which employees are organized by division, with each department corresponding to a different division. In the case of Google, this would be, for example, Google Ads, YouTube, Google Maps, Google Drive, Google Play…
They also refer to this model, in the case of Coca Cola, where a geographical divisional structure is applied, ie the different lines of business are distributed in different geographical areas.
As advantages of the divisional structure, they point out: “that the employees have a lot of autonomy and decision-making power, they are also very result-oriented, which is closely aligned with the global goals of the company. Their flexibility favors continuous improvement and adaptation to new environments.”
On the other hand, the main obstacle is the risk of duplicating some costs, “because there are no synergies by area, inefficiencies arise. Also, there is no collaborative learning as communication between departments is limited.”
They define the matrix structure as a structure that “combines functional and domain models.” This would be the case with Apple, where on the one hand it has “a division based on the departments of marketing, finance, sales, customer service … and at the same time a division based on business units such as App Store, Safari, iPhone, iPad, iTunes, Apple Watch, Apple Play, Apple TV…”
Exploiting the synergies between the different departments and aiming them together and at the same time towards the same goal while promoting employee autonomy would be one of the great advantages of this structure.
As disadvantages they name: “that the employees have to report to two bosses (the department head and the functional head), which means that the balance of power is not entirely clear. In addition, this type of structure is very rigid and has greater complexity to adapt to new environments, since all the areas are very strongly connected, which means that a small change in one of them changes another and does so in succession do the other to the end. to the need to practically completely adapt the entire institution”.
Red Bull: by projects
At Red Bull, employees are organized by project. They remind the IEA that Red Bull is much more than an energy drink brand. “Part of the success of this energy drink is all the marketing that it has, those marketing campaigns are exactly the projects that it has, like the Formula 1 team, the New York Red Bulls, RB Leipzig and the Red Bulls soccer teams. Bull. Bull Salzburg, its esports team or the championships such as Red Bull X-Fighters (motocross), Red Bull Batalla de los Gallos (rap) and others surf, ski, etc. In this way, each of their events is a different project, on that the employees concentrate.”
The benefits of the project-based organizational structure include: greater agility and flexibility in decision-making and execution; higher motivation of the employees, “because they perceive their work as something directly affected and feel the project as their own” and fluent communication within the individual departments.
As disadvantages, they point to the possible duplication of roles and the difficulty of sharing the learning acquired in each specific project with the company as a whole.