Divisional organizational structure advantages and disadvantages

A company comprised of competing divisions may allow office politics instead of sound strategic. The divisional organizational structure allows each division of a firm to be accounted for in isolation. It can easily be seen which department is successful in making profits while which are bearing losses.

Loss bearing divisions can be shut down completely while more investments can be made in profit earning divisions. Advantages of a Divisional Structure A divisional structure provides some distinct advantages for large organizations.

Each division can specialize and focus its efforts on its particular product,. What are the advantages of divisional organization? What is an example of a divisional structure?

How efficient is a divisional organization? The following are the main disadvantages of divisional organisation structure: ( 1) Conflicts between Divisional Heads: Every divisional head wants to establish his supremacy. To satisfy ego each demands maximum resources for his division.

This situation leads to conflicts among the various divisional heads.

Any business employing more than a few people needs to organize itself into a structure that defines how information travels within the company, and how workers in different roles and at different levels of responsibility relate to each other. Organizational structures increase efficiency by ensuring that all employees know to whom they report and from whom they take direction regarding their work activities. The two most common types of organizational structure are known as functional and divisional. A functional organizational structure organizes the chain of authority by occupational function.

For example, the administrative functions may be grouped together, delineating them from other functions such as sales and production. These broad areas may be further subdivide as when administration is divided into human resources and accounting units. Employees within each functional unit may have similar titles, backgrounds and job descriptions, although they may assume different levels of responsibility and supervision within their units. See full list on yourbusiness.

Divisional organizational structures divide the corporation into units based on factors such as geography or product line. For example, a car manufacturer may have a separate division for each class of vehicle it produces. A national retail chain might have a division for each state or region where it has sales outlets.

The lines of authority seen in functional structures provide for clear channels of communication and clear expectations about who reports to whom. This increases efficiency by eliminating guesswork and duplication of effort. Within each functional unit, employees of related specialties work together, providing for ease of information sharing.

The hierarchical structure makes it easy to identify promotional paths for employees, providing an additional motivating factor for the workers.

The major disadvantages of functional structures are the built-in barriers to interdepartmental communications and the tendency for specialists within a unit to develop tunnel vision, which can stifle innovation. A company with this structure is efficient as long as it stays within its founding purpose, but it may respond ineffectively if outer circumstances change or the organization seeks new areas of operation. In a divisional organization, personnel from multiple specialties work together on projects. This stimulates innovation and reduces problems involved with interdepartmental communication.

Because the major divisions operate on the same level with each other, the projects have a better chance of getting the resources and funding they need. Also, if the divisions are very large, they might tend to organize themselves functionally, thus experiencing the same disadvantages that are typical of functional structures. Advantages of Divisional Structure There are several advantages of the regional divisional structure. First of all, the performance of each division’s assessment can be done separately, and decisions can be made through their performance.

By pulling resources from these departments to devote to a specific product, location or customer, the divisional organizational structure gains some advantages the functional structure lacks. An advantage of a divisional structure is that each division can operate as a separate,. Another advantage of a divisional structure is that it allows for a high degree of specialisation.

The structures may promote allegiance to department rather than organization objectives. They may also place multiple demands on people, thereby creating stress. More advantages and disadvantages of divisional structures , as well as its contingencies, are cited below. Divisional structure offers many advantages over functioned structure especially in terms of autonomy for efficient management, management development, increasing organizational size up to any limit, and taking into account of specific problems related with each product or territory contributing to the overall objectives of the firm.

Disadvantages of a Divisional Structure. Some disadvantages of this structure include operational inefficiencies from separating specialized functions—for example, finance personnel in one division do not communicate with those in another division. This structure also raises issues with accounting practices and may have tax implications.