For any business that employs more than a handful of workers, choosing an organizational structure is essential aspect of basic operations. Two common organizational structures are multi-divisional and matrix. Each has its inherent advantages and disadvantages. Your business and its needs also impact whether one type of organizational structure is better suited for your business than the other, or whether you should consider a different organizational structure for your company.

Organizational Structure Purpose

An organizational structure provides a framework for the chains of authority within the company. Organizational structure also provides a systematic means to conduct the everyday operations for the company as well as an avenue to deal with problems, issues and challenges that may arise. An organizational chart also clarifies the areas of responsibility assigned to specific departments and directors, as well illustrating how the official chains of command work within the organisation.. A well-conceived organizational chart can assist in shaping the direction of the organisation at the same time that it serves as a visual representation of how departments and people relate to one another within the company.

Multi-divisional Structure

The multi-divisional structure is also known as the "M Form" organisation. Multi-divisional structures within an organisation function as semi-autonomous units within the company. Each division develops its own distinct operations; divisional managers often perform broad-reaching functions in the process of leading their teams, according to HRM Guide. One example of an "M Form" organisation ins the automobile industry is General Motors. This is in contrast with the "U Form" organisation that functions much more as a cohesive unit. An example of a "U Form" organisation in the automobile industry is the Ford Motor Company as it functioned before World War II, according to the Goliath website.

Matrix Structure

Matrix organizational structures represent a cross-disciplinary approach intended to generate a collaborative effort by personnel from different areas of the company. A matrix organizational structure creates project-focused teams with many members taking direction from one or more individuals who do not usually function as their immediate superiors within the company. Many large building projects within a company, for instance, building aircraft, are carried out with a matrix organizational structure. Many companies within the building and construction industries also have a matrix organizational structure.

Multi-divisional Versus Matrix Structure

When all the divisions within a multi-divisional organisation are functioning well, a healthy, friendly rivalry can develop between divisions without undermining the sense of working toward overall company goals. However, "M Form" companies run the risk of divisive conflict when some divisions perform better than others, or when resources are scarce.

Matrix organisations often enable an open internal flow of information, along with an efficient sharing of personnel and resources where they are need at the time that they are needed. However, poorly conceived matrix organizational structures can be confusing and in fact interfere with the effective operation of the company.