Organizational structure largely dictates how objectives and policies will be established. If an organization's structure is based on customer groups, then resources will be allocated in that manner. Similarly, if an organization's structure is setup along functional business lines, then resources are allocated by functional areas. We need to be aware of situation that changes in strategy lead to changes in organizational structure. Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, follows strategy. Structure does influence the strategy. Structure can also shape the choice of strategies. However, a more important concern is determining what types of structural changes are needed to implement new strategies and how these changes can best be accomplished. There are many types of organizational structure and each of them influences the strategic decisions and implementation. Organization structure for implementation of strategy is discussed below:
- Simple Structure: A simple structure is a form in which the owner manager makes all major decisions directly and monitors all activities. This structure involves little specialization of tasks, few rules and limited formalization. This structure is designed in a small business where there is a single product line with limited geographic market. The owner/ manager undertake almost all responsibilities of management along with assistants.
- Functional Structure: It is build around business functions. It is based on functions of an organization. This structure consists of CEO and a limited corporate staffs with functional line managers such as production, accounting, marketing, R and D, human resources etc. This structure facilitates career paths and professional development in specialized functional areas. However, it is generally adopted by smaller companies which have narrow product range.
- Multidivisional Structure/ SBU Structure: The multidivisional structure is composed of operating divisions, each representing a separate business or profit center. The top corporate officer delegates responsibilities for day-to-day operations. It is highly decentralized structure. Each strategic business units are divided on the base of products, services, geographical areas. When a firm diversifies its operations, a functional strategy becomes inadequate. Therefore, divisional structure is necessary to meet the coordination and decision making requirements resulting from increased diversity and size.
- Holding Company Structure: It is an investment company having shareholding in a variety of separate companies in which parent company exercises control.The ownership holds by parent company to subsidiary company may be fully or partially. The main advantage behind this holding company structure is
that the parent company can offer the best ideas to the subsidiary company to prepare and operate the strategy to the best potential.
- Matrix Structure: It is a combination of structures. It super imposes project structure on functional structure. It integrates knowledge and skills. It temporarily assigns people from functional departments to It provides skills and resources where and when they are must needed. It depends on both vertical and horizontal flows of authority and communication. In it the quality decision are possible. It fosters creativity. There is increased motivation, commitment and communication.
- Team based Structure: A team is a group whose individual efforts results in positive synergy through coordinated efforts. It combines both horizontal and vertical coordination. In this the team members work collectively to achieve their objectives. There is no rigid hierarchy. The performance evaluation is done by the member themselves. The productivity and satisfaction is high. Employee’s talent and skills are better utilized in this structure.