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HomeBusiness TheoryStrategyFunctional areas within the business

Functional areas within the business

Organisations are structured in radically different ways ranging from relatively fixed structures with positions, rules, and established chains of communication to dynamic structures in which people belong to teams that are continually being formed and reformed for the duration of a project.

Typical ways of organising people are:

  1. By function – dividing the organisation up into groups with similar specialisms e.g. marketing, finance and accounts, human resources, etc.
  2. By product – grouping people together according to the product they make. For example, BIC has three main divisions – pens, lighters, and razors.
  3. By process – grouping people together according to the processes that they are carrying out. For example retailing organisations like Argos, Dixons, and Travis Perkins will group employees according to whether they are involved in packing and display or customer service.
  4. By geographical area – most large companies are widely dispersed. Companies like BIC, Gillette, Kellogg’s, etc have European and North American divisions.

Matrix pattern

A further way of organising organisations, which is very popular today, is in a matrix pattern. A matrix is often two dimensional but can have more dimensions. In a matrix system an employee can be in two or more structures at the same time – e.g. a team in lighter production, and a team in marketing at the same time. Matrix structures allow considerable flexibility because employees can shift to different teams within the overall matrix structure.

Organisations can also be highly centralised or largely decentralised. In a highly centralised structure control will be tight from the centre or Head Office of the organisation. In contrast, in a decentralised organisation power will be passed down to the various project managers and teams. Organisation and control

People are organised in different ways in different organisations depending on factors such as:

  • the size of the organisation
  • culture of the organisation (typical pattern of doing things in the organisation)
  • nature of the industry
  • managers preferred structures etc.

Organisations structure

A basic distinction can be made between tall hierarchical organisations, and flatter teamwork structured organisations. A tall organisation will have several layers of command. In contrast team structures will be based on cells of team members working together, often belonging to several project teams which form and reform as projects start and finish. The term span of control is the number of people that an individual manages or controls. In tall hierarchical organisations, an individual employee may have a wide span of control. In contrast in a teamwork structure, the span of control may be narrow or may not exist at all.

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