The divisional management structure is a structure that is based on the allocation of large autonomous production and business units, as well as the management levels that correspond to them, with the provision of such units with complete independence in conducting operations. In addition, units are transferred to this level of responsibility in order to increase profits.
Structure Features
Today, the divisional management structure is considered the most advanced variety of modern organizational structures that pursue a hierarchical system of work. Such structures are characterized by the fact that managers are fully responsible for the results of the activities of the units that they head. In this regard, the most important place in a company that uses a divisional management structure does not belong to the person who manages the functional unit, but to those people who oversee production departments.
What types are there?
The company is structured into separate divisions according to one of three basic principles. In particular, according to the product principle, it is carried out taking into account the characteristics of the manufactured goods or services, depending on the orientation towards a particular consumer, as well as according to the regional principle, depending on which territory the company serves.
In this regard, there are three main types into which the divisional management structure is subdivided:
- Divisionally productive.
- Organizational.
- Divisional-regional.
Divisionally Productive
Such a divisional structure of enterprise management provides for the transfer of all the powers of specialists related to the management of the production and marketing of certain commercial products or services specifically to one person who becomes responsible for the entire product line. All other heads of functional services, in turn, will provide detailed reports to the manager on this product.
Companies that use this structure will be able to respond faster to any adjustments in a competitive environment, as well as the introduction of new technologies and changes in consumer demand. Work on the production of a product is supervised by one person, in connection with which improved coordination of the work of all employees is provided.
A possible disadvantage of such a structure is that there is a greater amount of costs, since the same types of work are used for different types of products. Each individual food division has its own functional divisions.
Organizational
Divisional Organizational Structure Management, which focuses directly on the client, provides for the grouping of units around certain groups of customers. The purpose of this structure is to fully satisfy the needs of specific consumers as perfectly as a company that serves only one group of people does.
Thus, the divisional organizational management structure provides for maximum efficiency and an individual approach to each individual client to achieve an extremely high result and develop the company's profitability.
Divisional-Regional
If the company’s activity extends to several regions, but at the same time it is necessary to use an individual strategy in each of them, then in this case it is best to use a divisional structure based on the territorial principle.
When such a divisional management structure of the organization is used, all employees in a certain region are subordinate to one leader, who, in turn, already bears direct responsibility to the top management of the company. Such a structure makes it possible to significantly simplify the solution of various problems that may be associated with local customs, the peculiarities of the current legislation and, of course, the socio-economic environment. The territorial division also allows you to train the managerial staff of the departments directly at the place of work.
Specific structures
There are several specific technologies that are actively used by companies in the current market, while each individual divisional management structure is distinguished by its advantages and disadvantages. You will see an example of such structures below; it is recommended that you familiarize yourself with everyone and choose the most optimal one for yourself in accordance with the needs and characteristics of the company.
Globally oriented product structure
Such a structure is based on a divisional structure, in which units are distributed by product, and each of them individually operates on the entire world market. The use of such a structure is quite common among companies with highly diversified products, that is, those products that differ significantly in terms of production technology, marketing technologies, as well as sales channels and a number of other signs.
First of all, this divisional-functional structure management is used in those companies for which the differences between several products are more important than the differences between the various territories in which these products are sold. This type of structure provides a more effective international orientation of the company, but at the same time it is characterized by lower coordination between individual divisions, as well as increased duplication of their activities. Thus, there are advantages and disadvantages of the divisional management structure, therefore, its use can be carried out far from all situations.
Globally oriented regional structure
In this case, a divisional structure is also used as a basis, but at the same time there is a geographical principle of construction. It should be noted that in this case, the national market is considered by management as one of the regional divisions. The most relevant is the use of this format of structures by those companies for which regional differences between customers are more important than differences in products. In the predominant majority of cases, the use of such systems is found in areas in which products are technologically slowly changing, such as automobile production, petroleum products, and many others.
The advantages that distinguish such a system include the fact that there is as close a relationship as possible between several geographical regions, and the maximum possible coordination of activities within their framework is achieved. The disadvantages are rather poor coordination of the work of individual units, as well as duplication of work.
Mixed structure
In such a system, along with an emphasis on a specific product, functional and territorial type connections are also added. This format of structures appeared due to the fact that each of the above structures has both its advantages and disadvantages, which significantly limited the possibility of their application, and there is no divisional type of management structure that could be called ideal. The organizational structure should be built in full accordance with the specific conditions of the company. Such conditions for fairly large objects are quite complex and diverse. They can not correspond to any organizational structure, made in its original form.
Recently, the use of a mixed system is quite common in various companies that operate in the United States.
What are the advantages and disadvantages of all such systems?
Given all the above information, we can distinguish the following disadvantages and advantages of the divisional management structure.
Benefits
- The use of divisional structures provides the company with the opportunity to pay attention to a specific product, consumer, or individual geographic region in the same amount as a specialized company that works only in a certain direction. Thus, the fastest response to any changes that occur in the external environment is achieved, and the extremely fast adaptation to changes in certain conditions is also provided.
- This format of the management structure provides an opportunity to focus on achieving the final results of the company’s activities, including the production of specific types of products, meeting the needs of a specific consumer, as well as saturation of goods with a particular regional market. Among other things, such a structure simplifies management, that is, it becomes much easier for top managers to work.
- Operational management completely separated from the strategic, as a result of which the representatives of the top management of the company begin to concentrate on management and strategic planning.
- Responsibility for profit is transferred entirely to the level of individual divisions, and decentralization of the adoption of any managerial decisions that require urgency is also ensured. In this way, management is beginning to move closer to market problems, and communication is being significantly improved.
- Widely developed breadth of thinking, as well as flexibility of perception and enterprise on the part of the leaders of each department.
disadvantages
- The linear divisional management structure significantly increased the growth of hierarchy. In other words, there was a demand for the formation of intermediate management levels to coordinate the work of individual groups of employees.
- The goals of each particular department can be opposed to the general goals of the company’s development, that is, when the interests of the top and bottom managers in the hierarchy begin to overlap.
- In the course of work, various conflicts between departments may occur, for example, when a shortage of key resources that are distributed centrally appears. In addition, there is also not the highest coordination of the activities of the branches, the fragmentation of staff services and, accordingly, the weakening of horizontal ties.
- In most cases, far from the most efficient use of resources is found, but at the same time there is completely no possibility to use them fully, since the resources are completely assigned to a particular unit.Along with this, the number of expenses for maintaining the administrative apparatus also increases, because the same functions are duplicated in units, and, consequently, the number of personnel also increases.
- It is far from easy to control the whole process from top to bottom, since a multi-level hierarchy is used within the boundaries of the units themselves. In addition, they may manifest all the shortcomings that have a linear, functional, matrix, divisional management structure.
- Limited professional development may be manifested on the part of unit specialists, because their teams are not as large as is observed in the case of using a linear-functional structure at the level of various companies.
What to choose?
As the most developed divisional management structures today, we can distinguish those systems that are based on the use of strategic business units. The use of such a structure is often found in companies that have a large number of independent units that are fairly close to each other in terms of business profile. In this case, in order to coordinate them among themselves, specialized intermediate management bodies are used, which are located between the top management and departments.
