Traditionally, an organization’s structure can more or less fit into one of the following categories:
This structure is the most traditional and standard whereby the organization is divided into different business units depending on their purpose/function. This includes functions that we are all familiar with such as HR, Marketing, Finance, Operations, etc. This structure creates small communities of people with talents and strengths in their given function and allows for the organization to capitalize on people’s strengths.
This structure is relatively rigid and does create silos. Many organizations are now shying away from this structure as it can impede effective communication, innovation and employee satisfaction, all factors that have been proven to be somewhat interconnected.
If you work for a large corporation who has several business lines, products or brands, sometimes the company will break down the organization into functioning product silos. This makes sense in certain organizations as it creates harmony and groups that know their product or brand very well.
This structure can help lessen risk as each product operates almost as an independent organization. However, this structure can, however, give a company a false sense of reality and can cause imbalances. For example, if one product line is suffering financially, but one is doing really well, at a high level, management may not have an accurate and clear picture of the organization’s current situation.
Some companies find that it may make more sense to divide their organization by geographic region allowing them to focus more on cultural adaptation and consumer research and relations. This works well for larger, international firms and allows for the sharing of knowledge and experiences, promoting innovation. It does have some increased risks as business lines are interconnected and interdependent.
This is becoming the increasing norm as innovative, forward thinking organizations leverage the best parts of all three of the above structures to create a hybrid that suits their needs.