General Motors
Multidivisional Structure
The multidivisional structure represents an opposite structure to functional structure. In a multidivisional structure organizational activities are grouped on the basis of products, services, customers, programs, technical process, or geography. All or most of the resources necessary for the accomplishment of specific objectives are set up as a self-contained unit headed by a product or division manager (Sims 2002).
General Motors chose the multidivisional structure because it supports diversification of products. Each product line has its own divisional hierarchy complete with support functions.
The advantages that General Motors can reap from adopting a multidivisional structure are:
1. Increased Effectiveness – because of the division of labor between divisional managers and corporate managers. Divisional managers are responsible for day-to-day operations while corporate managers are responsible for long-term planning.
2. Increased Control – managers can monitor the performance of divisional managers.
3. Profitable Growth – allocation of corporate resources can be strategically planned since each division can be viewed as its own profit center.
4. Internal Labor Market – corporate managers can be hired from the pool of divisional managers, providing an incentive for effective behavior among divisional managers (Riahi-Belkaoui 1995; Volberda 1999).
Matrix Structure
A matrix design is based on multiple support systems and authority relationships, whereby some employees report on two supervisors rather that one. Every matrix organization contains three unique and critical roles: the top manager who heads and balances the dual chains of command; the matrix bosses (functional, product, or area) who share subordinates; and the two-boss managers who report to two different matrix bosses. Each of these roles has it own unique requirements (Sims 2002).
The matrix structure is used by General Motors in areas where there is string environmental pressure and there are large amounts of information to be processed. The benefits that General Motors can gain from Matrix structure are:
1. Enhanced organizational flexibility
2. High motivation and increased organizational commitment
3. Team members have opportunity to learn new skills
4. Promotes decentralization (Riahi-Belkaoui 1995; Volberda 1999)
Potential Communication Problems
Multidivisional Structure
Communication problems occur in tall hierarchies. Multidivisional structure is considered the tallest hierarchy. There are a number of potential communication problems.
1. Distortion of Information by Divisions – each division does not communicate with others because they are concerned with the hierarchy of their own division. As the hierarchy gets taller, the chance for unintentional information distortion is greater.
2. Possibility for Conflict and Misinformation – since divisions compete for resources, they may not cooperate cause coordination problems. Also, divisional managers may not always present a true picture of the sate of their division in a bid to attract more resources.
3. Transfer Pricing – problems between divisions often revolve around the transfer price such as the price at which one division sells a product or information about innovations to another rdivision.
Matrix Structure
1. Unclear Roles – due to the lack of a clear control structure, expectations are not stable across teams. People resist change and they avoid conflict, or role ambiguity.
2. Group Behavior – the dynamics of group behavior may lead to slower decision-making, one-person domination, compromise decisions, or a loss of focus. The lack of a clearly defined hierarchy of authority can lead to conflict between functions and product teams.
3. Relationships – Employees are uncertain about reporting relationships. The member so the team are called ‘two-boss employees because they report to two superiors.
Degree of Centralization
Multidivisional Structure
The multidivisional structure is partly centralized and partly decentralized. Although each division manager is allowed to decide for day-to-day activities, strategic and long-term planning remains the role of the top management.
Matrix Structure
The matrix structure is highly decentralized. There is no clear control structure.
References
Riahi-Belkaoui, A. (1995). The Nature and Consequences of the Multidivisional Structure. Westport CT: Quorum Books.
Sims, R. (2002). Managing Organizational Behavior. Westport CT: Quorum Books.
Volberda, H. W. (1999). Building the Flexible Firm: How to Remain Competitive. Oxford England: Oxford University Press.
Credit:ivythesis.typepad.com
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