Happy 2009! Let's hope it's a better year than the last.
It is important to periodically analyze a firm's organizational structure to determine whether it is properly aligned with the overall strategies and goals established by senior management. Such an evaluation is an obviously a complex process and the firm's organizational structure generally does not fit easily into any particular model. Nonetheless, it may be useful to have a checklist of certain issues that need to be considered when determining which of four basic dimensions—functions, products, geography or customers—should be used as the basic for the organizational structure model. A functional structure is most useful and appropriate when an organization has a single product line that is relatively stable and which has long development and product life cycles. In that situation a functional structure is the best way to achieve standardization, specialization and economies of scale. A functional structure becomes outmoded, however, when organizations begin to diversify and expand their products and markets. If the organization is moving toward multiple product lines a product structure can accelerate product development cycles, develop and maintain specialized expertise in innovative product areas and reduce the challenges that arise when it is necessary to coordinate with multiple functional departments. A geographic dimension for the organizational structure becomes important when opportunities in the domestic market begin to slow down; however, the challenge is determining just what changes in product design and sales/marketing strategy are needed in order to be successful in foreign countries. Finally, customer-focused divisions are important when the organization has identified important customers that want a single point of contact for reviewing and purchasing the offerings of the various product- and market-focused divisions. The questions in this checklist have been adapted from Kates, A. and Galbraith, J.R. Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges. San Francisco: Jossey-Bass, 2007.