Organizational Impact Paper

Raul Vargas Jr.

OI/361

The rapid technological changes and global forces are sending a very clear message to every business organization: Innovate or dye. Organizational structures can easily hinder or foster innovation. Potential pitfalls can derive as a result of deeper factors embedded in a firm’s organizational DNA. Without a doubt, innovation is the key driver of value creation if companies want to remain on the competitive edge. Although there is no perfect organizational structure for every innovation environment, different types of organizations work successfully under different circumstances. Three different types of organizational structures will be in discussion: the functional, divisional, and the matrix structure as well as the potential impact that innovation can bring on strategy, process, product or services within each organizational structure. The functional structure is built on a strong hierarchy in which each employee’s position and function are clearly defined with a specific role to perform. This structure is the most formal and bureaucratic because it follows a strict chain of command. Among the different types of organizational structures, a functional structure works very well in organizations that do not change their work functions and methods frequently. However, large organizations with this structure demands for a very powerful management for internal conflicts resolution, and issues.
Despite specialized departments, it is very difficult to foster an innovative environment on strategy, process, product, or services. It becomes very difficult to function as innovative team because the lack of intense competition that requires quick action within an innovative environment. For larger companies or enterprises this structure may not prove very helpful because every decision takes time to execute, and communications across departments are very difficult, and distinct apart from each other as a result of organizational boundaries. Although this organizational structure often develops into a taller (vertical) structure, the number of management levels increases as well similar to a military chain of command in which innovation and creativity is sacrificed for control. This complex hierarchal framework requires a senior leadership open to change and controlling through shared vision rather than bureaucratic and linear control. A clear example for illustration purposes is Google’s cross-functional organizational structure in which the company sees its managers as leaders who foster inspiration and empower employees to meet their objectives set for themselves creating an innovative environment to strategize, implement processes, products and services. A divisional structure is organized into several divisions basically on three criteria: product or service, geographical location, or target market. When organizations grow, and get larger, centralized control increases as a result becoming slow, inflexible, and difficult to focus
A huge advantage of the divisional structure is the decentralized operational control in which each division functions like mini-company; decentralized allocation of resources that makes each division plays an active role of anticipating to change, and fostering innovation capability to follow different strategies, and policies under the umbrella of the governing company’s guidelines. Each division becomes profit-center resulting in unnecessary waste in allocation of resources. Divisional structure is conducive to strategic innovation and implementation in product development or services. A matrix structure is the most complex of the different organizational structures because of its internal complexity and management challenges. It is characterized by grouping employees by both products as well as functions and can also combine the best of both separate structures.
If a firm deals with three different products, it can form separate functional departments for all three, such as sales department, customer services, and troubleshooting departments for each product. It breaks the unity of command concept by reporting to both bosses functional department managers and product managers. This framework makes an efficient organizational structure, and is suitable for creativity and innovation by combining consumer trends with key technological innovations. Moreover, this approach enables the company to remain competitive with its technology, business applications, processes, and product development on the basis of consumer insights. The success of innovation on strategy, process, product or services within each organizational structure depends on key determinants, and factors that include the company’s willingness to embrace, manage creativity and innovation and successfully performing projects from conception to market introduction, anticipate by eliminating unnecessary projects, and to tie new-product development or service geared to specific sales, marketing and financial goals. It is critical to find a suitable organizational structure that works best for the organization as the wrong set up could jeopardize proper functioning in the organization.

REFERENCES:
Google’s Organizational Structure. Article retrieved from: http://www.ehow.com/about_6692920_google_s-organizational-structure.html#ixzz29NXxZFqs
Stamm, B. V. (2003). “Managing Innovation, Design and Creativity.” Retrieved from:

The University of Phoenix eBook Collection database.