A functional organizational structure, also called a bureaucratic organizational structure, divides the company based on specialty. For example, under this type of organizational structure, you would assign separate divisions for marketing, accounting and sales. On the one hand, this type of organizational structure benefits from having individuals entirely dedicated to one function. In some cases, there can be cost savings and efficiency gains in combining functions in this way. However, this type of organizational structure is prone to conflict. It can be difficult to facilitate strong lines of communication between functional departments; if departments are in separate locations, actual communication can be difficult, as can understanding the needs of the other department. Divisional
Companies also may be structured according to projects or products. This type of organizational structure is called divisional structure and is common in environments where projects, products or product lines are governed independently of each other. Examples of this include retailers such as Gap, Old Navy and Banana Republic. These divisions operate as separate companies, but they are each part of the Gap brand and Gap Inc. A divisional structure can make it easier for a company to respond to market changes. Also, within the division, communication is easier and team identification is encouraged. On the downside, work can become inefficient as some efforts are duplicated. There also can be conflict between divisions, especially if one is more successful than another.
The matrix organizational structure combines the functional and additional organizational structure types. There are project teams, bringing skilled individuals together from across the organization, but there are still divisions. As such, a person has two bosses: the division manager and the project manager. In this organizational structure, projects benefit from having cooperation across the...