Question

Explain the following key terms with 2-3 sentences each:

centralization:

decentralization:

divisional structure:

functional structure:

network structure:

matrix structure:

Answer 1

Ans:

centralization: Centralization is the degree to which formal authority is concentrated in one area or level of the organization. In a highly centralized structure, top management makes most of the key decisions in the organization, with very little input from lower-level employees.

decentralization: Decentralization is the process of pushing decision-making authority down the organizational hierarchy, giving lower-level personnel more responsibility and power to make and implement decisions. Benefits of decentralization can include quicker decision-making, increased levels of innovation and creativity, greater organizational flexibility, faster development of lower-level managers, and increased levels of job satisfaction and employee commitment.

divisional structure: The divisional structure is a type of organizational structure that groups each organizational function into a division. These divisions can correspond to either products or geographies. Each division contains all the necessary resources and functions within it to support that product line or geography (for example, its own finance, IT, and marketing departments).

functional structure: A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing. Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function.

network structure: The network structure is a newer type of organizational structure viewed as less hierarchical (i.e., more “flat”), more decentralized, and more flexible than other structures. In a network structure, managers coordinate and control relationships that are both internal and external to the firm. The concept underlying the network structure is the social network—a social structure of interactions. Open communication and reliable partners (both internally and externally) are key components of social networks.

matrix structure: The matrix structure is a type of organizational structure in which individuals are grouped simultaneously by two different operational perspectives. Matrix structures are inherently complex and versatile, making them more appropriate for large companies operating across different industries or geographic regions.