Divisional Structure Meaning
In case of school, there are many divisions of the same class, the primary reason for making a division in the school is to manage students in a better way same is the case with companies which uses divisional structure in their companies. In the case of divisional structure, companies make separate divisions or business units headed by the division manager who is responsible and accountable for the performance of employees under his or her unit. In order to understand this concept in a better way, one should look at the advantages and disadvantages of divisional structure –
Advantages of Divisional Structure
Accountability and Responsibility
The first and foremost advantage of divisional structure is that since each division acts as a profit center and division managers are given full autonomy over the operations of divisions, it is the divisional managers who are accountable as well as responsible for the performance of the division. In simple words, if the division performs well than divisional head will be rewarded and if the division does not perform well then it is the divisional head that has to face consequences.
Flexibility
In case of this structure divisional head are decision making authority and they do not have to consult company head before making day to day decisions it leads to faster decision making apart from giving flexibility to the divisional head as far as matters of divisions are concerned.
Easier Management
Since each division is autonomous and there is no overlapping within a company it gives more flexibility to the company as a problem in one division does not affect the working of other divisions. In simple words just like in case of schools suppose there are no divisions and teacher is absent than whole class will be affected, however if there are divisions of same class then class teacher of one division is absent than it will affect that division only and not the whole class same is the case with the company also.
Disadvantages of Divisional Structure
Animosity between Divisions
The first and foremost limitation of divisional structure is that it can create animosity between divisional head due to inappropriate allocation of funds to divisions or inappropriate allocation of resources between divisions by the company apart from divisions trying to take advantage of other divisions by snatching business from other divisions which we all know does not benefit the company as a whole as aim of the divisional heads should be to maximize profits of the company and not divisions.
Risk of Divisional Managers Abusing Power
In case of this structure, divisional managers are given too many powers, if the divisional manager is good then there is no problem but if the divisional manager is biased and arrogant than he or she may use this power to harm not only his or her division but also the company as a whole. In simple the saying that with great power comes great responsibility is not taken seriously by all people and it is the company who has to identify such managers and ensure that such people are not given too much power.
Duplication of Activities
In this structure since each division is different from each other, it leads to duplication of activities which result in this system being expensive than the traditional system of managing the company. Hence for example if division A needs 1000 units then it will order to those units from suppliers which has transport costs and after 3 days division B needs 2000 units then it will order those units which again will result in transport costs as opposed to company as a whole ordering 3000 units at one go and thus paying transportation cost one time only instead of paying it two times.
As one can see from the above that divisional structure has benefits as well as limitations and that is the reason why any company thinking adopting this structure should carefully first read above points and then decide whether to adopt or implement this strategy in the company.