Divisionalized Companies
Divisionalized Companies
The benefit of creating a divisional structure is that those managing and working in each division have a sense of responsibility for their own area of operations, but the risk lies in the divisional management taking actions which may appear to be beneficial to the division but which are not good for the organization as a whole.
The size of a department may vary from one organization to the next and the nature of a department will merge with that of a division as the department becomes larger. In some cases the words may be used interchangeably. For the purposes of this text, a division will have responsibility for its costs, profits and return on investment in assets, whereas a department would be responsible only for its costs, or possibly for costs and profits.
• Advantages of divisionalization
Where divisions exist and managers have decision-making power, their decisions about the business may be made more readily and with greater regard for the nature of the division. If all decisions are taken at a remote head office, the process may be delayed and may not have sufficient regard for any special circumstances of the division.
The freedom to make decisions also creates a challenge for those who manage the division and may make them feel more highly motivated towards achieving success for it. They will have responsibility for investment in assets and investment in employees, which gives a sense of controlling an entire business operation rather than being sandwiched between those who make the decisions and those who are required to implement them.
The existence of the division may also give employees a greater sense of identity with the operation of the division, particularly if it is in a separate geographical area or carries out a different operation from the rest of the organization.
• Disadvantages of divisionalization
Managers of divisions may forget that they also have a responsibility towards the organization
The benefit of creating a divisional structure is that those managing and working in each division have a sense of responsibility for their own area of operations, but the risk lies in the divisional management taking actions which may appear to be beneficial to the division but which are not good for the organization as a whole.
The size of a department may vary from one organization to the next and the nature of a department will merge with that of a division as the department becomes larger. In some cases the words may be used interchangeably. For the purposes of this text, a division will have responsibility for its costs, profits and return on investment in assets, whereas a department would be responsible only for its costs, or possibly for costs and profits.
• Advantages of divisionalization
Where divisions exist and managers have decision-making power, their decisions about the business may be made more readily and with greater regard for the nature of the division. If all decisions are taken at a remote head office, the process may be delayed and may not have sufficient regard for any special circumstances of the division.
The freedom to make decisions also creates a challenge for those who manage the division and may make them feel more highly motivated towards achieving success for it. They will have responsibility for investment in assets and investment in employees, which gives a sense of controlling an entire business operation rather than being sandwiched between those who make the decisions and those who are required to implement them.
The existence of the division may also give employees a greater sense of identity with the operation of the division, particularly if it is in a separate geographical area or carries out a different operation from the rest of the organization.
• Disadvantages of divisionalization
Managers of divisions may forget that they also have a responsibility towards the organization