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Unit 3: Behavioural Considerations

2. Since business unit is closer to the market for its products its manager may make sounder Notes
production and marketing than HO might and the unit as a whole can react to new threats
or opportunities more quickly.
Disadvantages are:
1. Business unit staff may duplicate some work that is done at the head quarters.
2. In some cases, the layers of business unit staff may cost more than the value gained by
divisionalisation.
3. Disputes may be there between business unit staffs and headquarters, one business unit
infringing the charter of another unit. There may also be disputes between business unit
personnel and headquarters staff.
Because of the apparently clear cut nature of profit responsibility in a business unit organization,
divisional organization structure is preferred since they can be viewed as profit centre or
investment centre.

Task Interview a few businessmen whom you know and ask them about the kind of
structure they follow.

3.5.4 Matrix Structure

In large organization, there is often a need to work on major products or projects, each of which
is strategically significant, hence the requirement of a matrix type of organization structure.
Figure 3.3 illustrates a matrix structure. Essentially such a type of structure is created by assigning
functional specialists to work on a special project or a new product or service. For the duration
of the project, the specialist from different areas forms a group or team and report to the team
leader. Once the project is completed the team members revert to their parent departments.

Figure 3.3: Matrix Organization Structure

GENERAL GENERAL GENERAL GENERAL
MANAGER MANAGER MANAGER MANAGER
Finance Engineering Manufacturing Marketing

Product
Manager A
chain of command division

Product or
Manager B
Lateral for product

Product
Manager C

Vertical Chain of Command for Functions

The matrix structure is a combination of the product and functional organisation and is usually
created for executing a project which requires the skilled services of a functional man as well as
the specialised knowledge of a product man. Large turnkey projects in specialised fields require

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