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managers. Moreover, in a flat structure, advancement opportunities will be more
limited because there are fewer management layers. Finally, while employees report
that flat structures are better at satisfying their higher-order needs such as self-
actualization, they also report that tall structures are better at satisfying security needs
[8]
of employees. Because tall structures are typical of large and well-established
companies, it is possible that when working in such organizations employees feel a
greater sense of job security.
Departmentalization
Organizational structures differ in terms of departmentalization, which is
broadly categorized as either functional or divisional.
Organizations using functional structures group jobs based on similarity in
functions. Such structures may have departments such as marketing, manufacturing,
finance, accounting, human resources, and information technology. In these
structures, each person serves a specialized role and handles large volumes of
transactions. For example, in a functional structure, an employee in the marketing
department may serve as an event planner, planning promotional events for all the
products of the company.
In organizations using divisional structures, departments represent the unique
products, services, customers, or geographic locations the company is serving. Thus
each unique product or service the company is producing will have its own
department. Within each department, functions such as marketing, manufacturing,
and other roles are replicated. In these structures, employees act like generalists as
opposed to specialists. Instead of performing specialized tasks, employees will be in
charge of performing many different tasks in the service of the product. For example,
a marketing employee in a company with a divisional structure may be in charge of
planning promotions, coordinating relations with advertising agencies, and planning
and conducting marketing research, all for the particular product line handled by his
or her division.
In reality, many organizations are structured according to a mixture of
functional and divisional forms. For example, if the company has multiple product
lines, departmentalizing by product may increase innovativeness and reduce response
times. Each of these departments may have dedicated marketing, manufacturing, and
customer service employees serving the specific product; yet, the company may also
find that centralizing some operations and retaining the functional structure makes
sense and is more cost effective for roles such as human resources management and
information technology. The same organization may also create geographic
departments if it is serving different countries.
Each type of departmentalization has its advantages. Functional structures tend
to be effective when an organization does not have a large number of products and
services requiring special attention. When a company has a diverse product line, each
product will have unique demands, deeming divisional (or product-specific)
structures more useful for promptly addressing customer demands and anticipating
market changes. Functional structures are more effective in stable environments that
are slower to change. In contrast, organizations using product divisions are more
agile and can perform better in turbulent environments. The type of employee who

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