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Writer's pictureOSMI.EDU
Dec 25, 20203 min read

Business Structure & Performance Management

This article would take you through different business structures, information requirement for each & role in performance management.


Business Structures, Information Needs & Implications for Performance Management

There are three major structures that would be discussed in detail under this section namely,

  1. Functional Structure

  2. Divisional Structure

  3. Network (or Matrix) Structure

Functional Structure

The people within the organization are divided by functions/activities/departments which would be led by a respective manager. The decision making tends to be centralized.

Information needs due to having a centralized structure would be,

  • Data from each department to be escalated to higher level.

  • Escalated data must be aggregated and analyzed by higher level for planning & control.

  • Feedback to be given to functional level.

Divisional Structure

This is when an organization is split into divisions that has its own functional structure. Mostly this happens when an organization grows and it can be based on products or geography or customer type or etc.

Due to the decentralized structure, the divisional managers would require information from respective functional departments of his division and then aggregate data to provide information to head office.


Network Structure

This is when an organization outsource majority of its functions and exists as a network of contracts with very few in house functions. Also known as virtual or matrix structure.

Characteristics of a Network Structure,

  • Organization has a very little physical premises (might be zero).

  • Stakeholders are connected through advanced IT such as emails, video conferencing etc.

  • Internal employees work remotely

It is very important to have targeted information for decision making.

  • Each party requires feedback on the performances.

  • Managers who regulates performance of the organization would require information for decision making mostly on resource allocation.

  • Controls are imposed through shared goals.

You have to do some home-work. Search for advantages and disadvantages of each business structure. It is very important for you to be aware of this as selecting the structure is purely a management decision. 
Make sure you pick the most appropriate business structure to your organization.

A service level agreement (SLA) is signed between entities in order to ensure that all stakeholders are aware of the deliverables, time lines, responding methods & etc. This is basically a negotiated legal agreement.


Complex Business Structures and Associated Problems

Apart from divisional and network structures, there are few other structures which can be categorized as complex structures namely,

  • Joint Ventures (JV)

  • Licensing

  • Strategic Alliances

  • Franchising

  • Multinational

  • Complex supply chains

Various types of problems can be seen in planning, controlling and measuring performance in above structures (Discussed in the presentation).


Service Oriented Businesses

These organizations offer services which are intangible unlike traditional product manufacturing organizations. The key characteristics differ a service-oriented business from manufacturing business.


Heterogeneity

Produces tailored products unlike identical bulk production does in manufacturing business. Clients will find it more difficult to judge prices.

Perishability

The value remained only for a certain time period.

Intangibility

Cannot be shown physically unlike products. Hence, convincing customers on potential value for money is very difficult.

Simultaneity

Services cannot be stored and often instantly delivered.

No transfer of ownership

Generally, use of a service provider is for a limited time period of time.


Information requirement when providing services would be more related to qualitative aspect such as customer satisfaction, reputation, availability & etc.


Business Change

Changes in a business can be categorized under,

  • Autonomation - Using machines and systems to conduct activities that has been done manually before.

  • Rationalization - Carrying out a process in a more logical way to reduce bottlenecks and increase efficiency which would improve the performance (Eg: Online Check-Ins of air line passengers).

  • Business Process Engineering - Re-thinking and radically re-designing the processes. Main intention would be to maximize customer value by removing non-value adding activities.

Approaches to Identify Business Process Re-Engineering Opportunities

  • Zero Based

  • Simplification

  • Value-Added Analysis

  • Gaps and Disconnects

Hope you understood the basics of business structures and impact on performance management. In our next article, we would be elaborating on Business Integration & Business Process Re-Engineering which would be directly linked to the above discussed area/s.




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