An organisation can be structured according to two common criteria, namely by function and by division.
Functional Structure
Functional structure puts together those employees engaged in one activity or similar activities. A company organised by function may have separate manufacturing, sales and finance department. A sales enlarger will be responsible for sale of all products of company. Advantage of functional structure is that managers are specialist in their respective areas of work and therefore, supervision visible. Firstly, quick decision-making becomes difficult because managers have to depend on top management. Secondly, accountability cannot be determined if an activity cannot be completed timely.
Divisional Structuring
Large companies like Life Insurance Corporation, State Bank of India, Larsen and Toubro are organised according to divisional structuring. Two common criteria of divisional structuring are product and region.
By Product
Every division of company is responsible for a product or group of products. Usually, it is applied whenever a product requires manufacturing and marketing technologies different from clothier product of company. If a company has many divisions each will look after production and marketing of a particular product.
By Geography
In such an arrangement geographical area of company is operation is divided into various regions. All activities of organisation production, marketing etc. are put together. Most of companies which have operations all over India follow this pattern. Such companies have offices in east, west, south and nth regions; for example (INGC, LIC. Divisional structure has two advantages. Firstly, coordination between two departments in the same region is faster. Secondly, decision-making is not delayed. At this time it is necessary to inform you that many organisations may have divisional structuring according to product or region or both. There are some additional criteria like customer, equipment and time for divisional structuring.
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