rganizational structure is the formal layout of a company's personnel. Structure clearly defines reporting relationships, decision-making authority, and the physical location of employees from various departments. A geographical organizational structure groups representatives from each functional department into units formed to serve a specific market or region. Geographical units can be highly effective if they are located within the regions they serve and employ workers from the local labor pool.
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Communication and Collaboration
Communication between representatives of the different business functions is much more personal in a geographical organizational structure. Rather than having to establish working relationships with people on the other side of the world through email and telephone, employees in a geographical structure often work side by side with personnel from various departments.
Grouping employees this way encourages the formation of strong, collaborative teams that work well together, engage in planning and decision-making together, and understand each other's personalities and work styles. An added advantage of this close working proximity is the ability of the team to adapt quickly to changes in divisional goals and processes, and to bring everyone on board with new strategic initiatives.
Local Managers
The ability to hire local management offers companies the advantage of having leaders who are completely familiar with the local business environment, culture, and legal climate. Local marketing managers understand exactly what drives local purchase behavior; local accounting managers understand the tax structure and financial reporting requirements of the region; and local staffing managers understand the management practices that are most effective in the region.
Decision-making effectiveness can be enhanced by relying on the knowledge and experience of local talent. Placing a mix of local and home office leaders at the helm of a geographical unit has the advantage of melding local culture with company culture, ensuring that the company is sufficiently adaptable to local conditions, while still being true to its core business methodologies.
Related Reading: The Advantages of Matrix Organizational Structure
Geographical Focus
According to Lamar.edu, customer service quality can be enhanced by implementing a geographical structure. Customers can feel more at ease when speaking with local representatives who fully understand their language and idiomatic expressions. Customer support representatives will also have greater access to representatives from other functions, as mentioned before, which can allow them to handle customer issues much more efficiently.
For example, in a functional structure, a customer support representative in India might speak with a customer from England, then call an account manager in Germany to obtain the information to help the customer. In a geographical structure, the support representative in India would speak with a customer from India, then ask an account representative down the hall for the needed information.
Focusing all functions on one geographical area allows each department to operate with precision: product attributes can be altered to suit local tastes; workplace policies can be altered to fit local workers; marketing can be tailored to the specific market; sales practices can stay within culturally acceptable boundaries; and pricing schemes can fit local trends.
Performance Measurement and Strategy
Aside from operational advantages, a geographical structure offers strategic advantages as well. Tracking the performance of individual markets and work groups is simplified under this structure, as metrics such as revenues, profit margins, costs, and performance improvements can be tagged to specific regions.
Home office executives have an invaluable strategic resource in their pool of local management talent; local managers from various departments can be consulted when making decisions, such as which new products to introduce, where to concentrate research efforts, and on which products or services to focus in different regions.
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About the Author
David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.
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