Functional vs. Divisional

About a year ago, Ben Thompson wrote a great blog post comparing and contrasting the strengths and weaknesses of divisional organizations and functional organizations:

Why Microsoft’s Reorganization is a Bad Idea

As you can probably tell from its title, the context was Microsoft’s reorg from a divisional organization to a functional one, but that’s outside the point for this post.

I keep going back to this post every time we’re considering a reorg, asking myself whether this moves us closer to the divisional or functional pole of the spectrum (most companies, especially in lower tiers, are hybrids) and therefore, how we should mitigate the risk in the trade-off.

Massive, enterprise-scale companies, truly have the option of choosing one over the other. But smaller companies don’t. Most small to mid-size companies are organized functionally, since at that scale, it is clearly the more effective way to organize. But it still has its shortcomings.

As Ben suggests, accountability in functional organizations is less clear. It’s also more likely that despite the overall structure, some people will be holding more divisional responsibilities (Product Managers are a great example).

More on one approach for dealing with this challenge in the next post.

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Functional vs. Divisional

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