Divisionalisation

Identify the possible factors that may have prompted the senior management to introduce a divisional structure and suggest some potential problems that may arise.

Reasons :

1. Decision makers at divisional level have more awareness of their markets and services and of local problems. They are closer to, and so have a better understanding of, day-to-day operational problems.

2. There is greater speed of decision making and responses to changing events since there is no need to refer decisions upwards. This is valued by customers and is particularly important in a modern rapidly-changing environment.

3. Divisionalisation allows senior management to concentrate on strategic problems affecting the organization as a whole They need not be burdened by large amounts of information that is not relevant to their role.

4. Divisionalisation helps junior mangers to develop in roles of responsibility.

5. Divisional managers can be more adventurous and are better motivated.

6. The authority to act to improve performance should motivate divisional managers.

7. A divisional structure can reduce the complexity and cost of the communications system.

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Potential problems that may arise:

1. Duplication of functions and facilities. It is perhaps wasteful for each division to have, say, its own accounts department.

2. There will be some loss of the information needed by senior managers to take strategic decisions. At the extreme, for example, a divisional manager may be able to hide the truth about a division’s poor performance from senior management, who would close down the division or change its manager if they were aware of the full story.

3. Competition between divisions may cause the divisions to take decisions that are not in the interests of the organization as a whole.

4. Senior management may spend too much time resolving disputes between the divisions, say in the level of cross charges, rather than concentrating on strategic issues.

5. Top management, by delegating decision making to divisional mangers, may loss control since they are not aware of what is going on in the organization as a whole.

6. On the other hand, senior management might have difficulty in fully delegating decision making.



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