The divisional organization structure is a decentralized management model that divides the enterprise into multiple relatively independent business units (divisions) based on products, regions, or customers. Each division has a complete functional structure (such as R&D, production, sales, etc.), operates with independent accounting, and is responsible for its own profits and losses, but must operate within the strategic framework of the headquarters.
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The core principles of a divisional organizational structure are 'centralized decision-making, decentralized operations': the headquarters retains strategic planning, personnel decisions, and budget control, while divisions have operational autonomy and are responsible for daily operations and achieving profit targets.
1. Division of Responsibilities
The headquarters sets strategic goals, allocates resources, supervises performance, and provides shared services (such as legal and auditing). Divisions execute strategies, operate independently, and bear profit responsibility.
2. Collaboration Mechanism
Resource exchanges within divisions are priced at market rates or cost-plus. Cross-department coordination is managed by the headquarters to oversee similar business units and reduce parochialism.
Assessment and Incentives
Profit indicators (such as ROI, EVA) and return on investment are the core assessment criteria. Bonus distribution is linked to divisional performance, encouraging the overachievement of targets.
At the headquarters level: equipped with functional personnel in strategic planning, financial auditing, human resources, responsible for setting corporate goals, allocating resources, supervising assessments, and ensuring strategic consistency. At the divisional level: led by a general manager, with core functional departments—marketing team responsible for market development and customer management; R&D team focusing on product innovation and technical support; production/operation team controlling supply chain and quality management; financial team executing budget control and cost analysis; human resources team responsible for recruitment, training, and performance assessment.
1. Improves decision-making efficiency, divisions have independent accounting and operate autonomously, able to quickly respond to market changes (e.g., Procter & Gamble divides divisions by product, flexibly adjusting strategies);
2. Strengthens strategic focus, headquarters concentrates on long-term planning, divisions delve into specific fields, promoting specialized development;
3. Stimulates internal competition, performance comparisons between divisions promote innovation and efficiency improvement, while also cultivating versatile management talents.
1. Risk of parochialism, divisions may excessively pursue their interests, ignoring overall corporate goals, leading to resource wastage;
2. High management costs, redundant functional structures (e.g., multiple divisions having finance, HR departments), increasing operational expenses;
3. The dilemma of balancing decentralization and control, excessive decentralization may weaken the headquarters' strategic coordination ability, while excessive centralization limits divisional flexibility.
Decentralized management, with headquarters focusing on strategic decisions, while divisions operate independently and have their own accounting.
Through internal transfer pricing or headquarters coordination mechanisms (such as cross-divisional) to reduce resource conflicts.
Large enterprises with diverse businesses, large scale, and a need for rapid market response (such as multinational corporations).
By using shared services (such as centralized auditing and IT support by headquarters) to reduce functional redundancy.
The divisional structure decentralizes by product/region, while the functional structure centralizes management by function. The former is more flexible but more costly.
Yes. ProcessOn flowchart tools can be used to draw divisional organizational structure diagrams.
Mind map tools: Select a topic, and in the right toolbar style, different levels of departments can be set to different colors;
Flowchart tools: Select a shape, and in the top toolbar, different levels of departments can be set to different colors.
