Divisional organizational structure explained

Org chart

The consumer division is shown in depth, with its own sales, operations and finance, and the sales line expanded. The industrial division is drawn one level down. Corporate finance and HR sit at the group level above both divisions.

Levels and designations

Approval chains

How the model works

Each division is run like its own company. A division president owns the profit and loss for a product or market, and has the functions needed to deliver it, such as its own sales and operations. This lets a division focus fully on its customers and move without waiting for the rest of the group. A small corporate office keeps functions that are cheaper or safer to share, such as group finance, human resources policy and legal, and sets common rules. Take a manufacturing group in Pune with a consumer appliances division and an industrial equipment division: each has its own sales force and plant, while group finance and HR sit at the centre.

Strengths and weaknesses

The strengths are focus and accountability. Each division concentrates on its own product or market, makes faster local decisions, and its head can be measured clearly on results. Divisions can be grown, compared or sold as units, which suits diverse groups.

The weaknesses are cost and duplication. Each division running its own functions means several sales and operations teams instead of one, which raises cost. Divisions can compete for group resources or talent, standards may drift apart, and a customer served by two divisions can get two different experiences. The corporate office must work to keep the group coherent.

• Clear profit accountability and focus per division
• Faster local decisions without waiting for the whole group
• Duplicated functions across divisions that raise cost
• Divisions competing for resources and drifting on standards

When it fits

The divisional structure fits larger companies whose products, markets or regions differ enough that each needs its own strategy and focus. It works when a group is big enough to afford separate functions per division and wants each unit measured on its own results. It fits less well for a small company with one product, where duplicating functions wastes money and a functional structure is simpler. Many groups use a mix: divisions for the businesses that differ, with shared corporate functions for finance, HR and legal held at the centre.

• Diverse products, markets or regions that each need focus
• A company large enough to afford functions per division
• A wish to measure each unit on its own results
• Not for small single-product companies where it wastes cost

Set up this structure in ZeniaHR

1. Set up each division as a group company or branch, and create departments within each division for its own functions like Sales and Operations.
2. Keep corporate functions such as group Finance, HR and Legal as central departments above the divisions under Organization masters.
3. Add designations within each division and at the corporate office, and use grades so pay bands stay consistent across divisions.
4. Give every employee a reporting manager inside their division, and an HR partner, so leave and corrections route within the division then to HR.
5. Use the org chart to confirm each division rolls up to its head and the divisions roll up to the CEO.
6. Keep leave, corrections and overtime on the reporting manager then HR route, and add division heads and corporate finance as reimbursement and hiring approvers.

Frequently asked questions