Product-based organizational structure explained

Org chart

The appliances product line is shown in depth, from its head to a product manager and the engineering and marketing staff. The electronics line is drawn one level down. Shared operations, HR and finance serve all product lines from the centre.

Levels and designations

Approval chains

How the model works

Each product line is a focused unit. A product head owns a product from idea to sale, with the core people that product needs, such as product managers, engineers and a sales team dedicated to that line. This lets everyone working on a product share one goal and one owner. Functions that gain from scale or must stay common, such as manufacturing operations, human resources and finance, are usually kept as shared central teams rather than duplicated in every line. Take a consumer durables company in Noida with an appliances line and an electronics line: each has its own product and sales team, while one operations team runs the factories and one HR and finance team serves both.

Strengths and weaknesses

The strengths are focus and accountability by product. Each line concentrates fully on its own product, customers and roadmap, decisions about that product are made by people who live and breathe it, and the line can be measured clearly on its own sales and profit, which suits companies with several distinct products that each need attention.

The weaknesses are some duplication and coordination cost. Roles like product management and sales are repeated across lines, which raises cost, and lines can compete for shared operations, budget or attention. Customers who buy across lines may see a disjointed experience, and the shared functions must serve several product heads fairly, which needs clear priorities set from the top.

• Full focus and one clear owner per product line
• Decisions made by people close to the product
• Some duplicated roles across lines that raise cost
• Lines competing for shared operations and budget

When it fits

The product-based structure fits companies with several distinct products that each need their own focus, roadmap and market, and that are large enough to give each line a dedicated team. Consumer goods, technology and manufacturing firms use it often. It differs from a full divisional structure by sharing more central functions, so it suits companies that want product focus without making each line a fully separate business. It fits badly for a single-product company, where a functional structure is simpler, or where products are so similar that separate teams only duplicate effort.

• Several distinct products that each need their own focus
• A company large enough for a team per product line
• A wish for product focus while sharing central functions
• Not for single-product firms or very similar products

Set up this structure in ZeniaHR

1. Create a department or group for each product line, and keep shared functions such as Operations, HR and Finance as central departments under Organization masters.
2. Add designations for product roles like Engineer, Product Manager and Sales Manager, and use grades to hold pay bands across product lines.
3. Give every employee a reporting manager within their product line or shared function, and an HR partner, so leave and corrections route correctly.
4. Set attendance rules and shifts by function, since product engineering, sales and shared operations may run different hours.
5. Use the org chart to confirm each product line rolls up to its head and shared functions roll up to the centre.
6. Keep leave, corrections and overtime on the reporting manager then HR route, and add product heads and corporate finance as reimbursement and hiring approvers.

Frequently asked questions