Structures help a person understand how a business is designed and how it operates. The reporting structures within a business are impacted by the differences between a matrix structure and a divisional structure. A matrix structure is organized around product and function, while a divisional structure focuses on product, market and geographic location. The structure of the organization has an impact on how information, resources and operations are conducted. Knowing the differences between these two structures helps a person understand how employee efforts are managed within an organization.
The matrix structure groups employees in the fields of function and product. Typically the matrix structure is focused around individual products, product lines or functions. For example, Product C and Product D separate structures with different chains of command: Each might include sales support, IT support, customer service support and operations support. The matrix structure is complex but allows for a focused approach to both products and functions.
The divisional structure is separated by nearly independent departments along the lines of product, market or geographic locations. The larger the organization, the more likely it has a divisional structure, which is simpler to manage and gives clearer lines of control. A company might have separate divisions for each product, each market area the company sells in or each geographic location where operations reside.
The divisional structure allows for more control, as each employee reports only to the structure in which he's located. An example might be a human resources department that works in and reports to the China office. In a matrix structure, the employee may report to two different authorities, which allows for more utilization but a more complex operation — for example, a sales employee may report to the manager of Product A, as well as the sales manager.
The structure used is also dependent on the size of the organization. Companies that are spread across the globe likely have local control, which lends itself to a divisional approach. A company that's located in a single area can work under a matrix structure. The further the lines of communication and locus of control, the less likely the matrix structure is to be used.