Organizational Structure: Flatarchy And Holacratic Structure

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Question :

The office manager must 'report' to the Firm Director by the deadline set by the office manager. The office manager will change for each activity. The Firm Director will give the office manager feedback about each task/activity and the office manager will in turn give this feedback to their office colleagues.

Activity 1.

 A small manufacturing firm approaches your office and believes there is a market for handheld tools that are carefully crafted for local markets. After spending two months in Europe, the president of this firm believes that his company can create a popular line of these tools.

1. What type of organization structure would be of most value to this firm in its initial efforts to go international?

 2. If the company in activity 1 finds a major market for its products in Europe and decides to expand into Asia, would you recommend any change in its organization structure? If yes, what would you suggest? If no, why? 

3. If this same company finds after three years of international efforts that it is selling 50 percent of its output overseas, what type of organizational structure would you suggest for the future?

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Answer :

Activity: Organizational Structure

< align="justify" style="text-align:justify;">1.

As far as the small manufacturing firm is concerned, the best suited organizational structure for it in its initial efforts to go international would be functional. The functional structure is quintessentially of bureaucratic nature with regard to dividing the firm on the basis of specialty. This is indicative of traditional business with separate divisions such as human resources, marketing, accounting, engineering and others which helps a start-up in the initial phase. This structure involves a top down flowchart with a high raking executive at the apex level to whom all departmental heads report directly (Chen et al. 2014). The advantage is that the working professionals are entirely dedicated towards a single function i.e. selling handheld tools to specific target groups in local markets. As this structural framework has clearly defined job roles as well as expectations, it tends to limit confusion to a great extent. 


As the firm in concern has managed to garner consumer interest in the local markets of Europe and is making good profit there; in all likely possibilities, the company would be expanding its business to other nations. In this case study, the concerned company supposedly finds a major market for its handheld tools (specifically crafted for local markets) in Europe and then decides for expanding to other parts of the world; whereas the option chosen by the firm for expansion is Asia. In this regard, recommendations can be made regarding changing the existent organizational structure. As the company would be expanding its business and going overseas again, therefore, organizational structure should be as per the market nature (Anderson, 2016). 

The company can be opting for splitting the firm structure into regional segments which is in a way a variant of the functional structure with the top executives at the apex level and regional managers would be reporting to them. In this way it is ensured that the product demands in different markets are being met in a localized manner. Localization i.e. to be specific regionalization is an integral objective of business in this regard in all aspects such as pricing, product lines and others (Chen et al. 2014). It is quite obvious that European and Asian markets are different; which means the firm products need to be sold to different customer sections in respect of varying demands as well as nature of the market. The responsibilities within the organization would be different as it would be operant on foreign lands as well. Therefore, regional division is necessary to cater to the varied regions of Asian market with the company products (i.e. handheld tools) that are especially crafted for local market. 


If after 3 years this same company is found to be selling 50% of its output overseas, then the organizational structure needs to be altered to suit the current business scenario. Flatarchy and to some extent holacratic structure can be proposed in this regard. Flatarchy structure is in between hierarchy and flat organizations in terms of comprising a little bit of both structures (Harper, 2015). As the concerned business firm has already opted for international business expansion and is selling half of its production to foreign nations; it is better the company focuses on having hierarchical as well as flat structured ad-hoc teams which would be not just dynamic in nature but also would be adapting towards any given business scenario. Involving overseas business means the company is interested in investing more money and time into creation of innovation programs which are designed for looking beyond a set R&D department. Focusing on innovation can earn the firm in gaining competitive advantage over others in the future of work and this structure would be effectively powerful in that regard (Anderson, 2016). 

Holacracy can be mentioned as a new age organizational structure which involves decentralized management as well as organizational governance. In this method, both authority and decision making are largely distributed throughout a holarchy of self-organizing teams. As the firm is not enormous with hundreds and thousands of employees, holacracy structure can be viable for this firm as this model is still very much an emerging structure (Robb and Robinson, 2014). The holacratic structure has come up in times when traditional hierarchy has reached its limits and alternatives to ‘flat management’ is lacking the much needed vigor for running business in effective manner. Another potent reason for proposing holacracy is that the structure-specific effects can be achieved without going through a radical change. For instance, the decentralized decision making does not necessarily require a whole new altered organizational structure but can easily thrive in flatarchy which has the capacity of leveraging some of its existent infrastructure (Harper, 2015).