Selecting the Right Organization and Structure for Sustainability

Abstract

Organization shapes the implementation of strategy as well as its success over the long term while companies without organization sink rapidly into chaos. The structure often influence leaders who, in turn, determine the company’s organization. Sustainable companies have three main choices in setting up a structure: functional structure, divisional structure, and a holding company structure. A functional structure is appropriate when the company is medium-size with little diversified central activities. It clearly defines responsibilities; it promotes the development of specialists in each office at all levels; but it generates a lack of coordination between functions. The divisional structure is more flexible and responsive. It permits to add, merge, or close divisions as required; it helps to focus on the strategic markets; it promotes decentralization of decisions and it minimize internal conflicts. However, it makes difficult knowledge sharing and cooperation between divisions. The holding company manages a portfolio of companies that are independent and often very different. Each has its strategy, its customers, and its own resources. Multidisciplinary teams are useful addition to increase the efficiency of a structure but they are not a universal remedy. It depends on their composition and on the way they are managed.