It is common for businesses to develop and grow differently, so there is a vast number of ways that companies may evolve. It usually depends on the management, industry, objectives, and specific leadership vision. These structural types have their own advantages, weaknesses, and challenges. For example, many firms face issues while allocating work and then coordinating diverse efforts after dividing responsibilities among groups of employees. The former process is called differentiation, and the latter is known as integration, and both play an essential role in organizational structure.
To begin with, differentiation is a process of separating a business into key components like units or departments. This division is especially common in major corporations because the larger a firm grows, the more challenging it becomes for a single leader to control all its operations. Thus, highly differentiated companies provide autonomy to their departments and units, making it easier to organize productive and effective work in all components. Noticeably, the corporate environment and culture may vary significantly in different units, which sometimes brings additional issues. Amazon and Apple are examples of companies that successfully differentiate their operations and have many different units.
Further, when firms apply differentiation, they still need to effectively perform their various tasks, which is why the process of integration is also significant. Overall, integration is the specific coordination of differentiated responsibilities and the work of all components. In other words, an organization that is highly integrated can have many various departments that are still closely connected and do not have much independence and autonomy. For instance, McDonald’s is a tightly controlled company, and most essential decisions are made by its small administrative group. Both integration and differentiation are extremely important and should be basic structures in organizations in order for them to operate effectively and be stronger than their competitors.
When it comes to integration, it is essential that firms choose carefully between the two available options. Overall, their choices should depend on the company’s industry, level of differentiation and its effectiveness, qualifications of managers, and other crucial factors. Organizations can coordinate group and individual efforts in two ways: vertically and laterally. The former is tighter, while the latter is more relaxed, informal, flexible, and simple.
Vertical integration refers to the system in which a firm’s higher levels use rules and policy, authority, and control and panning methods to coordinate the work of the staff. For example, authorized leaders have to make sure that action is aligned with the objectives and strategy of the firm. They make decisions, solve issues and conflicts, evaluate performance, and reward or punish employees. They also develop rules, policies, and planning and control systems so that the staff knows the work conditions and follows the standardized procedures. As mentioned above, all operations and decisions of McDonald’s are controlled by a small group of authorities, which is why it is possible to say that this company uses the vertical type of coordination.
Further, lateral integration uses task forces, meetings, gatherings, coordinating roles, matrix structures, and networks to control the efforts of the different units. Coordinating groups gather to negotiate and help dovetail the efforts and tasks of various departments. Spontaneous informal meetings make it possible for workers from different divisions to discuss some issues. Additionally, tasks forces allow the collaboration of diverse specialists when a rapid solution for a problem is required. The animation studio Pixar is an example of a company that integrates lateral coordination and does that extremely successfully: the informal connection between the workers and the three main groups allows them to develop more ideas and solve issues quickly.