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What is a multidivisional structure?

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A multidivisional structure is a corporate structure with multiple operating divisions in which every division represents profit or business centers. The corporate officers at the top of this structure delegate both daily operations and business unit strategy to the division managers.

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The multidivisional structure helps organizations stay more competitive in the global economy. Within organizations who use this structure, such as General Electric, every unit functions as its own business, complete with its separate corporate staff and president. In some cases, the parent company of such structures functions only to fund the divisions and offer guidance regarding organizationwide strategies. The general goal of this approach is to maximize the company's performance through a combination of financial and strategic controls.

Another benefit of this approach is that it simplifies control for corporate officers. In the case of General Motors' restructuring in the early 20th century, this approach allowed top officers to easily assess and compare each division's performance. Such comparisons also allowed managers of low-performance divisions to focus on ways to emulate better-performing divisions.

The multidivisional structure has two chief weaknesses, according to the University at Albany, a branch of State University of New York. One is that it leads to competition for resources between divisions. Another weakness is that it prevents easy coordination between separate units, leading to duplication of resources.

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