Departmentalization
Therefore, several authors have emphasized the need for establishing control systems that serve the purpose of allowing decentralized decisions, while still aligning all sub-units to the overall goals of the organization (Drucker 1954, Koontz & O’Donnell, 1964).Also, the high level of specialization is a barrier for the flexible reallocation of resources within the organization, i.e. people can not perform other tasks than those they are working with in their functional occupation.Alfred Chandler (in: March and Simon, 1958) identified a correlation between the application of purpose departmentalization and the use of a diversification strategy: ”The dominant centralized structure had one basic weakness.... As long as an enterprise belonged in an industry whose market, sources of raw materials, and production processes remained relatively unchanged, few entrepreneurial decisions have to be reached.In that situation, such a weakness was not critical, but where technology, market, and sources of supplies were changed rapidly, the defect of such a structure became more obvious.”