U vs M-form Organizational Structure

A U-form (unitary form) organizational structure describes a company managed as a single unit along functional lines such as marketing and finance. Conversely, an M-form (multidivisional) structure describes a company divided into multiple semi-autonomous units. Financial targets from a central authority control each unit.

Structure TypeType of StructureStructure DetailsAdvantagesDrawbacks
U-Form (Unitary)Unitary StructureThe U-form, or unitary structure, is a centralized organizational design where all decision-making authority is concentrated at the top of the hierarchy. There is typically one main division or department responsible for all key functions and decision-making.– Clear lines of authority and accountability. – Efficient decision-making process due to centralization. – Alignment with a single vision and strategy.Limited flexibility in responding to diverse market conditions or industry-specific needs. Potential bottleneck in decision-making at the top level. May not suit large or diversified organizations.
M-Form (Multidivisional)Multidivisional StructureThe M-form, or multidivisional structure, is a decentralized organizational design where a large organization is divided into semi-autonomous divisions or subsidiaries, each with its own leadership and decision-making authority. Each division operates somewhat independently.– Adaptability to diverse markets and industries. – Faster decision-making at the divisional level. – Specialization in specific business areas. – Risk and resource allocation at the divisional level.Coordination challenges between divisions. Potential variations in strategies, practices, and culture across divisions. May require effective corporate-level coordination and oversight. Overhead costs related to managing multiple divisions.
AspectU-Form Organizational StructureM-Form Organizational Structure
DefinitionU-Form Organizational Structure, also known as the Unitary or Unitary structure, is characterized by a centralized and hierarchical design where decision-making authority and control are concentrated at the top of the organization.M-Form Organizational Structure, also referred to as the Multidivisional or Divisional structure, is characterized by a decentralized approach where the organization is divided into multiple semi-autonomous divisions, each with its own decision-making authority.
Hierarchy– In a U-Form structure, there is a clear hierarchy with a single, dominant central authority, typically represented by top management or a CEO. Subordinate units report to higher levels in a linear fashion.– In an M-Form structure, the organization is divided into multiple divisions, each of which may have its own hierarchical structure. Each division operates with relative autonomy and reports to corporate headquarters.
Decision-Making– Decision-making in a U-Form structure is centralized, with major decisions made at the top level. Subordinate units or departments typically have limited decision-making authority and implement top-down directives.M-Form organizations distribute decision-making authority among divisional heads or managers, allowing divisions to make decisions independently within their areas of responsibility.
Control– Control in a U-Form structure is centralized, with top management closely monitoring and directing the activities of all departments or units. This central control ensures consistency and uniformity.M-Form organizations grant a degree of autonomy to divisions. While corporate headquarters retains overall control and oversight, divisions have more control over their operations and can adapt to local conditions.
Coordination– Coordination in a U-Form structure is typically achieved through formal rules, procedures, and hierarchical reporting. Communication and coordination flow through the established hierarchy.– In an M-Form organization, coordination often relies on divisional managers who are responsible for coordinating activities within their divisions. Corporate headquarters may facilitate coordination among divisions.
SpecializationU-Form organizations may exhibit specialization within individual departments or units, but the centralization of decision-making can limit specialization to some extent.M-Form organizations often exhibit a higher degree of specialization within divisions, as each division can tailor its strategies and operations to specific markets or functions.
FlexibilityU-Form organizations may struggle with flexibility and responsiveness to changing market conditions due to their centralized decision-making and control.M-Form structures can be more adaptable and responsive to diverse market conditions because divisions have more autonomy to make local decisions.
Risk Management– Risk management in a U-Form structure is primarily the responsibility of top management. Centralized control may limit the organization’s ability to mitigate risks effectively.M-Form organizations often have a better capacity to manage risks because divisions can tailor risk management strategies to their specific markets or operations.
Communication– Communication in a U-Form structure tends to follow formal channels and can be hierarchical. Top management’s directives are disseminated downward through the organization.– In an M-Form structure, communication can be more fluid between divisions and corporate headquarters, allowing for better sharing of information and best practices.
Adaptation to Diverse MarketsU-Form organizations may face challenges when entering diverse markets because they tend to have a single decision-making approach that may not be suitable for all markets.M-Form structures are better suited for diverse markets as divisions can adapt their strategies to local conditions, allowing the organization to enter and compete effectively in various markets.
Resource Allocation– Resource allocation in a U-Form structure is centralized, and top management decides how resources are allocated across the organization.– In an M-Form structure, resource allocation may involve divisional managers who have more control over resource allocation within their divisions, aligning resources with divisional strategies.
Corporate Culture– Corporate culture in a U-Form structure is often highly centralized, with a strong emphasis on following top management’s directives and maintaining uniformity.M-Form organizations may exhibit more diverse corporate cultures, as each division may develop its own culture based on its specific market or function.
Examples– Examples of U-Form organizations include small businesses, startups, and some government agencies where centralized control and decision-making are critical.– Examples of M-Form organizations include large multinational corporations like General Electric (GE) or Procter & Gamble (P&G), which have multiple divisions operating in various markets.

Understanding the U-form organizational structure.

The U-form organization relies on a functional approach to departmentalization and is often used to implement a single-product strategy. Developed during the railroad boom of the mid-19th century, the U-form structure was a great feat of organizational achievement. It helped rapidly growing companies manage their operations as scale and complexity increased. This gave rise to the first salaried managers with technical expertise and specialization.

This now conventional structure features a central management unit with several functionally organized departments. Decision-making is somewhat decentralized. Together with higher line authority, managers have the authority to delegate functional tasks to subordinates.

Since the U-form organizational structure emphasizes functional activities, coordination between each is crucial.


  • Productivity. Functional specialization increases productivity through effective division of labor. For example, marketing specialists improve the performance of the marketing function and allow the company to expand through increasing managerial capacity. In turn, this reduces the workload of the CEO who is free to concentrate on more critical issues.
  • Cost savings. Compared to other configurations, the costs of staffing each department in a U-form structure are significantly lower. The U-form structure facilitates a wide span of management, where single managers or supervisors oversee a large number of subordinates. This also helps the firm centralize authority.


  • Control loss. As the company grows larger, there is a progressive reduction in the ability of management to control it. As information is passed down through various levels of management, it can be subject to deliberate or accidental distortion.
  • Narrow focus. Since each senior manager is concerned with the efficient operation of their own functional area, they tend to devote less thought to wider company strategy. Worse still, senior managers may behave in such a way as to further their interests at the expense of others.

Understanding the M-form organizational structure

The M-form organizational structure became popular in the United States during the 1960s.

In the preceding decade, the post-war consumer boom saw the creation of new global mass markets for consumer goods. As a result, most organizations wanted to cash-in on this rapid growth by expanding into new markets and diversifying their product range.

This could only be achieved by utilizing the decentralized multidivisional business model seen in the M-form structure. Here, each business has a central office. But unlike the U-form structure, each functional division is allowed to make its own operational decisions.

History will show that the M-form structure allowed companies to manage a diverse range of products while maintaining efficiency and maximizing profit. The structure also enabled businesses to implement a corporate strategy of related diversification. 

Pioneered by General Motors and DuPont, the multidivisional form is now the most widely used among large modern firms.


  • An optimal level of centralization. Larger firms that enjoy distinct branding and economies of scale can also enjoy the operational flexibility of a much smaller firm. While a central authority still dictates general organizational direction, each division operates as its own entity. In other words, it is responsible for making a profit and catering to its own needs. This means it – and by extension, the company – can still operate if another division fails.
  • Incentivization and accountability. If a specific division is underperforming then it is easy to hold a manager accountable. Increased accountability encourages management to perform, particularly when such performance is actively and transparently measured against competing divisions.


  • Cost of management. With a greater number of managerial staff comes increased wage expenditure. This problem is exacerbated when one considers that the M-form structure favors specialization and expertise. While these qualities can drive growth, they also demand regular pay raises, bonuses, and other incentives.
  • Function duplication. The duplication of functions can also increase operating costs by diluting the benefits of economies of scale. In some cases, the duplication of functions leads to a lack of standardization when one division undercuts another to receive performance incentives.

Key takeaways:

  • A U-form (unitary form) organizational structure is used to implement a single-product strategy. Companies using this approach are managed as a single unit along functional lines such as finance and marketing.
  • An M-form (multidivisional form) organizational structure describes a company divided into multiple functional divisions. Each division has some degree of autonomy from a central authority.
  • During the post-war consumer boom, the M-form began to replace the U-form as the organizational structure of choice. This occurred as the M-form structure gave businesses the ability to expand into new markets with a diversified product range and maximize profits.

Key Highlights:

  • U-Form Organizational Structure:
    • Developed during the mid-19th century to manage growing companies during the railroad boom.
    • Relies on a functional approach to departmentalization.
    • Central management unit with functionally organized departments.
    • Decision-making is somewhat decentralized.
    • Emphasizes functional activities and coordination between departments.
    • Advantages: Productivity through specialization, cost savings through centralized authority.
    • Disadvantages: Control loss as the company grows, narrow focus on functional areas.
  • Advantages of U-Form:
    • Productivity: Functional specialization improves efficiency and managerial capacity.
    • Cost Savings: Lower staffing costs due to wide span of management and centralization.
  • Disadvantages of U-Form:
    • Control Loss: Management’s ability to control decreases as the company grows.
    • Narrow Focus: Senior managers may prioritize functional areas over broader company strategy.
  • M-Form Organizational Structure:
    • Became popular in the 1960s during the post-war consumer boom.
    • Allows companies to diversify products and expand into new markets.
    • Each business division has a central office and operational autonomy.
    • Efficient management of diverse product ranges.
    • Pioneered by General Motors and DuPont, widely used among large firms.
  • Advantages of M-Form:
    • Optimal Centralization: Allows operational flexibility while maintaining central direction.
    • Incentivization and Accountability: Divisions are accountable for their performance.
  • Disadvantages of M-Form:
    • Cost of Management: Increased managerial staff leads to higher wage expenditure.
    • Function Duplication: Duplication of functions can increase operating costs and lack standardization.
  • Key Takeaways:
    • U-Form: Used for single-product strategies, managed along functional lines.
    • M-Form: Used for diversification and expansion, divisions have autonomy.
    • M-Form replaced U-Form during post-war consumer boom for market expansion and diversification.

Read Next: Organizational Structure.

Types of Organizational Structures

Organizational Structures

Siloed Organizational Structures


In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.



Open Organizational Structures




In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.

Connected Business Frameworks

Portfolio Management

Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.

Kotter’s 8-Step Change Model

Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.

Nadler-Tushman Congruence Model

The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.

McKinsey’s Seven Degrees of Freedom

McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.

Mintzberg’s 5Ps

Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.

COSO Framework

The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.

TOWS Matrix

The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.

Lewin’s Change Management

Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.

Organizational Structure Case Studies

OpenAI Organizational Structure

OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.

Airbnb Organizational Structure

Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

Amazon Organizational Structure

The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.

Apple Organizational Structure

Apple has a traditional hierarchical structure with product-based grouping and some collaboration between divisions.

Coca-Cola Organizational Structure

The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.

Costco Organizational Structure

Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure. Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue. Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.

Dell Organizational Structure

Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.

eBay Organizational Structure

eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.

Facebook Organizational Structure

Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).

Goldman Sachs’ Organizational Structure

Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.

Google Organizational Structure

Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.

IBM Organizational Structure

IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.

McDonald’s Organizational Structure

McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.

McKinsey Organizational Structure

McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.

Microsoft Organizational Structure

Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

Nestlé Organizational Structure

Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.

Nike Organizational Structure

Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).

Patagonia Organizational Structure

Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.

Samsung Organizational Structure

samsung-organizational-structure (1)
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).

Sony Organizational Structure

Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.

Starbucks Organizational Structure

Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.

Tesla Organizational Structure

Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

Toyota Organizational Structure

Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).

Walmart Organizational Structure

Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

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