Organizational Structure

Need to create division of laborNeed to integrate these groups to

ensure organizational effectivenessDimensions of Macro StructureMicrostructure Management

Dimensions and Processes

Firm Growth as Evolutionary Process

Single Business

GeographicDiversification

(Foreign Sales as %Total Sales)

Product Diversification

(Product Diversity)

Product and GeographicDiversification

Horizontal Differentiation

degree to which tasks are divided into distinct homogeneous groups– function-wise

– geographic-wise

– product-wise

– production stage-wise

Prod 1 Prod 2 Prod 3 Prod 4

C EO

M kt M fg F inance R & D Log is tics

C E O

Vertical Differentiation

Number of levels within the organization

Sr. VP

VP

Asst. VP Asst. VP

Asst. B ranch Mgr

B ranch Mgr. B ranch Mgr.

Asst. VP

VP VP

Sr. VP

E VP E VP E VP

C EO

Spacial Dispersion

Degree to which activities are located in different areas

Finance R &D Legal

Support

U S

Prod 1

Mfg.

Pacific

Prod 2

Mfg

Eur.

H Q

Pre

ssu

res

for

Glo

bal

Eff

icie

ncy

and

Cen

tral

izat

ion

Pressures for Local Responsiveness and Decentralization

High

Low

HighLow

Horizontal Differentiation?

Vertical Differentiation?

Spacial Dispersion?

Structure Follows Strategy

Export

U.S.

Germany

Mexico

Malaysia

Functional Structurew/ International Sales Division

F in ./Acct.

M anufacturing M arketing Log istics

In ternationa lSa les

R & D

H Q

Multidomestic

U.S.

Germany

Mexico

Malaysia

Geographic Structure

Mkt. M fg. R & D

N . Am er. Eur. Latin Am er.

Prod. A Prod. B Prod. C

Pac.R im

H Q

Pure Global

U.S.

Germany

Mexico

Malaysia

Global Functional StructureFor Single-business Firms

F in ./Acct.

M anufacturingM exico

M arketingG erm any

R & DM alaysia

H QU .S .

Product Division StructureFor Product-diversified Firms

M fg . M kt. R &D

Product A

M fg . M kt. R &D

Product B

M fg . M kt. R &D

Product C

H Q

Transnational (1)

U.S.

Germany

Mexico

Malaysia

Matrix Structure (A)

R &D

U S

Eur

M exico

M alaysia

M arketing M anufacturingM exico

H QU .S .

Matrix Structure (B)

U S

Eur

Asia

Geographic A reas Product 1 P roduct 2 P roduct 3 P roduct 4

H Q

Transnational (2)

U.S.

Germany

Mexico

Malaysia

Engines

Final Assembly

Trim, seats,glass

Steel

R &D

Log istics

IntegratedFunctions

M arketing

G erm any

D rive tra in

M arketing

U S

Body/F ram e

M arketing

M alaysia

G lass/P lastic

M arketing

M exico

F ina lAssem bly

H Q

Matrix Structure (B)

Mixed Structure

Mfg.

Mkt.

R&D

PC s

Faxes

Mobil Phones

Copiers

U S

Faxes

Mobil Phones

Copiers

Europe

Faxes

Mobil Phones

Copiers

Pacific

H Q

Stopford-Wells Structure Model P

rodu

ct D

iver

sity

Lo

Hi

Foreign Sales as % of Total Sales

0% 100%

Intl.Division

ProductDivisions

GeographicDivisions

Mixed /Matrix /Network

Formalization

Degree to which rules, procedure, lines of authority/responsibility are enunciated or specified

More formality: eliminates confusion and uncertainty, limits creativity and innovation

Less formality: imbues flexibility, creative solutions.

Centralization

Degree to which authority and decision making is at higher levels of the organization

Centralized: tight org control, managers are order-takers

Decentralized: managers closest to product and/or customer able to make decisions

Data Management Control Mechanisms

Information systems Measurement systems Resource allocation procedures Strategic planning Budgeting processes

Managers’ Management Control Mechanisms

Choice/selection of key managers Career paths Rewards and punishment systems Management development Patterns of socialization

Organizational Learning/Conflict Resolution Control Mechanisms

Decision responsibility assignments Integrators Transnational teams Coordination committees Task forces

Decentralized Federation Configuration Model

Flows?Controls?

Changing Role of Top Management

Paradoxes…how to be:– global and local

– big and small

– centralized and decentralizedOld way…strategy-structure-systems:

– chief strategist

– structural architect

– information and control systems

Vertical Structural HierarchyTop-down view:

– order, symmetry, uniformity– neat decomposition of tasks & responsibilities

Bottom-up view:– reporting lines– documentation– reviews

The organization has its face toward the CEO and its ass toward the customer.– Jack Welch, CEO General Electric

Structural Management of a Portfolio of Processes

Entrepreneurial processCompetence-building processRenewal process

Entrepreneurship

Def.: externally-oriented, opportunity-seeking, ownership-motivated

Employees are most important assetGrow and divide principal25-5 ruleThe market is far better judge of new

products than some analyst or manager

Competence-BuildingTraditional role…cross-unit “matchmaker” New role…informational conduit, facilitator (on-

line dating)Kao’s VAN: dense info network linking mfg,

mkt, R&D, engineering, etc.– sift through data for customer clues and latent

technologies Intel’s “crisis support” culture

RenewalReduce complacencyGroves: Only the Paranoid SurviveAn organization should stretch itself to the point

where it almost becomes unglued – Jack Welch, CEO General Electric

ABB: Challenge business units with scenario-planning exercises

New 3M CEO’s: 30-5 rule