ORGANIZATIONAL STRUCTURE

Chapter 12 Lecture 1

Every Organization has a Structure

But structures can differ Due to choiceDue to national laws

The words used to describe them also can differ

Organization chart, design, structureThe way they are drawn can differ

pyramid, sideways pyramid, circle

The Structural Configuration

is the skeleton of the organization reflects corporate governance is intended to meet organizational

objectives arises out of strategic directions and causes managers to ask:

what structure will best aid us in meeting our strategy and objectives?

Restructuring Occurs for Many Reasons

Turnover in top management Competitive positioning Mergers and/or acquisitions Cost-savings Even the illusion of managerial control

The Illusion of Managerial Control

““We trained hard—but it seemed that every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization.”

–Petronius Arbiter, 210 B.C.

Structural Choice is Important Because

it focuses attention on particular areas shapes how resources will be used directs communication flows defines control and other processes illustrates people’s roles relative to others’

roles

Your Job

Understand organizational objectives (articulated in the varied levels of strategy)

Analyze the structure Assess the match between

organizational strategies and structures

Top Managers Answer to a Power Greater than Themselves

God or conscience in a wholly owned private firmGod or conscience in a wholly owned private firm The family in a family owned firm The family in a family owned firm The Board in a publicly owned firm:The Board in a publicly owned firm:

UU..SS.. boards often are chaired by the CEO boards often are chaired by the CEO Boards in UBoards in U..KK.. usually are chaired by a non usually are chaired by a non

executiveexecutive European companies often have a two-tier boardEuropean companies often have a two-tier board

In Germany, duties are split between In Germany, duties are split between supervisory and management boardssupervisory and management boards

Spain and France often use an Spain and France often use an eexecutive xecutive committeecommittee

Beneath the Board are Several Structural Types

Intra and interorganizational networksIntra and interorganizational networks Special casesSpecial cases Functional, divisional, hybridsFunctional, divisional, hybrids

Networks

Intraorganizational networks internal networksshamrockspiderwebs

Interorganizational networks strategic alliances joint ventures partial acquisitions/mergers cross-sector partnerships

Special Cases

Family structure Holding companies Virtual structure

Except for “born globals,” Most Companies Grow into Expansion

Most Common Structural TypesAmong Global Firms are: Functional structureFunctional structure Divisional structure Hybrid structures

Combined functional/divisional structureMatrix structure

Global Functional Structure

V P M arke tin g V P F in an ce

C ou n try A C ou n try B

P rod u c t 1 P rod u c t 2 P rod u c t 3

V P O p era tion s V P R & D V P L eg a l is su es

C E O

Divisional Structure Can Take Different Forms

ProductProduct GeographicGeographic Customer group servedCustomer group served

Global Geographic Division Structure

A d m in /F in an ce

V P fo r th e A m ericas V P E u rop e V P E . A s ia

M arke tin g O p era tion s

A u s tra lia /N Z In d on es ia Is lan d s

V P A u s tra las ia

C E O

Global Product Structure

D IV IS IO N A L S TR U C TU R E (B Y P R O D U C T L IN E S )

F R A G R A N C E S S K IN C A R E P R O D U C TS H A IR C A R E P R O D U C TS O TH E R P R O D U C TS

C O S M E TIC S C O R P O R A TIO N

Hybrids Often Emerge to Deal with Problems of Functional and Divisional Forms

Matrix forms are hybrids Some hybrids combine a mostly functional

structure with one or more important products or markets, e.g., North America

Some hybrids combine a mostly divisional structure with one or more important functions, e.g., marketing

We Use a Matrix to Organize Roles and Relationships in Business Education

Global Matrix Structure

M an ag em en t

fin an c in g

p arts

sp orts u tilit ies

lig h t tru cks

au tos

S tra teg ic B u s in ess u n its N . A m erica L a tin A m erica E u rop e A s ia

E xecu tive C om m ittee

C h a irm an o f th e B oard

Combined Functional and Divisional Structure

Danone Group, 2003

Chair and CEO Vice Chair and COO

General Secretary

Exec VP, Finance

Exec VP, Fresh Dairy

Exec VP, Water

Exec VP, Biscuits and

Cereal Snacks

Exec VP, Asia-Pacific

Exec VP, Intl Strategy

Intraorganizational Structures

spiderwebs spiderwebs internal internal networks networks shamrocksshamrocks horizontalhorizontal keiretsukeiretsu chaebolchaebol

Mitsubishi Group Network

Mitsubishi Village

Interorganizational Structures

Strategic Strategic aallianceslliances Joint Joint vventuresentures Partial acquisitionsPartial acquisitions

Special Cases

Family structures—usually hierarchical with a Family structures—usually hierarchical with a patriarch/matriarch or a set of family members patriarch/matriarch or a set of family members who divide tasks according to skill or obligation who divide tasks according to skill or obligation

Structures that arise out of national tradition—Structures that arise out of national tradition—German firms always have union representation German firms always have union representation and and twotwo levels of boards levels of boards

Holding companiesHolding companies Virtual organizationsVirtual organizations