Organizing for the Future - MIT OpenCourseWare · PDF fileOrganizing for the Future Arnoldo C. Hax ... Unrelated diversification Acquisition Holding company ... Amount of Power

Organizing for theOrganizing for the FutureFuture

Arnoldo C. Hax

Galbraith. Designing Organizations. Jossey-Bass, 1995.

Galbraith, and Lawler III, et al. Organizing for the Future: The New Logic for Managing Complex Organizations, Jossey-Bass, 1993.

Mohrman, et al. Tomorrow’s Organizations. Jossey-Bass, 1998.

Strategic Management FrameworkStrategic Management Framework

Planning Information Business Control & Reward Process Process Process Process

Strategy PerformanceStructure Processes

Culture

• Benchmarking

• Activity-Based Costing

• Balanced Scorecard

• Processes

• Activities

• New Organization Forms

• Technology

• Globalization

The ValueThe Value--Adding Corporation: Matching Structure with StrategyAdding Corporation: Matching Structure with Strategy

Holding companyAcquisitionUnrelated diversification

DivisionalInternalRelated diversification

FunctionalInternalSingle business

StructureGrowthStrategy

Division

Division/Company

Company

Bases

High

Medium

Low

Variable

Industry

Company

Company

Compensatio n

DivisionObjectiveUnrelated

CompanySubjective/Objective

Related

CompanySubjectiveSingle

CareerMeasuresStrategy

FinancialInvestmentUnrelated

StrategicProfitRelated

OperationalCostSingle

Type of ControlControl DataStrategy

Small

Large

Small

Staff

Holding company

Divisional

Functional

Structure

ServiceLowUnrelated

Policy/ReviewModerateRelated

PolicyHighSingle

Staff RoleCentralizationStrategy

Policies Contrasted for Two Diversified ModelsPolicies Contrasted for Two Diversified Models

Strategy Related Unrelated

Structure Divisional Holding company

Centralization Moderate Low

Staff Large Small

Staff Role Policy/Review Service

Control Profit center Investment center

Control type Strategic/Financial Financial

Compensation Company Industry

Percentage variable 10-30% 50% or more

Measures Subjective/Objective Objective

Careers Company Division

___________________________________________

_________________________

New Forms of Corporate Organization:New Forms of Corporate Organization:Corporate Strategy and OrganizationCorporate Strategy and Organization

Strategy Single Dual Related Mixed Unrelated Unrelated

Organizatio n Functional Front/Back Divisional Cluster Holding LBO

Diversity Low High Very high

Value-Added High Low

Emerging FrontEmerging Front--End/BackEnd/Back--End Model:End Model:IBMIBM’’s Fronts Front--Back StructureBack Structure

Human Resources

Financial Services

Process Industries

Legal AffairsCFO

CEO

Personal Computers

Client/Server Computing

- R&D

- Manufacturing

- Product marketing

- R&D

- Manufacturing

- Product marketing

- Sales

- Service

- Application software

- Customer

- Sales

- Service

- Application software

education

Source: Mohrman, et al. Tomorrow’s Organization. Jossey-Bass, 1998.

IBMIBM’’ss CustomerCustomer--Product StructureProduct Structure

Client/Server Computing Financial Services

R&D MarketingManufacturing



Sales Service

Sales Service

Sales Service

Storage Products

RetailingPersonal Computers

Consumer Goods


GEGE’’s SBU Structures SBU Structure

R&D MarketingManufacturing Sales Service

Jet Engines

Major Appliances


Medical Electronics



Mirror Image Structure:Mirror Image Structure: Hybrid Functional/GeographicalHybrid Functional/GeographicalStructure withStructure with Functional Integrators and TeamsFunctional Integrators and Teams

General Manager

- Purchasing

- Operations

- Marketing

- Human Resources

- Finance

-

- Purchasing

- Operations

- Marketing

- Human Resources

- Finance

-

Human Resources Operations MarketingFinance

Central region

Southern regionNorthern region

Purchasing

-

- Purchasing

- Operations

- Marketing

- Human Resources

- Finance

-

Functional cross-geographical

teams

Mirror Image Structure:Mirror Image Structure: Hybrid Structure Plus with Product TeamsHybrid Structure Plus with Product Teams

Human Resources Operations MarketingFinance

General Manager

- Purchasing

- Operations

- Marketing

- Human Resources

- Finance

-

- Purchasing

- Operations

- Marketing

- Human Resources

- Finance

-

- Purchasing

- Operations

- Marketing

- Human Resources

- Finance

-

Central region

Southern regionNorthern regionPurchasing

New product teams

R&D

Hybrid Structure for Financial ServicesHybrid Structure for Financial Services

Human Resources

Regional Team

Field Units: Sales & Marketing

Corporate Development

Finance

General Manager

Mutual Funds

- Underwriting

- Claims

- Investments

- Information technology

- Product marketing

- Money markets

- Stocks

- Bonds


- Product marketing

- Insurance

- Mutual funds

- Certificates

- Joint ventures

- Financial consultation

- Direct marketing

- 401K plans

- Segment

Insurance Certificates

-

-

-


- Product marketing marketing


FrontFront--Back Linkage: Regional TeamsBack Linkage: Regional Teams

Human Resources

Field Units: Sales & Marketing

Corporate DevelopmentFinance

General Manager

Mutual Funds

-

-

- Product marketing

-

-

- Product marketing

- Manager

-

-

- Financial consultants

Insurance Certificates

-

-

- Product marketing

Segment marketing

- Midwest

- Northeast

- South

- West

- Canada

Customer Database

Product Database

Regional Teams

Marketing Council

- Midwest

- Northeast

- South

- West

- Canada

- Midwest

- Northeast

- South

- West

- Canada

- Midwest

- Northeast

- South

- West

- Canada

- Midwest

- Northeast

- South

- West

- Canada


FrontFront--End StructureEnd Structure

Paper Group

-

- Soap

- Food

- Toiletries

- Paper

Finance

Regional Team

Soup Group

Customer Team

Toiletries Group

Operations Marketing Distribution SalesMarketing OperationsI.T.

-

-

-

- Group Sales

-

-

-

- Group Sales

-

- Soap

- Food

- Toiletries

- Paper

-

- Soap

- Food

- Toiletries

- Paper

-

- Soap

- Food

- Toiletries

- Paper

-

- Soap

- Food

- Toiletries

- Paper

-

- Group Sales

-

- Soap

- Food

- Toiletries

- Paper

-

- Soap

- Food

- Toiletries

- Paper

-Boys -Safeway -Vons

-

- Soap

- Food

- Toiletries

- Paper

Sales

Front End

Staff

CEO


Levels of International DevelopmentLevels of International Development

Level Proportion of Assets& Employees Outside of the Home Country

Role of the Subsidiary

Type of International Organization

I Zero None National company

II Low Startup International geographicaldivision

III Moderate Implementer Multidimensional network

IV High Leader Transnational organization


The Matrix Structure ofThe Matrix Structure of AseaAsea BrownBrown BoveriBoveri

CEO

Business Segment

Region

Country

Country Business

Business Area


Distribution of Power Between AxesDistribution of Power Between Axes

Business

Country

1 32 5 4 3 2 14

Amou

nt o

f Pow

er

Country Matrix Business Structure Structure Structure

1. Voluntary organization (self-organizing network)

2. Virtual teams

3. Formal teams

4. Business or country manager as full-time team leader

5. Matrix organization


CoordinationCoordination among the Power Between Axesamong the Power Between AxesHewlett Packard

Nestlé ABB

Business

Country

1 32 5 4 3 2 14

Amou

nt o

f Pow

er

Country Structure

Matrix Structure

Business Structure

Cross-border coordination Economic activity of host governments

Diversity of firm’s business portfolio


•• MultiMulti--cultural employees (cultural barriers, different cultural employees (cultural barriers, different work practices and legal environments, varying work practices and legal environments, varying degrees of skill levels)degrees of skill levels)

•• Broad spectrum of competitive environments Broad spectrum of competitive environments (number and type of competitors, different levels of (number and type of competitors, different levels of protectionism and regulatory environment)protectionism and regulatory environment)

•• Varying efficiency of manufacturing assetsVarying efficiency of manufacturing assets

•• VaryingVarying degree of infrastructure quality degree of infrastructure quality (communications and transportation)(communications and transportation)

•• Communications challenges (time zones, holidays, Communications challenges (time zones, holidays, language barriers)language barriers)

The Realities of a Truly Global CorporationThe Realities of a Truly Global Corporation

The Realities of a Truly Global Corporation (contThe Realities of a Truly Global Corporation (cont’’d.)d.)

YETYET

•• To become aTo become a ““world class corporationworld class corporation”” the entirethe entire corporation has to be oriented towards one highcorporation has to be oriented towards one high standard of world class performance. Make allstandard of world class performance. Make all employees feel that they are part of aemployees feel that they are part of a globalglobalorganization striving for world class status, andorganization striving for world class status, and feelfeel locallocal at the same time in the execution of theirat the same time in the execution of their programs.programs.

Being able to thrive in an environment which is:Being able to thrive in an environment which is:

•• globalglobal andand locallocal

•• complexcomplex andand simplesimple

•• bigbig andand smallsmall

•• centralizedcentralized andand decentralizeddecentralized

•• changingchanging andand stablestable

ABBABB’’s s ParadoxesParadoxes

The Renewal ProcessThe Renewal Process

Managing the tensionManaging the tensionbetween shortbetween short--termterm performance and longperformance and long--termtermambitionambition Creating and maintainingCreating and maintaining

organizational trustorganizational trust

RENEWAL PROCESS

Shaping and embeddingShaping and embedding corporate purposecorporate purpose

Managing operationalManaging operational interdependencies andinterdependencies and personal networkspersonal networks Linking skills, knowledgeLinking skills, knowledge

and resourcesand resources

ENTREPRENEUR

INTEGRATION PROCESS

Developing and nurturingDeveloping and nurturingorganizational valuesorganizational values

Creating and pursuingCreating and pursuingopportunitiesopportunities

Reviewing developinReviewing developing andg and supporting initiativessupporting initiatives

IAL PROCESS

Establishing strategicEstablishing strategicmission and performancemission and performance standardsstandards

TopFront-line Middle Management Management Management

Documents

Organizing for the Future - MIT OpenCourseWare · PDF fileOrganizing for the Future Arnoldo C. Hax ... Unrelated diversification Acquisition Holding company ... Amount of Power