Organizational Structure

Need

to create division of labor Need to integrate these groups to ensure organizational effectiveness Dimensions of Macro Structure Microstructure Management Dimensions and Processes

Firm Growth as Evolutionary Process

Single Business
Geographic Diversification
(Foreign Sales as %Total Sales)

Product Diversification
(Product Diversity)

Product and Geographic Diversification

Horizontal Differentiation

degree to which tasks are divided into distinct homogeneous groups

function-wise geographic-wise product-wise Mkt production stage-wise

CEO
Prod 1 Prod 2 Prod 3 Prod 4

CEO
Mfg Finance R&D Logistics

Vertical Differentiation

Number of levels within the organization

Sr. VP
VP
Asst. VP

CEO
EVP
Sr. VP
VP
Asst. VP

EVP

EVP

VP
Asst. VP Branch Mgr.

Branch Mgr. Asst. Branch Mgr

Spacial Dispersion

Degree to which activities are located in different areas

HQ

US
Support
Finance R&D Legal

Pacific
Mfg.
Prod 1

Eur.
Mfg
Prod 2

Structure Follows Strategy

Pressures for Global Efficiency and Centralization High Horizontal Differentiation?

Vertical Differentiation?

Low
Low

Spacial Dispersion?
High

Pressures for Local Responsiveness and Decentralization

Export
Germany
U.S. Mexico

Malaysia

Functional Structure w/ International Sales Division

HQ

Fin./Acct.
Manufacturing Marketing Logistics R&D

International Sales

Multidomestic
Germany
U.S. Mexico

Malaysia

Geographic Structure
HQ N. Amer.
Mkt. Mfg. R&D

Eur.

Latin Amer.

Pac.Rim

Prod. A Prod. B Prod. C

Pure Global
Germany
U.S. Mexico

Malaysia

Global Functional Structure

For Single-business Firms

HQ U.S. Fin./Acct.

Manufacturing Mexico

Marketing Germany

R&D Malaysia

Product Division Structure

For Product-diversified Firms

HQ Product A
Mfg.

Product B

Product C
Mkt. R&D

Mkt. R&D Mfg.

Mkt. R&D Mfg.

Transnational (1)
Germany
U.S. Mexico

Malaysia

Matrix Structure (A)

HQ U.S. R&D
Marketing Manufacturing Mexico

US Eur Mexico Malaysia

Matrix Structure (B)

HQ
Geographic Areas

Product 1

Product 2

Product 3

Product 4

US Eur Asia

Transnational (2)
Germany
U.S.
Steel Engines

Mexico
Final Assembly

Malaysia
Trim, seats, glass

Matrix Structure (B)

HQ
R&D

Integrated Functions

Drivetrain

Body/ Frame US
Marketing

Glass/ Plastic Malaysia

Marketing

Final Assembly Mexico

Marketing

Logistics

Germany
Marketing

Mixed Structure
HQ
PCs
Mfg.

US
Faxes

Europe
Faxes

Pacific
Faxes

Mkt.
R&D

Mobil Phones
Copiers

Mobil Phones
Copiers

Mobil Phones
Copiers

Stopford-Wells Structure Model

Hi Product Diversity Product Divisions Mixed / Matrix / Network

Lo

Intl. Division 0%

Geographic Divisions 100%

Foreign Sales as % of Total Sales

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 Career

of key managers

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

Paradoxeshow

to be:

global and local big and small centralized and decentralized

Old

waystrategy-structure-systems:

chief strategist structural architect information and control systems

Vertical Structural Hierarchy

Top-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

process Competence-building process Renewal process

Entrepreneurship
Def.:

externally-oriented, opportunityseeking, ownership-motivated Employees are most important asset Grow and divide principal 25-5 rule The market is far better judge of new products than some analyst or manager

Competence-Building
Traditional

rolecross-unit matchmaker New roleinformational conduit, facilitator (on-line dating) Kaos VAN: dense info network linking mfg, mkt, R&D, engineering, etc.
sift through data for customer clues and latent technologies
Intels

crisis support culture

Renewal
Reduce

complacency Groves: Only the Paranoid Survive An 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 CEOs: 30-5 rule