11 Organizational Structure

MGT 5391:
Session # 8
8 Types of Structures
http://macy.ba.ttu.edu/5491 Week #11organizational structure 1

Inputs TRANSFORMATION Outputs
Environmental
Results From High
Drivers
Performance / Exemplar
Organizations
1. External/ THE ORGANIZATION DESIGN PUZZLE:
Global Business HIGH PERFORMANCE LEARNING ORGANIZATION
Environment
1. Macro Organizational
2.Internal Organizational Effectiveness
Environment Structures
8. Shared Leadership
A.Corporate,
Business, & Decision Making 2. The Job/work 1. Customers
Worksite And Systems
Individual: 2. Financial/
Capabilities And 7. Recognition and Interdependence Business
Barriers (Culture) Financial Reward and 3. Technologies
Systems Design “FIT” 3. Employees
6. People and
B.Vision Human Resource 4. Information and 4. Organizational
Direction Systems Knowledge Systems Innovation
(VDSP)
5. Micro Organization 5. Societal
C. Organizational Structures: Team Design
Strategies
D. Business Organizational Processes (Individual, Group, Organizational and

Models Business Processes (Total Quality, Business Processes, etc.)
E. Labor
(Employee)
Management (Feedback)
Mutuality
F. Transformation/ Figure 1.
Change
Processes High performing organizations: Overall open systems model of critical
components
________________
Source: Modified from Macy, et al., (1995). Presented to the National Academy of Management, Vancouver, Canada, August.

The Common Eight Different Options for
Organization Structure
1. The Headquarters Structure

2. The Centerless – Decentralization Structure
3. The Functional Structure
4. The Product Structure
5. The Market (Customer) Structure
6. The Geographical Structure
7. The Process Structure
8. The Hybrid Structure – Combinations of the
above seven

OST
Eight TRANSFORMATION Categories - 1
MACRO STRUCTURE
1. CORPORATE Office
2. S.B.U. (Global and Regional)
3. Value Chain: Demand and
Supply sides
4. Business/Product Teams
5. Enterprise Teams
Concepts:
•Coordination/interface
• Communication
• Power & Control (Decision Making)-
Redistribution of Power & Control
• Reporting
• Capabilities
• Conflict
• Complexity
Today’s
• Information
• Centralization
• Span of Control
Focus
• Division of Labor
•Vertical and/or Horizontal Structure
Traditional Organization
Power Information
Knowledge Rewards
Outcomes = Lower Performance

(3.8% Financial
Performance Improvement Per
Year)
High Performance Work System

#1 Macro Structure #4 IS/IT
Power Information #3 Technologies
#5 Micro Structure
Knowledge Rewards #7 Recognition &
#2 Job/Work
Financial Reward Systems
#8 Shared Leadership
Outcomes = Higher Performance
# 6 Human Resource (10% Financial
Systems Improvement Per
Performance Year)

Organization Structure is
about:
- Power and Control and the
Re-distribution of Power and
Control (Less Layers -fewer

chiefs)
- Decision Making at the
Traditional Organization
Environment
n s
De
io
at
ci
ic
si
un
on
m
M
m
ak
Co
in
g
Boundaries of the System
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) Week #11organizational structure 7
http://macy.ba.ttu.edu/5491
Organization Structure is
about:
- Effective Communication
- Effective Coordination
- Speed/Responsiveness to
the Customer (both internal &
external)
- Empowerment throughout
21ST CENTURY ORGANIZATIONAL STRUCTURE DESIGN BLOCKS:
To Deliver Business Results
Corporation Organization
Global Strategic Business Unit (S.B.U.)
Market Focus/Demand Side Alignment

Enterprise Teams (Customer, Product, Channel, and Process
Supply Side Alignment to Manufacturing
Business Centers - Lines of Business

(Process Product Supply Mini-Businesses)
SDWT’s to Work Teams
Individuals
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
Typical Different Levels of 21st Century
Macro Organization Structures
1. Corporate Office/G.O. Structure
2. Regional/Global Structure
3. Business Teams
4. Product Teams
5. Enterprise Teams (Customer & Supplier

Sides of Value Chain)
21st Century Organization Design
GBU’s Markets/ Sales
Orgs. MDO’s
-Bus. “A” -Western Europe
-Bus. “B” -Central or Eastern Europe
-Bus. “C” -Middle East & Africa
-Bus. “D” -Northern Asia
-Bus. “E” -Greater China
-Bus. “F” -North America
-Bus. “ ” -Latin America
8
-South America
-Others

Global Business Services (GBS) & In/ Outsourcing
Corporate Functions/ Expertise Centers

GBU’s Markets/ Sales
Orgs. MDO’s
-Bus. “A” -Western Europe
-Bus. “B” -Central or Eastern Europe
-Bus. “C” -Middle East & Africa
-Bus. “D” -Northern Asia
-Bus. “E” -Greater China
-Bus. “F” -North America
-Bus. “ ” -Latin America
8
-South America
-Others…
Global Business Services (GBS) & In/ Outsourcing
Corporate Functions/ Expertise Centers

Question:
Is your Firm a “Cost Center” or a “Profit Center”?
Cost center: P/L Center:
Emphasis on: Emphasis on:

– Costs •Customer Satisfaction/
Loyalty/ repeat business
•Quality
•Service
•Innovation
•Production
•Costs

Four Key Concepts / Issues of Structure
( to be analyzed for your case)
• Integration
• Coordination
• Communications
• Power & Control

Time
6th Century – early GO/ Corporate Office P/L

1970
1970’s-Now SBU/ GBU

P/L
1980’s-Now LOB’s/ Brands/ Products

Modified P/L
E&T/ Stores/
1990’s-Now Countries/Regions
Modified P/L

Fifteen Trends in Organizational Design at the Firm Level
Creation of a Separate
1
“Company”(sell stock)
Innovative Changes Structures and Processes

8
2 Corporate Office (smaller)
Distributed
3 Global S.B.U.’s IT
Systems
4 E-Commerce SBU (Supplier-
Organization
-
5 Total Value Chain Design Customer
(SAP/EDI)
6 Global Enterprise Teams (Mini-business
with P/L Responsibility)
7 Regional Customer Enterprise Teams

(Mini-Business with P/L Responsibility)
Fifteen Trends in Organizational Design at the Firm Level
Other Types of Aligned of Enterprise Teams

9

(Product, Channel,or Process) 8
Matrix Enterprise Teams: Product/Channel/ Distributed

10 Customer and/or Process IT
Some Centralization - Great De- Systems
11 (Supplier-
Centralization
Organization
Integrative Learning/Coaching and Training -
12 Systems (Learning Contract) Customer
(SAP/EDI)
13 Innovative Pay Systems (Share the Wealth)
14 Simple & Innovative Business/People

Measurement Systems
15
Co-location: Customer, Team and Leaders
The Four Main Questions of Horizontal
Design Alignment
Corporate
Design
Strategic Business Unit (S.B.U./

G.B.U. Design
Supply-Chain/
Product
Demand/Chain
Supply
Alignment
_____
Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA. http://macy.ba.ttu.edu/5491
(forthcoming) Week #11organizational structure 19
The Typical Five Different Types Organization Structures in Exemplar Organizations
(N=102 North America Organizations)
1. Corporate Office
Macro Business Level 2. S.B.U.’s/GBU’s
3. Business Teams Value-Chain Design

1, 2, 3, 4, & 5
4. Product Teams Supply Demand
Side Side
5. Customer Account Teams
(Enterprise Teams)
Multi-International Consumer Products Firm: Current Structure – Sept. 2001
Corporate
GBU Key
Consumer 7 Global Customers/
Teams (30) Teams Trade
Consumers
Customer Business
External Relations Teams
Office GBS * Teams (6) (130)
Top
Core Functions Gov’t.
Management

2. The Centerless – Decentralization Structure

4. The Divisional/Product Structure


 8. The Hybrid Structure – Combinations of the

above seven
 Are recommended for Cleansheet Design http://macy.ba.ttu.edu/5491 Week #11organizational structure 22
he CENTERLESS CORPORATION
The Real World
Global
Core
Smaller Business
Power/Control & Corporate Units

(S.B.U.’s/
Governance Hub Lines of Business/
Markets/Products)
Source: Booz-Allen & Hamilton
Centralized
Services
Group

Nike: Another Type of Differentiated Network
(everything outside Nike HQ is outsourced)
Product Product
Distribution Design
Nike
Headquarters
(Broker)
Product
Advertising
Manufacturing
Accounts
Receivable

Examples of Decentralization (D) and
Centralization (C)
• Sales & Marketing (C)
• Process Development (D)
• Process Engineering (D)
• R&D (C&D)
• Customer Service (D)
• General Manager/V.P. (C)
• Value-Chain/Supply Chain (C-to SBU)
• Lab/Quality (D)
• HR (D)
• Engineering/Maintenance (D)
• IS/Product Acct./SHE/Training (C&D)
B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 25
The Question of Centralization
and Decentralization
Centralized “Design Fit” De-Centralized
Not either
“Centralized” or
“De-Centralized”,
but design fit
(what is best for
the business)
B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 26
Value Chain
Back Front
Core Market
Technologies Conceive Design Develop Procedure Market Sales Distribute Support (Customer)

Organization
Structure
Trends
Typical Movement from a “National”
Structure to a “Multi-National” Structure
High
5
International/
Centerless
Integrated/
Structure
Centerless
4 Structure
GBU
GBU
Structure
3 Structure
Market SBU
Share SBU
Structures
2 Structures
International
International
1 Division
Division
Structure
Structure
National
National
National
Structure
Structure
Structure
Low
Early Time
Time Very Mature
Traditional vs. Innovative System
Changes - 1
STRUCTURE :
TALL FLAT

Trends in Organizational Shapes
Yesterday Today

Changes - 2
TASK ORIENTATION:
INDIVIDUALIST/ TEAM/
SPECIALIST GENERALIST

Changes - 3
DECISION-MAKING:
CENTRALIZED DECENTRALIZED

Changes - 4
PHILOSOPHY:
AUTHORITARIAN PARTICIPATIVE

Traditional vs. HPO Changes - 5
PARTICIPATIVE/
EMPOWERMENT
PHILOSOPHY:
POWER & REDISTRIBUTION

CONTROL OF POWER AND
CONTROL
Four Elements for Structural Design
Hierarchical
Groupings
Structural
Linking
Mechanisms
Formal Processes Informal

and Systems Organizations
Eight Primary Options
For Choosing Macro
Organizational Structure

Choosing Macro Organization Structures -1
1. The Headquarters Structure Model
• Power and Control and Decision Making at Headquarters

• Communication flows from H.Q. to the field; from field to H.Q.
• Coordination at H.Q.; NOT between and among the
Field units
• Efficiency is main goal
2. The Centerless-Decentralized Structure Model
• Integrated Network
• Differentiated Network
•S.B.U., LOB’s, and field units is where the Power and
Control and Decision Making resides
• H.Q. acts as a “holding company”
• Communication flows from the S.B.U.’s, LOB’s, and
field units; also into H.Q.
• Coordination is within and across the S.B.U.’s, LOB’s,
and field units
• Effectiveness is the goal http://macy.ba.ttu.edu/5491 Week #11organizational structure 38
Choosing Macro Organization Structures -2
3. “Functional Structure”
•Small-size, single-product
•Undifferentiated market
•Scale or expertise within the function
•Long product development and life cycles
•Common standards
4. “Product Structure”
•Product or Groups of Products focused
•Multiple products for separate customers
•Short product development and life cycle
•Minimum efficient scale for functions or outsourcing
Choosing Macro Organization Structures - 3
5. “Market (Customer) Structure”
•Key market (customer) segments
•Products and/or services unique to segment
•Buyer (customer) strength
•Customer knowledge advantage
•Rapid customer service and product cycles
•Minimum efficient scale in functions or outsourcing
6. “Geographical Structure”
•Low value-to-transport cost ratio
•Service delivery on-site
•Closeness to customer for delivery or support
•Perception of the organization as “local” (not global)
•Geographical market (customer) segments needed
7. “Process Structure”
•Best seen as an alternative to the functional structure
•Potential for new processes and radical change to processes
•Reduced working capital
•Need for reducing process cycle times http://macy.ba.ttu.edu/5491 Week #11organizational structure 40
Choosing Macro Organization Structures - 4
8. “Hybrid Structure Model”
• Best seen as a combination option to the above seven different types

of structures
• A combination of one to three of the above seven types of structure
• Perception of the organization as being both “global” and “local”
• Horizontal S.B.U.’s, LOB’s: Integrated/Differentiated Networks
• Matrix Design
• Market/Customer Focus Enterprise Teams
• Used where the need for great flexibility (market/customer and innovation)
is demanded.
• Potential to maximize learning (information and knowledge sharing)

Dell’s Fast-Cycle Segmentation
In 1994, Dell was
a $3.5 billion company Small customers
Large customers
(Business and consumer)
In 1996,
$7.8 billion
Government
Large Midsize Small
and
companies companies customers
education
In 1999,
$18 billion
Global State
Large Midsize Small
enterprise Federal and Education Consumers
companies companies companies
accounts local

The Headquarters Structure Model
•Power and Control and Decision Making at Headquarters
• Communication flows from H.Q. to the field; from field to

H.Q.
• Coordination at H.Q.; NOT between and among the

Field units
• Efficiency is main goal
• Usually, early on in the Organizational Life Cycle
Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 43
The Headquarters Model
Headquarters
Field Field Field

A B C
Centralized Headquarters Model
A B Mainly Flows
of Goods
H.Q.
F C
E D Tight, Simple
Controls; (key
strategic decisions
made centrally)

CHARACTERISTICS OF CENTRALIZED HEADQUARTERS
MODEL
Strategic Key Configuration Role of Development

Approach Strategic of assets and Global and diffusion
capability capabilities operations of knowledge
Centralized Information and

Global Global - Implementing
Knowledge
scale and globally parent - developed and
efficiency scaled company retained at the
strategies center; Not in
business/product
units

A 2 nd Option: Coordinated Headquarters Model
Mainly Knowledge
A B Flows
(Technology products,
processes, systems
H.Q.
F C
E D
Formal System controls;
(planning, budgeting,
replicating parent company
administrative system
5

2. The Centerless- Decentralized
Structure Model
• S.B.U.’s, LOB’s and field units is where the
Power and Control and Decision Making resides
(Networked)
• H.Q. acts as a “holding company”
• Communication flows from the S.B.U.’s, LOB’s,

and field units; also into H.Q. (Networked)
• Coordination and integration is within and across

the S.B.U.’s, LOB’s, and field units (Networked)
• Effectiveness is the goal http://macy.ba.ttu.edu/5491 Week #11organizational structure 48

Centerless-Decentralized Structure
Mainly Financial Flows
(Capital out; dividends back)
Headquarters: Loose, simple

Controls; (Strategic
decisions decentralized)
The Peer-to-Peer Model
HQ
Unit
Peer - 1
HQ HQ
Unit Unit
Peer - 2 Peer - 2
HQ
Unit
Peer - 3

CHARACTERISTICS OF CENTERLESS-DECENTRALIZED
STRUCTURE
Strategic Key Configuration Role of Development

Approach Strategic of assets and Global and diffusion
capability capabilities operations of knowledge
Multi- National Decentralized Sensing & Information and

-national Responsive- and exploiting Knowledge
-ness nationally local developed and
self-sufficient opportunities retained within
each global
(very local)
business/
product unit

Integrated Network Model
Distributed, Specialized
Resources and capabilities
Large Flows of
Components,
Products, Resources,
People, Information
and Knowledge
Complex Process of Coordination Among
and cooperation in an environment of Interdependent
Shared Decision Making (Networked) Units

Differentiated Network Structure
• A recent innovation in organizational

architecture is the use of differentiated
network structures.
• A network structure design is a cluster

of different Organizations (Units, S.B.U.’s,
LOB’s) whose actions are coordinated
by contracts and/or mutual agreements
rather than through a formal hierarchy.

Re-conceptualizing the Structure of an Multi-National Corporation
as a Differentiated Network
Differentiated structures
within each S.B.U./Subsidiary
S.B.U. /SUBSIDIARY 1 S.B.U./SUBSIDIARY 2
Differentiated
Inter-linkages relationships
across between the
Business Units Much Smaller headquarters
Headquarters and each
Business
Unit
S.B.U./SUBSIDIARY 4 S.B.U./SUBSIDIARY 3
____________________________
Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 54
Nike: Another Type of Differentiated Network
(everything outside Nike HQ is outsourced)
Product Product
Distribution Design
Nike
Headquarters
(Broker)
Product
Advertising
Manufacturing
Accounts
Receivable

The Typical Structure Path for a Multi-National Corporations
High
Worldwide Global
S.B.U. Matrix
(Differentiated
Network)
Alternative
Foreign Path #2
Product
Alternative
Diversity
Path #1
Regional
International S.B.U.
Low Division
Low Foreign Revenue as a High
Percentage of Total Revenue
Source: Stepford & Wells, 1972 http://macy.ba.ttu.edu/5491 Week #11organizational structure 56
he CENTERLESS CORPORATION
The Real World
Global
Core
Smaller Business
Power/Control & Corporate Units

(S.B.U.’s/
Governance Hub Lines of Business/
Markets/Products)
Source: Booz-Allen & Hamilton
Centralized
Services
Group

3. “Functional Structure”
•Small-size, single-product
•Undifferentiated market
•Scale or expertise within the function
•Long product development and life cycles
•Common standards
• Usually, early on in the Organizational Life Cycle

Functional Organization Structure
General manager
Finance Human resources
Research and Product

Operations
development marketing

Hybrid Beatrice International: One Functional Automobile Products Business

4. “Product Structure” Model
•Product or Groups of Products focused
•Multiple products for separate customers
•Short product development and life cycle
•Minimum efficient scale for functions or

outsourcing

Moving to a Product Divisional (S.B.U., LOB)
Structure:
•The structure adopted to solve the control,

communication, coordination and
integration problems of functional
structures
(many kinds of products,

many different locations,
many types of customers/clients)
is the divisional or S.B.U. structure.

• Product Divisional = S.B.U. structure—a
structure in which functions are grouped
together according to the specific
demands of products,markets, or clients/
customers.
• The type of divisional (S.B.U.) structure

selected is driven by the specific type of
control, communication, coordination
and/or client/customer problems
experienced.
Product Group Structure of a Consumer Products Company
CEO
Corp. Headquarters Staff
Toiletries Soap Paper Food

S.B.U. S.B.U. S.B.U. S.B.U.
R&D
Towel
Tissue
Diapers
Sales

Product Structure
CEO
Finance Human resources
Electronic Medical
Computers
instruments instruments
R&D Operations Marketing

H. J. Heinz Product Division; ( S.B.U.) Structure
CEO
Vice President Vice President Vice President Vice President

Sales and Research and Materials Finance
Marketing Development Management
PDM PDM PDM PDM
Canned Frozen Frozen Baked

Soups Vegetable Entrees Goods
Division Division Division Division
Centralized support functions

Divisions/S.B.U.’s
• Multidivisional – S.B.U. Structure —a
structure in which staff/support functions
are decentralized and placed in
self-contained divisions.
• Typically used by an organization whose

products are very different and that
operates in several different industries.
• Some staff/support functions might remain

centralized at the H.Q. (e.g., both a
centralized R&D and a decentralized R&D)
Multidivisional – S.B.U. Structure: G.E., I.B.M., Matsushita
CEO
Corporate Headquarters Staff
Senior Senior VP Senior VP Senior VP Senior VP

Corporate Marketing Finance Materials Research and
VP’s
Management Development
S.B.U./
Divisional Division A Division B Division C Division D
GM’s/
Presidents
Functional
Managers
Support functions Support functions Support functions Support functions

Product Team Structure: Xerox, Hallmark and Chrysler
CEO
Functions
Vice President Vice President Vice President Vice President Vice President
Research and Sales and Manufacturing Materials Finance
Development Marketing Management
Product
Development
Teams
PTM PTM PTM
Matrix
Product Product Product
Division Division Division
Functional specialist
PTM Product Team Manager

Hybrid Product and Function Structure
Commercial airplane
S.B.U.
Product 1: Product 2: Product 3:

Narrow Wide Central
body body fabrication
Engineering Quality Operations

Apple Before and After Restructuring
Channel:
Dealers
Product 1:
Desktops
Mass
retailers
Product 2:
Mac Dealers
Laptops
Direct sales
Product 3:
Palmtops
Mail Order
Before Design After Design

Fourteen Trends in Organizational Design at the Firm Level
Creation of a Separate
1
“Company”(sell stock)

8
2 Corporate Office (smaller)
Distributed
3 Global S.B.U.’s IT
4 M&A and JV Systems
(Supplier-
E-Commerce SBU (inside or outside firm) Organization
5 -
Customer
6 Total Value Chain Design (SAP/EDI)
7 Global Enterprise Teams (Mini-business

with P/L Responsibility)
8 Regional Customer Enterprise Teams

(Mini-Business with P/L Responsibility)
5. “Market (Customer) Structure” Model
•Key market (customer) segments

•Products and/or services unique to segment
•Buyer (Customer) strength
•Customer knowledge advantage
•Rapid customer service and product cycles
•Minimum efficient scale in functions or
outsourcing

Market (Customer) Structure
• When an organization experiences control,

communication, coordination, and
integration problems that are a function of
the differences in the various customer/
client groups being served, a market
(customer) structure is used.
• Such a structure aligns functional skills

and activities with different client/customer
needs.
Market (Customer) Segments and Lateral Functions
S.B.U. General manager
Sales/marketing Information Finance Human Operations

technology Resources
Financial Governments Distribution

Health
services
Sales Sales Sales Sales
Marketing Marketing Marketing Marketing
Information Information Information Information

technology technology technology technology
Installation Installation Installation Installation
and repair and repair and repair and repair
Network Network Network Network
operations operations operations
http://macy.ba.ttu.edu/5491 operations
Week #11organizational structure 75
Mellon Bank Market Structure
CEO
Central Support Functions
Commercial Consumer Government Corporate

Division Division Division Division

A Front-end Focus
•Customers buy all products.
•Customers want a single contact point.
•Customers want a sourcing relationship.
•There are opportunities for cross-selling and bundling.
•More value-added is customer-specific.
•Advantage of customer knowledge.

Front-End Structure
CEO
Staff
Paper Toiletries Soup Front end

group group group
Regional team Customer team

Finance
Distribution
technology
Information
Sales
Operations
Operations
Marketing
Marketing
Sales
Vons

Dell’s Fast-Cycle Segmentation
In 1994, Dell was
a $3.5 billion company Small customers
Large customers
(Business and consumer)
In 1996,
$7.8 billion
Government
Large Midsize Small
and
companies companies customers
education
In 1999,
$18 billion
Global State
Large Midsize Small
enterprise Federal and Education Consumers
companies companies companies
accounts local

Three Potential Sources of Leverage in
Leveraged Business Groups
Back
Back Middle
Middle Front
Front
(Offering)
(Offering) Infrastructure
Infrastructure (Market/Customer)
(Market/Customer)
•Creation of •Means used to •How the Business

products/offerings produce and deliver goes to market?
products and
•“Platforms for services to
manufacturing customers •How the
products organization
responds to the
customer?
•Technologies
•The customers
underlying products
interface – typically
Enterprise Teams
Each component is a potential source of http://macy.ba.ttu.edu/5491
leverage Week #11organizational structure 80
6. “Geographical Structure” Model
•Low value-to-transport cost ratio
•Service delivery on-site
•Closeness to customer for delivery or support
•Perception of the organization as local
•Geographical market (customer) segments needed

Geographic Structure
• When an organization experiences control,
communication, coordination and
integration problems that are a function
of geography, a geographic divisional
(S.B.U., LOB) structure is used.
• Such a structure organizes divisions/

S.B.U./LOB’s according to the
requirements of different locations (Local).
Geographical (Pre-Restructuring)
CEO
Industrial Gases
AFROX
AFROX CIG
CIG U.K. AirCo
AirCo North
North Process
Process
(South U.K.Gases
Gases Pacific Plants
(SouthAfrica)
Africa) (Australia)
(Australia) (U.S.A)
(U.S.A) Pacific Plants

Geographical Structural Change (Post-
Restructuring)
CEO
Industrial Gases
North
North Process
Process
South
SouthAfrica
Africa Australia
Australia Europe
Europe Americas
Americas Pacific
Pacific Plants
Plants
Food
Food
Chemicals
Chemicals
Global
Market
Sectors
Electronics
Electronics
Steel
Steel

Geographic Structures: Crown Cork
& Seal, Neiman Marcus and
Wal-mart Regional
Operations
CEO
Regional Regional
Operations Operations
Central Support
Functions
Individual
stores
Regional
Operations

Apple: Geographical Structure
CEO
John Sculley
Apple Apple Apple Apple

Products USA Europe Pacific
Europe
Canada
West
Europe
Sales Australia
North
Service and
Marketing Japan
France
To Regions
South Latin
Europe America
Far
East
Geographical Structural Design: Xerox
1991 (Before)
Chairman
Marketing
Marketingand
and
Development
Development Chief
ChiefStaff
Staff Chief
ChiefFinancial
Financial
Research
Research Customer
Customer
and
andManufacturing
Manufacturing Officer
Officer Officer
Officer
Operations
Operations
U.S.
U.S.Operations
Operations Other
Other
World
WorldWide
Wide American
American Other
(Sales
(Salesand
and Rank
RankXerox
Xerox Geographic
Other
Geographic
marketing Operations Other
Other
Geographic
Other
Other
marketing Service) Operations Operating Units
Geographic
Service) Operating Units
Geographic
Geographic
Operating Units
Geographic
Geographic
Operating Units
Operating
Operating
OperatingUnits
OperatingUnits
Units
Units

Xerox 1992: Hybrid Organization Structure (After)
Markets/Customers
Business
BusinessDivision
Division11
Technologies
Business
BusinessDivision
Division22
Technology Customer
Management Operations
Process Divisions
Business
BusinessDivision
Division33
Business
BusinessDivision
Division44
Business
BusinessDivision
Division55
Strategic
Services Governance
7. “Process Structure”
•Best seen as an alternative to the functional

structure
•Potential for new processes and radical change

to processes
•Reduced working capital
•Need for reducing process cycle times

Process Organization Structure
General manager
New product Order Customer

development fulfillment acquisition and
process process maintenance
New product teams Product teams Customer teams

Work Flows Across Functional Structure
Scarce resource:
management time
General manager
Finance
Product Sales and

Operations
development marketing
Human resources
Work flow process to customer

Lateral Processes Across Departments
General
manager
Lateral process

A Generic Horizontal Organization with
Multiple Core Process Groups
Vice President
General General General General

Manager Manager Manager Manager
R&D Operations Strategy Finance
Manager Manager Manager
Process CORE PROCESS GROUP

Owner Performance
Team Team 1 Team 2 Team 3 Objective
Process CORE PROCESS GROUP

Owner Performance
CORE PROCESS GROUP

Process
Owner Performance
Process Structure
Reengineering Functional Structures: Re-

engineering is the process of redesigning
how tasks are bundled into roles and
functions to improve organizational
effectiveness.

Process Structure
• Reengineering involves shifting the focus

from functions isolated from each other
into horizontal/lateral business processes.
• A business process is any activity that cuts

across functional boundaries.
-Order fulfillment
-Inventory control
-Product design
- R&D
Example Business Processes & Teams
Top Management
Process
Team Team Team
Coordinator
New Product Development Process

Process
Coordinator Team Team Team
Order Fulfillment Process

Process
Coordinator Team Team Team
Procurement, Logistics process

8. Hybrid Structure Model – Combinations of
Some of the above Seven Structural Types
• Best seen as a combination option to the other seven

different types of structure.
• A combination of one to three or more of the above
seven types of structure.
• Perception of the organization as being both
“global” and “local”.
• Horizontal S.B.U.’s, LOB’s: Integrated/Differentiated
Networks
• Matrix Design
• Market/Customer Focus Enterprise Teams
• Used where the need for great flexibility (market/customer
and innovation) is demanded
• Potential to maximize learning (information and
knowledge sharing) http://macy.ba.ttu.edu/5491 Week #11organizational structure 97
Organization Form Options (or Grouping Alternatives)
•Function
•Work Process
1. Activity
Activity •Knowledge/skills/discipline
•Time
•Product
2. Output
Output •Service
•Project
•Market segment
3. User/Customer
User/Customer •User/Customer need
•Geography
Multifocused
Multifocused •Any Combination of
4. Organization
Organization Activity/Output/User
Grouping by Output (AT&T Early 1990’s)
Chairman
Communications
Communications Communications
Communications Network
NetworkSystems
Systems
Computer
Computer(NCR)
(NCR)
Services
ServicesGroup
Group Products
ProductsGroup
Group Group
Group

ABB (Simplified Structure)-1
CEO
(Percv Bamevik) (previous CEO –
Thought up this structure)
Executive
Committee
Power
Power Power
Power 47
47Other
Other
Robots
Robots
Transformers
Transformers Generation
Generation Business
BusinessAreas
Areas
Germany
Germany
U.S.A
U.S.A
National
Companies
Norway
Norway
137
137Other
Other
National
National
Companies
Companies
ABB: Four Types of Organization Structures - 2
Corporate Office A
(Very Small)
a Single Financial Performance Measurement System

Tight/Clear Accountability/Responsibility Through
3 Regions and 4 Businesses Areas (BA’s) B
Regions-National Companies
11 1
1 22 33
Global
Business 2
Corporate 2
Structures Areas 3
3
4
4
Company Presidents C
Local Country (some are also Country Managers) - 1 or 2 levels
Companies and
5,000 Profit Centers
Many Profit (lead by Profit Center Managers; D
Center Structures 3 levels to lowest person)
________________
ABB - Fall of 1998 - 3
What They Did:
• Break-up existing regional (local) S.B.U.’s
into smaller, more focused global
business S.B.U.’s
• 5,000 P/L Centers
Why?
• Streamlining the organization to tap
the trend towards greater globalization
• Shorten the decision process
• Flatten (once more) the structure
• Increase speed of decision making
____________________________
Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, http://macy.ba.ttu.edu/5491
CA (forthcoming) Week #11organizational structure 102
ABB-4
• The fundamental building block of this
Company are 5,000 small profit centers ($10-
12MM Sales/40-50 People). Resources are
placed within these units. There are only 150
Corporate staff (centerless – decentralized
holding company).
• H.Q. has 7/24/365 “real-time” information system
across the “A, B,C, & D” parts of their structure
(all have four common measures)
http://macy.ba.ttu.edu/5491 Week #11organizationalabb-2-28 slide1

structure 103
Asea, Brown, Boveri (ABB): One Business Area:
Relay Business Overview - 5
4 Global
Corporate 3 Business Corporate
Regions Areas
Business
President-
Regions Head
US Capability
Worldwide
Power Developer
Relay
Local/Country General Entrepreneur

Specific Manager-
Relays
B.A. Macy, Successful Strategic Change,
San Francisco: California:
Berret-KoehlerPublisherss (forthcoming) Profit Centers abb-2-28
http://macy.ba.ttu.edu/5491 Week #11organizational slide5
structure 104
ABB-10
The Partnership Between Financial
Wealth and Changes in Organization
Structures, Systems and Processes
Corporate Global Regions of Local One Customer Customers
Office Businesses the World Control Contact Point
Small Think Act • Many • Enterprise Rapidly

Globally Locally “Companies” Units/Teams Changing
(Matrix) (Matrix) (ABB-1,000) (CATS) Needs,
(ABB - 150 • Many Profit Wants, &
Xerox - Centers Desires
Europe - 300) (ABB -5,000)
• Tight
Accountability/ The Mirror
Responsibility
• Alignment Concept
________________
Another Hybrid:
Procter & Gamble
(P&G)

P&G’s Organization Structure: 2001
Corporation Functions
>18 mos.
< 18 mos.
GBU
Idea CBD (Sales)
(SBU’s)
MDO PRODUCTION/PROMOTION
Innovation Product CUSTOMERS/CONSUMERS
Global MDO/
P&L CBD Teams
GBS F
U • Marketing
N • R&D
C • IT
T
Country MDO I • HR
O • Sales
N • Product Supply
S
• Finance
CBD
Teams
Retail Customers

The Key Pillars of a
Horizontal Organization
Global Retail
Demand Fulfillment Sales Sales/
Organization Organization Organization Customers Consumers
Service
Organization
Enterprise Units: The “Mirror” Design Concept
The “Mirror”: One Contact Point
The Various Enterprise Customers/

Corporate Consumers
Global Units/ Retail
Office
SBU’s Team(s) Stores
1
2
3
4
5
6
7
etc.
(feedback)
P&G’s Enterprise Teams
(Customer Business Development)
GBU Customer 67%
Consumers
*Teams Customers/
Customer Teams Trade/
GBS External Relations * Retail
Stores
* Teams (Exemplar)
Core Functions
Gov’t.
Dec. 2000
Note: GBU’s = Global S.B.U.’s

GBS = Global Business Services

Another Hybrid Example –
HP
(from a Product Structure to
A Hybrid Model)

THE OLD HP: 83 Product Structures
Each product unit was responsible for its own profit/loss performance
HOME PCs,
CEO SCANNERS,
HANDHELDS, LASER PRINTERS,
LAPTOPS PRINTER PAPER
EXECUTIVE COUNCIL
CONSULTING INK CARTRIDGES,

SERCURITY DIGITAL CAMERAS,
SOFTWARE, HOME PRINTERS
UNIX SERVERS
Carly to HP: Snap to It = Three Phase Plan for Transition
NOW 2000: Improve growth and profits in core

businesses
- CONSOLIDATE
Folded HP’s 83 product divisions into four units: two product
development units that work with two sales and marketing groups--
one aimed at consumers, the other corporations.
- SET STRATEGY
Create a nine-person Strategy Council to allocate resources to the
best opportunities rather than leaving strategy to product chieftains
(see pages 195) .
- WHACK COSTS
Lower expenses by $1 billion by revamping internal processes
to tap the power of the Web.

THE NEW HYBRID HP
CARLY FIORINA •AUTHORITY
•RECOMMENDATIONS
STRATEGY COUNCIL •IDEAS & INNOVATIONS
Nine fast-rising managers who advise •PRODUCTS & INFORMATION
the executive council on allocating
money and people to growth EXECUTIVE COUNCIL
initiatives. Eight top lieutenants, including heads
of the four front-and-back-end groups.
FRONT END
CORPORATE SALES FRONT END

$34 billion in annual revenues
CONSUMER SALES
JOB Meet near-term financial targets $15 billion in annual revenues
by selling technology solutions to JOB Sell consumer gear with focus on
corporate clients. Keep back-end meeting current-year earnings and revenue
units abreast of what’s, how’s. goals. Let back end know of must-have
products and features
BACK END FRONT END

PRINTERS
43% of annual production COMPUTERS
JOB Build new printing and 57% of annual production
imaging products to ensure HP’s JOBS Focus on future success by
long-term growth. Track trends with making computers that companies
help from front-end units. and consumers want, with sales
input from front-end
CROSS-COMANY INITIATIVES
Personnel from the front- WIRELESS SERVICES
and back-end groups DIGITAL IMAGING Develop wireless COMMERCIAL
collaborate on projects Make photos, drawings, technologies that will PRINTING
aimed at sniffing out new and videos so easy to fuel sales of HP-made Divert printing jobs
markets what will create create, store and send devices, ranging from from offset presses to
growth. as e-mail. handhelds to servers. Net-linked HP printers

2. The Centerless – Decentralization Structure
4. The Product Structure
8. The Hybrid Structure – Combinations of the
above seven

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MGT 5391:

http://macy.ba.ttu.edu/5491 Week #11organizational structure 1

D. Business Organizational Processes (Individual, Group, Organizational and

http://macy.ba.ttu.edu/5491 Week #11organizational structure 2

1. The Headquarters Structure

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Outcomes = Lower Performance

High Performance Work System

http://macy.ba.ttu.edu/5491 Week #11organizational structure 5

Control (Less Layers -fewer

Global Strategic Business Unit (S.B.U.)

Market Focus/Demand Side Alignment

Supply Side Alignment to Manufacturing

Business Centers - Lines of Business

SDWT’s to Work Teams

5. Enterprise Teams (Customer & Supplier

http://macy.ba.ttu.edu/5491 Week #11organizational structure 11

Global Business Services (GBS) & In/ Outsourcing

Corporate Functions/ Expertise Centers

http://macy.ba.ttu.edu/5491 Week #11organizational structure 12

Global Business Services (GBS) & In/ Outsourcing

Corporate Functions/ Expertise Centers

Cost center: P/L Center:

Emphasis on: Emphasis on:

http://macy.ba.ttu.edu/5491 Week #11organizational structure 14

http://macy.ba.ttu.edu/5491 Week #11organizational structure 15

6th Century – early GO/ Corporate Office P/L

1970’s-Now SBU/ GBU

1980’s-Now LOB’s/ Brands/ Products

http://macy.ba.ttu.edu/5491 Week #11organizational structure 16

Innovative Changes Structures and Processes

7 Regional Customer Enterprise Teams

Other Types of Aligned of Enterprise Teams

Innovative Changes Structures and Processes

Matrix Enterprise Teams: Product/Channel/ Distributed

14 Simple & Innovative Business/People

Strategic Business Unit (S.B.U./

Macro Business Level 2. S.B.U.’s/GBU’s

3. Business Teams Value-Chain Design

http://macy.ba.ttu.edu/5491 Week #11organizational structure 21

 8. The Hybrid Structure – Combinations of the

Power/Control & Corporate Units

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Centralized “Design Fit” De-Centralized

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POWER & REDISTRIBUTION

Formal Processes Informal

For Choosing Macro

http://macy.ba.ttu.edu/5491 Week #11organizational structure 37

• Power and Control and Decision Making at Headquarters

• Best seen as a combination option to the above seven different types

• A combination of one to three of the above seven types of structure

• Perception of the organization as being both “global” and “local”

• Horizontal S.B.U.’s, LOB’s: Integrated/Differentiated Networks

• Market/Customer Focus Enterprise Teams

• Potential to maximize learning (information and knowledge sharing)

http://macy.ba.ttu.edu/5491 Week #11organizational structure 42