ORGANIZATIONAL STRUCTURE

Chapter 12 Lecture 1

Every Organization has a Structure

But

structures can differ Due to choice Due to national laws The words used to describe them also can differ Organization chart, design, structure The 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 hardbut 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 peoples 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 firm The family in a family owned firm The Board in a publicly owned firm: U.S. boards often are chaired by the CEO Boards in U.K. usually are chaired by a non executive European companies often have a two-tier board In Germany, duties are split between supervisory and management boards Spain and France often use an executive committee

Beneath the Board are Several Structural Types

Intra and interorganizational networks Special cases Functional, divisional, hybrids

Networks
Intraorganizational networks internal networks shamrock spiderwebs 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 Types Among Global Firms are:

Functional structure Divisional structure Hybrid structures Combined functional/divisional structure Matrix structure

Global Functional Structure

CEO

VP Marketing

VP Finance

VP Operations

VP R&D

VP Legal issues

Product 1

Product 2

Product 3

Country A

Country B

Divisional Structure Can Take Different Forms

Product Geographic Customer group served

Global Geographic Division Structure

CEO Admin/Finance

VP for the Americas

VP Europe

VP E. Asia

VP Australasia

Australia/NZ

Indonesia

Islands

Marketing

Operations

Global Product Structure

DIVISIONAL STRUCTURE (BY PRODUCT LINES)

COSMETICS CORPORATION

FRAGRANCES

SKIN CARE PRODUCTS

HAIR CARE PRODUCTS

OTHER PRODUCTS

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

Chairman of the Board

Executive Committee

Management

Strategic Business units

N. America

Latin America

Europe

Asia

autos

light trucks

sports utilities

parts

financing

Combined Functional and Divisional Structure

Danone Group, 2003
Chair and CEO Vice Chair and COO

General Secretary Exec VP, Biscuits and Cereal Snacks

Exec VP, Finance

Exec VP, Fresh Dairy

Exec VP, Water

Exec VP, Asia-Pacific

Exec VP, Intl Strategy

Intraorganizational Structures

spiderwebs internal networks shamrocks horizontal keiretsu chaebol

Mitsubishi Group Network

Mitsubishi Village

Interorganizational Structures
Strategic alliances Joint ventures Partial acquisitions

Special Cases

Family structuresusually hierarchical with a patriarch/matriarch or a set of family members who divide tasks according to skill or obligation Structures that arise out of national tradition German firms always have union representation and two levels of boards Holding companies Virtual organizations