Organization Design

We help clients design organizations to reduce costs, drive growth, and strengthen both shortterm performance and long-term organizational health.
Contact this practice We go beyond lines and boxes to define decision rights, accountabilities, internal governance, and linkages. Our design solutions help clients manage complexity and global scale to ensure sustained performance. Specifically, we work closely with our clients to:

Bring a rigorous approach to organization design

We assess the strengths and weaknesses of the current organization and design a robust new structure. In the current-state assessment, our diagnostic tools highlight areas where the organization presents challenges, which might lie in its structure, linkages, or culture, and help define criteria to guide the design process. In the design itself, our design tests help clients make choices on critical questions such as the optimal business-unit structure; the role of the corporate center and shared services; and capabilities needed for pivotal roles.

Link organization to strategy and realize value

We make sure the design focuses management attention on the strategic priorities and critical operations of each business unit, region, or productbe it international expansion, cost-cutting, or growth through acquisitions. Once the design is finalized, our unique implementation approach helps our clients quickly realize the economic value determined by the redesign.

Focus head offices on value creation

Many CEOs are concerned about waste and redundant hierarchy, particularly in head offices. Our approach identifies an explicit, value-adding mandate for the corporate centerfor example, co-ordinating key functions or driving specific strategic initiatives.

Drive accountability
By careful design of performance-management processes, we make sure all units have clear performance measures. Our accountability tools and decision-making frameworks help identify accountabilities for cross-unit processes.

Enable enterprise-wide collaboration

Achieving large-scale collaboration across the entire enterpriseon customer solutions, product development, innovation, and the likecan unlock tremendous value. Using our Social Network Analysis tool, we go beyond organization charts to reveal and tap into the informal communities through which the organization shares information and knowledge. We help clients understand the value collaboration can bring and the mechanisms to enable it.

Deal with complexity

Effective organization design must remove complexity that creates unnecessary cost and organizational friction, and channel whats left to employees who are equipped to handle it. Using our proprietary complexity survey, we pinpoint issues such as a lack of role clarity or poor processes that could hinder productivity.

Examples of our work

For a power retailer seeking major revenue growth, a new organizational design supported by strategy transformed the sales model, eliminating non-value-added activities, and strengthening top managements role as super coaches to the sales team. Profits grew by 25 percent in a year. In a global consumer goods company, a new CEO reduced the corporate center by 50 percent, redesigned key HR and finance processes for efficiency, and consolidated fragmented supply-chain functions. Savings totaled $500 million over 3 years. A global consumer goods manufacturer eliminated complexity in several regions and functions, halving the time it needed to make decisions in critical processes. This helped it bring products to market faster in response to changing customer needs.

Meet our people

Suzanne Heywood
Principal

Latest thinking

compendium

Perspectives on global organizations

This collection of articles highlights how innovative companies are using new models, different ways of thinking, and the latest technologies to manage the increasingly complex challenges of global footprints.more

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Introduction There is no one definite organizational structure and design that works for all businesses, but
almost all types of businesses have some degree of organizational structure and design that divides, groups, and coordinates job tasks in that business. eMayTrix Studio is a web design company that used to be a "one-person-business". I was the owner, graphic designer, programmer, webmaster, sales representative, customer service representative, and accountant for the first couple of years. As the client base expanded, I was no longer capable of taking care of every aspect of the business, especially with my schedule as a full time student at Cal State LA; so I had to start hiring assistants in order to meet project deadlines and customers' demands.

This section is presented by Yi-Chin Lilly (DBA May Lilly)

Certainly I had to divide, group, and assign job tasks to my assistants. I also needed to coordinate and supervise all the tasks performed. One great thing though: because of the nature of my business, all of my employees get to work at their own locations and at their own schedule as long as the deadline is met. I was surprised to see that most of the decisions I made for my business are mentioned in six key elements in organizational design that will be presented by Claudia Gardea in section 2, and I can claim that my business has a contemporary structure after studying the types of organizational designs which are presented by Adam Garcia in section 3. It is very interesting how theories can be used to evaluate an existing real world application, and therefore, after discussing the theories, Camha Nguyen and Jack Chi-Chun Ng will help you understand QUALCOMM's organizational structure and design by first introducing a brief history for QUALCOMM, then discussing how six key elements fit into their organizational design. We will then conclude by defining what type of organizational structure QUALCOMM has. Hopefully, after reading about our findings, you'll have a better idea on how to evaluate your own (or other people's) business structure and make critical decisions when needed, just like I did with mine.

Types of Organizational Designs Organizational designs fall into two categories, traditional and contemporary. Traditional designs
include simple structure, functional structure, and divisional structure. Contemporary designs would include team structure, matrix structure, project structure, boundaryless organization, and the learning organization. I am going to define and discuss each design in order to give an understanding of the organizational design concept.

I. Traditional Designs
1. Simple Structure A simple structure is defined as a design with low departmentalization, wide spans of control, centralized authority, and little formalization. This type of design is very common in small start up businesses. For example in a business with few employees the owner tends to be the manager and controls all of the functions of the business. Often employees work in all parts of the business and dont just focus on one job creating little if any departmentalization. In this type of design there are usually no standardized policies and procedures. When the company begins to expand then the structure tends to become more complex and grows out of the simple structure.

This section is presented by: Adam Garcia

2. Functional Structure A functional structure is defined as a design that groups similar or related occupational specialties together. It is the functional approach to departmentalization applied to the entire organization.

Revlon, Inc. is organized around the functions of operations, finance, human resources, and product research and development. Visit Revlon, Inc at www.revlon.com

3. Divisional Structure A divisional structure is made up of separate, semi-autonomous units or divisions. Within one corporation there may be many different divisions and each division has its own goals to accomplish. A manager oversees their division and is completely responsible for the success or failure of the division. This gets managers to focus more on results knowing that they will be held accountable for them.

Wal-Mart Stores, Inc. is organized by its divisions such as Wal-Mart Realty, Wal-Mart International, Wal-Mart Specialty Stores, Sam's Clubs, and Supercenters. Visit War-Mart Inc. at www.walmart.com

II. Contemporary Designs

1. Team Structure A team structure is a design in which an organization is made up of teams, and each team works towards a common goal. Since the organization is made up of groups to perform the functions of the company, teams must perform well because they are held accountable for their performance. In a team structured organization there is no hierarchy or chain of command. Therefore, teams can work the way they want to, and figure out the most effective and efficient way to perform their tasks. Teams are given the power to be as innovative as they want. Some teams may have a group leader who is in charge of the group.

Whole Foods Market, Inc. is structured entirely around teams. Each store composed of an average of 10 self-managed teams with a designated team leader, and the team leaders in each store are a team -- called store team. Visit Whole Foods Market, Inc atwww.wholefoodsmarket.com

2. Matrix Structure A matrix structure is one that assigns specialists from different functional departments to work on one or more projects. In an organization there may be different projects going on at once. Each specific project is assigned a project manager and he has the duty of allocating all the resources needed to accomplish the project. In a matrix structure those resources include the different functions of the company such as operations, accounting, sales, marketing, engineering, and human resources. Basically the project manager has to gather specialists from each function in order to work on a project, and complete it successfully. In this structure there are two managers, the project manager and the department or functional manager. 3. Project Structure A project structure is an organizational structure in which employees continuously work on projects. This is like the matrix structure; however when the project ends the employees dont go back their departments. They continuously work on projects in a team like structure. Each team has the necessary employees to successfully complete the project. Each employee brings his or her specialized skill to the team. Once the project is finished then the team moves on to the next project.

Previously known as Oticon Holding A/S, William Demant Holding A/S has no organizational departments or employee job titles. All work activities are project based, and these project teams form, disband, and form again as the work requires. Once the project is completed, employees move on to the next one. Visit William Demant Holding A/S at www.demant.com

4. Autonomous Internal Units Some large organizations have adopted this type of structure. That is, the organization is comprised of many independent decentralized business units, each with its own products, clients, competitors, and profit goals. There is no centralized control or resource allocation.

Asea Brown Boveri (ABB) is a global organization. It is actually about 1,000 companies operating in more than 140 countries around the globe. The whole operation is managed by just eight top executives at headquarters in Zurich, Switzerland, but each individual company has its own products, resources, and so on. Visit Asea Brown Boveri at www.abb.com

5. Boudaryless Organization A boundaryless organization is one in which its design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure. In other words it is an unstructured design. This structure is much more flexible because there is no boundaries to deal with such as chain of command, departmentalization, and organizational hierarchy. Instead of having departments, companies have used the team approach. In order to eliminate boundaries managers may use virtual, modular, or network organizational structures. In a virtual organization work is outsourced when necessary. There are a small number of permanent employees, however specialists are hired when a situation arises. Examples of this would be subcontractors or freelancers. A modular organization is one in which manufacturing is the business. This type of organization has work done outside of the company from different suppliers. Each supplier produces a specific piece of the final product. When all the pieces are done, the organization then assembles the final product. A network organization is one in which companies outsource their major business functions in order to focus more on what they are in business to do.

ChevronTexaco now sends most of their accounting to the Philippines in order to cut costs. They also send all their computer programming to India . Visit ChevronTexaco atwww.chevrontexaco.com

6. Learning Organization A learning organization is defined as an organization that has developed the capacity to continuously learn, adapt, and change. In order to have a learning organization a company must have very knowledgeable employees who are able to share their knowledge with others and be able to apply it in a work environment. The learning organization must also have a strong organizational culture where all employees have a common goal and are willing to work together through sharing knowledge and information. A learning organization must have a team design and great leadership. Learning organizations that are innovative and knowledgeable create leverage over competitors.

Six Key Elements in Organizational Design Organizational design is engaged when managers develop or change an organization's structure. Organizational Design is a
process that involves decisions about the following six key elements:

I. Work Specialization
Describes the degree to which tasks in an organization are divided into separate jobs. The main idea of this organizational design is that an entire job is not done by one individual. It is broken down into steps, and a different person completes each step. Individual employees specialize in doing part of an activity rather than the entire activity.

II. Departmentalization
It is the basis by which jobs are grouped together. For instance every organization has its own specific way of classifying and grouping work activities. There are five common forms of departmentalization: 1. Functional Departmentalization. As shown in the Figure 2-1, it groups jobs by functions performed. It can be used in all kinds of organizations; it depends on the goals each of them wants to achieve. Figure 2-1Functional Departmentalization example

This section is presented by: Claudia Gardea

Different aspects on this type of departmentalization: Positive Aspects Negative Aspects

o o

Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations Coordination within functional area In-depth specialization

o o

Poor communication across functional areas Limited view of organizational goals

2.

Product Departmentalization. It groups jobs by product line. Each manager is responsible of an area within the organization depending of his/her specialization Figure 2: Product Departmentalization example
Source: Bombardier Annual Report

Different aspects on this type of departmentalization: Positive Aspects Negative Aspects

o o o

Allows specialization in particular products and services Managers can become experts in their industry Closer to customers

o o

Duplication of functions Limited view of organizational goals

3.

Geographical Departmentalization. It groups jobs on the basis of territory or geography. Figure 2-3: Geographical Departmentalization example

Different aspects on this type of departmentalization: Positive Aspects Negative Aspects

o o

More effective and efficient handling of specific regional issues that arise Serve needs of unique geographic markets better

o o

Duplication of functions Can feel isolated from other organizational areas

4.

Process Departmentalization. It groups on the basis of product or customer flow. Figure 2-4: Process Departmentalization example

Different aspects on this type of departmentalization: Positive Aspects Negative Aspects

More efficient flow of work activities

Can only be used with certain types of products

5.

Customer Departmentalization. It groups jobs on the basis of common customers Figure 2-5: Customer Departmentalization example

Different aspects on this type of departmentalization: Positive Aspects Negative Aspects

Customers' needs and problems can be met by specialists

o o

Duplication of functions Limited view of organizational goals

III. Chain of command

It is defined as a continuous line of authority that extends from upper organizational levels to the lowest levels and clarifies who reports to whom. There are three important concepts attached to this theory:

Authority: Refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it. Responsibility: The obligation to perform any assigned duties. Unity of command: The management principle that each person should report to only one manager.

IV. Span of Control

It is important to a large degree because it determines the number of levels and managers an organization has. Also, determines the number of employees a manager can efficiently and effectively manage.

V. Centralization and Decentralization

More Centralization More Decentralization

Environment is stable Lower-level managers are not as capable or experienced at making decisions as upper-level managers. Lower-level managers do not want to have say in decisions Decisions are significant. Organization is facing a crisis or the risk of company failure. Company is large. Effective implementation of company strategies depends on managers retaining say over what happens.

Environment is complex, uncertain. Lower-level managers are capable and experienced at making decisions. Lower-level managers want a voice in decisions. Decisions are relatively minor. Corporate culture is open to allowing managers to have a say in what happens. Company is geographically dispersed. Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions

VI. Formalization
It refers to the degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.