MGT 5391: Session # 8 8 Types of Structures

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Inputs
Environmental Drivers 1. External/ Global Business Environment 2.Internal Environment
A.Corporate, Business, Worksite And Individual: Capabilities And Barriers (Culture)

TRANSFORMATION
THE ORGANIZATION DESIGN PUZZLE: HIGH PERFORMANCE LEARNING ORGANIZATION

Outputs
Results From High Performance / Exemplar Organizations

1. Macro Organizational Structures 8. Shared Leadership & Decision Making Systems 7. Recognition and Financial Reward Systems 6. People and Human Resource Systems 5. Micro Organization Structures: Team Design 2. The Job/work

Organizational Effectiveness

1. Customers 2. Financial/ Business 3. Employees

Interdependence and Design “FIT”

3. Technologies

B.Vision Direction (VDSP) C. Organizational Strategies D. Business Models E. Labor (Employee) Management Mutuality F. Transformation/ Change Processes

4. Information and Knowledge Systems

4. Organizational Innovation 5. Societal

Organizational Processes (Individual, Group, Organizational and Business Processes (Total Quality, Business Processes, etc.)

(Feedback)

________________ Source: Modified from Macy, et al., (1995). Presented to the National Academy of Management, Vancouver, Canada, August.

Figure 1. High performing organizations: Overall open systems model of critical components
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The Common Eight Different Options for Organization Structure
1. 2. 3. 4. 5. 6. 7. 8. The Headquarters Structure The Centerless – Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure – Combinations of the above seven

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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 • Information • Centralization • Span of Control • Division of Labor •Vertical and/or Horizontal Structure

Today’s Focus
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Traditional Organization
Power Knowledge Information Rewards

Performance

Outcomes = Lower Performance (3.8% Financial Improvement Per Year)

High Performance Work System
#1 Macro Structure
#5 Micro Structure #2 Job/Work #8 Shared Leadership # 6 Human Resource Systems
Power Knowledge Information Rewards

#4 IS/IT #3 Technologies #7 Recognition & Financial Reward Systems Outcomes = Higher Performance (10% Financial Improvement Per Year)

Performance

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Organization Structure is about:
- Power and Control and the Re-distribution of Power and Control (Less Layers -fewer chiefs) - Decision Making at the

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Traditional Organization Environment
un ic at io n m s

on si ci De g in ak M

Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) Week #11organizational structure 7 http://macy.ba.ttu.edu/5491

Boundaries of the System

Co

m

Organization Structure is about:
- Effective Communication - Effective Coordination - Speed/Responsiveness to the Customer (both internal & external) - Empowerment throughout

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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) http://macy.ba.ttu.edu/5491 Week #11organizational structure 9

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)
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 10

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

8

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21st Century Organization Design
Global Business Services (GBS) & In/ Outsourcing

Corporate Functions/ Expertise Centers

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

Global Business Services (GBS) & In/ Outsourcing Corporate Functions/ Expertise Centers
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8

Question: Is your Firm a “Cost Center” or a “Profit Center”?
Cost center: Emphasis on: – Costs P/L Center: Emphasis on: •Customer Satisfaction/ Loyalty/ repeat business •Quality •Service •Innovation •Production •Costs
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Four Key Concepts / Issues of Structure ( to be analyzed for your case)

• Integration • Coordination • Communications • Power & Control
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Time GO/ Corporate Office

6th Century – early 1970

P/L

1970’s-Now

SBU/ GBU P/L

1980’s-Now

LOB’s/ Brands/ Products Modified P/L E&T/ Stores/ Countries/Regions

1990’s-Now

Modified P/L

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Fifteen Trends in Organizational Design at the Firm Level 1 2 3 4 5

8

Corporate Office (smaller) Global S.B.U.’s E-Commerce SBU Total Value Chain Design

Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)

6 Global Enterprise Teams (Mini-business with P/L Responsibility) 7

Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)

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Innovative Changes Structures and Processes

Creation of a Separate “Company”(sell stock)

Fifteen Trends in Organizational Design at the Firm Level Other Types of Aligned of Enterprise Teams (Product, Channel,or Process)
Matrix Enterprise Teams: Product/Channel/ Customer and/or Process Some Centralization - Great DeCentralization Integrative Learning/Coaching and Training Systems (Learning Contract) Innovative Pay Systems (Share the Wealth) Simple & Innovative Business/People Measurement Systems Co-location: Customer, Team and Leaders
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8

10 11 12 13 14 15

Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)

Innovative Changes Structures and Processes

9

The Four Main Questions of Horizontal Design Alignment
Corporate Design
Strategic Business Unit (S.B.U./ G.B.U. Design Supply-Chain/ Product Supply Alignment

Demand/Chain

_____ Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA. http://macy.ba.ttu.edu/5491 Week #11organizational structure 19 (forthcoming)

The Typical Five Different Types Organization Structures in Exemplar Organizations (N=102 North America Organizations)

1. Macro Business Level
1, 2, 3, 4, & 5

Corporate Office 2. S.B.U.’s/GBU’s Value-Chain Design Supply Side Demand Side

3. Business Teams 4. Product Teams
(Enterprise Teams)

5. Customer Account Teams

Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 20

Multi-International Consumer Products Firm: Current Structure – Sept. 2001

Corporate

GBU GBS
Core Functions

Consumer Teams (30) External Relations * Teams (6)

Office
Top Management

7 Global Teams Customer Business Teams (130)

Key Customers/ Trade

Consumers

Gov’t.

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

 The Centerless – Decentralization Structure 2.
3. The Functional Structure

 The Divisional/Product Structure 4.
5.  The Market (Customer) Structure 6. The Geographical Structure 7.  The Process Structure

 8. The Hybrid Structure – Combinations of the
above seven
 Are recommended for Cleansheet Design
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he CENTERLESS CORPORATION The Real World
Global Core

Power/Control & Governance
Source: Booz-Allen & Hamilton

Smaller Corporate Hub
Centralized Services Group

Business Units (S.B.U.’s/ Lines of Business/ Markets/Products)

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Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced)
Product Distribution Product Design

Nike Headquarters (Broker)
Advertising Accounts Receivable
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Product Manufacturing

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)

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The Question of Centralization and Decentralization
Centralized “Design Fit”
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)

De-Centralized

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Value Chain
Back Front

Core Technologies

Conceive

Design Develop Procedure Market

Sales Distribute Support

Market (Customer)

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Organization Structure Trends
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Typical Movement from a “National” Structure to a “Multi-National” Structure
High

Market Share 1

3 2

GBU GBU Structure Structure

4

5 International/ Centerless Integrated/ Structure Centerless
Structure

SBU SBU Structures Structures

International International Division Division Structure Structure

National National National Structure Structure Low Early

Structure

Time Time

Very Mature
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Traditional vs. Innovative System Changes - 1
STRUCTURE :

TALL

FLAT

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Trends in Organizational Shapes

Yesterday

Today

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Traditional vs. Innovative System Changes - 2
TASK ORIENTATION:

INDIVIDUALIST/ SPECIALIST

TEAM/ GENERALIST
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Traditional vs. Innovative System Changes - 3
DECISION-MAKING:

CENTRALIZED

DECENTRALIZED
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Traditional vs. Innovative System Changes - 4
PHILOSOPHY:

AUTHORITARIAN

PARTICIPATIVE

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

POWER & CONTROL

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REDISTRIBUTION OF POWER AND CONTROL

Four Elements for Structural Design
Hierarchical Groupings

Structural Linking Mechanisms Formal Processes and Systems Informal Organizations
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Eight Primary Options For Choosing Macro Organizational Structure

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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
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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)
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Dell’s Fast-Cycle Segmentation
In 1994, Dell was a $3.5 billion company

Large customers

Small customers (Business and consumer)

In 1996, $7.8 billion Large companies Midsize companies

Government and education

Small customers

In 1999, $18 billion
Global enterprise accounts Large companies Midsize companies Federal State and local Education Small companies Consumers

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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)

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The Headquarters Model

Headquarters

Field A

Field B

Field C
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Centralized Headquarters Model
A H.Q. F E D B
Mainly Flows of Goods

C
Tight, Simple Controls; (key strategic decisions made centrally)

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CHARACTERISTICS OF CENTRALIZED HEADQUARTERS MODEL
Strategic Approach Key Strategic capability Configuration of assets and capabilities Role of Global operations Implementing Development and diffusion of knowledge Information and Knowledge developed and retained at the center; Not in business/product units

Global

Global scale efficiency

Centralized and globally scaled

parent company strategies

8

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A 2 nd Option: Coordinated Headquarters Model
Mainly Knowledge Flows (Technology products, processes, systems

A H.Q. F

B

C

E

D
Formal System controls; (planning, budgeting, replicating parent company administrative system
5

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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
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Centerless-Decentralized Structure
Mainly Financial Flows (Capital out; dividends back)

Headquarters: Loose, simple Controls; (Strategic decisions decentralized)
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The Peer-to-Peer Model
HQ Unit Peer - 1

HQ Unit Peer - 2

HQ Unit Peer - 2

HQ Unit Peer - 3
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CHARACTERISTICS OF CENTERLESS-DECENTRALIZED STRUCTURE
Strategic Approach Key Strategic capability Configuration of assets and capabilities Role of Global operations Development and diffusion of knowledge

Decentralized Multi- National -national Responsive- and nationally -ness self-sufficient (very local)

Sensing & exploiting local opportunities

Information and Knowledge developed and retained within each global business/ product unit

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Integrated Network Model
Distributed, Specialized Resources and capabilities

Complex Process of Coordination and cooperation in an environment of Shared Decision Making

Large Flows of Components, Products, Resources, People, Information and Knowledge Among Interdependent (Networked) Units

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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.
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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

Inter-linkages across Business Units

Much Smaller Headquarters

Differentiated relationships between the headquarters and each Business Unit

S.B.U./SUBSIDIARY 4
____________________________ Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)

S.B.U./SUBSIDIARY 3
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Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced)
Product Distribution Product Design

Nike Headquarters (Broker)
Advertising Accounts Receivable
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Product Manufacturing

The Typical Structure Path for a Multi-National Corporations High

Worldwide S.B.U. Alternative Path #2 Alternative Path #1

Global Matrix

(Differentiated Network)

Foreign Product Diversity

International Division Low Foreign Revenue as a Low Percentage of Total Revenue
Source: Stepford & Wells, 1972

Regional S.B.U. High

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he CENTERLESS CORPORATION The Real World
Global Core

Power/Control & Governance
Source: Booz-Allen & Hamilton

Smaller Corporate Hub
Centralized Services Group

Business Units (S.B.U.’s/ Lines of Business/ Markets/Products)

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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
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Functional Organization Structure
General manager

Finance

Human resources

Research and development

Operations

Product marketing

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Hybrid Beatrice International: One Functional Automobile Products Business

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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

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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.
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• 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.
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Product Group Structure of a Consumer Products Company

CEO
Corp. Headquarters Staff

Toiletries S.B.U.

Soap S.B.U.

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

Food S.B.U.

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Product Structure
CEO

Finance

Human resources

Electronic instruments

Medical instruments

Computers

R&D

Operations

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

Vice President Sales and Marketing

Vice President Research and Development

Vice President Materials Management

Vice President Finance

PDM

PDM

PDM

PDM

Canned Soups Division

Frozen Vegetable Division

Frozen Entrees Division

Baked Goods Division

Centralized support functions Divisions/S.B.U.’s
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• 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)
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Multidivisional – S.B.U. Structure: G.E., I.B.M., Matsushita
CEO

Corporate Headquarters Staff

Senior Corporate VP’s

Senior VP Marketing

Senior VP Finance

Senior VP Materials Management

Senior VP Research and Development

S.B.U./ Divisional GM’s/ Presidents

Division A

Division B

Division C

Division D

Functional Managers

Support functions

Support functions

Support functions

Support functions

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Product Team Structure: Xerox, Hallmark and Chrysler
CEO

Functions

Vice President Research and Development

Vice President Sales and Marketing

Vice President Manufacturing

Vice President Materials Management

Vice President Finance

Product Development Teams PTM PTM PTM

Matrix
Product Division Product Division Product Division

Functional specialist PTM Product Team Manager

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Hybrid Product and Function Structure
Commercial airplane S.B.U.

Product 1: Narrow body

Product 2: Wide body

Product 3: Central fabrication

Engineering Quality

Operations

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

Before Design

After Design
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Fourteen Trends in Organizational Design at the Firm Level 1 2 3 4 5 6 7 8

8

Corporate Office (smaller) Global S.B.U.’s
M&A and JV E-Commerce SBU (inside or outside firm)

Total Value Chain Design
Global Enterprise Teams (Mini-business with P/L Responsibility)

Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)

Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)

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Innovative Changes Structures and Processes

Creation of a Separate “Company”(sell stock)

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

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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.
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Market (Customer) Segments and Lateral Functions
S.B.U. General manager

Sales/marketing

Information technology

Finance

Human Resources

Operations

Health Sales Marketing Information technology Installation and repair Network operations

Financial services Sales Marketing Information technology Installation and repair Network operations

Governments Sales Marketing

Distribution Sales Marketing

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Mellon Bank Market Structure
CEO

Central Support Functions

Commercial Division

Consumer Division

Government Division

Corporate Division

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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.
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Front-End Structure
CEO
Staff Paper group Toiletries group Soup group Regional team

Front end

Customer team
Finance

Distribution

Information technology

Sales

Operations

Operations

Marketing

Marketing

Sales

Vons

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Dell’s Fast-Cycle Segmentation
In 1994, Dell was a $3.5 billion company

Large customers

Small customers (Business and consumer)

In 1996, $7.8 billion Large companies Midsize companies

Government and education

Small customers

In 1999, $18 billion
Global enterprise accounts Large companies Midsize companies Federal State and local Education Small companies Consumers

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Three Potential Sources of Leverage in Leveraged Business Groups
Back Back (Offering) (Offering) Middle Middle Infrastructure Infrastructure Front Front (Market/Customer) (Market/Customer)

•Creation of products/offerings •“Platforms for manufacturing products

•Means used to produce and deliver products and services to customers

•How the Business goes to market?

•How the organization responds to the customer? •The customers interface – typically Enterprise Teams

•Technologies underlying products

Each component is a potential source of http://macy.ba.ttu.edu/5491 Week #11organizational structure 80 leverage

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

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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).
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Geographical (Pre-Restructuring)

CEO
Industrial Gases

(South Africa) (South Africa)

AFROX AFROX

(Australia) (Australia)

CIG CIG

U.K. Gases U.K. Gases

AirCo AirCo
(U.S.A) (U.S.A)

North North Pacific Pacific

Process Process Plants Plants

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Geographical Structural Change (PostRestructuring)
CEO
Industrial Gases

South Africa South Africa

Australia Australia

Europe Europe

Americas Americas

North North Pacific Pacific

Process Process Plants Plants

Food Food

Global Market Sectors

Chemicals Chemicals

Electronics Electronics

Steel Steel

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Geographic Structures: Crown Cork & Seal, Neiman Marcus and Wal-mart
Regional Operations

Regional Operations

CEO Central Support Functions

Regional Operations

Individual stores

Regional Operations

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Apple: Geographical Structure
CEO John Sculley

Apple Products

Apple USA

Apple Europe
Europe West Europe North

Apple Pacific
Canada

Sales Service and Marketing To Regions

Australia

France

Japan

South Europe

Latin America Far East

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Geographical Structural Design: Xerox 1991 (Before)
Chairman

Research Research

Development Development and Manufacturing and Manufacturing

Marketing and Marketing and Customer Customer Operations Operations

Chief Staff Chief Staff Officer Officer

Chief Financial Chief Financial Officer Officer

World Wide World Wide marketing marketing

U.S. Operations U.S. Operations (Sales and (Sales and Service) Service)

Rank Xerox Rank Xerox

American American Operations Operations

Other Other Other Geographic Other Geographic Other Other Geographic Other Other Operating Units Geographic Operating Units Geographic Geographic Operating Units Geographic Geographic Operating Units Operating Units Operating Units Operating Units Operating Units

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Xerox 1992: Hybrid Organization Structure (After)

Markets/Customers

Technologies

Business Division 1 Business Division 1

Technology Management Process

Business Division 2 Business Division 2

Business Division 3 Business Division 3

Customer Operations Divisions

Business Division 4 Business Division 4

Business Division 5 Business Division 5 Strategic Services Governance

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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

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Process Organization Structure
General manager

New product development process

Order fulfillment process

Customer acquisition and maintenance

New product teams

Product teams

Customer teams
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Work Flows Across Functional Structure
Scarce resource: management time

General manager

Finance

Product development

Operations Human resources

Sales and marketing

Work flow process to customer
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Lateral Processes Across Departments
General manager

Lateral process

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A Generic Horizontal Organization with Multiple Core Process Groups
Vice President

General Manager R&D

General Manager Operations

General Manager Strategy

General Manager Finance

Manager

Manager

Manager

Process Owner Team Process Owner Team Process Owner Team

CORE PROCESS GROUP

Team 1

Team 2

Team 3

Performance Objective

CORE PROCESS GROUP

Team 1

Team 2

Team 3

Performance Objective

CORE PROCESS GROUP

Team 1

Team 2

Performance Team 3 Objective http://macy.ba.ttu.edu/5491 Week #11organizational structure 93

Process Structure
Reengineering Functional Structures: Reengineering is the process of redesigning how tasks are bundled into roles and functions to improve organizational effectiveness.

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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
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Example Business Processes & Teams
Top Management Process Coordinator

Team

Team

Team

New Product Development Process
Process Coordinator Team Team Team

Process Coordinator

Order Fulfillment Process
Team Team Team

Procurement, Logistics process

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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 •Knowledge/skills/discipline •Time •Product •Service •Project •Market segment •User/Customer need •Geography

1. 2. 3. 4.

Activity Activity

Output Output

User/Customer User/Customer

Multifocused Multifocused Organization Organization

•Any Combination of Activity/Output/User
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Grouping by Output (AT&T Early 1990’s)

Chairman

Communications Communications Services Group Services Group

Communications Communications Products Group Products Group

Computer (NCR) Computer (NCR)

Network Systems Network Systems Group Group

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ABB (Simplified Structure)-1
CEO
(Percv Bamevik) (previous CEO – Thought up this structure) Executive Committee

Power Power Transformers Transformers

Power Power Generation Generation

Robots Robots

47 Other 47 Other Business Areas Business Areas

Germany Germany

National Companies

U.S.A U.S.A

Norway Norway
137 Other 137 Other National National Companies Companies
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ABB: Four Types of Organization Structures - 2
Corporate Office
(Very Small)

A
Tight/Clear Accountability/Responsibility Through a Single Financial Performance Measurement System

3 Regions and 4 Businesses Areas (BA’s) B Regions-National Companies
Global Business Areas
1 1 2 3 4 1 1 2 2 3 3

Corporate Structures

2 3 4

Company Presidents

C

Local Country (some are also Country Managers) - 1 or 2 levels Companies and 5,000 Profit Centers Many Profit D (lead by Profit Center Managers; Center Structures 3 levels to lowest person)

________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 101

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 Week #11organizational structure 102 CA (forthcoming)

ABB-4
• The fundamental building block of this Company are 5,000 small profit centers ($1012MM 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)

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Asea, Brown, Boveri (ABB): One Business Area: Relay Business Overview - 5 Corporate 3 Regions 4 Global Business Areas Business Head Worldwide Relay

Corporate

Regions

PresidentUS Power

Capability Developer

Local/Country Specific
B.A. Macy, Successful Strategic Change, San Francisco: California: Berret-KoehlerPublisherss (forthcoming)

General ManagerRelays Profit Centers

Entrepreneur

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ABB-10 The Partnership Between Financial Wealth and Changes in Organization Structures, Systems and Processes
Corporate Office Small Global Businesses Think Globally (Matrix) Regions of the World Act Locally (Matrix) Local Control One Customer Contact Point Customers • Many • Enterprise Rapidly “Companies” Units/Teams Changing (ABB-1,000) (CATS) Needs, • Many Profit Wants, & Centers Desires (ABB -5,000) • Tight The Mirror Accountability/ Responsibility Concept • Alignment

(ABB - 150 Xerox Europe - 300)

________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 105

Another Hybrid: Procter & Gamble (P&G)

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P&G’s Organization Structure: 2001
Corporation Functions >18 mos. < 18 mos. GBU CBD (Sales) (SBU’s) Product P&L GBS MDO
Global MDO/ CBD Teams

Idea Innovation

PRODUCTION/PROMOTION CUSTOMERS/CONSUMERS

Country MDO

F U N C T I O N S

• Marketing • R&D • IT • HR • Sales • Product Supply • Finance

CBD Teams

Retail Customers
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The Key Pillars of a Horizontal Organization

Demand Organization

Fulfillment Organization

Global Sales Organization

Retail Sales/ Customers

Consumers

Service Organization
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 108

Enterprise Units: The “Mirror” Design Concept
The “Mirror”: One Contact Point Corporate Office The Various Global SBU’s 1 2 3 4 5 6 7 etc. (feedback)
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 109

Enterprise Units/ Team(s)

Customers/ Consumers Retail Stores

P&G’s Enterprise Teams (Customer Business Development)

GBU GBS
Core Functions

Customer *Teams External Relations * Teams

67% Customer Teams * (Exemplar)
Customers/ Trade/ Retail Stores

Consumers

Gov’t. Dec. 2000

Note: GBU’s = Global S.B.U.’s GBS = Global Business Services

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Another Hybrid Example – HP (from a Product Structure to A Hybrid Model)
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THE OLD HP: 83 Product Structures
Each product unit was responsible for its own profit/loss performance

HOME PCs, HANDHELDS, LAPTOPS

CEO

SCANNERS, LASER PRINTERS, PRINTER PAPER

EXECUTIVE COUNCIL

CONSULTING SERCURITY SOFTWARE, UNIX SERVERS

INK CARTRIDGES, DIGITAL CAMERAS, HOME PRINTERS
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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.

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THE NEW HYBRID HP
CARLY FIORINA STRATEGY COUNCIL Nine fast-rising managers who advise the executive council on allocating money and people to growth initiatives. FRONT END CORPORATE SALES $34 billion in annual revenues JOB Meet near-term financial targets by selling technology solutions to corporate clients. Keep back-end units abreast of what’s, how’s. BACK END PRINTERS
43% of annual production JOB Build new printing and imaging products to ensure HP’s long-term growth. Track trends with help from front-end units.

•AUTHORITY •RECOMMENDATIONS •IDEAS & INNOVATIONS •PRODUCTS & INFORMATION

EXECUTIVE COUNCIL
Eight top lieutenants, including heads of the four front-and-back-end groups. FRONT END CONSUMER SALES
$15 billion in annual revenues JOB Sell consumer gear with focus on meeting current-year earnings and revenue goals. Let back end know of must-have products and features

FRONT END COMPUTERS
57% of annual production JOBS Focus on future success by making computers that companies and consumers want, with sales input from front-end

CROSS-COMANY INITIATIVES
Personnel from the frontand back-end groups collaborate on projects aimed at sniffing out new markets what will create growth. DIGITAL IMAGING Make photos, drawings, and videos so easy to create, store and send as e-mail. WIRELESS SERVICES Develop wireless technologies that will fuel sales of HP-made devices, ranging from handhelds to servers. COMMERCIAL PRINTING Divert printing jobs from offset presses to Net-linked HP printers

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The Common Eight Different Options for Organization Structure
1. 2. 3. 4. 5. 6. 7. 8. The Headquarters Structure The Centerless – Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure – Combinations of the above seven

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