Organizational Structure

 Need to create division of labor

 Need to integrate these groups to
ensure organizational effectiveness
 Dimensions of Macro Structure
 Microstructure Management
Dimensions and Processes
 Firm Growth as Evolutionary Process

Single Business

Geographic Product
Diversification Diversification
(Foreign Sales as %Total Sales) (Product Diversity)

Product and Geographic

Diversification
 Horizontal Differentiation
 degree to which tasks CEO
are divided into
Prod 1 Prod 2 Prod 3 Prod 4
distinct homogeneous
groups
– function-wise
– geographic-wise
CEO
– product-wise Mkt Mfg Finance R&D Logistics
– production stage-wise
 Vertical Differentiation
 Number of levels CEO
within the
EVP EVP EVP
organization
Sr. VP Sr. VP

VP VP VP

Asst. VP Asst. VP Asst. VP

Branch Mgr. Branch Mgr.

Asst. Branch Mgr

 Spacial Dispersion
 Degree to which
activities are located in
different areas
HQ

US Pacific Eur.

Support Mfg. Mfg

Finance R&D Legal Prod 1 Prod 2

 Structure Follows Strategy
Pressures for Global Efficiency

High
and Centralization

Horizontal Differentiation?

Vertical Differentiation?

Low Spacial Dispersion?

Low High
Pressures for Local Responsiveness and Decentralization
 Export

Germany

U.S.

Mexico

Malaysia
 Functional Structure
w/ International Sales Division
HQ

Fin./Acct.

Manufacturing Marketing Logistics R&D

International
Sales
 Multidomestic

Germany

U.S.

Mexico

Malaysia
 Geographic Structure

HQ

N. Amer. Eur. Latin Amer. Pac.Rim

Mkt. Mfg. R&D Prod. A Prod. B Prod. C

 Pure Global

Germany

U.S.

Mexico

Malaysia
 Global Functional Structure
For Single-business Firms

HQ
U.S.

Fin./Acct.

Manufacturing Marketing R&D

Mexico Germany Malaysia
 Product Division Structure
For Product-diversified Firms

HQ

Product A Product B Product C

Mfg. Mkt. R&D Mfg. Mkt. R&D Mfg. Mkt. R&D

 Transnational (1)

Germany

U.S.

Mexico

Malaysia
Matrix Structure (A)
HQ
U.S.
R&D

Marketing Manufacturing
Mexico

US
Eur
Mexico
Malaysia
 Matrix Structure (B)

HQ

Geographic Areas Product 1 Product 2 Product 3 Product 4

US
Eur
Asia
 Transnational (2)

Germany
Engines
U.S.
Steel

Mexico
Final
Assembly

Malaysia
Trim, seats,
glass
 Matrix Structure (B)
HQ
R&D

Integrated Drivetrain Body/ Glass/ Final

Functions
Frame Plastic Assembly

Logistics Germany US Malaysia Mexico

Marketing Marketing Marketing Marketing

 Mixed Structure

HQ

PCs US Europe Pacific

Mfg. Faxes Faxes Faxes

Mkt. Mobil Phones Mobil Phones Mobil Phones

R&D Copiers Copiers Copiers

Stopford-Wells Structure Model
Hi
Product Mixed /
Product Diversity

Divisions Matrix /
Network

Intl. Geographic
Lo Division Divisions
0% 100%
Foreign Sales as % of Total Sales
 Formalization
 Degree to which rules, procedure, lines of
authority/responsibility are enunciated or
specified
 More formality: eliminates confusion and
uncertainty, limits creativity and innovation
 Less formality: imbues flexibility, creative
solutions.
 Centralization
 Degree to which authority and decision
making is at higher levels of the organization
 Centralized: tight org control, managers are
order-takers
 Decentralized: managers closest to product
and/or customer able to make decisions
 Data Management Control
Mechanisms
 Information systems
 Measurement systems
 Resource allocation procedures
 Strategic planning
 Budgeting processes
 Managers’ Management
Control Mechanisms
 Choice/selection of key managers
 Career paths
 Rewards and punishment systems
 Management development
 Patterns of socialization
 Organizational Learning/
Conflict Resolution
Control Mechanisms
 Decision responsibility assignments
 Integrators
 Transnational teams
 Coordination committees
 Task forces
Decentralized Federation Configuration
Model

Flows?
Controls?
Changing Role of Top Management
 Paradoxes…how to be:
– global and local
– big and small
– centralized and decentralized
 Old way…strategy-structure-systems:
– chief strategist
– structural architect
– information and control systems
 Vertical Structural Hierarchy
 Top-down view:
– order, symmetry, uniformity
– neat decomposition of tasks & responsibilities
 Bottom-up view:
– reporting lines
– documentation
– reviews
 The
organization has its face toward the
CEO and its ass toward the customer.
– Jack Welch, CEO General Electric
 Structural Management of a
Portfolio of Processes
 Entrepreneurial
process
 Competence-building process
 Renewal process
 Entrepreneurship
 Def.: externally-oriented, opportunity-
seeking, ownership-motivated
 Employees are most important asset
 Grow and divide principal
 25-5 rule
 The market is far better judge of new
products than some analyst or manager
 Competence-Building
 Traditional role…cross-unit “matchmaker”
 New role…informational conduit,
facilitator (on-line dating)
 Kao’s VAN: dense info network linking
mfg, mkt, R&D, engineering, etc.
– sift through data for customer clues and latent
technologies
 Intel’s “crisis support” culture
 Renewal
 Reduce complacency
 Groves: Only the Paranoid Survive
 An organization should stretch itself to the
point where it almost becomes unglued
– Jack Welch, CEO General Electric
 ABB: Challenge business units with
scenario-planning exercises
 New 3M CEO’s: 30-5 rule