Structuring the
Company for
Entrepreneurship
 Structure
refers to the formal pattern of how
people and jobs are grouped and how the
activities of different people or functions are
connected
 Structures
are created to bring order and
logic
to company operations
 Once
formalized, the structure is not static
 Two
(2) components (or issues) of
structure
• Differentiation is about the ways decision-
making authority is distributed, tasks are
grouped, and people are assigned to tasks.
• Integration refers to the ways in which
people and functions are coordinated.
 How
many levels should there be in the
organization?
 What should be the targeted span of
control?
 How centralized or decentralized should
operations be?
 How formal or informal should structural
relations be?
 Should the interaction emphasize functional
specialization or cross-functional
interaction?
Answering these questions comes down to four
(4) major policy areas:




Specialization—the number and types of
specialties to be used or performed in the
organization
Shape—the number of people forming departments
at each level
Distribution of power—power distribution within
and between levels
Departmentalization—the forming of people into
departments, groups, or areas
Greiner (1972) Structural Evolution
Highly Informal
Functional
Structure
Decentralization
and
GeographicallyOrganized
SBUs with
Centralized
Structure
Matrix
Structure/CrossFunctional
Teams
 Simple
structure—highly informal with topdown coordination
 Machine
bureaucracy—ridged structure with
standardized work roles
 Organic—limited
flexible structure
hierarchy with highly-
 Divisional—self-contained
business unites
with separate production and marketing
functions for each
Mechanistic Structure
• Operating Styles – must be uniform and
restricted
• Reluctant adaptation – with insistence on
holding fast to tried-and-true management
principles despite changes in business
conditions
• Tight control – through sophisticated control
systems
More benign or controllable
external environment
Conservative management style is
more appropriate
Mechanistic/bureaucratic
structure is effective
Organic Structure
• Operating styles – allowed to
vary freely
• Free adaptation – by the organization to
changing circumstances
• Loose, informal control – with emphasis on
norm of cooperation
More hostile external environment
Management style must be more
entrepreneurial
Organic structure is needed to
facilitate entrepreneurship
An entrepreneurial structure is subject to
continual experimentation and change
“Organizational designs that facilitate
variety, change, and speed are sources of
competitive advantage. These designs are
difficult to execute and copy because they
are intricate blends of many different
design policies.”
-Galbraith, 1995
Covin and Slevin (1990) propose some
additional elements:
• Managers allowed to freely vary their operating
styles
• Authority that is assigned based on the expertise of
the individual
• Free adaptation of the organization to changing
circumstances
• An emphasis on results rather than processes or
procedures
• Loose, informal controls with an emphasis on a
norm of cooperation
• Flexible on-the-job behavior, shaped by
requirements of the situation and personality of
the employee
• Frequent use of group participation and group
consensus
• Open channels of communication with free flow of
information
MANAGEMENT
PseudoEffective
Entrepreneurial entrepreneurial entrepreneurial
firms
firms
2 1
3 4
Conservative
Efficient
bureaucratic
firms
Unstructured
unadventurous
firms
Mechanistic
Organic
When deciding which type of organizational structure
will be most effective, management must decide to
what extent the structure is more:
 Simple
versus Complex
 Centralized versus Decentralized
 Formal versus Informal
 Autonomous versus Integrated
 Highly Specialized versus More Generalist
 Full-time versus Part-time
Ray of Light projects
• No budget
• Not approved
• Early conceptualizing
Emerging Potential Projects
• Seed capital
• Approved by Opportunity
Review Board
• Concept refinement/prototype
testing
Mainstream Development
Projects
• Formal budget
• Approved by senior
mgt/directors
• Formal NPD process
 More
innovation because matching
characteristics
 Innovation
clearly corporate-wide task
 Likelihood
of interfunctional coordination
higher
 Ray
of light and emerging potential projects
bring more flexibility and speed to innovation
process