11-1
Session 19
Organizational Structure
11-2
Learning Objectives
1. Identify five traditional organizational structures
and the pros and cons of each
2. Explain the product-team structure and how it is a
prototype of more open/agile structures.
3. What is meant by agile, virtual organizations
4. Explain what is meant by boundaryless
organizations and why they are important
Traditional Organizational
Structures
•
11-3
Organizational structure refers to the formalized
arrangement of interaction between and
responsibility for the tasks, people, and resources
in an organization
• It is most often seen as a chart,
often a pyramidal chart, with
positions or titles and roles
in cascading
fashion
11-4
Division of Labor
Remains the fundamental
organizational structuring
philosophy
11-5
Winthrop Organization Chart
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11-6
Traditional Structures
• Simple
• Functional
• Divisional
• Matrix
• Product-Team
11-7
Simple Organizational Structure
•
•
•
A simple organizational structure is one where
there is an owner and a few employees and where
the arrangement of tasks, responsibilities, and
communication is highly informal and
accomplished through direct supervision
This type of structure can be very demanding on
the owner-manager
Most businesses in this country and around the
world are of this type
11-8
Functional Organizational Structure
•
A functional organizational structure is one on
which the tasks, people, and technologies
necessary to do the work of the business are
divided into separate “functional” groups (such as
marketing, operations, and finance) with
increasingly formal procedures for coordinating
and integrating their activities to provide the
business’s products and services
11-9
Functional Organization Structures
11-10
Divisional Structure
•
•
•
A divisional organizational structure is one in which a
set of relatively autonomous units, or divisions, are
governed by a central corporate office but where each
operating division has its own functional specialists who
provide products or services different from those of other
divisions
This expedites decision making in response to varied
competitive environments
The division usually is given profit responsibility
Multidivisional (M-Form)
Structures
Cooperative M-Form
related divisions/SBUs
(concentrically diverse)
therefore sharing of
information & best
practices is mandated
by the corporate level
more complex structure
11-11
Competitive M-Form
Unrelated divisions/SBUs
(conglomerately diverse)
therefore no forced
sharing of information
& techniques; divisions
operate autonomously
holding company model
Simpler structure
11-12
Competitive M-Form
Competitive in
what way?
11-13
Divisional Organization Structure
11-14
Strategic Business Unit
•
•
The strategic business unit (SBU) is an
adaptation of the divisional structure whereby
various divisions or parts of divisions are grouped
together based on some common strategic
elements, usually linked to distinct product/market
differences
The advantages and disadvantages of the SBU
form are very similar to those identified for
divisional structures
11-15
Holding Company Structure
•
A final form of the divisional organization is the
holding company structure, where the corporate
entity is a broad collection of often unrelated
businesses (more conglomerately diverse) and
divisions such that it (the corporate entity) acts as
financial overseer “holding” the ownership interest
in the various parts of the company but has little
direct managerial involvement
11-16
Matrix Organizational Structure
•
•
The matrix organizational structure
is one in which functional and staff
personnel are assigned to both a basic
functional area and to a project or
product manager
The matrix form is intended to make
the best use of talented people within
a firm by combining the advantages of
functional specialization and productproject specialization
11-17
Matrix Organizational Structure
11-18
Product-Team Structure
•
•
The product-team structure seeks to simplify
and amplify the focus of resources on a narrow but
strategically important product, project, market,
customer, or innovation
The product-team structure assigns functional
managers and specialists to a new product,
project, or process team that is empowered to
make major decisions about their product
11-19
The Product-Team Structure
Trends Affecting Organizations
st
in the 21 Century
• Globalization
• The Internet
• Speed
11-20
Efforts to Improve
Traditional Structures
•
•
•
•
•
11-21
Redefine the role of corporate headquarters from
control to support and coordination
Balance the demands for control/differentiation
with the need for coordination/integration
Restructure to emphasize and support strategically
critical activities
Reengineer strategic business processes
Downsize and self-manage
Creating Agile, Virtual
Organizations
•
•
11-22
Virtual organization: a temporary network of
independent companies—suppliers, customers,
subcontractors, even competitors—linked
primarily by information technology to share
skills, access to markets, and costs
An agile organization is one that identifies
a set of business capabilities (core competencies
from VC analysis) central to high-profitability
operations and then builds a virtual organization
around those capabilities
Outsourcing—Creating
a Modular Organization
•
•
•
11-23
Outsourcing is simply obtaining work previously
done by employees inside the companies from
sources outside the company
A modular organization provides products or
services using different, self-contained specialists
or companies brought together—outsourced—to
contribute their primary or support activity to
result in a successful outcome
Business process outsourcing (BPO) is the most
rapidly growing segment of the outsourcing
services industry worldwide (esp. HR and MIS)
11-24
Types of Boundaries
•
•
•
•
Horizontal boundaries—between different
departments or functions in a firm. (silos)
Vertical boundaries—between operations and
management, and levels of management, between
“corporate” and “division”
Geographic boundaries—between different
physical locations; between different countries or
regions of the world and between cultures
External interface boundaries—between a
company and its customers, suppliers, partners,
regulators, and competitors
11-25
Becoming Boundaryless
•
Jack Welch coined the term “boundaryless” to
illustrate his vision for GE
•
Achieved via outsourcing, strategic alliances,
product-team structures, & reengineering
•
Technology, particularly driven by the Internet,
has and will be a major driver
Ambidextrous Learning
Organization
•
•
•
11-26
The rise of the virtual organizational structure
highlights the central role knowledge plays in
implementation
Shift from exploitation to exploration (Ragan)
indicates the growing importance of cooperative
organizational structures that enable a learning
organization to allow global companies the
chance to build competitive advantage
An ambidextrous organization emphasizes
coordination over control as well as flexibility