Major Concerns in OrganizingMajor Concerns in Organizing Division of Labor (Differentiation)Division of Labor (Differentiation) Coordination (Integration)Coordination (Integration)

Organizing Involves:Organizing Involves:VERTICAL VERTICAL STRUCTURESTRUCTURE

- Coordination from Top to - Coordination from Top to Bottom Bottom

» Who reports to whom?Who reports to whom?» Vertical linkages Vertical linkages

Chain of CommandChain of Command Rules and PlansRules and Plans Information SystemsInformation Systems

Organizing Involves:Organizing Involves:HORIZONTAL STRUCTUREHORIZONTAL STRUCTURE

- Departmentalization- Departmentalization»Who works together?Who works together?»Horizontal linkages (for cross-Horizontal linkages (for cross-

functional communication)functional communication) Information systemsInformation systems Direct contact (liaisons, etc.)Direct contact (liaisons, etc.) Task forcesTask forces Full time integratorsFull time integrators TeamsTeams

Departmentalization TypesDepartmentalization Types Internal Operations Internal Operations

OrientedOriented– FunctionalFunctional– Network (Virtual)Network (Virtual)

Output OrientedOutput Oriented– DivisionalDivisional

» ProductProduct» GeographicGeographic» CustomerCustomer

– Team (Cluster)Team (Cluster)

CombinationsCombinations– Hybrid Hybrid

» different types at different types at differentdifferent places in an places in an org.org.

– Matrix (Multi-Matrix (Multi-focused)focused)

» different types different types simultaneously at the simultaneously at the samesame places in an org. places in an org.

Functional ApproachFunctional Approach

Departments based on similar activities, skills Departments based on similar activities, skills and resource use.and resource use.

CEOCEO

VPVPFinanceFinance

VPVPProductionProduction

VPVPMarketingMarketing

Divisional ApproachDivisional Approach

Departments based on working on similar Departments based on working on similar output (product/geography/customer). output (product/geography/customer). Functions (e.g., marketing) are split among the Functions (e.g., marketing) are split among the divisions.divisions.

CEOCEO

VPVPBeerBeer

VPVPComputersComputers

VPVPLawnmowersLawnmowers

Functions (e.g., marketing) are split Functions (e.g., marketing) are split among the divisions.among the divisions.

Exam ple : Food & Beverage M anufacturing

Marketing F inance Manufacturing

G enera l ManagerFoods D ivis ion

Marketing F inance Manufacturing

G enera l ManagerSoft D rinks D ivis ion

President

Departmentalization by Division Departmentalization by Division (Product)(Product)

Geographic divisions Geographic divisions All functional skills in each regionAll functional skills in each region

C orp ora teH ead q u arte rs

C orp ora teF in an ce

V P E u rop e

E as t C oas tR eg ion

M an u fac tu rin g F in an ce M arke tin g

C en tra lR eg ion

W es t C oas tR eg ion

V P N orth A m erica V P F ar E as t

P res id en t

Exam ple : C om puter M anufacturer

Marketing Sales F inance

G enera l ManagerC om m ercia l Market

Marketing Sales F inance

G enera l ManagerC onsum er Market

P resident

Departmentalization by CustomerDepartmentalization by Customer

Functional ApproachFunctional Approach Advantages:Advantages:

– Efficient use of resources Efficient use of resources – Economies of ScaleEconomies of Scale– In-depth skill specializationIn-depth skill specialization

Disadvantages:Disadvantages:– Poor communication among departmentsPoor communication among departments– Slow response to external changesSlow response to external changes– Loyalty more to function than customer or Loyalty more to function than customer or

the whole organizationthe whole organization

Divisional ApproachDivisional Approach Advantages:Advantages:

– Quicker changes in an unstable environmentQuicker changes in an unstable environment– More in touch with customersMore in touch with customers

Disadvantages:Disadvantages:– Duplication of resources needed across Duplication of resources needed across

divisions (i.e., Costs)divisions (i.e., Costs)» Competition for resources among divisionsCompetition for resources among divisions» More managers neededMore managers needed

– Less professional specializationLess professional specialization

Project CProject CManagerManager

Project BProject BManagerManager

Project AProject AManagerManager

EngineeringEngineeringManagerManager

MarketingMarketingManagerManager

SoftwareSoftwareManagerManager

e.g., Functional and Product structures combined.e.g., Functional and Product structures combined.Employees are assigned to a specific project Employees are assigned to a specific project team and have a permanent functional unitteam and have a permanent functional unit

Matrix StructureMatrix Structure

PresidentPresident

8 - 1414

Global Matrix Structure

CanadianDivision

Individual business division

Automobileproductgroup

Chemicalsproductgroup

Consumergoodsproduct group

North American Area

UnitedStatesDivision

MexicanDivision

European Area

BritishDivision

FrenchDivision

Pacific Area

JapaneseDivision

TTaiwanDivision

Matrix Structure: General Motors’ ITMatrix Structure: General Motors’ IT

Matrix ApproachMatrix Approach

Two chains of command simultaneously (e.g., Two chains of command simultaneously (e.g., functional and product or product and geog.)functional and product or product and geog.)

To get the advantages of both structures. For To get the advantages of both structures. For example: Functional (efficiency, high example: Functional (efficiency, high specialization) and Divisional Structures specialization) and Divisional Structures (decentralized decision making)(decentralized decision making)

Often used with sophisticated technology, fast-Often used with sophisticated technology, fast-changing environment and/or multinational changing environment and/or multinational firmsfirms

Disadvantages of MatrixDisadvantages of Matrix Violates the unity of command conceptViolates the unity of command concept Many meetings to coordinate activities Many meetings to coordinate activities High conflict between two sides of matrixHigh conflict between two sides of matrix Need for extensive human relations Need for extensive human relations

trainingtraining

Team ApproachTeam Approach Cross-functional teams (Clusters) Cross-functional teams (Clusters)

consist of employees from various consist of employees from various functional departments functional departments

Teams typically have more decision Teams typically have more decision making power than previously held by making power than previously held by workers at their levels.workers at their levels.

Team StructureTeam StructureTeam StructureTeam StructureCEOCEO

FunctionalFunctional ManagersManagers

SalesSales DesignDesign ProductionProduction

Product A Team Product B Team Product C Team

=

= Team member

Product Team Manager

Team ApproachTeam Approach AdvantagesAdvantages

– More ideas and skills availableMore ideas and skills available– Quicker response time (than centralized)Quicker response time (than centralized)– Better moraleBetter morale– Reduced administrative overheadReduced administrative overhead

DisadvantagesDisadvantages– ConflictConflict– Time and resources spent on meetingsTime and resources spent on meetings

Network ApproachNetwork Approach Organization (Virtual) divides major Organization (Virtual) divides major

functions among separate companies functions among separate companies brokered by a small headquarters brokered by a small headquarters organizationorganization

Somewhat like a Somewhat like a functional functional organization.organization.

CoreCoreFirmFirm

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

ProductProductDevelopmentDevelopment

FirmFirm(France)(France)

MarketingMarketingFirmFirm

(U.K.)(U.K.)

CustomerCustomerServiceService

FirmFirm(U.S.A.)(U.S.A.)

ProductionProductionFirmFirm

(China)(China)

AccountingAccountingFirmFirm

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

Network Organizational StructureNetwork Organizational Structure

Network ApproachNetwork Approach

AdvantagesAdvantages– Global competitiveness, especially by small Global competitiveness, especially by small

firmsfirms– FlexibilityFlexibility– Reduced CostsReduced Costs

DisadvantagesDisadvantages– No hands-on controlNo hands-on control– Limited loyalty among member firmsLimited loyalty among member firms

Designs for Global OperationsDesigns for Global Operations Basic Global StructuresBasic Global Structures

– Global Global ProductProduct Division Structure Division Structure» Meganational StrategyMeganational Strategy

Diverse products each sold in many countriesDiverse products each sold in many countries– Global Global GeographicGeographic Division Structure Division Structure

» Multidomestic StrategyMultidomestic Strategy Products/services tailored to specific countries/regionsProducts/services tailored to specific countries/regions

– Global Global MatrixMatrix Structure Structure» Transnational StrategyTransnational Strategy

Global Integration with Local ResponsivenessGlobal Integration with Local Responsiveness– Global Global FunctionalFunctional Structure Structure

» Goal: Tight, centralized controlGoal: Tight, centralized control (Rare)(Rare)