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Organizational structure and design Organizational structure (overview) Organization structure Defines how tasks are allocated Specifies reporting relationships Defines formal coordinating mechanisms and interaction patterns Organizational structure (overview)

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organizational structure overview
Organizational structure (overview)
  • Organization structure
    • Defines how tasks are allocated
    • Specifies reporting relationships
    • Defines formal coordinating mechanisms and interaction patterns

S V Horner 2008

organizational structure overview3
Organizational structure (overview)
  • Balances two conflicting forces
    • Need for division of tasks into meaningful groupings: division of labor
    • Need to integrate groupings for effectiveness and efficiency
  • Changes in response to organizational growth

S V Horner 2008

simple structure
Simple structure
  • Low departmentalization
  • Wide spans of control
  • Authority centralized in a single person
  • Low formalization

S V Horner 2008

simple structure5
Simple structure
  • Start ups and small firms
  • Centralized in owner-manager
    • “walk around management”
    • Strategic controls at corporate level
  • Flexible, innovative, responsive
  • Most appropriate for focused business level strategies

S V Horner 2008

functional structure
Functional Structure

S V Horner 2008

functional structure7

Chief Executive Officer or President

Manager Production

Manager Purchasing

Manager Marketing

Manager R&D

Manager HR

Manager IT

Lower-level managers, specialists, and operating personnel

Functional Structure

S V Horner 2008

functional structure8
Functional structure
  • Workers grouped according to similar functions and work activities
  • Relatively centralized with CEO as key coordinator
  • Growth of rules, policies, and procedures
  • Strengths: economies of scale, worker expertise
  • Weaknesses: slow responsiveness, over centralization, low coordination between departments, potential conflict

S V Horner 2008

slide9

The Divisional Structure

Chief Executive Officer

Corporate Office (Staff)

Product A

Product B

Product C

Product D

S V Horner 2008

divisional structure
Divisional structure
  • Organized by type of output
  • Decentralized operations with central control
  • Semi-autonomous units functionally organized

S V Horner 2008

divisional structure11
Divisional structure
  • Strengths: responsiveness, internal coordination, decentralized
  • Weaknesses: less efficiency, coordination, and integration across divisions, less functional expertise

S V Horner 2008

divisional structure12
Divisional structure
  • Three important outcomes
    • Allows accurate monitoring and control
    • Facilitates comparison across product lines
    • Provides feedback for improving division performance

S V Horner 2008

variations of divisional structure
Variations of divisional structure
  • Strategic business unit (SBU)
  • Holding company (conglomerate)

S V Horner 2008

sbu form and related diversification
SBU form and related diversification
  • Related diversification or mix of related and unrelated businesses; i.e., limited links
  • Three levels: corporate headquarters (president and staff), strategic business units, product or geographic divisions

S V Horner 2008

sbu form and related diversification16
SBU form and related diversification
  • Divisions within SBUs are integrated with one another, but SBUs are independent of each other
  • Corporate staff oversees and consults with SBUs but provides little direct input into product strategy

S V Horner 2008

sbu form
SBU form
  • Advantages
    • greater decentralization
    • simplifies planning and control at corporate level
    • low synergies among SBUs
  • Disadvantages
    • added hierarchy
    • increases expenses
    • further removes corporate management from operations

S V Horner 2008

holding company structure19
Holding company structure
  • Used when corporate portfolio is unrelated

S V Horner 2008

matrix structure dual authority
Matrix structure: Dual authority
  • Matrix bosses
    • Department head: responsible for functional expertise, maintaining rules, and standards
    • Brand, product, or project manager responsible for coordination, customers, and product performance

S V Horner 2008

matrix structure dual authority22
Matrix structure: Dual authority
  • Two-boss employees
    • May be subject to conflicting demands
    • Dual loyalty means dealing effectively with both bosses
  • Top leader directs both command structures

S V Horner 2008

matrix structure
Matrix structure
  • Strengths
    • Enables coordination possible
    • Better resource utilization
    • Well suited to complex, unstable environment
    • Allows development of either functional (technical) or general management skills
    • Best suited for mid-size organizations with multiple products

S V Horner 2008

matrix structure24
Matrix structure
  • Weaknesses
    • Dual authority violates unity of command principle
    • Requires good people skills and training
    • Involves frequent direct contact and high commitment to matrix form
    • Requires proper environmental conditions

S V Horner 2008

matrix structure25
Matrix structure
  • May be most appropriate when:
    • Sharing scarce resources (e.g., people and/or equipment) across product lines
    • Responding to multiple outcomes (e.g., technical expertise and rapid change in product lines)
    • Environment is complex and unstable
    • Organization is of moderate size with multiple products

S V Horner 2008

structure and strategy
Structure and strategy
  • Structure follows strategy
    • Strategy determines structure, e.g., related diversification forces shift from functional to divisional structure
  • Structure constrains strategy
    • Structure difficult to change

S V Horner 2008

summary
Summary
  • Four basic types of structure: simple, functional, divisional, matrix
  • Each may be appropriate under certain conditions and strategies

S V Horner 2008