ORGANIZATIONAL STRUCTURE Chapter 12 Lecture 1

Every Organization has a Structure But structures can differ   Due to choice   Due to national laws The words used to describe them also can differ   Organization chart, design, structure The way they are drawn can differ   pyramid, sideways pyramid, circle

The Structural Configuration is the skeleton of the organization reflects corporate governance is intended to meet organizational objectives arises out of strategic directions and causes managers to ask:   what structure will best aid us in meeting our strategy and objectives?

Restructuring Occurs for Many Reasons Turnover in top management Competitive positioning Mergers and/or acquisitions Cost-savings Even the illusion of managerial control

The Illusion of Managerial Control “ “We trained hard—but it seemed that every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization.” –Petronius Arbiter, 210 B.C.

Structural Choice is Important Because it focuses attention on particular areas shapes how resources will be used directs communication flows defines control and other processes illustrates people’s roles relative to others’ roles

Your Job Understand organizational objectives (articulated in the varied levels of strategy) Analyze the structure Assess the match between organizational strategies and structures

Top Managers Answer to a Power Greater than Themselves God or conscience in a wholly owned private firm God or conscience in a wholly owned private firm The family in a family owned firm The family in a family owned firm The Board in a publicly owned firm: The Board in a publicly owned firm:  U.S. boards often are chaired by the CEO  Boards in U.K. usually are chaired by a non executive  European companies often have a two-tier board  In Germany, duties are split between supervisory and management boards  Spain and France often use an executive committee

Beneath the Board are Several Structural Types Intra and interorganizational networks Intra and interorganizational networks Special cases Special cases Functional, divisional, hybrids Functional, divisional, hybrids

Networks Intraorganizational networks internal networks shamrock spiderwebs Interorganizational networks   strategic alliances   joint ventures   partial acquisitions/mergers   cross-sector partnerships

Special Cases Family structure Holding companies Virtual structure

Except for “born globals,” Most Companies Grow into Expansion

Most Common Structural Types Among Global Firms are: Functional structure Functional structure Divisional structure Hybrid structures   Combined functional/divisional structure   Matrix structure

Global Functional Structure

Divisional Structure Can Take Different Forms Product Product Geographic Geographic Customer group served Customer group served

Global Geographic Division Structure

Global Product Structure

Hybrids Often Emerge to Deal with Problems of Functional and Divisional Forms Matrix forms are hybrids Some hybrids combine a mostly functional structure with one or more important products or markets, e.g., North America Some hybrids combine a mostly divisional structure with one or more important functions, e.g., marketing

We Use a Matrix to Organize Roles and Relationships in Business Education

Global Matrix Structure

Combined Functional and Divisional Structure Danone Group, 2003 Chair and CEO Vice Chair and COO General Secretary Exec VP, Finance Exec VP, Fresh Dairy Exec VP, Water Exec VP, Biscuits and Cereal Snacks Exec VP, Asia-Pacific Exec VP, Intl Strategy

Intraorganizational Structures spiderwebs spiderwebs internal internal networks networks shamrocks shamrocks horizontal horizontal keiretsu keiretsu chaebol chaebol

Mitsubishi Group Network

Mitsubishi Village

Interorganizational Structures Strategic alliances Strategic alliances Joint ventures Joint ventures Partial acquisitions Partial acquisitions

Special Cases Family structures—usually hierarchical with a patriarch/matriarch or a set of family members who divide tasks according to skill or obligation Family structures—usually hierarchical with a patriarch/matriarch or a set of family members who divide tasks according to skill or obligation Structures that arise out of national tradition— German firms always have union representation and two levels of boards Structures that arise out of national tradition— German firms always have union representation and two levels of boards Holding companies Holding companies Virtual organizations Virtual organizations