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

Organizing Involves: VERTICAL STRUCTURE - Coordination from Top to Bottom »Who reports to whom? »Vertical linkages u Chain of Command u Rules and Plans u Information Systems

Organizing Involves: HORIZONTAL STRUCTURE - Departmentalization »Who works together? »Horizontal linkages (for cross- functional communication) u Information systems u Direct contact (liaisons, etc.) u Task forces u Full time integrators u Teams

Departmentalization Types u Internal Operations Oriented –Functional –Network (Virtual) u Output Oriented –Divisional »Product »Geographic »Customer –Team (Cluster) u Combinations –Hybrid »different types at different places in an org. –Matrix (Multi- focused) »different types simultaneously at the same places in an org.

Functional Approach Departments based on similar activities, skills and resource use. Vice President Marketing Production Control Vice President Manufacturing Vice President Finance President CEO VPFinanceVPProductionVPMarketing

Divisional Approach Departments based on working on similar output (product/geography/customer). Functions (e.g., marketing) are split among the divisions. Vice President Marketing Production Control Vice President Manufacturing Vice President Finance President CEO VPBeerVPComputersVPLawnmowers

u Functions (e.g., marketing) are split among the divisions. Departmentalization by Division (Product)

Geographic divisions u All functional skills in each region

Departmentalization by Customer

Functional Approach u Advantages: –Efficient use of resources –Economies of Scale –In-depth skill specialization u Disadvantages: –Poor communication among departments –Slow response to external changes –Loyalty more to function than customer or the whole organization

Divisional Approach u Advantages: –Quicker changes in an unstable environment –More in touch with customers u Disadvantages: –Duplication of resources needed across divisions (i.e., Costs) »Competition for resources among divisions »More managers needed –Less professional specialization

Project C Manager Project B Manager Project A Manager EngineeringManagerMarketingManagerSoftwareManager e.g., Functional and Product structures combined. Employees are assigned to a specific project team and have a permanent functional unit Matrix Structure President

Global Matrix Structure Canadian Division Individual business division Automobile product group Chemicals product group Consumer goods product group North American Area United States Division Mexican Division European Area British Division French Division Pacific Area Japanese Division TTaiwan Division

Matrix Structure: General Motors’ IT

Matrix Approach u Two chains of command simultaneously (e.g., functional and product or product and geog.) u To get the advantages of both structures. For example: Functional (efficiency, high specialization) and Divisional Structures (decentralized decision making) u Often used with sophisticated technology, fast- changing environment and/or multinational firms

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

Team Approach u Cross-functional teams (Clusters) consist of employees from various functional departments u Teams typically have more decision making power than previously held by workers at their levels.

Team Structure CEO Functional Managers Managers SalesDesignProduction Product A Team Product B Team Product C Team = = Team member Product Team Manager

Team Approach u Advantages –More ideas and skills available –Quicker response time (than centralized) –Better morale –Reduced administrative overhead u Disadvantages –Conflict –Time and resources spent on meetings

Network Approach u Organization (Virtual) divides major functions among separate companies brokered by a small headquarters organization u Somewhat like a functional organization.

Core Firm (U.S.A.) Product Development Firm (France) Marketing Firm (U.K.) Customer Service Firm (U.S.A.) Production Firm (China) Accounting Firm (U.S.A.) Network Organizational Structure

Network Approach u Advantages –Global competitiveness, especially by small firms –Flexibility –Reduced Costs u Disadvantages –No hands-on control –Limited loyalty among member firms

Designs for Global Operations u Basic Global Structures –Global Product Division Structure »Meganational Strategy u Diverse products each sold in many countries –Global Geographic Division Structure »Multidomestic Strategy u Products/services tailored to specific countries/regions –Global Matrix Structure »Transnational Strategy u Global Integration with Local Responsiveness –Global Functional Structure »Goal: Tight, centralized control (Rare) (Rare)