1. Organizational Structure
Session 21
Organizational Structure

2. Learning Objectives
1. Identify five traditional organizational structures and the pros and cons of each
Explain the product-team structure and how it is a prototype of more open/agile structures.
What is meant by agile, virtual organizations
Explain what is meant by boundaryless organizations and why they are important

3. Traditional Organizational Structures
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

4. Elements of Structure
Regardless of Type all Structures should include:
Some kind of governance
Rules by which the organization operates
A distribution of work

5. Remains the fundamental organizational structuring philosophy
Division of Labor
Remains the fundamental organizational structuring philosophy

6. Winthrop Organization Chart
February 20, 2007
February 20, 2007

7. Traditional Structures
Simple
Functional
Divisional
Matrix
Product-Team

8. 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 – eventually micro manager.
Most businesses in this country and around the world are of this type

9. 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

10. Functional Organization Structures

11. Functional Structure

12. 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

13. Divisional Structure

14. Geographic Divisional Structure: Army

15. 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
Competitive M-Form Unrelated divisions/SBUs (conglomerately diverse) therefore no forced sharing of information & techniques; divisions operate autonomously holding company model Simpler structure

16. Competitive in what way?
Competitive M-Form
Competitive in what way?

17. Divisional Organization Structure

18. 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

19. 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

20. TEXTRON HOLDING COMPANY

21. 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 product-project specialization

22. Matrix Organizational Structure

23. Global Matrix Structure

24. 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

25. The Product-Team Structure

26. Trends Affecting Organizations in the 21st Century
Globalization
The Internet
Speed

27. Efforts to Improve Traditional Structures
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

28. Creating Agile, Virtual Organizations
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

29. Outsourcing—Creating a Modular Organization
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)

30. 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

31. 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

32. Ambidextrous Learning Organization
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