1. Organizational Structures
BOH4M

2. Organizing
Deciding how best to group organizational activities and resources

3. Formal vs. Informal Formal Structure Informal Structure
The way that the organization if configured
Defines hierarchy, chain of command, work groups, etc.
Informal Structure
The unofficial working relationships within the organization
i.e. who hangs out with who

4. Functional Divisions The most common structure
Jobs are grouped together that involve the same type of activity
Marketing, finance, manufacturing, HR, etc.
Pros: Managers need only be familiar with one set of skills, coordinating departmental activities easy
Cons: Decision making can become slow/bureaucratic in larger organizations, employees may focus too narrowly on their department

5. A functional structure is the bedrock of horizontal differentiation
A functional structure is the bedrock of horizontal differentiation. It is the first “structure” that organizations adapt as they grow.
Functional Structure
Research and
Development
Sales and
Marketing
Manufacturing
Materials Management
Finance
CEO
4 -

6. Product Divisions Grouping activities around product groups
Examples
GM, Chevrolet, Cadillac
Coke, Sprite, Dasani
Pros: easy to coordinate all activities associated with a product, quicker decision making easy to assess performace
Cons: too much focus on own product, higher admin costs

7. Product Division Structure
Vice President
Sales and Marketing
Vice President Research and Development
Vice President Materials Management
CEO
Vice President Finance
Canned
Soups
Division
PDM
Frozen
Vegetable
Entrees
Baked
Goods
Centralized support functions
Divisions
4 -
4-19

8. Geographic Divisions Grouped based on the area served Examples:
North America, Europe, Asia, etc.
Ontario, Quebec, Maritimes, etc.
Pros: Can tailor operations to unique demands of each market
Cons: Expensive

9. Geographic Structure CEO Regional Operations Central Support Functions
Individual
stores
4 -
4-31

10. Customer Divisions
Grouped based on customer served or distribution channel
Examples:
Industrial Sales, Consumer Sales
Vending machines, retail, restaurants
Pros: can create groups oriented to serving unique needs of specific customers
Cons: Expensive

11. Central Support Functions
Market Structure
Commercial
Division
Consumer
Government
Corporate
CEO
Central Support Functions
4 -

12. Which structure would make the most sense?
Apple
Nike
McDonalds
Nokia
Pepsi

13. The Silo Effect
The main problem with a divisional structure is that grouping people together means you are isolating them from the other groups
This means that interdivisional communication is hard, and people tend to only focus on their own group

14. Matrix Structure
Attempt to avoid the Silo effect by inserting horizontal lines of communication into the structure
Ex: grouping people by function and customer division
Pros: better interdepartmental communication and coordination
Cons: more bosses to report to, requires well organized information systems

15. Matrix Structure 4 - CEO V ice President Engineering Finance
Purchasing
Sales and
Marketing
Research and
Development
Product A
Manager
Product B
Product C
Product D
Product Team
Two-boss employee
4 -

16. Flat vs. Tall Structures
An organization with lots of levels of authority, and one where managers have relatively few people reporting directly to them is “tall”
An organization with few levels of authority, and where managers have large spans of control is “flat”
Pros/Cons?

17. 3 Types of Ownership
Sole Proprietorship
Partnership
Corporation

18. Organization Structures of a Corporation
Ownership of a corporation is controlled by the company’s shares or stocks
Usually for each share, the owner get one vote…10 shares = 10 votes
A proxy (substitute or stand-in) contract can be used
Proxy contracts allows the votes of one shareholder to be cast by another shareholder (given them more power)

19. Public versus Private Corporations
Shares of a public corporation can be purchased by anyone on one of the major stock exchanges (TSX, NYSE, NASDAQ)
Shares of a private corporation limited and can not be purchased by the public…they are only available to owner’s family members or employees of the corporation

20. Shareholders and the Executive Structure
Because shareholders’ votes control the corporation they are above the Chairperson of the Board in the executive structure
It is important to note that the chairperson usually has the most shares and therefore controls the company through her votes