1. Organizational Design: Structure, Culture, and Control
Instructor:
Dr.Gehan Shanmuganathan

2. Zappos: Success through customer service
Zappos: An Organization Designed to Deliver Happiness
ChapterCase 11
Zappos: Success through customer service
Customer service all in-house
No scripts or timed calls
Flat Organizational Structure = Flexibility
Job rotation = trained talent
4 weeks of orientation training
Including 2 weeks on customer service phones!
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3. LO 11-1 Define organizational design and list its three components.
LO Explain how organizational inertia can lead established firms to failure.
LO Define organizational structure and describe its four elements.
LO Compare and contrast mechanistic versus organic organizations.
LO Describe different organizational structures and match them with appropriate strategies.
LO Describe the elements of organizational culture and explain where organizational cultures can come from the how they can be changed.
LO Compare and contrast different strategic control and reward systems.
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4. How to Organize for Competitive Advantage
Organizational design
Goal is to translate strategies into realized ones
Structure
Processes
Procedures
Structure follows strategies
Structure must be flexible
Yahoo failed to make changes to their organizational structure!
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5. Organizational Inertia
EXHIBIT 11.2
Organizational Inertia
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6. The Key Elements of Organizational Structure
Organizational structure determines
Work efforts of individuals and teams
Resource distribution
Key building blocks
Specialization
Formalization
Centralization
Hierarchy
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7. Assembling the Pieces: Mechanistic vs. Organic Organizations
Low degree of specialization and formalization
Flat structure
Decentralized decision making
Uses virtual team due to information technology
Example: Zappos, W. L. Gore, and many high-tech firms
Mechanistic organizations
High degree of specialization and formalization
Tall hierarchy
Centralized decision making
Example: McDonald’s
INSTRUCTOR: Embedded at the bottom of this slide is a link to a 10-minute video by MIT professor Andrew McAfee on how Web 2.0 may change the workplace.
Video on Web 2.0
Changing workplace
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8. Matching Strategy and Structure
Simple structure
Small firms with low complexity
Top management makes all important strategic decisions
Low degree of formalization and specialization
A basic organizational structure
Examples: small advertising, consulting, accounting, and law firms
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9. Functional Structure Functional structure
Groups of employees with distinct functional areas
The areas of expertise correspond to distinct stages in the company value chain activities
Example: College of Business Administration, School of Management…etc.
Recommended with narrow products/services
Matches well with business-level strategy
Cost leadership  Mechanistic organization
Differentiation  Organic organization
Integration strategy  Ambidextrous organization
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10. Multidivisional Structure
Consists of several distinct SBUs
Each SBU is independent and led by a CEO
Each CEO of SBUs report to the corporate office
Examples:
Zappos is an SBU under Amazon
Skype is an SBU under Microsoft
Paypal is an SBU under eBay
Companies using M-form structure
GE, Honda
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11. Typical M-Form Structure
EXHIBIT 11.7
Typical M-Form Structure
Functional Structure
Matrix Structure
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12. Matrix Structure A combination of functional and M-form structure
Creation of dual line of authority and reporting lines
Each SBU receives support both horizontally and vertically
Very versatile
Enhanced learning from different SBUs
Shortcomings
Difficult to implement
Complexity increases when expanding, especially globally
Unclear reporting structure causes confusion and delays
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13. Organizational Culture
Culture must be valuable, rare, inimitable, and non-substitutable (RBV)
Causal ambiguity and social complexity
Organizational culture is an important resource!
Southwest Airlines
Friendly and energized employees work collaboratively
Zappos
Deliver WOW through service
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14. Strategic Control and Reward Systems
Internal governance mechanisms
Culture
Sanctions
Input controls
Rules and standard operating procedures
Budgets
Behavior guidelines
Output controls
Result-oriented
ROWEs
INSTRUCTOR: Embedded at the bottom of this slide is a 10-minute video by RSA about Daniel Pink’s work on motivation and the surprising results that paying more actually yields lower performance…The video is referenced in the text at the top of page RSA Animate is well worth a look if you have not explored their video library yet. It can be found at: or their home website: and searching for “Animate”.
Dan Pink’s
RSA Video
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15. ChapterCase 11/ Consider This
WOW factors became WOW mistakes
Erroneous price cap not discovered for 6 hours
Zappos honored the sales placed during the time with mistaken price$49.95 everything!
Customers are happy due to the fact that Zappos handled the situation smoothly
This is the real WOW!!!
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