class organization-structure
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ORGANIZATIONAL STRUCTURE
What Is Organizational Structure?
Key Elements:
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization
Key Elements:
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization
What Determines Organizational What Determines Organizational Structure?Structure?
To what degree are tasks subdivided into separate jobs?To what degree are tasks subdivided into separate jobs? On what basis will jobs be grouped together?On what basis will jobs be grouped together? To whom do individuals and groups report?To whom do individuals and groups report? How many individuals can a manager efficiently and How many individuals can a manager efficiently and
effectively direct?effectively direct? Where does decision-making authority lie?Where does decision-making authority lie? To what degree will there be rules and regulations to direct To what degree will there be rules and regulations to direct
employees and managers?employees and managers?
Key Design Questions and Answers for Designing the Proper Organization Structure
What Is Organizational Structure?
Division of labor:
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Less between-job downtime increases productivity
• Specialized training is more efficient
• Allows use of specialized equipment
Division of labor:
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Less between-job downtime increases productivity
• Specialized training is more efficient
• Allows use of specialized equipment
Economies and Diseconomies of Work Specialization
What Is Organizational Structure?
Grouping Activities By:
• Function
• Product
• Geography
• Process
• Customer
Grouping Activities By:
• Function
• Product
• Geography
• Process
• Customer
What Is Organizational Structure?
Narrow Span Drawbacks:
• Expense of additional layers of management.
• Increased complexity of vertical communication.
• Encouragement of overly tight supervision and discouragement of employee autonomy.
Narrow Span Drawbacks:
• Expense of additional layers of management.
• Increased complexity of vertical communication.
• Encouragement of overly tight supervision and discouragement of employee autonomy.
Concept:Concept:
Wider spans of Wider spans of management increase management increase organizational organizational efficiency.efficiency.
Concept:Concept:
Wider spans of Wider spans of management increase management increase organizational organizational efficiency.efficiency.
Contrasting Spans of Control
What Is Organizational Structure?
StrategyStrategy StrategyStrategy
Why DoWhy DoStructuresStructures
Differ?Differ?
Why DoWhy DoStructuresStructures
Differ?Differ?
OrganizationOrganizationSizeSize
OrganizationOrganizationSizeSize
TechnologyTechnology TechnologyTechnology EnvironmentEnvironment EnvironmentEnvironment
Common Organization Designs
The Bureaucracy
StrengthsStrengths Functional economies Functional economies
of scaleof scale Minimum duplication Minimum duplication
of personnel and of personnel and equipmentequipment
Enhanced Enhanced communicationcommunication
Centralized decision Centralized decision makingmaking
WeaknessesWeaknesses Subunit conflicts with Subunit conflicts with
organizational goalsorganizational goals Obsessive concern Obsessive concern
with rules and with rules and regulationsregulations
Lack of employee Lack of employee discretion to deal with discretion to deal with problemsproblems
Decentralization: Benefits When Low and When High
Low Decentralization(High Centralization)
Eliminates the additional responsibility not desired by people performing routine jobs
Permits crucial decisions to be made by individuals who have the “big picture”
High Decentralization(Low Centralization)
Can eliminate levels of management, making a leaner organization
Promotes greater opportunities for decisions to be made be people closest to problems
Mechanistic vs. Organic Designs
Dimension
Stability
Specialization
Formal rules
Authority
Mechanistic
Change unlikely
Many specialists
Rigid rules
Centralized in a few top people
Organic
Change likely
Many generalists
Considerable flexibility
Decentralized, diffused throughout the organization
Structure
Mechanistic Versus Organic Models
Organization Structure: Its Determinants and Outcomes
Types of OrganizationTypes of Organization Functional organizationFunctional organization Project-based organizationProject-based organization Matrix organizationMatrix organization
Parameters for each organization typeParameters for each organization type Organizational Unit Organizational Unit Key playersKey players Roles and ResponsibilitiesRoles and Responsibilities Structure: Information flow between rolesStructure: Information flow between roles Benefits and Challenges (“pros and cons”)Benefits and Challenges (“pros and cons”)
Organizational Structures
Groups, Teams and Committees
Group:Group: A set of people who are assigned to a common A set of people who are assigned to a common task and who work individually to accomplish their task and who work individually to accomplish their assignment. assignment.
Team:Team: A small group of people working on the same A small group of people working on the same problem or subproblem in a project. The team members problem or subproblem in a project. The team members depend on one another to do their tasks. depend on one another to do their tasks. Project Team: Based on the premise that every Project Team: Based on the premise that every
member can and must make a valuable contribution to member can and must make a valuable contribution to the project.the project.
Committee:Committee: Comprised of people who come together to Comprised of people who come together to review and critique issues, propose recommendations for review and critique issues, propose recommendations for action. action.
What Is an Organization? A group of two or more people working together to A group of two or more people working together to
achieve a common set of goalsachieve a common set of goals Developing organization chartsDeveloping organization charts
Organization chartOrganization chartA representation of the positions and relationships A representation of the positions and relationships
in an organizationin an organization Chain of commandChain of command
The line of authority that extends from the highest The line of authority that extends from the highest to the lowest levels of the organizationto the lowest levels of the organization
Staff (advisory) positionsStaff (advisory) positionsJobs that are not part of the direct chain of Jobs that are not part of the direct chain of
command in the organizationcommand in the organization
Organization Definition OrganizationDefinition Organization: A set of : A set of organizationalorganizational units and their different units and their different
relationshipsrelationships with each other. with each other. Organizational units can be organized according to many different categories, for Organizational units can be organized according to many different categories, for
example by function or by project type. Typical examples of organizational example by function or by project type. Typical examples of organizational units: units: Functional organization: Research, Development, Marketing, SalesFunctional organization: Research, Development, Marketing, Sales Project organization: Project 1, Project 2, ….Project organization: Project 1, Project 2, ….
A organization usually has 3 different types of relationships between A organization usually has 3 different types of relationships between organizational units. organizational units. Reporting structure: To report status informationReporting structure: To report status information Decision structure: To propagating decisionsDecision structure: To propagating decisions Communication structure: To exchange of informationCommunication structure: To exchange of information
Functional Organization DefinitionDefinition: In a : In a functional organizationfunctional organization participants are grouped participants are grouped
into so-called into so-called departmentsdepartments, each of which addresses a function., each of which addresses a function. Examples of departments: Examples of departments:
Traditional businesses: Research, development, production, Traditional businesses: Research, development, production, sales, finance. sales, finance.
In software companies the departments correspond to the In software companies the departments correspond to the activities in the software process: Analysis, design, activities in the software process: Analysis, design, integration, testing departments.integration, testing departments.
Key properties: Key properties: Projects are usually pipelined through the departments of a Projects are usually pipelined through the departments of a
functional organization. The project starts in research, then it functional organization. The project starts in research, then it moves to development, then it moves to production, ….moves to development, then it moves to production, ….
Only a few participants are involved in the complete project. Only a few participants are involved in the complete project. Separate departments often address the same cross-functional Separate departments often address the same cross-functional
needs (Examples: configuration management, IT needs (Examples: configuration management, IT infrastructure)infrastructure)
Example of a Functional Organization
Executive Office
Finance Production Sales Marketing
Region1
Region2
IT
Region1
Region2
IT
Region1
Region2
IT
Region1
Region2
IT
Line organization of a „traditional business“
Properties of Functional Organizations Advantages:Advantages:
Members of a department have a good understanding of the Members of a department have a good understanding of the functional area they support.functional area they support.
Departments don‘t compete with another to get the support of Departments don‘t compete with another to get the support of their support teams their support teams
Disadvantages:Disadvantages: Because each department has its own support team, different Because each department has its own support team, different
work procedures and reporting systems are the rule.work procedures and reporting systems are the rule. It is difficult to make major investments in equipment and It is difficult to make major investments in equipment and
facilities. facilities. Example: Two departments with a budget of 50,000 Euro each need a printer that costs 100,000 Euro.Example: Two departments with a budget of 50,000 Euro each need a printer that costs 100,000 Euro. Both need only 50% of the maximum capacity. Both need only 50% of the maximum capacity. Neither department can buy it, because they don‘t have sufficient funds. Neither department can buy it, because they don‘t have sufficient funds.
High chance for overlap or duplication of work among High chance for overlap or duplication of work among departmentsdepartments
Project Organization In a In a project organizationproject organization participants are participants are
grouped into grouped into projectsprojects, each of which has a , each of which has a problem to be solved within time and budget.problem to be solved within time and budget.
Key properties: Key properties: Teams are assembled for a project as it is Teams are assembled for a project as it is
created. Each project has a project leader. created. Each project has a project leader. All participants are involved in the complete All participants are involved in the complete
project.project. Teams are disassembled when the project Teams are disassembled when the project
terminatesterminates
Properties of Project Organizations AdvantagesAdvantages
Very responsive to new project requests (because the project is Very responsive to new project requests (because the project is newly established and can be tailored around the problem)newly established and can be tailored around the problem)
New people can be hired/selected who are very familiar with the New people can be hired/selected who are very familiar with the problem or who have special capabilities. problem or who have special capabilities.
There is no waste of staff workloadThere is no waste of staff workload Disadvantages:Disadvantages:
Teams cannot be assembled rapidly. Often it is difficult to manage Teams cannot be assembled rapidly. Often it is difficult to manage the staffing/hiring process. the staffing/hiring process.
Because there are „no predefined lines“, roles and responsibilities Because there are „no predefined lines“, roles and responsibilities need to be defined at the beginning of the projectneed to be defined at the beginning of the project
Matrix Organization In a matrix organization, participants from different departments of the In a matrix organization, participants from different departments of the
functional organizastion are assigned to work on projects as they are created. functional organizastion are assigned to work on projects as they are created. The project manager and team members may be assigned to the project for The project manager and team members may be assigned to the project for
<= 100 % of their time<= 100 % of their time
Executive Office
Finance Production Sales Marketing
Project A
Project B
Project C
Participants of Project A
Participants of Project B
Properties of Matrix Organizations
Advantages:Advantages: Teams for projects can be assembled rapidlyTeams for projects can be assembled rapidly Scarce expertise can be applied to different projects Scarce expertise can be applied to different projects
as needed as needed Consistent work and reporting procedures can be Consistent work and reporting procedures can be
used for projects of the same type.used for projects of the same type. Disadvantages:Disadvantages:
Team members usually are not familiar with each Team members usually are not familiar with each Team member have different working stylesTeam member have different working styles Team members must get used to each otherTeam members must get used to each other
New Challenges in Matrix Organizations
Team members must respond to two different bosses with different Team members must respond to two different bosses with different focus:focus: Focus of the functional manager: Assignments to different projects, Focus of the functional manager: Assignments to different projects,
performance appraisalperformance appraisal Focus of the project manager: Work assignments, project team supportFocus of the project manager: Work assignments, project team support
Team members working on multiple projects have competing Team members working on multiple projects have competing demands for their timedemands for their time Team members working on more than one project have even more project Team members working on more than one project have even more project
members to report tomembers to report to Some people who have claim on the team member‘s time may be at similar Some people who have claim on the team member‘s time may be at similar
levels in the organization‘s hierarchylevels in the organization‘s hierarchy
Multiple work procedures and reporting systems are used by different Multiple work procedures and reporting systems are used by different team membersteam members Development of common procedures needs to be addressed at project kickoff Development of common procedures needs to be addressed at project kickoff
timetime
When to use a Functional Organization
Projects with high degree of certainty, stability, uniformity and Projects with high degree of certainty, stability, uniformity and repetition.repetition. Requires little communicationRequires little communication Role definitions are clearRole definitions are clear
When?When? The more people on the project, the more need for a formal The more people on the project, the more need for a formal
structurestructure Customer might insist that the test team be independent from the Customer might insist that the test team be independent from the
design team design team Project manager insists on a previously successful structure Project manager insists on a previously successful structure
When to Use a Project or Matrix Organization
Project with degree of uncertaintyProject with degree of uncertainty Open communication needed among Open communication needed among
membersmembers Roles are defined on project basisRoles are defined on project basis
When?When? Requirements change during developmentRequirements change during development New technology develops during projectNew technology develops during project
Metamodel for Organizations
Functional Organization
ProjectOrganization
Matrix Organization
Definition: Role
A A rolerole is a set of responsibilities is a set of responsibilities A role is instantiated during a project and A role is instantiated during a project and
assigned to one or more persons.assigned to one or more persons. Instances of roles are often also called Instances of roles are often also called
playersplayers („who are the key players?“) or („who are the key players?“) or stakeholdersstakeholders
General Responsibilities of Team Members
Technical responsibilities:Technical responsibilities: Perform assigned tasks within time and budgetPerform assigned tasks within time and budget Acquire technical skills and knowledge needed to perform Acquire technical skills and knowledge needed to perform
the workthe work People responsibilitiesPeople responsibilities
Identify situations and problems that might affect your Identify situations and problems that might affect your team members‘s tasksteam members‘s tasks
Keep your team members informed of your progress and Keep your team members informed of your progress and problems you encounterproblems you encounter
Hierarchical Organization Often also called Often also called centralized organizationcentralized organization. Examples: Military, . Examples: Military,
church, traditional businesses. church, traditional businesses. Key property:Key property: The organization has a tree structure. Decisions The organization has a tree structure. Decisions
are made at the root and communicated to the leaf nodes. The are made at the root and communicated to the leaf nodes. The decision association is also used for reporting and communication. decision association is also used for reporting and communication.
Advantages: Advantages: Centralized control over project selectionCentralized control over project selection One set of management and reporting procedures for all project participants One set of management and reporting procedures for all project participants
across all projectsacross all projects Established working relationships among peopleEstablished working relationships among people Clearly established lines of authority to set priorities and resolved conflictsClearly established lines of authority to set priorities and resolved conflicts Authority to pressure people to honor their action itemsAuthority to pressure people to honor their action items Clearly defined career pathClearly defined career path
Hierarchical Project Organization
Chief Executive
First Level Manager(“Front-Line Manager”)
Project Members
Basis of organization:Complicated information and control flow
across hierarchical boundaries
Basis of organization:Complicated information and control flow
across hierarchical boundaries
A B
A wants to talk to B: Complicated Information Flow
Control FlowInformation Flow
B wants to make sure A does a certain change: Complicated Controlflow
Example of a Hierarchical Organization:Chief Programmer Team [Brooks 1995] Chief Programmer
Librarian Administration Tester
Junior Programmer
AssistantChief Programmer
Senior Programmer
Disadvantages of Hierarchical Organizations
Slow response timeSlow response time The process of evaluating and approving change requests often takes too long The process of evaluating and approving change requests often takes too long
because of long reporting/decision lines.because of long reporting/decision lines. Difficult to manage the workload of the people:Difficult to manage the workload of the people:
People are assigned fulltime to the organization, but projects don’t’ come in a People are assigned fulltime to the organization, but projects don’t’ come in a smooth stream.smooth stream.
Project request might not require the people who are available or their expertise. Project request might not require the people who are available or their expertise. Unfamiliarity with application or solution domain areaUnfamiliarity with application or solution domain area
People are usually hired for their technical proficiency in a specialty that the People are usually hired for their technical proficiency in a specialty that the organization normally performs. organization normally performs.
They often have only limited experience, if the problem to be solved is outside of They often have only limited experience, if the problem to be solved is outside of their field of expertise.their field of expertise.
Nonhierarchical Organizations
Key property:Key property: The organization has a The organization has a general graph structure with different edges general graph structure with different edges for the decision, reporting and communication for the decision, reporting and communication flows. Decisions can be made at various nodes flows. Decisions can be made at various nodes in the graph. in the graph.
Nonhierarchical Project Organization
Project Leader
Coaches
Team Members
Basis of organization:Nonlinear information flow across dynamically formed units
Basis of organization:Nonlinear information flow across dynamically formed units
Subsystem TeamSubsystem TeamSubsystem Team
A B
B wants to make sure A does a certain change: Decision FlowA wants to talk to B: Communication Flow
A Nonhierarchical Organization: Egoless Programming [Weinberg 1971]
Analyst
Designer Librarian
Tester Programmer
Observations on Organizational Structures
Hierarchical structure Hierarchical structure ““Reports”, “Decides” and “Communicates-With” all mapped on the same Reports”, “Decides” and “Communicates-With” all mapped on the same
associationassociation Does not work well with iterative and incremental software development Does not work well with iterative and incremental software development
processprocess Manager is not necessarily always rightManager is not necessarily always right
Project-based structuresProject-based structures ““Reports”, “Decides” and “Communicates-With”are different associationsReports”, “Decides” and “Communicates-With”are different associations Cuts down on bureaucracy Cuts down on bureaucracy Reduces development timeReduces development time Decisions are expected to be made at each levelDecisions are expected to be made at each level Hard to manageHard to manage
Flexibility of Organizations An organization is flexible, if it allows “late” or “dynamic” An organization is flexible, if it allows “late” or “dynamic”
bindings between roles and people and information flows between bindings between roles and people and information flows between roles. roles.
Late binding (Cannot be changed after project kickoff):Late binding (Cannot be changed after project kickoff): Organizational units and information flows are established for Organizational units and information flows are established for
the project. (Example: The top level design influences the team the project. (Example: The top level design influences the team structure: At kickoff each subsystem is assigned to a team)structure: At kickoff each subsystem is assigned to a team)
Dynamic binding (Can be changed anytime):Dynamic binding (Can be changed anytime): The organizational relationship changes over time (Example: The organizational relationship changes over time (Example:
We start with a hierarchical organization at project kickoff and We start with a hierarchical organization at project kickoff and end with a nonhierarchical organization at project finish time.) end with a nonhierarchical organization at project finish time.)
We recognize the fact that organizational units change over We recognize the fact that organizational units change over timetime
New teams can be formedNew teams can be formed Existing teams can be mergedExisting teams can be merged An existing team can be removed from the organizationAn existing team can be removed from the organization
Key Concepts for Mapping Roles to People
Authority: Authority: The ability to make binding decisions between people and rolesThe ability to make binding decisions between people and roles
Responsibility: Responsibility: The commitment to achieve specific results. The commitment to achieve specific results.
Accountability: Accountability: Tracking a task performance to a participant.Tracking a task performance to a participant.
Delegation: Delegation: Binding a responsibility assigned to one person (including Binding a responsibility assigned to one person (including
yourself) to another person.yourself) to another person.
Authority vs Responsibility vs Accountability Authority vs ResponsibilityAuthority vs Responsibility
They are similar: Both are upfront agreements. Before you start a They are similar: Both are upfront agreements. Before you start a project, you agree on who can make decisions and who will ensure that project, you agree on who can make decisions and who will ensure that particular results are achieved.particular results are achieved.
They are different: Authority focuses on process such as activities and They are different: Authority focuses on process such as activities and tasks, responsibility focuses on outcome such as work products and tasks, responsibility focuses on outcome such as work products and deliverablesdeliverables
Responsibility vs Accountability: Responsibility vs Accountability: Similarity: Both focus on resultsSimilarity: Both focus on results Difference: Responsibility is a before-the-fact agreement, Difference: Responsibility is a before-the-fact agreement,
accountability is an after-the-fact process.accountability is an after-the-fact process. If you are responsible you should be held accountable.If you are responsible you should be held accountable. If you are not responsible you should not be held accountable. If you are not responsible you should not be held accountable. Scapegoating: Making somebody accountable who was not responsible Scapegoating: Making somebody accountable who was not responsible
Delegation Delegation:Delegation: Rebinding a responsibility assigned to one participant Rebinding a responsibility assigned to one participant
(including yourself) to another project participant.(including yourself) to another project participant. Three reasons for delegation:Three reasons for delegation:
Time Management: To free yourself up to do other tasksTime Management: To free yourself up to do other tasks Expertise: To have the most qualified person make decisionsExpertise: To have the most qualified person make decisions Training: Training: To develop another person’s ability to handle additional To develop another person’s ability to handle additional
assignments. assignments. You can delegate authority, but not responsibilityYou can delegate authority, but not responsibility You can share responsibilityYou can share responsibility
Shared relationship between activities and roles can be described in Shared relationship between activities and roles can be described in a linear responsibility charta linear responsibility chart
Linear Responsibility Chart A A linear responsibility chart linear responsibility chart is a matrix that is a matrix that
depicts the role that each project participant will depicts the role that each project participant will play in different activities identified in the work play in different activities identified in the work breakdown structure. breakdown structure.
Rows: Project activitiesRows: Project activities Columns: Roles/Project participants Columns: Roles/Project participants Entries: Type of responsibilityEntries: Type of responsibility
P (Primary responsibility):P (Primary responsibility): You have committed to ensure that the desired result is You have committed to ensure that the desired result is achievedachieved
S (Secondary responsibility):S (Secondary responsibility): You have committed to some portion of the result You have committed to some portion of the result A (Approval):A (Approval): You are not doing the work, but you will approve what has been You are not doing the work, but you will approve what has been
donedone R (Review):R (Review): You will review and comment on the work product of an activity You will review and comment on the work product of an activity O (Output):O (Output): You will receive the work product of an activity You will receive the work product of an activity I (Input):I (Input): You will provide input for a task or activity You will provide input for a task or activity
Example of a Responsibility Chart
Project Team TeamProject Team Team Team Team Manager Leader Member A Member BManager Leader Member A Member B
Develop SPMP P
Run weekly meeting
A SP
Write SDD P S S S
Legend:P = Primary responsibilityS = Secondary responsibility)A = Approval
Analysing Responsibility Charts identifies Risks Problem: Somebody is heavily committed.Problem: Somebody is heavily committed.
Possible Project Management Issues: Not enough time to handle Possible Project Management Issues: Not enough time to handle all duties, making too many key decisions, What if this person all duties, making too many key decisions, What if this person leaves during the projectleaves during the project
Problem: The project manager has no direct responsibilitiesProblem: The project manager has no direct responsibilities Issues: Will the project manager fully understand status reports?Issues: Will the project manager fully understand status reports?
Problem: An activity requires many approvalsProblem: An activity requires many approvals Issue: Does anyone else have to approve the activity. Are there Issue: Does anyone else have to approve the activity. Are there
too many people involved approvals? Is your estimated duration too many people involved approvals? Is your estimated duration of the activity too optimistic, because the approval is out of your of the activity too optimistic, because the approval is out of your hands?hands?
After you identify an issue, you should address it in your risk After you identify an issue, you should address it in your risk management plan. management plan.
Micro Management
Micromanagement is the excessive Micromanagement is the excessive involvement of a manager in the details of a involvement of a manager in the details of a task assigned to a team member. task assigned to a team member.
Micromanagement is inefficient use of the Micromanagement is inefficient use of the time and energy of all project participants. time and energy of all project participants.
It leads to tension and low morale among all It leads to tension and low morale among all project members.project members.
Why do people micromanage?Why do people micromanage?
Reasons for Micro Management
The manager is interested in and enjoys the workThe manager is interested in and enjoys the work The manager is a technical expert and feels he/she can do the job The manager is a technical expert and feels he/she can do the job
best. best. The manager may fell they did not explain the assignment clearly. The manager may fell they did not explain the assignment clearly. The manager is looking for a way to stay involved with the person The manager is looking for a way to stay involved with the person
and or the team. and or the team. The manager feels threatended because you have more technical The manager feels threatended because you have more technical
knowledge. knowledge. The manager does not have a clear understanding on how to spend The manager does not have a clear understanding on how to spend
project time. project time. The manager wants to stay up-to-date in case somebody else asks The manager wants to stay up-to-date in case somebody else asks
about the work. about the work.
Overcoming Micro Management
Don‘t be defensive when the manager asks questions. Don‘t be defensive when the manager asks questions. Doing so make it appear as if you are hinding something and Doing so make it appear as if you are hinding something and
the manager will worry even more. the manager will worry even more. Thank the micromanager for the interest and time. Thank the micromanager for the interest and time.
Complaining about micromanagement will cause the Complaining about micromanagement will cause the micromanager to do it even more.micromanager to do it even more.
Offer to explain to the micromanager how you will approach Offer to explain to the micromanager how you will approach your tasksyour tasks
Work with the micromanager to develop a scheme for sharing Work with the micromanager to develop a scheme for sharing progress and accomplishments. progress and accomplishments.
Every Organization has a Structure
But structures can differ Due to choiceDue to national laws
The words used to describe them also can differ
Organization chart, design, structureThe 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
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
Special Cases
Family structure Holding companies Virtual structure
Except for “born globals,” Most Companies Grow into Expansion
Most Common Structural TypesAmong Global Firms are: Functional structureFunctional structure Divisional structure Hybrid structures
Combined functional/divisional structureMatrix structure
Global Functional Structure
V P M arke tin g V P F in an ce
C ou n try A C ou n try B
P rod u c t 1 P rod u c t 2 P rod u c t 3
V P O p era tion s V P R & D V P L eg a l is su es
C E O
Divisional Structure Can Take Different Forms
ProductProduct GeographicGeographic Customer group servedCustomer group served
Global Geographic Division Structure
A d m in /F in an ce
V P fo r th e A m ericas V P E u rop e V P E . A s ia
M arke tin g O p era tion s
A u s tra lia /N Z In d on es ia Is lan d s
V P A u s tra las ia
C E O
Global Product Structure
D IV IS IO N A L S TR U C TU R E (B Y P R O D U C T L IN E S )
F R A G R A N C E S S K IN C A R E P R O D U C TS H A IR C A R E P R O D U C TS O TH E R P R O D U C TS
C O S M E TIC S C O R P O R A TIO N
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
M an ag em en t
fin an c in g
p arts
sp orts u tilit ies
lig h t tru cks
au tos
S tra teg ic B u s in ess u n its N . A m erica L a tin A m erica E u rop e A s ia
E xecu tive C om m ittee
C h a irm an o f th e B oard
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
Interorganizational Structures
Strategic Strategic aallianceslliances Joint Joint vventuresentures Partial acquisitionsPartial acquisitions
Special Cases
Family structures—usually hierarchical with a Family structures—usually hierarchical with a patriarch/matriarch or a set of family members patriarch/matriarch or a set of family members who divide tasks according to skill or obligation who divide tasks according to skill or obligation
Structures that arise out of national tradition—Structures that arise out of national tradition—German firms always have union representation German firms always have union representation and and twotwo levels of boards levels of boards
Holding companiesHolding companies Virtual organizationsVirtual organizations
Organizational Culture
Organizational cultureOrganizational culture is a set of shared is a set of shared assumptions, values, and behaviors that assumptions, values, and behaviors that characterize the functioning of an characterize the functioning of an organization.organization.
Many experts believe the underlying cause Many experts believe the underlying cause of many companies’ problems is NOT the of many companies’ problems is NOT the structure or staff, structure or staff, but the but the cultureculture..
Ten Characteristics ofOrganizational Culture
Member identity*Member identity* Group emphasis*Group emphasis* People focusPeople focus Unit integration*Unit integration* ControlControl
Risk tolerance*Risk tolerance* Reward criteria*Reward criteria* Conflict tolerance*Conflict tolerance* Means-ends orientationMeans-ends orientation Open-systems focus*Open-systems focus*
*Project work is most successful in an organizational culture where these characteristics are highly prevalent and where the other characteristics are balanced.