Transcript Organizational Structure

Organizational Structure
Chapter 11
McGraw-Hill/Irwin
Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
1.
2.
3.
4.
Identify five traditional organizational structures
and the pros and cons of each
Describe the product-team structure and explain
why it is a prototype for the more open, agile
organizational structure
Explain five ways improvements have been
sought in traditional organizational structures
Describe what is meant by agile, virtual
organizations
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Learning Objectives (contd.)
5.
6.
7.
Explain how outsourcing can create agile, virtual
organizations, along with its pros and cons
Describe boundaryless organizations and why
they are important
Explain why organizations of the future need to
be ambidextrous learning organizations and how
this fits into the global economy
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Organizational Structure

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
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Simple Organizational Structure

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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
Most businesses in this country and around the
world are of this type
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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
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Functional Organization Structures
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Divisional Structure
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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
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Divisional Organization Structure
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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
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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 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
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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 productproject specialization
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Matrix Organizational Structure
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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
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The Product-Team Structure
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What a Difference a Century Can Make
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Trends Affecting Organizations
in the 21st Century

Globalization

The Internet

Speed
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Efforts to Improve Traditional
Structures
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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
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Creating Agile, Virtual Organizations
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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 central to highprofitability operations and then builds a virtual
organization around those capabilities
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Outsourcing—Creating
a Modular Organization
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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
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Types of Boundaries
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Horizontal boundaries—between different
departments or functions in a firm.
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
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Becoming Boundaryless
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Jack Welch coined the term
“boundaryless” to illustrate his vision for
GE
Outsourcing, strategic alliances, productteam structures, reengineering,
restructuring—all are ways to move
toward boundaryless organization
Technology, particularly driven by the
Internet, has and will be a major driver of
the boundaryless organization
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From Traditional Structure to B-Web
Structure
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Ambidextrous Learning Organization
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The evolution of the virtual organizational
structure as an integral mechanism managers use
has brought with it recognition of the central role
knowledge plays in implementation
The shift from exploitation to exploration
(Ragan) indicates the growing importance of
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
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