11 Organizational Structure

MGT 5391: Session # 8 8 Types of Structures
http://macy.ba.ttu.edu/5491 Week #11organizational structure 1
Inputs
Environmental Drivers
1. External/ Global Business Environment 2.Internal Environment
A.Corporate, Business, Worksite And Individual: Capabilities And Barriers (Culture)
TRANSFORMATION
THE ORGANIZATION DESIGN PUZZLE: HIGH PERFORMANCE LEARNING ORGANIZATION
Outputs
Results From High Performance / Exemplar Organizations
1. Macro Organizational Structures 8. Shared Leadership & Decision Making Systems 7. Recognition and Financial Reward Systems 6. People and Human Resource Systems 5. Micro Organization Structures: Team Design 2. The Job/work
Organizational Effectiveness
1. Customers 2. Financial/ Business 3. Employees
Interdependence and Design FIT
3. Technologies
B.Vision Direction (VDSP) C. Organizational Strategies D. Business Models
4. Information and Knowledge Systems
4. Organizational Innovation
5. Societal
Organizational Processes (Individual, Group, Organizational and Business Processes (Total Quality, Business Processes, etc.)
E. Labor (Employee) Management Mutuality

F. Transformation/ Change Processes
(Feedback)
________________ Source: Modified from Macy, et al., (1995). Presented to the National Academy of Management, Vancouver, Canada, August.
Figure 1. High performing organizations: Overall open systems model of critical components
The Common Eight Different Options for Organization Structure

1. 2. 3. 4. 5. 6. 7. 8. The Headquarters Structure The Centerless Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure Combinations of the above seven
OST Eight TRANSFORMATION Categories - 1

MACRO STRUCTURE
1. CORPORATE Office 2. S.B.U. (Global and Regional) 3. Value Chain: Demand and Supply sides 4. Business/Product Teams 5. Enterprise Teams Concepts: Coordination/interface Communication Power & Control (Decision Making)Redistribution of Power & Control Reporting Capabilities Conflict Complexity Information Centralization Span of Control Division of Labor Vertical and/or Horizontal Structure
Todays Focus
Traditional Organization
Power Knowledge Information Rewards
Performance
Outcomes = Lower Performance (3.8% Financial Improvement Per Year)
High Performance Work System

#1 Macro Structure
#5 Micro Structure #2 Job/Work #8 Shared Leadership # 6 Human Resource Systems
Performance Power Knowledge Information Rewards
#4 IS/IT #3 Technologies #7 Recognition & Financial Reward Systems Outcomes = Higher Performance (10% Financial Improvement Per Year)
Organization Structure is about:

- Power and Control and the Re-distribution of Power and Control (Less Layers -fewer chiefs) - Decision Making at the Lowest appropriate level
Traditional Organization Environment
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) Week #11organizational structure 7 http://macy.ba.ttu.edu/5491
Boundaries of the System
Organization Structure is about:

- Effective Communication - Effective Coordination - Speed/Responsiveness to the Customer (both internal & external) - Empowerment throughout the organization
21ST CENTURY ORGANIZATIONAL STRUCTURE DESIGN BLOCKS: To Deliver Business Results
Corporation Organization Global Strategic Business Unit (S.B.U.) Market Focus/Demand Side Alignment Enterprise Teams (Customer, Product, Channel, and Process Supply Side Alignment to Manufacturing Business Centers - Lines of Business (Process Product Supply Mini-Businesses) SDWTs to Work Teams Individuals
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 9
Typical Different Levels of 21st Century Macro Organization Structures

1. Corporate Office/G.O. Structure 2. Regional/Global Structure
3. Business Teams
4. Product Teams 5. Enterprise Teams (Customer & Supplier Sides of Value Chain)
21st Century Organization Design

GBUs -Bus. A -Bus. B -Bus. C -Bus. D -Bus. E -Bus. F -Bus. Markets/ Sales Orgs. MDOs -Western Europe -Central or Eastern Europe -Middle East & Africa -Northern Asia -Greater China -North America -Latin America -South America -Others

Global Business Services (GBS) & In/ Outsourcing
Corporate Functions/ Expertise Centers

GBUs -Bus. A -Bus. B -Bus. C -Bus. D -Bus. E -Bus. F -Bus. Markets/ Sales Orgs. MDOs -Western Europe -Central or Eastern Europe -Middle East & Africa -Northern Asia -Greater China -North America -Latin America -South America -Others
Global Business Services (GBS) & In/ Outsourcing Corporate Functions/ Expertise Centers
Question: Is your Firm a Cost Center or a Profit Center?

Cost center: Emphasis on: Costs P/L Center: Emphasis on: Customer Satisfaction/ Loyalty/ repeat business Quality Service Innovation Production Costs
Four Key Concepts / Issues of Structure ( to be analyzed for your case)
Integration Coordination Communications Power & Control

Time GO/ Corporate Office
6th Century early 1970
P/L
1970s-Now
SBU/ GBU P/L
1980s-Now
LOBs/ Brands/ Products Modified P/L E&T/ Stores/ Countries/Regions
1990s-Now
Modified P/L
Fifteen Trends in Organizational Design at the Firm Level 1 2 3 4 5
Corporate Office (smaller)

Global S.B.U.s E-Commerce SBU
Total Value Chain Design
Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)
6 Global Enterprise Teams (Mini-business with P/L Responsibility)
Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)
Innovative Changes Structures and Processes
Creation of a Separate Company(sell stock)
Fifteen Trends in Organizational Design at the Firm Level
8
Matrix Enterprise Teams: Product/Channel/ 10 Customer and/or Process Some Centralization - Great De11 Centralization
12 13 14 15
Integrative Learning/Coaching and Training Systems (Learning Contract) Innovative Pay Systems (Share the Wealth) Simple & Innovative Business/People Measurement Systems Co-location: Customer, Team and Leaders
Other Types of Aligned of Enterprise Teams (Product, Channel,or Process)
The Four Main Questions of Horizontal Design Alignment

Corporate Design
Strategic Business Unit (S.B.U./ G.B.U. Design Supply-Chain/ Product Supply Alignment
Demand/Chain
_____ Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA. http://macy.ba.ttu.edu/5491 (forthcoming) Week #11organizational structure 19
The Typical Five Different Types Organization Structures in Exemplar Organizations (N=102 North America Organizations)
1. Macro Business Level

1, 2, 3, 4, & 5
Corporate Office 2. S.B.U.s/GBUs
3. Business Teams 4. Product Teams

(Enterprise Teams)
Value-Chain Design
Supply Side Demand Side
5. Customer Account Teams
Multi-International Consumer Products Firm: Current Structure Sept. 2001
Corporate
GBU GBS
Core Functions
Consumer Teams (30) External Relations * Teams (6)
Office
Top Management
7 Global Teams Customer Business Teams (130)
Key Customers/ Trade
Govt.

1. The Headquarters Structure
2. The Centerless Decentralization Structure

3. The Functional Structure
4. The Divisional/Product Structure 5. The Market (Customer) Structure

6. The Geographical Structure
7. The Process Structure

8. The Hybrid Structure Combinations of the
above seven
Are recommended for Cleansheet Design
The CENTERLESS CORPORATION The Real World

Global Core
Power/Control & Governance

Source: Booz-Allen & Hamilton
Smaller Corporate Hub

Centralized Services Group
Business Units (S.B.U.s/ Lines of Business/ Markets/Products)
Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced)
Product Distribution
Product Design
Nike Headquarters (Broker)

Advertising
Accounts Receivable
Product Manufacturing
Examples of Decentralization (D) and Centralization (C)

Sales & Marketing (C) Process Development (D) Process Engineering (D) R&D (C&D) Customer Service (D) General Manager/V.P. (C) Value-Chain/Supply Chain (C-to SBU) Lab/Quality (D) HR (D) Engineering/Maintenance (D) IS/Product Acct./SHE/Training (C&D)
B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
The Question of Centralization and Decentralization

Centralized Design Fit De-Centralized
Not either Centralized or De-Centralized, but design fit (what is best for the business)
B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
Value Chain
Back Front
Core Technologies
Conceive
Design Develop Procedure Market
Sales Distribute Support
Market (Customer)
Organization
Structure Trends
Typical Movement from a National Structure to a Multi-National Structure

High
4 Market Share 1 3 2
5 International/ Centerless Integrated/ Structure Centerless

Structure
GBU GBU Structure Structure
SBU SBU Structures Structures
International International Division Division Structure Structure
National National National Structure Structure

Low Early
Structure
Time Time
Very Mature
Traditional vs. Innovative System Changes - 1

STRUCTURE :
TALL
FLAT
Trends in Organizational Shapes
Yesterday
Today

TASK ORIENTATION:
INDIVIDUALIST/ SPECIALIST
TEAM/ GENERALIST

DECISION-MAKING:
CENTRALIZED
DECENTRALIZED

PHILOSOPHY:
AUTHORITARIAN
PARTICIPATIVE
Traditional vs. HPO Changes - 5

PARTICIPATIVE/ EMPOWERMENT PHILOSOPHY:
POWER & CONTROL
REDISTRIBUTION OF POWER AND CONTROL
Four Elements for Structural Design

Hierarchical Groupings
Structural Linking Mechanisms Formal Processes and Systems Informal Organizations

Eight Primary Options For Choosing Macro

Organizational Structure
Choosing Macro Organization Structures -1

1. The Headquarters Structure Model
Power and Control and Decision Making at Headquarters Communication flows from H.Q. to the field; from field to H.Q. Coordination at H.Q.; NOT between and among the Field units Efficiency is main goal
2. The Centerless-Decentralized Structure Model

Integrated Network Differentiated Network S.B.U., LOBs, and field units is where the Power and Control and Decision Making resides H.Q. acts as a holding company Communication flows from the S.B.U.s, LOBs, and field units; also into H.Q. Coordination is within and across the S.B.U.s, LOBs, and field units Effectiveness is the goal http://macy.ba.ttu.edu/5491 Week #11organizational structure 38
Choosing Macro Organization Structures -2

3. Functional Structure
Small-size, single-product Undifferentiated market Scale or expertise within the function Long product development and life cycles Common standards
4. Product Structure
Product or Groups of Products focused Multiple products for separate customers Short product development and life cycle Minimum efficient scale for functions or outsourcing
Choosing Macro Organization Structures - 3

5. Market (Customer) Structure
Key market (customer) segments Products and/or services unique to segment Buyer (customer) strength Customer knowledge advantage Rapid customer service and product cycles Minimum efficient scale in functions or outsourcing
6. Geographical Structure
Low value-to-transport cost ratio Service delivery on-site Closeness to customer for delivery or support Perception of the organization as local (not global) Geographical market (customer) segments needed
7. Process Structure
Best seen as an alternative to the functional structure Potential for new processes and radical change to processes Reduced working capital Need for reducing process cycle times http://macy.ba.ttu.edu/5491 Week #11organizational structure 40
Choosing Macro Organization Structures - 4

8. Hybrid Structure Model
Best seen as a combination option to the above seven different types of structures A combination of one to three of the above seven types of structure Perception of the organization as being both global and local
Horizontal S.B.U.s, LOBs: Integrated/Differentiated Networks

Matrix Design Market/Customer Focus Enterprise Teams Used where the need for great flexibility (market/customer and innovation) is demanded. Potential to maximize learning (information and knowledge sharing)
Dells Fast-Cycle Segmentation

In 1994, Dell was a $3.5 billion company
Large customers
Small customers (Business and consumer)
In 1996, $7.8 billion Large companies Midsize companies
Government and education
Small customers
In 1999, $18 billion

Global enterprise accounts Large companies Midsize companies Federal State and local Education Small companies Consumers
The Headquarters Structure Model

Power and Control and Decision Making at Headquarters Communication flows from H.Q. to the field; from field to H.Q. Coordination at H.Q.; NOT between and among the Field units Efficiency is main goal Usually, early on in the Organizational Life Cycle
Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
The Headquarters Model
Headquarters
Field A
Field B
Field C
Centralized Headquarters Model

A H.Q.
F E D C
Mainly Flows of Goods
Tight, Simple Controls; (key strategic decisions made centrally)
CHARACTERISTICS OF CENTRALIZED HEADQUARTERS MODEL

Strategic Approach Key Strategic capability Configuration of assets and capabilities Role of Global operations Implementing Development and diffusion of knowledge Information and Knowledge developed and retained at the center; Not in business/product units
Global
Globalscale efficiency
Centralized and globally scaled
parent company strategies
A 2nd Option: Coordinated Headquarters Model

Mainly Knowledge Flows (Technology products, processes, systems
A H.Q. F
D
Formal System controls; (planning, budgeting, replicating parent company administrative system
5
2. The Centerless- Decentralized Structure Model

S.B.U.s, LOBs and field units is where the Power and Control and Decision Making resides (Networked)
H.Q. acts as a holding company

Communication flows from the S.B.U.s, LOBs, and field units; also into H.Q. (Networked) Coordination and integration is within and across the S.B.U.s, LOBs, and field units (Networked) Effectiveness is the goal
Centerless-Decentralized Structure
Mainly Financial Flows (Capital out; dividends back)
Headquarters: Loose, simple Controls; (Strategic decisions decentralized)

The Peer-to-Peer Model

HQ Unit Peer - 1
HQ
HQ
Unit Peer - 2
Unit Peer - 2
HQ Unit Peer - 3
CHARACTERISTICS OF CENTERLESS-DECENTRALIZED STRUCTURE

Strategic Approach Key Strategic capability Configuration of assets and capabilities Role of Global operations Development and diffusion of knowledge
Decentralized Multi- National -national Responsive- and nationally -ness self-sufficient (very local)
Sensing & exploiting local opportunities
Information and Knowledge developed and retained within each global business/ product unit
Integrated Network Model

Distributed, Specialized Resources and capabilities
Large Flows of Components, Products, Resources, People, Information and Knowledge Complex Process of Coordination Among and cooperation in an environment of Interdependent (Networked) Units Shared Decision Making
Differentiated Network Structure

A recent innovation in organizational architecture is the use of differentiated network structures.
A network structure design is a cluster of different Organizations (Units, S.B.U.s, LOBs) whose actions are coordinated by contracts and/or mutual agreements rather than through a formal hierarchy.
Re-conceptualizing the Structure of an Multi-National Corporation as a Differentiated Network

Differentiated structures within each S.B.U./Subsidiary
S.B.U. /SUBSIDIARY 1 S.B.U./SUBSIDIARY 2
Inter-linkages across Business Units
Much Smaller Headquarters
Differentiated relationships between the headquarters and each Business Unit
S.B.U./SUBSIDIARY 4
____________________________ Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
S.B.U./SUBSIDIARY 3
Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced)
Product Distribution
Product Design
Nike Headquarters (Broker)

Advertising
Accounts Receivable
Product Manufacturing
The Typical Structure Path for a Multi-National Corporations High Worldwide S.B.U. Foreign Product Diversity
Global Matrix
Alternative Path #2
Alternative Path #1
(Differentiated Network)
International Division Low Foreign Revenue as a Low Percentage of Total Revenue

Source: Stepford & Wells, 1972
Regional S.B.U.
High
The CENTERLESS CORPORATION The Real World

Global Core
Power/Control & Governance

Source: Booz-Allen & Hamilton
Smaller Corporate Hub

Centralized Services Group
Business Units (S.B.U.s/ Lines of Business/ Markets/Products)
3. Functional Structure
Small-size, single-product
Undifferentiated market
Scale or expertise within the function Long product development and life cycles Common standards Usually, early on in the Organizational Life Cycle
Functional Organization Structure
General manager
Finance
Human resources
Research and development
Operations
Product marketing
Hybrid Beatrice International: One Functional Automobile Products Business
4. Product Structure Model Product or Groups of Products focused Multiple products for separate customers Short product development and life cycle Minimum efficient scale for functions or outsourcing
Moving to a Product Divisional (S.B.U., LOB) Structure: The structure adopted to solve the control, communication, coordination and integration problems of functional structures (many kinds of products, many different locations, many types of customers/clients) is the divisional or S.B.U. structure.
Product Divisional = S.B.U. structurea structure in which functions are grouped together according to the specific demands of products,markets, or clients/ customers. The type of divisional (S.B.U.) structure selected is driven by the specific type of control, communication, coordination and/or client/customer problems experienced.
Product Group Structure of a Consumer Products Company
CEO
Corp. Headquarters Staff
Toiletries S.B.U.
Soap S.B.U.
Paper S.B.U. R&D Towel Tissue Diapers Sales
Food S.B.U.
Product Structure
CEO
Finance
Human resources
Electronic instruments
Medical instruments
Computers
R&D
Operations
Marketing
H. J. Heinz Product Division; ( S.B.U.) Structure

CEO
Vice President Sales and Marketing
Vice President Research and Development
Vice President Materials Management
Vice President Finance
PDM
PDM
PDM
PDM
Canned Soups Division
Frozen Vegetable Division
Frozen Entrees Division
Baked Goods Division
Centralized support functions Divisions/S.B.U.s

Multidivisional S.B.U. Structure a structure in which staff/support functions are decentralized and placed in self-contained divisions.
Typically used by an organization whose products are very different and that operates in several different industries.
Some staff/support functions might remain centralized at the H.Q. (e.g., both a centralized R&D and a decentralized R&D)
Multidivisional S.B.U. Structure: G.E., I.B.M., Matsushita

CEO
Corporate Headquarters Staff
Senior Corporate VPs
Senior VP Marketing
Senior VP Finance
Senior VP Materials Management
Senior VP Research and Development
S.B.U./ Divisional GMs/ Presidents
Division A
Division B
Division C
Division D
Functional Managers
Support functions
Support functions
Support functions
Support functions
Product Team Structure: Xerox, Hallmark and Chrysler

CEO
Functions
Vice President Research and Development
Vice President Sales and Marketing
Vice President Manufacturing
Vice President Materials Management
Vice President Finance
Product Development Teams PTM PTM PTM
Matrix
Product Division Product Division Product Division
Functional specialist PTM Product Team Manager
Hybrid Product and Function Structure

Commercial airplane S.B.U.
Product 1: Narrow body
Product 2: Wide body
Product 3: Central fabrication
Engineering Quality
Operations
Apple Before and After Restructuring

Channel:
Dealers
Product 1: Desktops Mass retailers Mac Dealers
Product 2: Laptops
Direct sales Product 3: Palmtops Mail Order
Before Design
After Design
Fourteen Trends in Organizational Design at the Firm Level 1 2 3 4 5 6
Corporate Office (smaller)

Global S.B.U.s
M&A and JV E-Commerce SBU (inside or outside firm)
Total Value Chain Design

Global Enterprise Teams (Mini-business with P/L Responsibility)
7 8
Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)
Creation of a Separate Company(sell stock)
5. Market (Customer) Structure Model

Key market (customer) segments Products and/or services unique to segment Buyer (Customer) strength Customer knowledge advantage Rapid customer service and product cycles Minimum efficient scale in functions or outsourcing
Market (Customer) Structure

When an organization experiences control, communication, coordination, and integration problems that are a function of the differences in the various customer/ client groups being served, a market (customer) structure is used. Such a structure aligns functional skills and activities with different client/customer needs.
Market (Customer) Segments and Lateral Functions

S.B.U. General manager
Sales/marketing
Information technology
Finance
Human Resources
Operations
Health Sales Marketing Information technology Installation and repair Network operations
Financial services Sales Marketing Information technology Installation and repair Network operations
Governments Sales Marketing
Distribution Sales Marketing
Information Information technology technology Installation Installation and repair and repair Network Network operations operations http://macy.ba.ttu.edu/5491 Week #11organizational structure 75
Mellon Bank Market Structure

CEO
Central Support Functions
Commercial Division
Consumer Division
Government Division
Corporate Division
A Front-end Focus
Customers buy all products. Customers want a single contact point. Customers want a sourcing relationship. There are opportunities for cross-selling and bundling.
More value-added is customer-specific.

Advantage of customer knowledge.
Front-End Structure
CEO
Staff Paper group Toiletries group Soup group
Front end
Regional team
Customer team
Finance Distribution
Information technology
Operations Vons
Operations
Dells Fast-Cycle Segmentation

In 1994, Dell was a $3.5 billion company
Large customers
Small customers (Business and consumer)
In 1996, $7.8 billion Large companies Midsize companies
Government and education
Small customers
In 1999, $18 billion

Global enterprise accounts Large companies Midsize companies Federal State and local Education Small companies Consumers
Three Potential Sources of Leverage in Leveraged Business Groups

Back (Offering) Middle Infrastructure Front (Market/Customer)
Creation of products/offerings Platforms for manufacturing products
Means used to produce and deliver products and services to customers
How the Business goes to market?
How the organization responds to the customer? The customers interface typically Enterprise Teams
Technologies underlying products
Each component is a potential source of http://macy.ba.ttu.edu/5491 leverage Week #11organizational structure 80
6. Geographical Structure Model

Low value-to-transport cost ratio Service delivery on-site Closeness to customer for delivery or support Perception of the organization as local Geographical market (customer) segments needed
Geographic Structure
When an organization experiences control, communication, coordination and integration problems that are a function of geography, a geographic divisional (S.B.U., LOB) structure is used. Such a structure organizes divisions/ S.B.U./LOBs according to the requirements of different locations (Local).
Geographical (Pre-Restructuring)
CEO
Industrial Gases
AFROX
(South Africa)
CIG
(Australia)
U.K. Gases
AirCo
(U.S.A)
North Pacific
Process Plants
Geographical Structural Change (PostRestructuring)

CEO
Industrial Gases
South Africa
Australia
Europe
Americas
North Pacific
Process Plants
Food
Global Market Sectors
Chemicals
Electronics
Steel
Geographic Structures: Crown Cork & Seal, Neiman Marcus and Wal-mart
Regional Operations
Regional Operations
CEO Central Support Functions
Regional Operations
Individual stores
Regional Operations
Apple: Geographical Structure

CEO John Sculley
Apple Products
Apple USA
Apple Europe
Europe West Europe North
Apple Pacific
Canada
Sales Service and Marketing To Regions
Australia
France
Japan
South Europe
Latin America Far East
Geographical Structural Design: Xerox 1991 (Before)

Chairman
Research
Development and Manufacturing
Marketing and Customer Operations
Chief Staff Officer
Chief Financial Officer
World Wide marketing
U.S. Operations (Sales and Service)
Rank Xerox
American Operations
Other Other Geographic Other Other Geographic Operating Units Geographic Geographic Operating Units Operating OperatingUnits Units
Xerox 1992: Hybrid Organization Structure (After)
Business Division 1
Business Division 2 Technology Management Process Customer Operations Divisions
Business Division 3
Business Division 4
Business Division 5 Strategic Services Governance

7. Process Structure
Best seen as an alternative to the functional structure Potential for new processes and radical change to processes Reduced working capital Need for reducing process cycle times
Process Organization Structure

General manager
New product development process
Order fulfillment process
Customer acquisition and maintenance
New product teams
Product teams
Customer teams
Work Flows Across Functional Structure

Scarce resource: management time
General manager
Finance
Product development
Operations Human resources
Sales and marketing
Work flow process to customer

Lateral Processes Across Departments

General manager
Lateral process
A Generic Horizontal Organization with Multiple Core Process Groups

Vice President
General Manager R&D
General Manager Operations
General Manager Strategy
General Manager Finance
Manager
Manager
Manager
Process Owner Team Process Owner Team Process Owner Team
CORE PROCESS GROUP
Team 1
Team 2
Team 3
Performance Objective
CORE PROCESS GROUP
Team 1
Team 2
Team 3
Performance Objective
CORE PROCESS GROUP
Team 1
Team 2
Performance Team 3 Objective http://macy.ba.ttu.edu/5491 Week #11organizational structure 93
Process Structure
Reengineering Functional Structures: Reengineering is the process of redesigning how tasks are bundled into roles and functions to improve organizational effectiveness.
Process Structure
Reengineering involves shifting the focus from functions isolated from each other into horizontal/lateral business processes.
A business process is any activity that cuts across functional boundaries. -Order fulfillment -Inventory control -Product design - R&D
Example Business Processes & Teams

Top Management
Process Coordinator
Team
Team
Team
New Product Development Process

Process Coordinator Team Team Team
Process Coordinator
Order Fulfillment Process

Team Team Team
Procurement, Logistics process
8. Hybrid Structure Model Combinations of Some of the above Seven Structural Types
Best seen as a combination option to the other seven different types of structure. A combination of one to three or more of the above seven types of structure. Perception of the organization as being both global and local. Horizontal S.B.U.s, LOBs: Integrated/Differentiated Networks Matrix Design Market/Customer Focus Enterprise Teams Used where the need for great flexibility (market/customer and innovation) is demanded Potential to maximize learning (information and knowledge sharing) http://macy.ba.ttu.edu/5491 Week #11organizational structure 97
Organization Form Options (or Grouping Alternatives)

Function Work Process Knowledge/skills/discipline Time Product Service Project Market segment User/Customer need Geography
1.
Activity
2.
Output
3.
User/Customer
4.
Multifocused Organization
Any Combination of Activity/Output/User

Grouping by Output (AT&T Early 1990s)
Chairman
Communications Services Group
Communications Products Group
Computer (NCR)
Network Systems Group
ABB (Simplified Structure)-1

CEO
(Percv Bamevik) (previous CEO Thought up this structure) Executive Committee
Power Transformers
Power Generation
Robots
47 Other Business Areas
Germany
U.S.A
National Companies
Norway
137 Other National Companies
ABB: Four Types of Organization Structures - 2

Corporate Office
(Very Small)
A
Tight/Clear Accountability/Responsibility Through a Single Financial Performance Measurement System
3 Regions and 4 Businesses Areas (BAs) B Regions-National Companies

Global Business Areas
1 1 2 1 1 2 2 3 3
Corporate Structures
2
3
4
3
4
Company Presidents
Local Country (some are also Country Managers) - 1 or 2 levels Companies and 5,000 Profit Centers Many Profit D (lead by Profit Center Managers; Center Structures 3 levels to lowest person)
________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 101
ABB - Fall of 1998 - 3

What They Did: Break-up existing regional (local) S.B.U.s into smaller, more focused global business S.B.U.s 5,000 P/L Centers Why? Streamlining the organization to tap the trend towards greater globalization Shorten the decision process Flatten (once more) the structure Increase speed of decision making
____________________________ Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, http://macy.ba.ttu.edu/5491 CA (forthcoming) Week #11organizational structure 102
ABB-4
The fundamental building block of this Company are 5,000 small profit centers ($10-12MM Sales/40-50 People). Resources are placed within these units. There are only 150 Corporate staff (centerless decentralized holding company). H.Q. has 7/24/365 real-time information system across the A, B,C, & D parts of their structure (all have four common measures)
abb-2-28 slide1 http://macy.ba.ttu.edu/5491 Week #11organizational structure 103
Asea, Brown, Boveri (ABB): One Business Area: Relay Business Overview - 5 4 Global Business Areas Business Head Worldwide Relay
Corporate
3 Regions
Corporate
Regions
PresidentUS Power
Capability Developer
Local/Country Specific
B.A. Macy, Successful Strategic Change, San Francisco: California: Berret-KoehlerPublisherss (forthcoming)
General ManagerRelays Profit Centers
Entrepreneur
abb-2-28 slide5 http://macy.ba.ttu.edu/5491 Week #11organizational structure 104
ABB-10 The Partnership Between Financial Wealth and Changes in Organization Structures, Systems and Processes
Corporate Office Small Global Businesses Think Globally (Matrix) Regions of the World Act Locally (Matrix) Local Control One Customer Contact Point Customers Many Enterprise Rapidly Companies Units/Teams Changing (ABB-1,000) (CATS) Needs, Many Profit Wants, & Centers Desires (ABB -5,000) Tight The Mirror Accountability/ Responsibility Concept Alignment
(ABB - 150 Xerox Europe - 300)
________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 105
Another Hybrid:
Procter & Gamble (P&G)
P&Gs Organization Structure: 2001

Corporation Functions >18 mos. < 18 mos. GBU CBD (Sales) (SBUs) Product P&L GBS MDO
Global MDO/ CBD Teams
Idea Innovation
PRODUCTION/PROMOTION CUSTOMERS/CONSUMERS
Country MDO
F U N C T I O N S
Marketing R&D IT HR Sales Product Supply Finance
CBD Teams
Retail Customers
The Key Pillars of a Horizontal Organization
Demand Organization
Fulfillment Organization
Global Sales Organization
Retail Sales/ Customers
Consumers
Service Organization
Enterprise Units: The Mirror Design Concept

The Mirror: One Contact Point
Corporate Office
The Various Global SBUs

1 2 3 4 5 6 7 etc.
Enterprise Units/ Team(s)
Customers/ Consumers Retail Stores
(feedback)
P&Gs Enterprise Teams (Customer Business Development)
GBU GBS
Core Functions
Customer *Teams External Relations * Teams
67%
Customer Teams * (Exemplar)
Customers/ Trade/ Retail Stores
Govt.
Dec. 2000
Note: GBUs = Global S.B.U.s GBS = Global Business Services
Another Hybrid Example HP (from a Product Structure to A Hybrid Model)

THE OLD HP: 83 Product Structures

Each product unit was responsible for its own profit/loss performance
HOME PCs, HANDHELDS, LAPTOPS
CEO
SCANNERS, LASER PRINTERS, PRINTER PAPER
EXECUTIVE COUNCIL
CONSULTING SERCURITY SOFTWARE, UNIX SERVERS
INK CARTRIDGES, DIGITAL CAMERAS, HOME PRINTERS

Carly to HP: Snap to It = Three Phase Plan for Transition NOW 2000: Improve growth and profits in core businesses
- CONSOLIDATE Folded HPs 83 product divisions into four units: two product development units that work with two sales and marketing groups-one aimed at consumers, the other corporations. - SET STRATEGY Create a nine-person Strategy Council to allocate resources to the best opportunities rather than leaving strategy to product chieftains (see pages 195) . - WHACK COSTS Lower expenses by $1 billion by revamping internal processes to tap the power of the Web.
THE NEW HYBRID HP

CARLY FIORINA STRATEGY COUNCIL Nine fast-rising managers who advise the executive council on allocating money and people to growth initiatives. FRONT END CORPORATE SALES $34 billion in annual revenues JOB Meet near-term financial targets by selling technology solutions to corporate clients. Keep back-end units abreast of whats, hows. BACK END PRINTERS
43% of annual production JOB Build new printing and imaging products to ensure HPs long-term growth. Track trends with help from front-end units.
AUTHORITY RECOMMENDATIONS IDEAS & INNOVATIONS PRODUCTS & INFORMATION
EXECUTIVE COUNCIL
Eight top lieutenants, including heads of the four front-and-back-end groups. FRONT END CONSUMER SALES
$15 billion in annual revenues JOB Sell consumer gear with focus on meeting current-year earnings and revenue goals. Let back end know of must-have products and features
FRONT END COMPUTERS

57% of annual production JOBS Focus on future success by making computers that companies and consumers want, with sales input from front-end
CROSS-COMANY INITIATIVES
Personnel from the frontand back-end groups collaborate on projects aimed at sniffing out new markets what will create growth. DIGITAL IMAGING Make photos, drawings, and videos so easy to create, store and send as e-mail. WIRELESS SERVICES Develop wireless technologies that will fuel sales of HP-made devices, ranging from handhelds to servers. COMMERCIAL PRINTING Divert printing jobs from offset presses to Net-linked HP printers

1. 2. 3. 4. 5. 6. 7. 8. The Headquarters Structure The Centerless Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure Combinations of the above seven

11 Organizational Structure

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MGT 5391: Session # 8 8 Types of Structures

http://macy.ba.ttu.edu/5491 Week #11organizational structure 1

1. Customers 2. Financial/ Business 3. Employees

Interdependence and Design FIT

B.Vision Direction (VDSP) C. Organizational Strategies D. Business Models

4. Information and Knowledge Systems

E. Labor (Employee) Management Mutuality

The Common Eight Different Options for Organization Structure

http://macy.ba.ttu.edu/5491 Week #11organizational structure 3

OST Eight TRANSFORMATION Categories - 1

Outcomes = Lower Performance (3.8% Financial Improvement Per Year)

High Performance Work System

http://macy.ba.ttu.edu/5491 Week #11organizational structure 5

Organization Structure is about:

Traditional Organization Environment

Boundaries of the System

Organization Structure is about:

21ST CENTURY ORGANIZATIONAL STRUCTURE DESIGN BLOCKS: To Deliver Business Results

Typical Different Levels of 21st Century Macro Organization Structures

21st Century Organization Design

http://macy.ba.ttu.edu/5491 Week #11organizational structure 11

21st Century Organization Design

Corporate Functions/ Expertise Centers

http://macy.ba.ttu.edu/5491 Week #11organizational structure 12

21st Century Organization Design

Question: Is your Firm a Cost Center or a Profit Center?

http://macy.ba.ttu.edu/5491 Week #11organizational structure 14

Four Key Concepts / Issues of Structure ( to be analyzed for your case)

Integration Coordination Communications Power & Control

Time GO/ Corporate Office

6th Century early 1970

SBU/ GBU P/L

LOBs/ Brands/ Products Modified P/L E&T/ Stores/ Countries/Regions

http://macy.ba.ttu.edu/5491 Week #11organizational structure 16

Fifteen Trends in Organizational Design at the Firm Level 1 2 3 4 5

Corporate Office (smaller)

Total Value Chain Design

Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)

6 Global Enterprise Teams (Mini-business with P/L Responsibility)

Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)

http://macy.ba.ttu.edu/5491 Week #11organizational structure 17

Innovative Changes Structures and Processes

Creation of a Separate Company(sell stock)

Fifteen Trends in Organizational Design at the Firm Level

http://macy.ba.ttu.edu/5491 Week #11organizational structure 18

Innovative Changes Structures and Processes

Other Types of Aligned of Enterprise Teams (Product, Channel,or Process)

The Four Main Questions of Horizontal Design Alignment

1. Macro Business Level

Corporate Office 2. S.B.U.s/GBUs

3. Business Teams 4. Product Teams

5. Customer Account Teams

Multi-International Consumer Products Firm: Current Structure Sept. 2001

Consumer Teams (30) External Relations * Teams (6)

7 Global Teams Customer Business Teams (130)

Key Customers/ Trade

http://macy.ba.ttu.edu/5491 Week #11organizational structure 21

The Common Eight Different Options for Organization Structure

2. The Centerless Decentralization Structure

4. The Divisional/Product Structure 5. The Market (Customer) Structure

7. The Process Structure

The CENTERLESS CORPORATION The Real World

Power/Control & Governance