ORGANIZATIONAL STRUCTURE

Chapter 12 Lecture 1
Every Organization has a
Structure
But structures can differ
Due to choice

Due to national laws

The words used to describe them also can

differ
Organization chart, design, structure

The 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
 The Illusion of Managerial
Control
“We trained hard—but it seemed that every time we
were beginning to form up into teams, we would
be reorganized. I was to learn later in life that we
tend to meet any new situation by reorganizing;
and a wonderful method it can be for creating the
illusion of progress while producing confusion,
inefficiency, and demoralization.”
–Petronius Arbiter, 210 B.C.
 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
Top Managers Answer to a
Power Greater than Themselves
 God or conscience in a wholly owned private firm
 The family in a family owned firm
 The Board in a publicly owned firm:
 U.S. boards often are chaired by the CEO

 Boards in U.K. usually are chaired by a non

executive
 European companies often have a two-tier
board
 In Germany, duties are split between
supervisory and management boards
 Spain and France often use an executive
committee
 Beneath the Board are Several
Structural Types
 Intra and interorganizational networks
 Special cases
 Functional, divisional, hybrids
 Networks
Intraorganizational networks
internal networks
shamrock
spiderwebs
Interorganizational networks
 strategic alliances

 joint ventures

 partial acquisitions/mergers

 cross-sector partnerships
 Special Cases
 Family structure
 Holding companies
 Virtual structure
Except for “born globals,” Most
Companies Grow into
Expansion
Most Common Structural Types
Among Global Firms are:
 Functional structure
 Divisional structure
 Hybrid structures
 Combined functional/divisional structure

 Matrix structure
 Global Functional Structure

CEO

VP Marketing VP Finance VP Operations VP R&D VP Legal issues

Product 1 Product 2 Product 3

Country A Country B
 Divisional Structure Can Take
Different Forms
 Product
 Geographic
 Customer group served
 Global Geographic Division
Structure

CEO

Admin/Finance

VP for the Americas VP Europe VP E. Asia VP Australasia

Australia/NZ Indonesia Islands

Marketing Operations
Global Product Structure

DIVISIONAL STRUCTURE (BY PRODUCT LINES)

COSMETICS CORPORATION

FRAGRANCES SKIN CARE PRODUCTS HAIR CARE PRODUCTS OTHER PRODUCTS

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

Chairman of the Board

Executive Committee

Management

Strategic Business units N. America Latin America Europe Asia

autos

light trucks

sports utilities

parts

financing
 Combined Functional and
Divisional Structure
Danone Group, 2003
Chair and CEO Vice Chair and COO

Exec VP, Exec VP,

General
Exec VP, Fresh Dairy Water
Secretary
Finance

Exec VP, Exec VP, Exec VP,

Biscuits and Asia-Pacific Intl Strategy
Cereal Snacks
 Intraorganizational Structures

 spiderwebs
 internal
 networks
 shamrocks
 horizontal
 keiretsu
 chaebol
Mitsubishi Group Network
Mitsubishi Village
 Interorganizational Structures
 Strategic alliances
 Joint ventures
 Partial acquisitions
 Special Cases
 Family structures—usually hierarchical with a
patriarch/matriarch or a set of family members
who divide tasks according to skill or obligation
 Structures that arise out of national tradition—
German firms always have union representation
and two levels of boards
 Holding companies
 Virtual organizations