11 Organizational Structure

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

MGT 5391:Session # 8

8 Types of Structures
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Figure 1.

High performing organizations: Overall open systems model of critical

components________________

Source: Modified from Macy, et al., (1995). Presented to the National Academy of Management, Vancouver, Canada, August.

7. Recognition and

Financial Reward

Systems

THE ORGANIZATION DESIGN PUZZLE:

HIGH PERFORMANCE LEARNING ORGANIZATION

3. Technologies

1. MacroOrganizational

Structures

Results From High

Performance / Exemplar

Organizations

OrganizationalEffectiveness

1. External/

Global Business

Environment

A.Corporate,

Business,

Worksite And

Individual:

Capabilities And

Barriers (Culture)

B.Vision

Direction

(VDSP)

C. Organizational

Strategies

Environmental

Drivers

2.Internal

Environment

E. Labor

(Employee)

Management

Mutuality

2. The Job/work

5. Micro Organization

Structures: Team Design

6. People andHuman Resource

Systems

8. Shared Leadership

& Decision Making

Systems

(Feedback)

Organizational Processes (Individual, Group, Organizational and

Business Processes (Total Quality, Business Processes, etc.)

Interdependence

and

Design FIT

TRANSFORMATION OutputsInputs

1. Customers

2. Financial/

Business

3. Employees

4. Organizational

Innovation

5. Societal

D. Business

Models

F. Transformation/

Change

Processes

4. Information and

Knowledge Systems


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The Common Eight Different Options forOrganization Structure

1. The Headquarters Structure2. The Centerless Decentralization Structure3. The Functional Structure4. The Product Structure5. The Market (Customer) Structure6. The Geographical Structure

7. The Process Structure8. The Hybrid Structure Combinations of theabove seven


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OSTEight TRANSFORMATION Categories - 1

MACRO STRUCTURE1. CORPORATE Office2. S.B.U. (Global and Regional)3. Value Chain: Demand and

Supply sides4. 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 LaborVertical and/or Horizontal Structure

TodaysFocus


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Performance

Traditional Organization

Power Information

Knowledge Rewards

Performance

High Performance Work System

Power Information

Knowledge Rewards

Outcomes = Lower Performance(3.8% Financial

Improvement PerYear)

Outcomes = Higher Performance(10% FinancialImprovement Per

Year)

#4 IS/IT

#7 Recognition &Financial Reward Systems

# 6 Human ResourceSystems

#1 Macro Structure

#5 Micro Structure#2 Job/Work#8 Shared Leadership

#3 Technologies


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Organization Structure is

about:- Power and Control and the

Re-distribution of Power andControl (Less Layers -fewer

chiefs)- Decision Making at the

Lowest appropriate level


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Traditional OrganizationEnvironment

Boundaries of the SystemSource: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
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Organization Structure is

about:- Effective Communication- Effective Coordination- Speed/Responsiveness tothe 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

IndividualsSource: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming)



Typical Different Levels of 21st CenturyMacro 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)Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming)



21st Century Organization DesignGBUs Markets/ Sales

Orgs. MDOs

-Bus. A -Western Europe

-Bus. B -Central or Eastern Europe

-Bus. C -Middle East & Africa

-Bus. D -Northern Asia

-Bus. E -Greater China-Bus. F -North America

-Bus. -Latin America8

-South America

-Others



21st Century Organization Design

Global Business Services (GBS) & In/ Outsourcing

Corporate Functions/ Expertise Centers



21st Century Organization DesignGBUs Markets/ Sales

Orgs. MDOs

-Bus. A -Western Europe

-Bus. B -Central or Eastern Europe

-Bus. C -Middle East & Africa

-Bus. D -Northern Asia

-Bus. E -Greater China-Bus. F -North America

-Bus. -Latin America8

-South America

Global Business Services (GBS) & In/ Outsourcing

Corporate Functions/ Expertise Centers

-Others



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

6th Century early1970

1970s-Now

1980s-Now

1990s-Now

GO/ Corporate Office

SBU/ GBU

LOBs/ Brands/ Products

E&T/ Stores/Countries/Regions

P/L

P/L

Modified P/L

Modified P/L



Fifteen Trends in Organizational Design at the Firm Level

Creation of a Separate

Company(sell stock)

DistributedIT

Systems(Supplier-

Organization-

Customer

(SAP/EDI)

Innova

tive

Ch

anges

Struc

tures

an

dProcesses

Corporate Office (smaller)

Global S.B.U.s

Total Value Chain Design

Regional Customer Enterprise Teams

(Mini-Business with P/L Responsibility)

Global Enterprise Teams (Mini-businesswith P/L Responsibility)

E-Commerce SBU

8

1

2

3

4

5

6

7



Innovative Pay Systems (Share the Wealth)

Matrix Enterprise Teams: Product/Channel/Customer and/or Process

Some Centralization - Great De-Centralization

Fifteen Trends in Organizational Design at the Firm Level

DistributedIT

Systems(Supplier-Organization

-Customer(SAP/EDI)

Other Types of Aligned of Enterprise Teams(Product, Channel,or Process)9

10

Integrative Learning/Coaching and TrainingSystems (Learning Contract)

11

Innova

tive

Ch

anges

Struc

turesan

dProcesses

12

Simple & Innovative Business/PeopleMeasurement Systems

8

13

14

Co-location: Customer, Team and Leaders

15



CorporateDesign

Strategic Business Unit (S.B.U./G.B.U. Design

Supply-Chain/

Product

Supply

Alignment

Demand/Chain

The Four Main Questions of Horizontal

Design Alignment

_____

Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA. (forthcoming)

The T pical Fi e Different T pes Organi ation Str ct res in E emplar Organi ation



Macro Business Level

1, 2, 3, 4, & 5

S.B.U.s/GBUsBusiness Teams

Product Teams

1.

3.2.

5.

Value-Chain Design

SupplySide

DemandSide

Corporate Office

4.

Customer Account Teams(Enterprise Teams)

Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming)

The Typical Five Different Types Organization Structures in Exemplar Organization(N=102 North America Organizations)



ConsumerTeams (30)

External Relations* Teams (6)

7 GlobalTeams

Customer BusinessTeams(130)

KeyCustomers/

Trade

Govt.

GBU

GBS

Core Functions

Corporate

Office

TopManagement

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

Th C Ei ht Diff t O ti f




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 theabove seven

Are recommended for Cleansheet Design



The CENTERLESS CORPORATIONThe Real WorldGlobalCore

BusinessUnits(S.B.U.s/Lines of Business/Markets/Products)

CentralizedServicesGroup

Power/Control &Governance

SmallerCorporateHub

Source:Booz-Allen&H

amilton

Nik A th T f Diff ti t d N t k



Nike: Another Type of Differentiated Network(everything outside Nike HQ is outsourced)

NikeHeadquarters(Broker)

ProductDesign

Product

Manufacturing

AccountsReceivable

Advertising

ProductDistribution

E l f D t li ti (D) d


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Examples of Decentralization (D) andCentralization (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)

Q f C


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The Question of Centralizationand Decentralization

Centralized

Not eitherCentralized or

De-Centralized,but design fit(what is best forthe business)

Design Fit De-Centralized

B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)


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DevelopDesignConceive SupportDistributeSalesMarketProcedure

Back Front

CoreTechnologies

Market(Customer)

Value Chain


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Organization

Structure

Trends


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Typical Movement from a National

Structure to a Multi-National Structure

NationalStructure

InternationalDivision

Structure

SBUStructures

GBU

Structure

Integrated/CenterlessStructure

Time

1

2

3

4

5

NationalStructure

Low

High

MarketShare

Early Very MatureTime

NationalStructure


Structure

SBUStructures

GBUStructure

International/CenterlessStructure

T diti l I ti S t


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Traditional vs. Innovative SystemChanges - 1

STRUCTURE :

TALL FLAT


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Trends in Organizational Shapes

Yesterday Today

T diti l I ti S t


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TASK ORIENTATION:

INDIVIDUALIST/SPECIALIST

TEAM/GENERALIST

T diti l I ti S t


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DECISION-MAKING:

CENTRALIZED DECENTRALIZED

T diti l I ti S t


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PHILOSOPHY:

AUTHORITARIAN PARTICIPATIVE


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Traditional vs. HPO Changes - 5

PARTICIPATIVE/EMPOWERMENTPHILOSOPHY:

POWER &CONTROL

REDISTRIBUTIONOF POWER AND

CONTROL

F El t f St t l D i


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Four Elements for Structural Design

Hierarchical

Groupings

Structural

Linking

Mechanisms

Formal Processes

and Systems

Informal

Organizations


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Eight Primary Options

For Choosing Macro

Organizational Structure

Choosing Macro Organization Structures 1


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1. The Headquarters Structu re 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 -Decentral ized Structure Model

Integrated Network Differentiated NetworkS.B.U., LOBs, and field units is where the Power and

Control and Decision Making residesH.Q. acts as a holding companyCommunication 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

Choosing Macro Organization Structures -1



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3. Funct ionalStructure

Small-size, single-productUndifferentiated marketScale or expertise within the functionLong product development and life cyclesCommon standards

4. ProductStructure

Product or Groups of Products focusedMultiple products for separate customersShort product development and life cycle

Minimum efficient scale for functions or outsourcing


Choosing Macro Organization Structures - 3


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5. Market(Customer) Structure

Key market (customer) segments

Products and/or services unique to segmentBuyer (customer) strengthCustomer knowledge advantageRapid customer service and product cyclesMinimum efficient scale in functions or outsourcing

6. GeographicalStructure

Low value-to-transport cost ratioService delivery on-siteCloseness to customer for delivery or supportPerception of the organization as local (not global)

Geographical market (customer) segments needed

7. ProcessStructure

Best seen as an alternative to the functional structurePotential for new processes and radical change to processes

Reduced working capitalNeed for reducing process cycle times



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8. Hybrid Structure Model

Best seen as a combination option to the above seven different typesof 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)


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Large customersSmall customers

(Business and consumer)

Largecompanies

Midsizecompanies

Governmentand

education

Smallcustomers

Dells Fast-Cycle Segmentation

ConsumersSmall

companiesEducation

Stateandlocal

FederalMidsize

companiesLarge

companies

Globalenterpriseaccounts

In 1994, Dell wasa $3.5 billion company

In 1996,$7.8 billion

In 1999,$18 billion


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The Headquarters Struc tu re Model

Power and Control and Decision Making at Headquarters

Communication flows from H.Q. to the field; from field toH.Q.

Coordination at H.Q.; NOT between and among theField 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


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Headquarters

The Headquarters Model

FieldA

FieldB

FieldC


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Centralized Headquarters Model

CF

D

BA

E

Mainly Flows

of Goods

Tight, Simple

Controls; (key

strategic decisions

made centrally)

H.Q.


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8

Strategic

Approach

Key

Strategiccapability

Configuration

of assets andcapabilities

Role of

Globaloperations

Development

and diffusionof knowledge

CHARACTERISTICS OF CENTRALIZED HEADQUARTERS

MODEL

Global Global-

scale

efficiency

Centralized

and globally

scaled

Implementing

parent -

companystrategies

Information and

Knowledge

developed and

retained at thecenter; Not in

business/product

units


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5

A 2nd Option: Coordinated Headquarters Model

CF

D

BA

E

Mainly KnowledgeFlows

(Technology products,

processes, systems

Formal System controls;(planning, budgeting,

replicating parent company

administrative system

H.Q.

2 The Centerless Decentral ized


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2. The Centerless - Decentral ized

Structu re Model

S.B.U.s, LOBs and field units is where thePower 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 acrossthe S.B.U.s, LOBs, and field units (Networked)

Effectiveness is the goal

Centerless-Decentralized Structure


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Headquarters: Loose, simple

Controls; (Strategic

decisions decentralized)

Mainly Financial Flows

(Capital out; dividends back)

Centerless-Decentralized Structure

The Peer-to-Peer Model


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The Peer-to-Peer ModelHQ

HQ HQ

HQ

UnitPeer - 1

UnitPeer - 2

UnitPeer - 3

UnitPeer - 2

CHARACTERISTICS OF CENTERLESS DECENTRALIZED


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StrategicApproach

Key

Strategic

capability

Configuration

of assets and

capabilities

Role of

Global

operations

Development

and diffusion

of knowledge

CHARACTERISTICS OF CENTERLESS-DECENTRALIZED

STRUCTURE

Multi-

-national

National

Responsive-

-ness

Decentralized

and

nationallyself-sufficient

(very local)

Sensing &

exploiting

localopportunities

Information and

Knowledge

developed andretained within

each global

business/

product unit

I t t d N t k M d l


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Complex Process of Coordination

and cooperation in an environment of

Shared Decision Making

Distributed, Specialized

Resources and capabilities

Integrated Network Model

Large Flows of

Components,

Products, Resources,

People, Informationand Knowledge

Among

Interdependent

(Networked) Units


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Differentiated Network Structure

A recent innovation in organizationalarchitecture is the use of differentiatednetwork structures.

A network structure design is a clusterof different Organizations (Units, S.B.U.s,

LOBs) whose actions are coordinated

by contracts and/or mutual agreementsrather than through a formal hierarchy.

Re-conceptualizing the Structure of an Multi-National Corporation


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as a Differentiated Network

Differentiated structures

within each S.B.U./Subsidiary

Much SmallerHeadquarters

S.B.U. /SUBSIDIARY 1 S.B.U./SUBSIDIARY 2

S.B.U./SUBSIDIARY 4

S.B.U./SUBSIDIARY 3

Inter-linkagesacross

Business Units

Differentiatedrelationshipsbetween theheadquartersand each

BusinessUnit

____________________________Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)

Nike: Another Type of Differentiated Network


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yp(everything outside Nike HQ is outsourced)

NikeHeadquarters

(Broker)

ProductDesign

Product

Manufacturing

AccountsReceivable

Advertising

ProductDistribution


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The Typical Structure Path for a Multi-National Corporations

High

High

Low

Low

ForeignProductDiversity

Foreign Revenue as aPercentage of Total Revenue

WorldwideS.B.U.

GlobalMatrix

AlternativePath #2

AlternativePath #1


RegionalS.B.U.

Source: Stepford & Wells, 1972

(DifferentiatedNetwork)


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The CENTERLESS CORPORATIONThe Real WorldGlobalCore

BusinessUnits(S.B.U.s/Lines of Business/Markets/Products)

CentralizedServicesGroup

Power/Control &Governance

SmallerCorporateHub

Sour

ce:Booz-Allen&H

amilton


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3. Funct ionalStructure

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


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General manager

Functional Organization Structure

Finance Human resources

Research anddevelopment Operations

Productmarketing

Hybrid Beatrice International: One Functional Automobile Products Business


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yb d eat ce te at o a O e u ct o a uto ob e oducts us ess

4 Product Structure Model


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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)


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g ( )Structure:

The structure adopted to solve the control,communication, coordination andintegration problems of functional

structures

(many kinds of products,many different locations,

many types of customers/clients)

is the divisional or S.B.U. structure.


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Product Divisional = S.B .U. structu reastructure in which functions are groupedtogether according to the specificdemands of products,markets, or clients/customers.

The type of divisional (S.B.U.) structure

selected is driven by the specific type ofcontrol, communication, coordinationand/or client/customer problems

experienced.

Product Group Structure of a Consumer Products Company


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Product Group Structure of a Consumer Products Company

CEO

ToiletriesS.B.U.

SoapS.B.U.

PaperS.B.U.

FoodS.B.U.

Corp. Headquarters Staff

R&D

Towel

TissueDiapers

Sales

Product Structure


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Product Structure

CEO

Finance Human resources

Electronicinstruments

Medicalinstruments

Computers

R&D Operations Marketing

H. J. Heinz Product Division; ( S.B.U.) Structure


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; ( )

Vice PresidentSales andMarketing

Vice PresidentResearch andDevelopment

Vice PresidentMaterials

Management

CEO

Vice PresidentFinance

CannedSoupsDivision

PDM

FrozenVegetableDivision

PDM

FrozenEntreesDivision

PDM

BakedGoodsDivision

PDM

Centralized support functions

Divisions/S.B.U.s

Mult id iv is ional S B U Struc tu re a


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Mult id iv is ional S.B .U. Struc tu reastructure in which staff/support functionsare decentralized and placed inself-contained divisions.

Typically used by an organization whose

products are very different and thatoperates in several different industries.

Some staff/support functions might remaincentralized at the H.Q. (e.g., both acentralized R&D and a decentralized R&D)

Multidivisional S.B.U. Structure: G.E., I.B.M., Matsushita


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, ,

SeniorCorporateVPs

CEO

S.B.U./Divisional

GMs/Presidents

Senior VP

Marketing

Senior VP

Finance

Senior VP

Materials

Management

Senior VP

Research and

Development

Functional

Managers

Corporate Headquarters Staff

Division B

Support functions

Division D

Support functions

Division A

Support functions Support functions

Division C

Product Team Structure: Xerox, Hallmark and Chrysler


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ProductDivision

ProductDivision

CEO

Functions

Product

Development

Teams

ProductDivision

V ice President

Research and

Development

Vice President

Sales and

Marketing

V ice President

Manufacturing

Vice President

Finance

Functional specialist

Vice President

Materials

Management

PTM Product Team Manager

PTM PTM PTM

Matrix

Hybrid Product and Function Structure


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Commercial airplaneS.B.U.

Product 1:Narrow

body

Product 2:Widebody

Product 3:Central

fabrication

Engineering Quality Operations

Hybrid Product and Function Structure

Apple Before and After Restructuring


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Apple Before and After Restructuring

Mac Dealers

Product 3:

Palmtops

Product 2:Laptops

Product 1:Desktops

Mail Order

Direct sales

Mass

retailers

Dealers

Before Design After Design

Channel:

Fourteen Trends in Organizational Design at the Firm Level


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Creation of a SeparateCompany(sell stock)

DistributedIT

Systems(Supplier-

Organization-

Customer(SAP/EDI)

Innova

tive

C

hanges

Struc

ture

san

dProcesses

Corporate Office (smaller)

Global S.B.U.s

Total Value Chain Design

Regional Customer Enterprise Teams

(Mini-Business with P/L Responsibility)

Global Enterprise Teams (Mini-businesswith P/L Responsibility)

E-Commerce SBU (inside or outside firm)

8

1

2

3

5

6

7

8

M&A and JV4

M k (C ) S M d l


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5. Market (Customer) Structure Model

Key market (customer) segmentsProducts and/or services unique to segmentBuyer (Customer) strength

Customer knowledge advantageRapid customer service and product cyclesMinimum efficient scale in functions or

outsourcing

Market (Customer) Structure


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When an organization experiences control,communication, coordination, andintegration 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 skillsand activities with different client/customerneeds.

Market (Customer) Structure

Market (Customer) Segments and Lateral Functions


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Sales/marketing

S.B.U. General manager

Informationtechnology

Finance HumanResources

Operations

HealthFinancialservices Governments Distribution

Sales Sales Sales Sales

Marketing Marketing Marketing Marketing





Installationand repair




Networkoperations

Networkoperations

Networkoperations

Networkoperations


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Mellon Bank Market Structure

CommercialDivision

ConsumerDivision

GovernmentDivision

CorporateDivision

CEO

Central Support Functions

A Front-end Focus


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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.

A Front end Focus

Front-End Structure


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CEO

Papergroup

Soupgroup

Toiletriesgroup

Front end

Regional team Customer team

Staff

Operations

Operations

Inform

ation

techn

ology

Distribution

Finance

Vons

Dells Fast-Cycle Segmentation


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Large customersSmall customers

(Business and consumer)

Largecompanies

Midsizecompanies

Governmentand

education

Smallcustomers

Dell s Fast Cycle Segmentation

ConsumersSmall

companiesEducation

Stateandlocal

FederalMidsize

companiesLarge

companies

Globalenterpriseaccounts

In 1994, Dell wasa $3.5 billion company

In 1996,$7.8 billion

In 1999,$18 billion

Three Potential Sources of Leverage inL d B i G


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Back(Offering) Front(Market/Customer)MiddleInfrastructure

Creation ofproducts/offerings

Platforms formanufacturingproducts

Technologiesunderlying products

Means used toproduce and deliverproducts andservices tocustomers

The customersinterface typicallyEnterprise Teams

How the Businessgoes to market?

How theorganization

responds to thecustomer?

Each component is a potential source ofleverage

Leveraged Business Groups
http://localhost/var/www/apps/5491http://localhost/var/www/apps/5491http://localhost/var/www/apps/5491http://localhost/var/www/apps/5491


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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


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When an organization experiences control,communication, coordination andintegration problems that are a functionof 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).

Geographic Structure

Geographical (Pre-Restructuring)


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CEOIndustrial Gases

AFROX

(South Africa)

Process

Plants

North

Pacific

AirCo(U.S.A)U.K. Gases

CIG(Australia)

Geographical Structural Change (Post-R t t i )


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CEOIndustrial Gases

South AfricaProcessPlants

NorthPacific

AmericasEuropeAustralia

Restructuring)

Food

Chemicals

Electronics

Steel

GlobalMarket

Sectors

Geographic Structures: Crown Cork& S l N i M d


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& Seal, Neiman Marcus and

Wal-mart

Regional

Operations

RegionalOperations

Regional

Operations

RegionalOperations

CEO

Central SupportFunctions

Individualstores

Apple: Geographical Structure


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AppleProducts

AppleUSA

AppleEurope

ApplePacific

CEOJohn Sculley

Canada

Australia

Japan

LatinAmerica

FarEast

EuropeWest

EuropeNorth

France

SouthEurope

SalesService andMarketing

To Regions

Geographical Structural Design: Xerox1991 (B f )


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Chairman

Chief FinancialOfficer

Chief StaffOfficer

Marketing andCustomer

Operations

Developmentand Manufacturing

Research

AmericanOperations

Rank XeroxU.S. Operations

(Sales andService)

World Widemarketing

1991 (Before)

OtherGeographic

Operating Units

OtherGeographic

Operating Units

OtherGeographic

Operating Units

OtherGeographic

Operating Units

Xerox 1992: Hybrid Organization Structure (After)


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Business Division 1

Business Division 2

Business Division 3

Business Division 4

Business Division 5

Technology

ManagementProcess

Customer

OperationsDivisions

GovernanceStrategicServices

7 P St t


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7. Process Structure

Best seen as an alternative to the functionalstructure

Potential for new processes and radical changeto processes

Reduced working capital

Need for reducing process cycle times

Process Organization Structure


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General manager

New productdevelopment

process

Orderfulfillmentprocess

Customeracquisition andmaintenance

New product teams Product teams Customer teams

Work Flows Across Functional Structure


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General manager

Finance

Human resources

Productdevelopment

OperationsSales andmarketing

Work flow process to customer

Scarce resource:management time

Lateral Processes Across Departments


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Generalmanager

Lateral process

A Generic Horizontal Organization withMultiple Core Process Groups


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Team 1 Team 2 Team 3



PerformanceObjective

PerformanceObjective

Performance

Objective

ProcessOwnerTeam

ProcessOwnerTeam

ProcessOwnerTeam

Vice President

GeneralManager

R&D

GeneralManager

Operations

GeneralManagerStrategy

GeneralManagerFinance

Manager Manager Manager

CORE PROCESS GROUP

CORE PROCESS GROUP

CORE PROCESS GROUP

Process Structure


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Reengineering Functional Structures: Re-engineering is the process of redesigning

how tasks are bundled into roles and

functions to improve organizationaleffectiveness.

Process Structure


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Reengineering involves shifting the focusfrom functions isolated from each otherinto horizontal/lateral business processes.

A business process is any activity that cutsacross functional boundaries.

-Order fulfillment-Inventory control-Product design- R&D

Example Business Processes & Teams


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Top Management

Process

CoordinatorTeam Team Team

ProcessCoordinator Team Team Team

ProcessCoordinator Team Team Team

New Product Development Process

Order Fulfillment Process

Procurement, Logistics process

8. Hybrid Structure Model Combinations of


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ySome of the above Seven Structural Types

Best seen as a combination option to the other sevendifferent types of structure.

A combination of one to three or more of the aboveseven types of structure.

Perception of the organization as being bothglobal and local.

Horizontal S.B.U.s, LOBs: Integrated/DifferentiatedNetworks

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)

Organization Form Options (or Grouping Alternatives)


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Activity

Output

User/Customer

MultifocusedOrganization

Function

Work ProcessKnowledge/skills/disciplineTime

Product

ServiceProject

Market segmentUser/Customer need

Geography

Any Combination ofActivity/Output/User

1.

2.

3.

4.

Grouping by Output (AT&T Early 1990s)


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Chairman

Communications

Services Group

Communications

Products GroupComputer (NCR)

Network Systems

Group

CEOABB (Simplified Structure)-1


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ExecutiveCommittee

PowerTransformers

RobotsPower

Generation

Germany

U.S.A

Norway

NationalCompanies

(Percv Bamevik) (previous CEOThought up this structure)

137 OtherNational

Companies

47 OtherBusiness Areas

ABB: Four Types of Organization Structures - 2


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Regions-National Companies

CorporateStructures

Global

BusinessAreas

A

B

1 2 31

2

3

4

C(some are also Country Managers) - 1 or 2 levelsLocal Country

Companies andMany Profit

Center StructuresTight/Clear

Ac

coun

tability

/Respo

ns

ibility

Throug

h

aSing

leFinanc

ialPerformance

Measuremen

tSyste

m

________________Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming)

(Very Small)

D

Corporate Office

3 Regions and 4 Businesses Areas (BAs)

Company Presidents

5,000 Profit Centers(lead by Profit Center Managers;

3 levels to lowest person)

1

2

3

4

1 2 3

ABB - Fall of 1998 - 3


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What They Did:

Break-up existing regional (local) S.B.U.sinto smaller, more focused globalbusiness S.B.U.s

5,000 P/L CentersWhy?

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, CA (forthcoming)

ABB-4


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The fundamental building block of thisCompany 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 holdingcompany).

H.Q. has 7/24/365 real-time informationsystem across the A, B,C, & D parts of

their structure (all have four common

measures abb-2-28 slide1 Asea, Brown, Boveri (ABB): One Business Area:

Relay Business Overview - 5


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y

BusinessHead

WorldwideRelay

Corporate

Regions

Local/CountrySpecific

Corporate3Regions

4 Global

BusinessAreas

President-US

Power

GeneralManager-Relays

CapabilityDeveloper

Entrepreneur

Profit CentersB.A. Macy, Successful Strategic Change,

San Francisco: California:Berret-KoehlerPublisherss (forthcoming) abb-2-28 slide5

ABB-10

Th P t hi B t Fi i l


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The Partnership Between Financial

Wealth and Changes in OrganizationStructures, Systems and ProcessesCorporate Global Regions of Local One Customer Customers

Office Businesses the World Control Contact Point

Small Think

Globally

(Matrix)

Act

Locally

(Matrix)

Many

Companies

(ABB-1,000)

Many Profit

Centers

(ABB -5,000)

Tight

Accountability/

Responsibility

Alignment

Enterprise

Units/Teams

(CATS)

Rapidly

Changing

Needs,

Wants, &

Desires

The Mirror

Concept

________________Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming)

(ABB - 150

Xerox -

Europe - 300)
http://localhost/var/www/apps/5491http://localhost/var/www/apps/5491http://localhost/var/www/apps/5491http://localhost/var/www/apps/5491


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Another Hybrid:

Procter & Gamble

(P&G)

P&Gs Organization Structure: 2001


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>18 mos.GBU

(SBUs)

ProductP&L

< 18 mos.CBD (Sales)

MDO

GBS

Corporation Functions

Idea

InnovationPRODUCTION/PROMOTIONCUSTOMERS/CONSUMERS

Marketing R&D IT HR Sales Product Supply Finance

F

UNCTIONS

Country MDO

CBDTeams

Global MDO/CBD Teams

Retail Customers

The Key Pillars of a


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Horizontal Organization

DemandOrganization

FulfillmentOrganization

GlobalSales

Organization

RetailSales/

Customers Consumers


ServiceOrganization

Enterprise Units: The Mirror Design Concept


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CorporateOffice

The VariousGlobalSBUs

EnterpriseUnits/

Team(s)

Customers/RetailStores

Consumers

123456

7etc.

(feedback)

The Mirror: One Contact Point


P&Gs Enterprise Teams(C t B i D l t)


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Customer*Teams

External Relations* Teams

67%

Customer Teams*

(Exemplar)

Customers/Trade/Retail

Stores

Dec. 2000

Govt.

GBU

GBS

Core Functions

(Customer Business Development)

Note: GBUs = Global S.B.U.sGBS = Global Business Services


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Another Hybrid Example

HP

(from a Product Structure to

A Hybrid Model)

THE OLD HP: 83 Product Structures


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Each product unit was responsible for its own profit/loss performance

CEO

EXECUTIVE COUNCIL

INK CARTRIDGES,DIGITAL CAMERAS,

HOME PRINTERS

CONSULTINGSERCURITYSOFTWARE,

UNIX SERVERS

SCANNERS,LASER PRINTERS,PRINTER PAPER

HOME PCs,HANDHELDS,

LAPTOPS

Carly to HP: Snap to It = Three Phase Plan for Transition


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NOW 2000: Improve growth and profits in corebusinesses

- CONSOLIDATEFolded HPs 83 product divisions into four units: two productdevelopment units that work with two sales and marketing groups--one aimed at consumers, the other corporations.

- SET STRATEGYCreate a nine-person Strategy Council to allocate resources to thebest opportunities rather than leaving strategy to product chieftains(see pages 195) .

- WHACK COSTSLower expenses by $1 billion by revamping internal processesto tap the power of the Web.

THE NEW HYBRID HPAUTHORITYRECOMMENDATIONSIDEAS & INNOVATIONS

CARLY FIORINA

STRATEGY COUNCIL


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PRODUCTS & INFORMATION

EXECUTIVE COUNCILEight top lieutenants, including headsof the four front-and-back-end groups.

CONSUMER SALES$15 billion in annual revenues

JOB Sell consumer gear with focus onmeeting current-year earnings and revenue

goals. Let back end know of must-have

products and features

COMPUTERS57% of annual production

JOBS Focus on future success bymaking computers that companiesand consumers want, with sales

input from front-end

CROSS-COMANY INITIATIVESPersonnel from the front-and back-end groupscollaborate on projectsaimed at sniffing out newmarkets what will creategrowth.

DIGITAL IMAGINGMake photos, drawings,and videos so easy tocreate, store and sendas e-mail.

WIRELESS SERVICESDevelop wirelesstechnologies that willfuel sales of HP-madedevices, ranging fromhandhelds to servers.

COMMERCIALPRINTINGDivert printing jobsfrom offset presses toNet-linked HP printers

STRATEGY COUNCILNine fast-rising managers who advisethe executive council on allocatingmoney and people to growthinitiatives.

CORPORATE SALES$34 billion in annual revenuesJOB Meet near-term financial targetsby selling technology solutions tocorporate clients. Keep back-endunits abreast of whats, hows.

PRINTERS43% of annual productionJOB Build new printing andimaging products to ensure HPslong-term growth. Track trends withhelp from front-end units.

FRONT END

FRONT END

FRONT END

BACK END



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g

1. The Headquarters Structure2. The Centerless Decentralization Structure3. The Functional Structure

4. The Product Structure5. The Market (Customer) Structure6. The Geographical Structure7. The Process Structure

8. The Hybrid Structure Combinations of theabove seven

Documents

11 Organizational Structure