Session III

The Art and Science of Organization Design

Outline for TodayOutline for Today1. What is organization structure?

2. Different types of structure– functional– multidivisional– matrix– network: combines formal and informal organization– hybrid forms

3. Pros and cons of each structure

4. The Jacobs Suchard case

Functional StructureFunctional Structure

President

VP,Finance

VP,Human Resources

Management

VP,Operations

VP,Research

and Development

VP,Public

Relations

VP,Marketing

Public Relations

StaffHead

DesignerChief

EngineerForeman SchedulerAccounting

Staff

Functional Organizational Functional Organizational StructureStructure

l Organized According to Bureaucratic Principles– Differentiation of offices by functions

» Ex: Sales, Marketing, Finance, Production, Engineering, R&D

– Integration at level of senior management– Attention of departments to functional requirements

l Adapted to stable environments

Multidivisional OrganizationMultidivisional Organization

President

CorporateVice-President

Finance

CorporateVice President,

Personnel

CorporateVice-PresidentPublic Affairs

CorporateVice-President

Planning

InternationalDivisions

Dental ProductsDivision

Medical ProductsDivision

PharmaceuticalDivision

Hospital SupportServices Division

Multidivisional StructureMultidivisional Structure

l Combines bureaucracy within divisions with internal capital markets and financial controls– Differentiation of offices by divisions

» Product and geographical divisions Ex:: J&J

– Integration of business strategy at level of divisions» Decentralization of business strategies and implementation» Resource allocation of capital, technology, and human resources by

senior management

– Attention of divisions to markets, technology, and financial controls

» Limits emphasis on cost improvements, productivityl Adapted to innovations in technology and marketing

– Internal selection process of divisions

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Multidivisional Organization with Multidivisional Organization with Lateral RelationsLateral Relations

President

CorporateVice-President

Finance

CorporateVice President,

Personnel

CorporateVice-PresidentPublic Affairs

CorporateVice-President

Planning

InternationalDivisions*

Dental ProductsDivision*

PharmaceuticalDivision*

Hospital SupportServices Division

*Members of task force

Medical ProductsDivision

Basic Design Options for Basic Design Options for Multinational CorporationsMultinational Corporations

Product Line

Global ProductOrganization

Country or RegionOrganization

Matrix

Place

Country Responsiveness Global Integration

Country Adaptation Global Products

Country Competitors Global Competitors

Country Manufacture Global Factories

Country Customer Global Customers

Week IX D30 MurmannSource: Adapted from J.R.Galbraith and R.K. Kazanjian, Strategy Implementation: Structure Systems and Process, 2d ed. St. Paul: West, 1986, 159.

Functions

Manufacturing

Finance

Human Resource

Marketing

Others

Functions

Sara Lee Bakery WorldSara Lee Bakery World--WideWide

Foodservice Retail Bakery/Deli Direct/Thrift International

& Subsidiaries

Sara Lee

Bakery

Sara Lee Meats

(Jimmy Dean,

Hillshire Farm)

Hanes Knitwear Coach Leather

Sara Lee

Corporation

Sara Lee: Old Organizational Sara Lee: Old Organizational StructureStructure

Field Sales Force

VP Field Sales

Natl. Acct. Sales Force

Dir. Natl. Acct.

Product Managers

Dir. Field

Marketing

Natl. Acct.

Mktg. Mgrs.

Dir. Natl. Acct.

Marketing

Promotions

Manager

Finance/admin.

Manager

Food Service SrVPGeneral Manager

Sara Lee Food Services: New Sara Lee Food Services: New Marketing Matrix StructureMarketing Matrix Structure

Segment Mgmt Product Mgmt

Breakfast Desserts Pies Promotions

Health Care

Lodging

Business &Industry

Colleges & Universities

Quick Service

Restaurants

Matrix StructureMatrix Structure

l In theory, combines advantages of functional and divisional form with dual focus– Differentiation by division and by function– Integration process unclear and highly political– Attention: Dual focus

l In practice, largely unsuccessful in U.S. and Western countries– High political conflict, administrative costs, advantages of

functional and divisional structures not realized

Network OrganizationNetwork Organization

l Departs from traditional bureaucratic model– No stable, clearly defined hierarchy

» Complex networks of vertical and horizontal relationships» Intra and interorganizational networks» Differentiation and integration both through temporary cross-

functional project teams» Reliance on strategic alliances and joint ventures

– Combines formal and informal organization– Example: Hollywood Film Production, Benetton, Corning?

Hybrid StructuresHybrid Structures

l Most organizations combine various forms– In U.S. multidivisional form increasingly combined with network

forms » Cross-functional teams» Informal relationships» Temporary workgroups

l No Optimal Structure– Constant changes in structure– Emphasis on action and getting things done

l Recent trends– Increased importance of interorganizational networks and alliances– Increased externalization of work