Dec 21, 2015
Learning ObjectivesLearning Objectives Understand the dimensions of organizational Understand the dimensions of organizational
structure and how they are importantstructure and how they are important Select an appropriate business-level structureSelect an appropriate business-level structure Select an appropriate corporate-level structure for Select an appropriate corporate-level structure for
firms with more than one business unitfirms with more than one business unit Develop a comprehensive strategic control Develop a comprehensive strategic control
systemsystem Understand the characteristics of accident-prone Understand the characteristics of accident-prone
organizations and how to avoid themorganizations and how to avoid them
Dimensions of Organizational Dimensions of Organizational StructureStructure
Hierarchy of AuthorityHierarchy of Authority Degree of CentralizationDegree of Centralization ComplexityComplexity SpecializationSpecialization FormalizationFormalization ProfessionalismProfessionalism
Functional StructureFunctional StructureFunctional StructureFunctional Structure
General Manager
Marketing Finance Operations HR R&D/Eng
Functional StructureFunctional StructureFunctional StructureFunctional Structure Organizing FrameworkOrganizing Framework
Inputs such as marketing and productionInputs such as marketing and production Degree of CentralizationDegree of Centralization
High centralizationHigh centralization Competitive EnvironmentCompetitive Environment
Stable, demands for internal efficiency or Stable, demands for internal efficiency or functional specializationfunctional specialization
Growth StrategyGrowth Strategy Market penetrationMarket penetration
Organizing FrameworkOrganizing Framework Inputs such as marketing and productionInputs such as marketing and production
Degree of CentralizationDegree of Centralization High centralizationHigh centralization
Competitive EnvironmentCompetitive Environment Stable, demands for internal efficiency or Stable, demands for internal efficiency or
functional specializationfunctional specialization Growth StrategyGrowth Strategy
Market penetrationMarket penetration
Functional StructureFunctional StructureFunctional StructureFunctional Structure StrengthsStrengths
Economies of scaleEconomies of scale Functional expertise and specializationFunctional expertise and specialization Best if few products or servicesBest if few products or services
WeaknessesWeaknesses Slow response timeSlow response time Hierarchy overloadHierarchy overload Sometimes poor coordination across departmentsSometimes poor coordination across departments Can restrict view or broader organizational goalsCan restrict view or broader organizational goals
StrengthsStrengths Economies of scaleEconomies of scale Functional expertise and specializationFunctional expertise and specialization Best if few products or servicesBest if few products or services
WeaknessesWeaknesses Slow response timeSlow response time Hierarchy overloadHierarchy overload Sometimes poor coordination across departmentsSometimes poor coordination across departments Can restrict view or broader organizational goalsCan restrict view or broader organizational goals
Product/Market StructureProduct/Market StructureProduct/Market StructureProduct/Market StructureGeneral Manager
Marketing Operations
Product A
Administrative DepartmentsAdministrative Departments
Marketing Operations
Product B
Marketing Operations
Market A
Marketing Operations
Market B
General Manager
Administrative DepartmentsAdministrative Departments
Product/Market StructureProduct/Market StructureProduct/Market StructureProduct/Market Structure Organizing FrameworkOrganizing Framework
Outputs such as product groups or marketsOutputs such as product groups or markets Degree of CentralizationDegree of Centralization
DecentralizedDecentralized Competitive EnvironmentCompetitive Environment
Dynamic with pressure to satisfy particular Dynamic with pressure to satisfy particular market needs very wellmarket needs very well
Growth StrategyGrowth Strategy Market and/or product developmentMarket and/or product development
Organizing FrameworkOrganizing Framework Outputs such as product groups or marketsOutputs such as product groups or markets
Degree of CentralizationDegree of Centralization DecentralizedDecentralized
Competitive EnvironmentCompetitive Environment Dynamic with pressure to satisfy particular Dynamic with pressure to satisfy particular
market needs very wellmarket needs very well Growth StrategyGrowth Strategy
Market and/or product developmentMarket and/or product development
Product/Market StructureProduct/Market StructureProduct/Market StructureProduct/Market Structure StrengthsStrengths
Suited to fast change in an unstable environmentSuited to fast change in an unstable environment High levels of client satisfactionHigh levels of client satisfaction High coordination across functionsHigh coordination across functions Best in larger organizations with several products or marketsBest in larger organizations with several products or markets
WeaknessesWeaknesses Loss of economies of scale within functional areasLoss of economies of scale within functional areas Some redundancy of functionsSome redundancy of functions Loss of in-depth functional specializationLoss of in-depth functional specialization May lead to poor coordination across product lines or marketsMay lead to poor coordination across product lines or markets
StrengthsStrengths Suited to fast change in an unstable environmentSuited to fast change in an unstable environment High levels of client satisfactionHigh levels of client satisfaction High coordination across functionsHigh coordination across functions Best in larger organizations with several products or marketsBest in larger organizations with several products or markets
WeaknessesWeaknesses Loss of economies of scale within functional areasLoss of economies of scale within functional areas Some redundancy of functionsSome redundancy of functions Loss of in-depth functional specializationLoss of in-depth functional specialization May lead to poor coordination across product lines or marketsMay lead to poor coordination across product lines or markets
Project Matrix StructureProject Matrix StructureProject Matrix StructureProject Matrix StructureGeneral Manager
Support FunctionsSupport Functions
ProjectManager A
ProjectManager A
ProjectManager A
MarketingManager
R&DManager
OperationsManager
Project Matrix StructureProject Matrix StructureProject Matrix StructureProject Matrix Structure Organizing FrameworkOrganizing Framework
Inputs and outputsInputs and outputs
Degree of CentralizationDegree of Centralization Decentralization with shared authorityDecentralization with shared authority
Competitive EnvironmentCompetitive Environment Responds well to internal pressure for efficiency or Responds well to internal pressure for efficiency or
specialization AND external market pressure to satisfy specialization AND external market pressure to satisfy particular market needs or customersparticular market needs or customers
Growth StrategyGrowth Strategy Frequent changes to products and markets (allows Frequent changes to products and markets (allows
flexible use of human resource)flexible use of human resource)
Organizing FrameworkOrganizing Framework Inputs and outputsInputs and outputs
Degree of CentralizationDegree of Centralization Decentralization with shared authorityDecentralization with shared authority
Competitive EnvironmentCompetitive Environment Responds well to internal pressure for efficiency or Responds well to internal pressure for efficiency or
specialization AND external market pressure to satisfy specialization AND external market pressure to satisfy particular market needs or customersparticular market needs or customers
Growth StrategyGrowth Strategy Frequent changes to products and markets (allows Frequent changes to products and markets (allows
flexible use of human resource)flexible use of human resource)
Project Matrix StructureProject Matrix StructureProject Matrix StructureProject Matrix Structure StrengthsStrengths
Achieves coordinationAchieves coordination Flexible use of human resourcesFlexible use of human resources Works well in medium-sized firms with multiple productsWorks well in medium-sized firms with multiple products
WeaknessesWeaknesses Dual authority can cause frustration and confusionDual authority can cause frustration and confusion Excellent interpersonal skills neededExcellent interpersonal skills needed Additional training can be expensiveAdditional training can be expensive Time consuming, frequent meetingsTime consuming, frequent meetings Great effort to maintain power balanceGreat effort to maintain power balance
StrengthsStrengths Achieves coordinationAchieves coordination Flexible use of human resourcesFlexible use of human resources Works well in medium-sized firms with multiple productsWorks well in medium-sized firms with multiple products
WeaknessesWeaknesses Dual authority can cause frustration and confusionDual authority can cause frustration and confusion Excellent interpersonal skills neededExcellent interpersonal skills needed Additional training can be expensiveAdditional training can be expensive Time consuming, frequent meetingsTime consuming, frequent meetings Great effort to maintain power balanceGreat effort to maintain power balance
Network StructureNetwork StructureNetwork StructureNetwork Structure
InformationCenter
Network StructureNetwork StructureNetwork StructureNetwork Structure Organizing FrameworkOrganizing Framework
OutputsOutputs Degree of CentralizationDegree of Centralization
Very decentralizedVery decentralized Competitive EnvironmentCompetitive Environment
Conditions vary from region to regionConditions vary from region to region Growth StrategyGrowth Strategy
Market penetration or market developmentMarket penetration or market development
Organizing FrameworkOrganizing Framework OutputsOutputs
Degree of CentralizationDegree of Centralization Very decentralizedVery decentralized
Competitive EnvironmentCompetitive Environment Conditions vary from region to regionConditions vary from region to region
Growth StrategyGrowth Strategy Market penetration or market developmentMarket penetration or market development
Network StructureNetwork StructureNetwork StructureNetwork Structure StrengthsStrengths
Units can focus on specific needs of marketsUnits can focus on specific needs of markets High levels of client satisfactionHigh levels of client satisfaction Works well in larger organizations with highly Works well in larger organizations with highly
differentiated marketsdifferentiated markets
WeaknessesWeaknesses Loss of economies of scaleLoss of economies of scale Duplication of resourcesDuplication of resources Hard to coordinate units when coordination is Hard to coordinate units when coordination is
necessary or desirablenecessary or desirable Can be confusing to customers with locations in Can be confusing to customers with locations in
multiple regions where the firm operatesmultiple regions where the firm operates
StrengthsStrengths Units can focus on specific needs of marketsUnits can focus on specific needs of markets High levels of client satisfactionHigh levels of client satisfaction Works well in larger organizations with highly Works well in larger organizations with highly
differentiated marketsdifferentiated markets
WeaknessesWeaknesses Loss of economies of scaleLoss of economies of scale Duplication of resourcesDuplication of resources Hard to coordinate units when coordination is Hard to coordinate units when coordination is
necessary or desirablenecessary or desirable Can be confusing to customers with locations in Can be confusing to customers with locations in
multiple regions where the firm operatesmultiple regions where the firm operates
Corporate Structures -- MultidivisionalCorporate Structures -- MultidivisionalCorporate Structures -- MultidivisionalCorporate Structures -- Multidivisional
Few businesses compared to the other corporate structuresFew businesses compared to the other corporate structures Moderate/low relatedness across divisionsModerate/low relatedness across divisions Moderate/low need for coordination across divisionsModerate/low need for coordination across divisions Financial synergy may be available across divisions and some Financial synergy may be available across divisions and some
operational synergy (although limited) only to the extent that the operational synergy (although limited) only to the extent that the divisions are related to each otherdivisions are related to each other
Few businesses compared to the other corporate structuresFew businesses compared to the other corporate structures Moderate/low relatedness across divisionsModerate/low relatedness across divisions Moderate/low need for coordination across divisionsModerate/low need for coordination across divisions Financial synergy may be available across divisions and some Financial synergy may be available across divisions and some
operational synergy (although limited) only to the extent that the operational synergy (although limited) only to the extent that the divisions are related to each otherdivisions are related to each other
CEO
Corporate Staff
Division VP Division VP Division VP
Corporate Structures -- Strategic Business UnitCorporate Structures -- Strategic Business UnitCorporate Structures -- Strategic Business UnitCorporate Structures -- Strategic Business Unit
Many businesses, some of which are related to each otherMany businesses, some of which are related to each other Groups (SBUs) of related businessesGroups (SBUs) of related businesses Coordination needed within each SBU; low need for Coordination needed within each SBU; low need for
coordination across SBUscoordination across SBUs Financial synergy across SBUs, potential exists for Financial synergy across SBUs, potential exists for
operational synergy within SBUsoperational synergy within SBUs
Many businesses, some of which are related to each otherMany businesses, some of which are related to each other Groups (SBUs) of related businessesGroups (SBUs) of related businesses Coordination needed within each SBU; low need for Coordination needed within each SBU; low need for
coordination across SBUscoordination across SBUs Financial synergy across SBUs, potential exists for Financial synergy across SBUs, potential exists for
operational synergy within SBUsoperational synergy within SBUs
CEO
Corporate Staff
SBU Manager SBU Manager SBU Manager
Related Divisions Related Divisions Related Divisions
SBU Staff SBU Staff SBU Staff
Corporate Structures -- MatrixCorporate Structures -- MatrixCorporate Structures -- MatrixCorporate Structures -- Matrix
Any number of businessesAny number of businesses Highly related businesses so people can easily transferHighly related businesses so people can easily transfer Very high level of coordination is requiredVery high level of coordination is required Many opportunities exist for operational synergies (for Many opportunities exist for operational synergies (for
innovation, to reduce costs, or serve multiple markets well)innovation, to reduce costs, or serve multiple markets well)
Any number of businessesAny number of businesses Highly related businesses so people can easily transferHighly related businesses so people can easily transfer Very high level of coordination is requiredVery high level of coordination is required Many opportunities exist for operational synergies (for Many opportunities exist for operational synergies (for
innovation, to reduce costs, or serve multiple markets well)innovation, to reduce costs, or serve multiple markets well)
CEO and Staff
Marketing
Division 2Division 1
Operations
R&D
Corporate Structures -- TransnationalCorporate Structures -- TransnationalCorporate Structures -- TransnationalCorporate Structures -- Transnational
Many businesses in different nationsMany businesses in different nations Highly related businesses (similar to corporate matrix)Highly related businesses (similar to corporate matrix) Very high level of coordination is requiredVery high level of coordination is required Many opportunities exist for operational synergies on a Many opportunities exist for operational synergies on a
world wide scale (for innovation, to reduce costs, or world wide scale (for innovation, to reduce costs, or serve multiple markets well)serve multiple markets well)
Many businesses in different nationsMany businesses in different nations Highly related businesses (similar to corporate matrix)Highly related businesses (similar to corporate matrix) Very high level of coordination is requiredVery high level of coordination is required Many opportunities exist for operational synergies on a Many opportunities exist for operational synergies on a
world wide scale (for innovation, to reduce costs, or world wide scale (for innovation, to reduce costs, or serve multiple markets well)serve multiple markets well)
U.S.A.U.S.A.
AsiaAsia
EuropeEurope
Marketing Operations R&DMarketing Operations R&D
Product Group 1Product Group 1
Product Group 2Product Group 2
Product Group 3Product Group 3
Steps in Developing a Steps in Developing a Feedback Control SystemFeedback Control System
Determine Broad GoalsDetermine Broad Goals Establish Links Between Broad Goals and Establish Links Between Broad Goals and
Resource Areas or Activities of the OrganizationResource Areas or Activities of the Organization Create Measurable Operating Goals for Each Create Measurable Operating Goals for Each
Resource Area or ActivityResource Area or Activity Assign Responsibility for Goal AccomplishmentAssign Responsibility for Goal Accomplishment Develop Specific Action PlansDevelop Specific Action Plans Allocate ResourcesAllocate Resources Follow UpFollow Up
Key Result Areas and Possible MeasuresKey Result Areas and Possible Measures
CustomersCustomers Sales $ and volumeSales $ and volume New customersNew customers New customer New customer
contactscontacts
CustomersCustomers Growth in salesGrowth in sales Turnover of Turnover of
customer basecustomer base Ability to control Ability to control
priceprice
Near-Term MeasuresNear-Term Measures Long-term MeasuresLong-term Measures
Key Result Areas and Possible MeasuresKey Result Areas and Possible Measures
SuppliersSuppliers Cost of materialsCost of materials Delivery timeDelivery time InventoryInventory Availability of Availability of
materialsmaterials
SuppliersSuppliers Growth rate of Growth rate of
material cost, material cost, delivery time or delivery time or inventoryinventory
New ideas from New ideas from supplierssuppliers
Near-Term MeasuresNear-Term Measures Long-term MeasuresLong-term Measures
Key Result Areas and Possible MeasuresKey Result Areas and Possible Measures
Financial Financial CommunityCommunity EPSEPS Stock PriceStock Price Number of “buy” Number of “buy”
listslists ROEROE
Financial Financial CommunityCommunity Ability to convince Ability to convince
Wall Street of Wall Street of strategystrategy
Growth in ROE, Growth in ROE, EPS, or stock priceEPS, or stock price
Near-Term MeasuresNear-Term Measures Long-term MeasuresLong-term Measures
EmployeesEmployees Number of Number of
suggestionssuggestions ProductivityProductivity Number of Number of
grievancesgrievances
EmployeesEmployees Number of internal Number of internal
promotionspromotions TurnoverTurnover
Key Result Areas and Possible MeasuresKey Result Areas and Possible MeasuresNear-Term MeasuresNear-Term Measures Long-term MeasuresLong-term Measures
CongressCongress New legislation New legislation
affecting firmaffecting firm Access to key Access to key
members and staffmembers and staff
CongressCongress Number of new Number of new
regulations that affect regulations that affect industryindustry
Ratio of “cooperative” Ratio of “cooperative” vs. “competitive” vs. “competitive” encountersencounters
Key Result Areas and Possible MeasuresKey Result Areas and Possible MeasuresNear-Term MeasuresNear-Term Measures Long-term MeasuresLong-term Measures
Consumer Consumer AdvocatesAdvocates Number of meetings, Number of meetings,
hostile encounters, hostile encounters, coalitions formed or coalitions formed or legal actionslegal actions
Consumer Consumer AdvocatesAdvocates Number of Number of
changes in policy changes in policy due to CAdue to CA
Number of CA-Number of CA-initiated “calls for initiated “calls for help”help”
Key Result Areas and Possible MeasuresKey Result Areas and Possible MeasuresNear-Term MeasuresNear-Term Measures Long-term MeasuresLong-term Measures
EnvironmentalistsEnvironmentalists Number of meetings, Number of meetings,
hostile encounters, hostile encounters, coalitions formed, coalitions formed, EPA complaints or EPA complaints or legal actionslegal actions
EnvironmentalistsEnvironmentalists Number of changes in Number of changes in
policy due to policy due to environmentalistsenvironmentalists
Number of Number of environmentalist “calls environmentalist “calls for help”for help”
Key Result Areas and Possible MeasuresKey Result Areas and Possible MeasuresNear-Term MeasuresNear-Term Measures Long-term MeasuresLong-term Measures
Feedback ControlsFeedback Controls
PerformancePerformanceFeedbackFeedback
EstablishEstablishStrategicStrategicDirectionDirection
Formulate Formulate BasicBasic
StrategiesStrategies
ImplementationImplementationStrategies and Strategies and
ControlsControls
Goals and Goals and ObjectivesObjectives
Feedback ControlFeedback Control
OrganizationalOrganizational OutcomesOutcomes
TTIIMMEE
Compare Compare Goals to Goals to
OutcomesOutcomes
Feedforward ControlsFeedforward Controls
Business Business IntelligenceIntelligence
Establish Establish StrategicStrategicDirectionDirection
Formulate Formulate BasicBasic
StrategiesStrategies
ImplementationImplementationStrategies & Strategies &
ControlsControls
Analyze BroadAnalyze BroadEnvironmentEnvironment
Analyze Analyze OperatingOperating
Environment Environment
Analyze Analyze ResourcesResources
& Strategies& Strategies
Feedforward ControlFeedforward Control
Behavioral, Process and Behavioral, Process and Accounting ControlsAccounting Controls
Establish Establish StrategicStrategicDirectionDirection
Formulate BasicFormulate Basic StrategiesStrategies
ImplementationImplementationStrategies and Strategies and
ControlsControls
Behavioral ControlsBehavioral ControlsBureaucracyBureaucracy Socialization Socialization
processes (clan)processes (clan)Human resources Human resources
systemssystems
Process ControlsProcess ControlsUsed to guide daily Used to guide daily
processes and processes and work activities; work activities;
oftenoftentechnology basedtechnology based
Accounting ControlsAccounting ControlsSystems to ensure the Systems to ensure the accurate collection and accurate collection and
reporting of financial reporting of financial informationinformation
How Control Elements Fit TogetherHow Control Elements Fit Together
Business IntelligenceBusiness Intelligence
Establish StrategicEstablish StrategicDirectionDirection
Formulate BasicFormulate Basic StrategiesStrategies
Create ImplementationCreate ImplementationStrategies and ControlsStrategies and Controls
Information used to guide firm Information used to guide firm strategies and manage resources strategies and manage resources
and stakeholder relationships and stakeholder relationships (includes performance feedback)(includes performance feedback)
Analyze BroadAnalyze BroadEnvironmentEnvironment
Analyze OperatingAnalyze OperatingEnvironment Environment
Analyze ResourcesAnalyze Resources and Strategiesand Strategies
Goals and ObjectivesGoals and Objectives
Specific targets set; shouldSpecific targets set; shouldbe mission drivenbe mission driven
Organizational OutcomesOrganizational OutcomesGrowthGrowth
Stakeholder satisfactionStakeholder satisfactionProfitabilityProfitability
Level of innovationLevel of innovationOther outcomesOther outcomes TT
IIMMEE
Compare Goals Compare Goals to Outcomesto Outcomes
Behavioral ControlsBehavioral ControlsBureaucracyBureaucracy
Socialization processes (clan)Socialization processes (clan)Human resources systemsHuman resources systems
Process ControlsProcess ControlsUsed to guide daily processes Used to guide daily processes
and work activities; oftenand work activities; oftentechnology basedtechnology based
Accounting ControlsAccounting ControlsSystems to ensure the accurate Systems to ensure the accurate
collection and reporting of collection and reporting of financial informationfinancial information
Feedforward ControlFeedforward ControlFeedback
Control
Feedback
Control
Behavioral, Process and Accounting ControlsBehavioral, Process and Accounting Controls
The Five Phases of Crisis The Five Phases of Crisis ManagementManagement
Signal DetectionSignal Detection Preparation / PreventionPreparation / Prevention Containment / Damage Containment / Damage
LimitationLimitation RecoveryRecovery LearningLearning
Preventing and Controlling CrisesPreventing and Controlling Crises
Strategic ActionsStrategic Actions Technical and Structural ActionsTechnical and Structural Actions Evaluation and Diagnostic Evaluation and Diagnostic
ActionsActions Communication ActionsCommunication Actions Psychological and Cultural Psychological and Cultural
ActionsActions