Organizational Structure and Controls Organizational Structure and Controls ©2000 South-Western College Publishing.

Organizational Structure and Controls

©2000 South-Western College Publishing

Structure TypesStructure Types

All organizations require some form of organizational All organizations require some form of organizational structure to implement and manage their strategiesstructure to implement and manage their strategies

Firms frequently alter their structure as they grow in Firms frequently alter their structure as they grow in size and complexitysize and complexity

Three basic structure types:Three basic structure types:

Functional StructureFunctional StructureMulti-divisional Structure (M-form)Multi-divisional Structure (M-form)

Simple StructureSimple Structure

Strategy & StructureStrategy & StructureGrowth PatternsGrowth Patterns

Sales Growth CoordinationSales Growth Coordinationand Control Problemsand Control Problems

Efficient implementationEfficient implementationof formulated strategyof formulated strategy

MultidivisionalMultidivisionalStructureStructure

Efficient implementationEfficient implementationof formulated strategyof formulated strategy

Sales Growth CoordinationSales Growth Coordinationand Control Problemsand Control Problems

Functional Functional StructureStructure

Simple Simple StructureStructure

Simple StructureSimple Structure

Owner / ManagerOwner / Manager

Owner/Manager makes all major decisions Owner/Manager makes all major decisions directly and monitors all activitiesdirectly and monitors all activities

Difficult to maintain this structure as Difficult to maintain this structure as the firm grows in size and complexitythe firm grows in size and complexity

* Production* Production* Finance* Finance

* Engineering* Engineering* Accounting* Accounting

* Sales & Marketing* Sales & Marketing* Human Resources* Human Resources

Functional StructureFunctional StructureFirst stage beyond a Simple StructureFirst stage beyond a Simple Structure

Appropriate for single or dominant-business firmsAppropriate for single or dominant-business firms

Allows specialization of tasksAllows specialization of tasks

Overcomes information processing limits of Overcomes information processing limits of single owner/managersingle owner/manager

Functional department heads report to Chief Functional department heads report to Chief Executive Officer who integrates decisions and Executive Officer who integrates decisions and actions from a company-wide point of viewactions from a company-wide point of view

Risks conflicts between myopic function managersRisks conflicts between myopic function managers

ProductionProductionFinanceFinance EngineeringEngineering AccountingAccounting Sales & Sales & MarketingMarketing

Human Human ResourcesResources

Functional StructureFunctional Structure

Chief Executive OfficerChief Executive Officer

Corporate Corporate FinanceFinance

Corporate Corporate R&DR&D

Corporate Corporate MarketingMarketing

Corporate Corporate Human Human

ResourcesResources

Strategic Strategic PlanningPlanning

MarketingMarketingEngineeringEngineering OperationsOperations PersonnelPersonnel AccountingAccounting

Functional Structure forFunctional Structure forCost LeadershipCost Leadership Strategy Strategy

Office of the PresidentOffice of the President

CentralizedCentralizedStaffStaff

• Operations is main functionOperations is main function

• Process engineering is Process engineering is emphasized rather than new emphasized rather than new product R&Dproduct R&D

• Formalized procedures allow Formalized procedures allow for low-cost culturefor low-cost culture

• Structure is mechanical; job Structure is mechanical; job roles are highly structuredroles are highly structured

Relatively large Relatively large centralized staff centralized staff coordinates coordinates functionsfunctions

MarketingMarketingNew New Product Product R&DR&D

OperationsOperations HumanHumanResourcesResources

FinanceFinance

R&DR&D MarketingMarketing

Functional Structure forFunctional Structure forDifferentiationDifferentiation Strategy Strategy

President andPresident andLimited StaffLimited Staff

• Marketing is the main function for tracking new product ideasMarketing is the main function for tracking new product ideas• New product R&D is emphasizedNew product R&D is emphasized• Most functions are decentralizedMost functions are decentralized• Formalization is limited to foster change and promote new ideasFormalization is limited to foster change and promote new ideas• Overall structure is organic; job roles are less structuredOverall structure is organic; job roles are less structured

Multi-Divisional StructureMulti-Divisional Structure

Each division is operated as a separate businessEach division is operated as a separate business

Appropriate for related-diversified businessesAppropriate for related-diversified businesses

Key task of corporate managers is exploiting synergies Key task of corporate managers is exploiting synergies among divisionsamong divisions

Managers use a combination of strategic controls and Managers use a combination of strategic controls and financial controlsfinancial controls

Managers try to strike a balance between:Managers try to strike a balance between:Competing among divisions for scarce capital resourcesCompeting among divisions for scarce capital resourcesCreating opportunities for cooperation to develop synergiesCreating opportunities for cooperation to develop synergies

The goal is to maximize overall firm performanceThe goal is to maximize overall firm performance


Balance on these dimensions may change over timeBalance on these dimensions may change over time

The decision-making of managers in a Multi-The decision-making of managers in a Multi-Divisional structure may be:Divisional structure may be:

Centralized or DecentralizedCentralized or DecentralizedBureaucratic or Non-bureaucraticBureaucratic or Non-bureaucratic

Changes in strategyChanges in strategyDegree of diversificationDegree of diversificationGeographic scopeGeographic scopeNature of competitionNature of competition

Structure will evolve over time with:Structure will evolve over time with:

DivisionDivision DivisionDivision DivisionDivision DivisionDivision

ProductionProductionFinanceFinance EngineeringEngineering AccountingAccounting Sales & Sales & MarketingMarketing

Human Human ResourcesResources








ResourcesResources

PresidentPresident

Strategic Strategic Business Business Unit AUnit A

SBU FormSBU FormRelated-Linked StrategyRelated-Linked Strategy






ResourcesResources

DivisionDivisionDivisionDivisionDivisionDivision

Strategic Strategic Business Business Unit CUnit C

DivisionDivisionDivisionDivisionDivisionDivision

Strategic Strategic Business Business Unit BUnit B

Strategic Strategic Business Business Unit DUnit D

• Structural integration exists among divisions within SBUs, but not across SBUsStructural integration exists among divisions within SBUs, but not across SBUs• Each SBU may have its own budget for staff to foster integrationEach SBU may have its own budget for staff to foster integration• Corporate headquarters staff serve as consultants to SBUs and divisionsCorporate headquarters staff serve as consultants to SBUs and divisions

Competitive FormCompetitive FormUnrelated /Holding Company StrategyUnrelated /Holding Company Strategy

PresidentPresident

LegalLegalAffairsAffairs

FinanceFinance

• Corporate headquarters has a small staffCorporate headquarters has a small staff• Finance and auditing are the most prominent functions in the headquartersFinance and auditing are the most prominent functions in the headquarters• Divisions are independent and separate for financial evolution purposesDivisions are independent and separate for financial evolution purposes• Divisions retain strategic control, but cash is managed by the corporate officeDivisions retain strategic control, but cash is managed by the corporate office• Divisions compete for corporate resourcesDivisions compete for corporate resources

AuditingAuditing

DivisionDivisionDivisionDivisionDivisionDivisionDivisionDivision DivisionDivision

Cost LeadershipCost LeadershipDecentralizationDecentralizationDifferentiationDifferentiationCentralizationCentralization

Multi-Divisional StructureMulti-Divisional StructureThe choice between centralization and decentralization The choice between centralization and decentralization is frequently based on the business-level strategy is frequently based on the business-level strategy implemented in each divisionimplemented in each division

Complex Multi-Divisional structure firms may be Complex Multi-Divisional structure firms may be simultaneously centralized and decentralized , simultaneously centralized and decentralized , depending upon the various business-level strategies depending upon the various business-level strategies employed throughout the firm’s individual businessesemployed throughout the firm’s individual businesses

Multi-Divisional structure firms use a combination of:Multi-Divisional structure firms use a combination of:

Financial ControlsFinancial ControlsStrategic Controls Strategic Controls

A Structural evolution based on A Structural evolution based on GeographicGeographic lines usually lines usually implies a implies a Multi-DomesticMulti-Domestic International Strategy International Strategy

Evolution of Multi-Divisional StructureEvolution of Multi-Divisional Structure

North North AmericaAmerica AustraliaAustraliaEuropeEurope AsiaAsia Latin Latin

AmericaAmerica AfricaAfrica

Product AProduct A Product BProduct B Product CProduct C Product DProduct D


Corporate Office (Staff)Corporate Office (Staff)

Implementation of a Implementation of a MultidomesticMultidomestic Strategy StrategyWorldwideWorldwideGeographicGeographic

AreaAreaStructureStructure

MultinationalMultinationalHeadquartersHeadquarters

AsiaAsia UnitedUnitedStatesStates

LatinLatinAmericaAmerica EuropeEurope

AustraliaAustraliaMiddleMiddleEast/East/

AfricaAfrica

• Green circles indicate decentralization of operationsGreen circles indicate decentralization of operations• Emphasis is on differentiation by local demand to fit a cultureEmphasis is on differentiation by local demand to fit a culture• Corporate headquarters coordinates financial resources among Corporate headquarters coordinates financial resources among

independent subsidiariesindependent subsidiaries• The organization is like a decentralized federationThe organization is like a decentralized federation

Product AProduct A Product BProduct B Product CProduct C Product DProduct D

A Structural evolution based on A Structural evolution based on ProductProduct lines lines usually implies a usually implies a GlobalGlobal International Strategy International Strategy

Evolution of Multi-Divisional StructureEvolution of Multi-Divisional Structure


Corporate Office (Staff)Corporate Office (Staff)

Implementation of a Implementation of a GlobalGlobal Strategy StrategyWorldwideWorldwide

ProductProductDivisionalDivisionalStructureStructure

• Green circle indicates centralization to coordinate information Green circle indicates centralization to coordinate information flow among worldwide productsflow among worldwide products

• Headquarters uses many intercoordination devices to facilitate Headquarters uses many intercoordination devices to facilitate global economies of scale and scopeglobal economies of scale and scope

• Headquarters also allocates financial resources cooperativelyHeadquarters also allocates financial resources cooperatively• The organization is like a centralized federationThe organization is like a centralized federation

MultinationalMultinationalHeadquartersHeadquarters

WorldwideWorldwideProductsProductsDivisionDivision






Strategic NetworksStrategic Networks

A Strategic Network is a grouping of organizations A Strategic Network is a grouping of organizations that has been formed to create value through that has been formed to create value through participation in an array of cooperative arrangements, participation in an array of cooperative arrangements, such as a strategic alliancesuch as a strategic alliance

A Strategic Center Firm often manages the networkA Strategic Center Firm often manages the network

The Strategic Center Firm identifies actions that The Strategic Center Firm identifies actions that increase the opportunity for each firm to achieve increase the opportunity for each firm to achieve success through its participation in the networksuccess through its participation in the network

The Strategic Center Firm creates incentives that The Strategic Center Firm creates incentives that reduce the probability of any single firm taking reduce the probability of any single firm taking advantage of its network partnersadvantage of its network partners

A Strategic NetworkA Strategic Network

StrategicStrategicCenterCenterFirmFirm

Network FirmsNetwork Firms


Strategic Center Firm’s Critical FunctionsStrategic Center Firm’s Critical Functions

Strategic OutsourcingStrategic Outsourcing

Capability DevelopmentCapability Development

Technology SharingTechnology Sharing

Building Linkages to Building Linkages to Facilitate LearningFacilitate Learning



Center firm coordinates outsourcing among partners, Center firm coordinates outsourcing among partners, initiates actions and coordinates problem solvinginitiates actions and coordinates problem solving







Strategic center firm manages the development and sharing Strategic center firm manages the development and sharing technology-based ideas among network partnerstechnology-based ideas among network partners

Capability and TechnologyCapability and Technology


Center firm attempts to develop each partner’s core Center firm attempts to develop each partner’s core competencies and provides incentives for network firms to competencies and provides incentives for network firms to share their capabilities and competencies with partnersshare their capabilities and competencies with partners








Building Linkages to Facilitate LearningBuilding Linkages to Facilitate Learning

Strategic center firm emphasizes to partners the need to build Strategic center firm emphasizes to partners the need to build linkages between value chains and networks of value chains.linkages between value chains and networks of value chains.

The strategic network seeks to develop a competitive The strategic network seeks to develop a competitive advantage in primary or support activitiesadvantage in primary or support activities

IDEOLOGÍA

Partes Básicas de una Organización

Ápice Estratégico

Tecnoestructura

Núcleo de Operaciones

Personal de ApoyoLinea

Intermedia

Fuente: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116.

Formas de Organización• La Organización Empresarial• La Organización Máquina• La Organización Profesional • La Organización Diversificada• La Organización Innovadora• La Organización Misionaria• La Organización Política

Impulsos por tipos de configuración CONFIGURACIÓ

NPRINC MECANISMO DE COORDINACIÓN

PARTE CLAVE DE LA ORGANZACIÓN

IMPULSOS

Empresarial, nuevos negocios

Supervisión directa

Ápice Estratégico Liderazgo, Dirección

Máquina, banco, manufacturas

Procesos Standard

Tecnoestructutra Racionalización, Eficiencia

Profesional, consultoras

Habilidades Standard

Operaciones Profesionalización; Destreza

Diversificada, múltip. Negocios

Producción Standard

Linea Intermedia Fragmentación, Concentración

Innovadora, Inv & Desarrollo

Adaptación mutua

Apoyo Colaboración, Aprendizaje

Misionaria, ONG’s, Educación

Normas Standard Ideología Descentralización, Cooperación

Política, partidos políticos

Ninguna Ninguna La desunión, Competencia

Organizational Structure and Controls Organizational Structure and Controls ©2000 South-Western College Publishing.

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