11 Organizational Structure
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MGT 5391: Session # 8 8 Types of Structures
http://macy.ba.ttu.edu/5491 Week #11organizational structure 1
Inputs
TRANSFORMATION
Environmental Drivers 1. External/ Global Business Environment
THE ORGANIZATION DESIGN PUZZLE: HIGH PERFORMANCE LEARNING ORGANIZATION
B.Vision Direction (VDSP) C. Organizational Strategies D. Business Models E. Labor (Employee) Management Mutuality F. Transformation/ Change Processes
Results From High Performance / Exemplar Organizations
1. Macro Organizational Structures
2.Internal Environment A.Corporate, Business, Worksite And Individual: Capabilities And Barriers (Culture)
Outputs
8. Shared Leadership & Decision Making Systems 7. Recognition and Financial Reward Systems
Organizational Effectiveness
2. The Job/work
Interdependence and Design “FIT”
6. People and Human Resource Systems
3. Technologies
1. Customers 2. Financial/ Business 3. Employees
4. Information and Knowledge Systems 5. Micro Organization Structures: Team Design
4. Organizational Innovation 5. Societal
Organizational Processes (Individual, Group, Organizational and Business Processes (Total Quality, Business Processes, etc.)
(Feedback)
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.
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The Common Eight Different Options for Organization Structure 1. 2. 3. 4. 5. 6. 7. 8.
The Headquarters Structure The Centerless – Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure – Combinations of the above seven
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OST Eight TRANSFORMATION Categories - 1 MACRO STRUCTURE
1. CORPORATE Office 2. S.B.U. (Global and Regional) 3. Value Chain: Demand and Supply sides 4. 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 Labor •Vertical and/or Horizontal Structure
Today’s Focus http://macy.ba.ttu.edu/5491 Week #11organizational structure 4
Traditional Organization Power Knowledge
Information Rewards
Outcomes = Lower Performance (3.8% Financial Improvement Per Year)
Performance
High Performance Work System #1 Macro Structure #5 Micro Structure #2 Job/Work #8 Shared Leadership # 6 Human Resource Systems
Power Knowledge
Information Rewards
Performance
#4 IS/IT #3 Technologies #7 Recognition & Financial Reward Systems Outcomes = Higher Performance (10% Financial Improvement Per Year)
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Organization Structure is about: - Power and Control and the Re-distribution of Power and Control (Less Layers -fewer chiefs) - Decision Making at the
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m m
g in ak M
Co
on si ci De
un ic at io n
s
Traditional Organization Environment
Boundaries of the System
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) Week #11organizational structure 7 http://macy.ba.ttu.edu/5491
Organization Structure is about: - Effective Communication - Effective Coordination - Speed/Responsiveness to the Customer (both internal & external) - Empowerment throughout
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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) SDWT’s to Work Teams Individuals Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 9
Typical Different Levels of 21st Century Macro 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) http://macy.ba.ttu.edu/5491 Week #11organizational structure 10
21st Century Organization Design GBU’s
Markets/ Sales Orgs. MDO’s -Western Europe
-Bus. “B” -Bus. “C”
-Central or Eastern Europe -Middle East & Africa
-Bus. “D”
-Northern Asia
-Bus. “E” -Bus. “F”
-Greater China -North America
-Bus. “ ”
-Latin America
8
-Bus. “A”
-South America -Others
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21st Century Organization Design Global Business Services (GBS) & In/ Outsourcing
Corporate Functions/ Expertise Centers
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21st Century Organization Design GBU’s
Markets/ Sales Orgs. MDO’s -Western Europe
-Bus. “B” -Bus. “C”
-Central or Eastern Europe -Middle East & Africa
-Bus. “D”
-Northern Asia
-Bus. “E” -Bus. “F”
-Greater China -North America
-Bus. “ ”
-Latin America
8
-Bus. “A”
-South America -Others…
Global Business Services (GBS) & In/ Outsourcing Corporate Functions/ Expertise Centers http://macy.ba.ttu.edu/5491 Week #11organizational structure 13
Question: Is your Firm a “Cost Center” or a “Profit Center”? Cost center:
P/L Center:
Emphasis on: – Costs
Emphasis on: •Customer Satisfaction/ Loyalty/ repeat business •Quality •Service •Innovation •Production •Costs http://macy.ba.ttu.edu/5491 Week #11organizational structure 14
Four Key Concepts / Issues of Structure ( to be analyzed for your case)
• Integration • Coordination • Communications • Power & Control http://macy.ba.ttu.edu/5491 Week #11organizational structure 15
Time
6th Century – early 1970
1970’s-Now
1980’s-Now
GO/ Corporate Office
P/L
SBU/ GBU P/L
LOB’s/ Brands/ Products Modified P/L
1990’s-Now
E&T/ Stores/ Countries/Regions
Modified P/L
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1
Creation of a Separate “Company”(sell stock) 8
2 3 4 5
Corporate Office (smaller) Global S.B.U.’s E-Commerce SBU Total Value Chain Design
Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)
6 Global Enterprise Teams (Mini-business with P/L Responsibility) 7
Innovative Changes Structures and Processes
Fifteen Trends in Organizational Design at the Firm Level
Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)
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9 10 11 12 13 14 15
Other Types of Aligned of Enterprise Teams (Product, Channel,or Process) Matrix Enterprise Teams: Product/Channel/ Customer and/or Process Some Centralization - Great DeCentralization Integrative Learning/Coaching and Training Systems (Learning Contract) Innovative Pay Systems (Share the Wealth) Simple & Innovative Business/People Measurement Systems
8
Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)
Innovative Changes Structures and Processes
Fifteen Trends in Organizational Design at the Firm Level
Co-location: Customer, Team and Leaders http://macy.ba.ttu.edu/5491 Week #11organizational structure 18
The Four Main Questions of Horizontal Design Alignment Corporate Design Strategic Business Unit (S.B.U./ G.B.U. Design Supply-Chain/ Product Supply Alignment
Demand/Chain
_____ Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA. http://macy.ba.ttu.edu/5491 (forthcoming) Week #11organizational structure 19
The Typical Five Different Types Organization Structures in Exemplar Organizations (N=102 North America Organizations)
Corporate Office
1. Macro Business Level
2.
S.B.U.’s/GBU’s
3. Business Teams
1, 2, 3, 4, & 5
4.
Product Teams
Value-Chain Design Supply Side
5. Customer Account Teams
Demand Side
(Enterprise Teams)
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 20
Multi-International Consumer Products Firm: Current Structure – Sept. 2001
Corporate
GBU
Top Management
GBS Core Functions
External Relations * Teams (6)
7 Global Teams Customer Business Teams (130)
Gov’t.
Consumers
Office
Consumer Teams (30)
Key Customers/ Trade
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The Common Eight Different Options for Organization Structure 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 the above seven
Are recommended for Cleansheet Design
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he CENTERLESS CORPORATION The Real World Global Core
Source: Booz-Allen & Hamilton
Power/Control & Governance
Smaller Corporate Hub
Business Units (S.B.U.’s/ Lines of Business/ Markets/Products)
Centralized Services Group
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Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced) Product Distribution
Product Design
Nike Headquarters (Broker) Product Manufacturing
Advertising Accounts Receivable
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Examples of Decentralization (D) and Centralization (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)
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The Question of Centralization and Decentralization Centralized
“Design Fit”
De-Centralized
Not either “Centralized” or “De-Centralized”, but design fit (what is best for the business) B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
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Value Chain Back
Core Technologies
Front
Conceive
Design Develop Procedure Market
Sales Distribute Support
Market (Customer)
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Organization Structure Trends http://macy.ba.ttu.edu/5491 Week #11organizational structure 28
Typical Movement from a “National” Structure to a “Multi-National” Structure High
4
3
Market Share
2 1
5 International/ Centerless Integrated/ Structure Centerless Structure
GBU GBU Structure Structure
SBU SBU Structures Structures
International International Division Division Structure Structure
National National National Structure Structure
Structure
Low Early
Time Time
Very Mature http://macy.ba.ttu.edu/5491 Week #11organizational structure 29
Traditional vs. Innovative System Changes - 1 STRUCTURE :
TALL
FLAT
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Trends in Organizational Shapes
Yesterday
Today
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Traditional vs. Innovative System Changes - 2 TASK ORIENTATION:
INDIVIDUALIST/ SPECIALIST
TEAM/ GENERALIST http://macy.ba.ttu.edu/5491 Week #11organizational structure 32
Traditional vs. Innovative System Changes - 3 DECISION-MAKING:
CENTRALIZED
DECENTRALIZED http://macy.ba.ttu.edu/5491 Week #11organizational structure 33
Traditional vs. Innovative System Changes - 4 PHILOSOPHY:
AUTHORITARIAN
PARTICIPATIVE
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Traditional vs. HPO Changes - 5 PARTICIPATIVE/ EMPOWERMENT PHILOSOPHY:
POWER & CONTROL
REDISTRIBUTION OF POWER AND CONTROL
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Four Elements for Structural Design Hierarchical Groupings
Structural Linking Mechanisms Formal Processes and Systems
Informal Organizations http://macy.ba.ttu.edu/5491 Week #11organizational structure 36
Eight Primary Options For Choosing Macro Organizational Structure
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Choosing Macro Organization Structures -1 1. The Headquarters Structure 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-Decentralized Structure Model • Integrated Network • Differentiated Network •S.B.U., LOB’s, and field units is where the Power and Control and Decision Making resides • H.Q. acts as a “holding company” • Communication flows from the S.B.U.’s, LOB’s, and field units; also into H.Q. • Coordination is within and across the S.B.U.’s, LOB’s, and field units • Effectiveness is the goal http://macy.ba.ttu.edu/5491 Week #11organizational structure 38
Choosing Macro Organization Structures -2 3. “Functional Structure”
•Small-size, single-product •Undifferentiated market •Scale or expertise within the function •Long product development and life cycles •Common standards 4. “Product Structure”
•Product or Groups of Products focused •Multiple products for separate customers •Short product development and life cycle •Minimum efficient scale for functions or outsourcing http://macy.ba.ttu.edu/5491 Week #11organizational structure 39
Choosing Macro Organization Structures - 3 5. “Market (Customer) Structure”
•Key market (customer) segments •Products and/or services unique to segment •Buyer (customer) strength •Customer knowledge advantage •Rapid customer service and product cycles •Minimum efficient scale in functions or outsourcing 6. “Geographical Structure”
•Low value-to-transport cost ratio •Service delivery on-site •Closeness to customer for delivery or support •Perception of the organization as “local” (not global) •Geographical market (customer) segments needed 7. “Process Structure”
•Best seen as an alternative to the functional structure •Potential for new processes and radical change to processes •Reduced working capital •Need for reducing process cycle times http://macy.ba.ttu.edu/5491 Week #11organizational structure 40
Choosing Macro Organization Structures - 4 8. “Hybrid Structure Model”
• Best seen as a combination option to the above seven different types of 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, LOB’s: 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) http://macy.ba.ttu.edu/5491 Week #11organizational structure 41
Dell’s Fast-Cycle Segmentation In 1994, Dell was a $3.5 billion company
Small customers (Business and consumer)
Large customers
In 1996, $7.8 billion Large companies
Government and education
Midsize companies
Small customers
In 1999, $18 billion Global enterprise accounts
Large companies
Midsize companies
Federal
State and local
Education
Small companies
Consumers
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The Headquarters Structure 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 • Usually, early on in the Organizational Life Cycle
Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
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The Headquarters Model
Headquarters
Field A
Field B
Field C http://macy.ba.ttu.edu/5491 Week #11organizational structure 44
Centralized Headquarters Model A
B H.Q.
F
Mainly Flows of Goods
C E
D
Tight, Simple Controls; (key strategic decisions made centrally)
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CHARACTERISTICS OF CENTRALIZED HEADQUARTERS MODEL Strategic Approach
Global
Key Strategic capability
Global scale efficiency
Configuration of assets and capabilities
Centralized and globally scaled
Role of Global operations Implementing
parent company strategies
Development and diffusion of knowledge Information and Knowledge developed and retained at the center; Not in business/product units
8
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A 2 nd Option: Coordinated Headquarters Model
A
B
Mainly Knowledge Flows (Technology products, processes, systems
H.Q. F
C
E
D Formal System controls; (planning, budgeting, replicating parent company administrative system 5
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2. The Centerless- Decentralized Structure Model • S.B.U.’s, LOB’s and field units is where the Power and Control and Decision Making resides (Networked) • H.Q. acts as a “holding company” • Communication flows from the S.B.U.’s, LOB’s, and field units; also into H.Q. (Networked) • Coordination and integration is within and across the S.B.U.’s, LOB’s, and field units (Networked) • Effectiveness is the goal
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Centerless-Decentralized Structure Mainly Financial Flows (Capital out; dividends back)
Headquarters: Loose, simple Controls; (Strategic decisions decentralized) http://macy.ba.ttu.edu/5491 Week #11organizational structure 49
The Peer-to-Peer Model HQ Unit Peer - 1
HQ
HQ
Unit Peer - 2
Unit Peer - 2
HQ Unit Peer - 3 http://macy.ba.ttu.edu/5491 Week #11organizational structure 50
CHARACTERISTICS OF CENTERLESS-DECENTRALIZED STRUCTURE Strategic Approach
Key Strategic capability
Configuration of assets and capabilities
Decentralized Multi- National -national Responsive- and nationally -ness self-sufficient (very local)
Role of Global operations
Sensing & exploiting local opportunities
Development and diffusion of knowledge
Information and Knowledge developed and retained within each global business/ product unit
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Integrated Network Model Distributed, Specialized Resources and capabilities
Complex Process of Coordination and cooperation in an environment of Shared Decision Making
Large Flows of Components, Products, Resources, People, Information and Knowledge Among Interdependent (Networked) Units
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Differentiated Network Structure • A recent innovation in organizational architecture is the use of differentiated network structures. • A network structure design is a cluster of different Organizations (Units, S.B.U.’s, LOB’s) whose actions are coordinated by contracts and/or mutual agreements rather than through a formal hierarchy. http://macy.ba.ttu.edu/5491 Week #11organizational structure 53
Re-conceptualizing the Structure of an Multi-National Corporation as a Differentiated Network Differentiated structures within each S.B.U./Subsidiary S.B.U./SUBSIDIARY 2
S.B.U. /SUBSIDIARY 1
Inter-linkages across Business Units
Much Smaller Headquarters
S.B.U./SUBSIDIARY 4 ____________________________ Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
Differentiated relationships between the headquarters and each Business Unit
S.B.U./SUBSIDIARY 3 http://macy.ba.ttu.edu/5491 Week #11organizational structure 54
Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced) Product Distribution
Product Design
Nike Headquarters (Broker) Product Manufacturing
Advertising Accounts Receivable
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The Typical Structure Path for a Multi-National Corporations High
Global Matrix
Worldwide S.B.U.
Foreign Product Diversity
(Differentiated Network)
Alternative Path #2 Alternative Path #1
Regional S.B.U.
International Division Low Foreign Revenue as a Low Percentage of Total Revenue Source: Stepford & Wells, 1972
High
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he CENTERLESS CORPORATION The Real World Global Core
Source: Booz-Allen & Hamilton
Power/Control & Governance
Smaller Corporate Hub
Business Units (S.B.U.’s/ Lines of Business/ Markets/Products)
Centralized Services Group
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3. “Functional Structure” •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 http://macy.ba.ttu.edu/5491 Week #11organizational structure 58
Functional Organization Structure General manager
Finance
Research and development
Human resources
Operations
Product marketing
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Hybrid Beatrice International: One Functional Automobile Products Business
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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
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Moving to a Product Divisional (S.B.U., LOB) Structure: •The structure adopted to solve the control, communication, coordination and integration problems of functional structures (many kinds of products, many different locations, many types of customers/clients) is the divisional or S.B.U. structure. http://macy.ba.ttu.edu/5491 Week #11organizational structure 62
• Product Divisional = S.B.U. structure—a structure in which functions are grouped together according to the specific demands of products,markets, or clients/ customers. • The type of divisional (S.B.U.) structure selected is driven by the specific type of control, communication, coordination and/or client/customer problems experienced. http://macy.ba.ttu.edu/5491 Week #11organizational structure 63
Product Group Structure of a Consumer Products Company
CEO Corp. Headquarters Staff
Toiletries S.B.U.
Soap S.B.U.
Paper S.B.U.
Food S.B.U.
R&D Towel Tissue Diapers Sales http://macy.ba.ttu.edu/5491 Week #11organizational structure 64
Product Structure CEO
Finance
Electronic instruments
R&D
Operations
Human resources
Medical instruments
Computers
Marketing http://macy.ba.ttu.edu/5491 Week #11organizational structure 65
H. J. Heinz Product Division; ( S.B.U.) Structure CEO
Vice President Sales and Marketing
Vice President Research and Development
Vice President Materials Management
Vice President Finance
PDM
PDM
PDM
PDM
Canned Soups Division
Frozen Vegetable Division
Frozen Entrees Division
Baked Goods Division
Centralized support functions Divisions/S.B.U.’s http://macy.ba.ttu.edu/5491 Week #11organizational structure 66
• Multidivisional – S.B.U. Structure —a structure in which staff/support functions are decentralized and placed in self-contained divisions. • Typically used by an organization whose products are very different and that operates in several different industries. • Some staff/support functions might remain centralized at the H.Q. (e.g., both a centralized R&D and a decentralized R&D) http://macy.ba.ttu.edu/5491 Week #11organizational structure 67
Multidivisional – S.B.U. Structure: G.E., I.B.M., Matsushita CEO
Corporate Headquarters Staff
Senior Corporate VP’s
S.B.U./ Divisional GM’s/ Presidents
Senior VP
Senior VP
Senior VP
Senior VP
Marketing
Finance
Materials
Research and
Management
Development
Division A
Division B
Division C
Division D
Support functions
Support functions
Support functions
Support functions
Functional Managers
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Product Team Structure: Xerox, Hallmark and Chrysler CEO
Functions
Vice President Research and Development
Vice President Sales and Marketing
Vice President Manufacturing
Vice President Materials Management
Vice President Finance
Product Development Teams PTM
PTM
PTM
Product Division
Product Division
Matrix Product Division
Functional specialist PTM Product Team Manager
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Hybrid Product and Function Structure Commercial airplane S.B.U.
Product 1: Narrow body
Engineering Quality
Product 2: Wide body
Product 3: Central fabrication
Operations
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Apple Before and After Restructuring Channel: Dealers Product 1: Desktops Mass retailers Mac
Dealers
Product 2: Laptops Direct sales Product 3: Palmtops Mail Order
Before Design
After Design http://macy.ba.ttu.edu/5491 Week #11organizational structure 71
1
Creation of a Separate “Company”(sell stock) 8
2
Corporate Office (smaller)
3
Global S.B.U.’s
4
M&A and JV
5 6
E-Commerce SBU (inside or outside firm)
7 8
Total Value Chain Design
Innovative Changes Structures and Processes
Fourteen Trends in Organizational Design at the Firm Level
Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)
Global Enterprise Teams (Mini-business with P/L Responsibility)
Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)
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5. “Market (Customer) Structure” Model •Key market (customer) segments •Products and/or services unique to segment •Buyer (Customer) strength •Customer knowledge advantage •Rapid customer service and product cycles •Minimum efficient scale in functions or outsourcing
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Market (Customer) Structure • When an organization experiences control, communication, coordination, and integration 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 skills and activities with different client/customer needs. http://macy.ba.ttu.edu/5491 Week #11organizational structure 74
Market (Customer) Segments and Lateral Functions S.B.U. General manager
Sales/marketing
Health
Information technology
Financial services
Finance
Human Resources
Governments
Operations
Distribution
Sales
Sales
Sales
Sales
Marketing
Marketing
Marketing
Marketing
Information technology Installation and repair Network operations
Information technology Installation and repair Network operations
Information Information technology technology Installation Installation and repair and repair Network Network operations operations http://macy.ba.ttu.edu/5491 Week #11organizational structure 75
Mellon Bank Market Structure CEO
Central Support Functions
Commercial Division
Consumer Division
Government Division
Corporate Division
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A Front-end Focus •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. http://macy.ba.ttu.edu/5491 Week #11organizational structure 77
Front-End Structure CEO Staff Paper group
Toiletries group
Soup group
Front end
Regional team
Customer team Finance Operations
Information technology
Sales
Distribution
Marketing
Operations
Sales
Marketing
Vons
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Dell’s Fast-Cycle Segmentation In 1994, Dell was a $3.5 billion company
Small customers (Business and consumer)
Large customers
In 1996, $7.8 billion Large companies
Government and education
Midsize companies
Small customers
In 1999, $18 billion Global enterprise accounts
Large companies
Midsize companies
Federal
State and local
Education
Small companies
Consumers
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Three Potential Sources of Leverage in Leveraged Business Groups Back Back (Offering) (Offering)
•Creation of products/offerings •“Platforms for manufacturing products
•Technologies underlying products
Middle Middle Infrastructure Infrastructure
•Means used to produce and deliver products and services to customers
Front Front (Market/Customer) (Market/Customer)
•How the Business goes to market?
•How the organization responds to the customer? •The customers interface – typically Enterprise Teams
Each component is a potential source of http://macy.ba.ttu.edu/5491 leverage Week #11organizational structure 80
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
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Geographic Structure • When an organization experiences control, communication, coordination and integration problems that are a function of geography, a geographic divisional (S.B.U., LOB) structure is used. • Such a structure organizes divisions/ S.B.U./LOB’s according to the requirements of different locations (Local). http://macy.ba.ttu.edu/5491 Week #11organizational structure 82
Geographical (Pre-Restructuring)
CEO Industrial Gases
AFROX AFROX
(South (SouthAfrica) Africa)
CIG CIG
(Australia) (Australia)
U.K. U.K.Gases Gases
AirCo AirCo (U.S.A) (U.S.A)
North North Pacific Pacific
Process Process Plants Plants
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Geographical Structural Change (PostRestructuring) CEO Industrial Gases
South SouthAfrica Africa
Australia Australia
Europe Europe
Americas Americas
North North Pacific Pacific
Process Process Plants Plants
Food Food
Global Market Sectors
Chemicals Chemicals
Electronics Electronics
Steel Steel
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Geographic Structures: Crown Cork & Seal, Neiman Marcus and Wal-mart
Regional Operations
Regional Operations
Individual stores
CEO Central Support Functions
Regional Operations
Regional Operations
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Apple: Geographical Structure CEO John Sculley
Apple Products
Apple USA
Sales Service and Marketing To Regions
Apple Europe
Apple Pacific
Europe West
Canada
Europe North
Australia
France
Japan
South Europe
Latin America Far East
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Geographical Structural Design: Xerox 1991 (Before) Chairman
Research Research
Development Development and andManufacturing Manufacturing
World WorldWide Wide marketing marketing
U.S. U.S.Operations Operations (Sales (Salesand and Service) Service)
Marketing Marketingand and Customer Customer Operations Operations
Chief ChiefStaff Staff Officer Officer
Rank RankXerox Xerox
American American Operations Operations
Chief ChiefFinancial Financial Officer Officer
Other Other Other Geographic Other Geographic Other Other Geographic Other Other Operating Units Geographic Operating Units Geographic Geographic Operating Units Geographic Geographic Operating Units Operating Operating Units Units Operating Operating Units Units
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Business BusinessDivision Division11
Technology Management Process
Business BusinessDivision Division22
Business BusinessDivision Division33
Customer Operations Divisions
Business BusinessDivision Division44
Business BusinessDivision Division55 Strategic Services
Markets/Customers
Technologies
Xerox 1992: Hybrid Organization Structure (After)
Governance http://macy.ba.ttu.edu/5491 Week #11organizational structure 88
7. “Process Structure” •Best seen as an alternative to the functional structure •Potential for new processes and radical change to processes •Reduced working capital •Need for reducing process cycle times
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Process Organization Structure General manager
New product development process
Order fulfillment process
New product teams
Product teams
Customer acquisition and maintenance
Customer teams http://macy.ba.ttu.edu/5491 Week #11organizational structure 90
Work Flows Across Functional Structure Scarce resource: management time
General manager
Finance
Product development
Sales and marketing
Operations Human resources
Work flow process to customer http://macy.ba.ttu.edu/5491 Week #11organizational structure 91
Lateral Processes Across Departments General manager
Lateral process
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A Generic Horizontal Organization with Multiple Core Process Groups Vice President
General Manager R&D
General Manager Operations
Manager
Process Owner Team Process Owner Team Process Owner Team
Manager
General Manager Strategy
Manager
CORE PROCESS GROUP
Team 1
Team 2
Team 3
CORE PROCESS GROUP
Team 1
Team 2
General Manager Finance
Team 3
Performance Objective
Performance Objective
CORE PROCESS GROUP
Team 1
Team 2
Performance Team 3 Objective http://macy.ba.ttu.edu/5491 Week #11organizational structure 93
Process Structure Reengineering Functional Structures: Reengineering is the process of redesigning how tasks are bundled into roles and functions to improve organizational effectiveness.
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Process Structure • Reengineering involves shifting the focus from functions isolated from each other into horizontal/lateral business processes. • A business process is any activity that cuts across functional boundaries. -Order fulfillment -Inventory control -Product design - R&D http://macy.ba.ttu.edu/5491 Week #11organizational structure 95
Example Business Processes & Teams Top Management
Process Coordinator
Team
Team
Team
New Product Development Process Process Coordinator
Process Coordinator
Team
Team
Team
Order Fulfillment Process Team
Team
Procurement, Logistics process
Team
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8. Hybrid Structure Model – Combinations of Some of the above Seven Structural Types • Best seen as a combination option to the other seven different types of structure. • A combination of one to three or more of the above seven types of structure. • Perception of the organization as being both “global” and “local”. • Horizontal S.B.U.’s, LOB’s: 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) http://macy.ba.ttu.edu/5491 Week #11organizational structure 97
Organization Form Options (or Grouping Alternatives)
1. 2.
Activity Activity
Output Output
3.
User/Customer User/Customer
4.
Multifocused Multifocused Organization Organization
•Function •Work Process •Knowledge/skills/discipline •Time •Product •Service •Project •Market segment •User/Customer need •Geography
•Any Combination of Activity/Output/User http://macy.ba.ttu.edu/5491 Week #11organizational structure 98
Grouping by Output (AT&T Early 1990’s)
Chairman
Communications Communications Services ServicesGroup Group
Communications Communications Products ProductsGroup Group
Computer Computer(NCR) (NCR)
Network NetworkSystems Systems Group Group
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ABB (Simplified Structure)-1 CEO (Percv Bamevik) (previous CEO – Thought up this structure) Executive Committee
Power Power Transformers Transformers
Power Power Generation Generation
Robots Robots
47 47Other Other Business BusinessAreas Areas
Germany Germany
National Companies
U.S.A U.S.A
Norway Norway 137 137Other Other National National Companies Companies http://macy.ba.ttu.edu/5491 Week #11organizational structure 100
ABB: Four Types of Organization Structures - 2 Corporate Office
3 Regions and 4 Businesses Areas (BA’s) B Regions-National Companies
Corporate Structures
Global Business Areas
11
1 1
22
33
2
2
3
3
4
4
Company Presidents
C
Local Country (some are also Country Managers) - 1 or 2 levels Companies and 5,000 Profit Centers Many Profit D (lead by Profit Center Managers; Center Structures 3 levels to lowest person)
Tight/Clear Accountability/Responsibility Through a Single Financial Performance Measurement System
A
(Very Small)
________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 101
ABB - Fall of 1998 - 3 What They Did: • Break-up existing regional (local) S.B.U.’s into smaller, more focused global business S.B.U.’s • 5,000 P/L Centers Why? • 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, http://macy.ba.ttu.edu/5491 CA (forthcoming) Week #11organizational structure 102
ABB-4 • The fundamental building block of this Company are 5,000 small profit centers ($1012MM Sales/40-50 People). Resources are placed within these units. There are only 150 Corporate staff (centerless – decentralized holding company). • H.Q. has 7/24/365 “real-time” information system across the “A, B,C, & D” parts of their structure (all have four common measures)
slide1 http://macy.ba.ttu.edu/5491 Week #11organizationalabb-2-28 structure 103
Asea, Brown, Boveri (ABB): One Business Area: Relay Business Overview - 5 Corporate
Regions
4 Global Business Areas
3 Regions
Business Head Worldwide Relay
PresidentUS Power
Local/Country Specific B.A. Macy, Successful Strategic Change, San Francisco: California: Berret-KoehlerPublisherss (forthcoming)
General ManagerRelays Profit Centers
Corporate
Capability Developer
Entrepreneur
abb-2-28 slide5 http://macy.ba.ttu.edu/5491 Week #11organizational structure 104
ABB-10 The Partnership Between Financial Wealth and Changes in Organization Structures, Systems and Processes Corporate Office Small
Global Businesses
Regions of the World
Think Globally (Matrix)
Act Locally (Matrix)
(ABB - 150 Xerox Europe - 300)
Local Control
One Customer Contact Point
Customers
• Many • Enterprise Rapidly “Companies” Units/Teams Changing (ABB-1,000) (CATS) Needs, • Many Profit Wants, & Centers Desires (ABB -5,000) • Tight The Mirror Accountability/ Responsibility Concept • Alignment
________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 105
Another Hybrid: Procter & Gamble (P&G)
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P&G’s Organization Structure: 2001 Corporation Functions
Idea Innovation
>18 mos. < 18 mos. GBU CBD (Sales) (SBU’s) MDO
Product P&L
Global MDO/ CBD Teams
GBS
Country MDO
PRODUCTION/PROMOTION CUSTOMERS/CONSUMERS
F U N C T I O N S
• Marketing • R&D • IT • HR • Sales • Product Supply • Finance
CBD Teams
Retail Customers http://macy.ba.ttu.edu/5491 Week #11organizational structure 107
The Key Pillars of a Horizontal Organization
Demand Organization
Fulfillment Organization
Global Sales Organization
Retail Sales/ Customers
Consumers
Service Organization Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 108
Enterprise Units: The “Mirror” Design Concept The “Mirror”: One Contact Point Corporate Office
The Various Global SBU’s
Enterprise Units/ Team(s)
Customers/ Consumers Retail Stores
1 2 3 4 5 6 7 etc. (feedback) Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 109
P&G’s Enterprise Teams (Customer Business Development)
GBS
External Relations * Teams
Core Functions
67% Customer Teams * (Exemplar)
Customers/ Trade/ Retail Stores
Consumers
Customer *Teams
GBU
Gov’t. Dec. 2000
Note: GBU’s = Global S.B.U.’s GBS = Global Business Services
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Another Hybrid Example – HP (from a Product Structure to A Hybrid Model) http://macy.ba.ttu.edu/5491 Week #11organizational structure 111
THE OLD HP: 83 Product Structures Each product unit was responsible for its own profit/loss performance
CEO
HOME PCs, HANDHELDS, LAPTOPS
SCANNERS, LASER PRINTERS, PRINTER PAPER
EXECUTIVE COUNCIL
CONSULTING SERCURITY SOFTWARE, UNIX SERVERS
INK CARTRIDGES, DIGITAL CAMERAS, HOME PRINTERS http://macy.ba.ttu.edu/5491 Week #11organizational structure 112
Carly to HP: Snap to It = Three Phase Plan for Transition NOW 2000: Improve growth and profits in core businesses - CONSOLIDATE Folded HP’s 83 product divisions into four units: two product development units that work with two sales and marketing groups-one aimed at consumers, the other corporations. - SET STRATEGY Create a nine-person Strategy Council to allocate resources to the best opportunities rather than leaving strategy to product chieftains (see pages 195) . - WHACK COSTS Lower expenses by $1 billion by revamping internal processes to tap the power of the Web.
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THE NEW HYBRID HP CARLY FIORINA STRATEGY COUNCIL Nine fast-rising managers who advise the executive council on allocating money and people to growth initiatives.
•AUTHORITY •RECOMMENDATIONS •IDEAS & INNOVATIONS •PRODUCTS & INFORMATION
EXECUTIVE COUNCIL Eight top lieutenants, including heads of the four front-and-back-end groups.
FRONT END
FRONT END
CORPORATE SALES $34 billion in annual revenues JOB Meet near-term financial targets by selling technology solutions to corporate clients. Keep back-end units abreast of what’s, how’s.
CONSUMER SALES $15 billion in annual revenues JOB Sell consumer gear with focus on meeting current-year earnings and revenue goals. Let back end know of must-have products and features
BACK END
FRONT END
PRINTERS 43% of annual production JOB Build new printing and imaging products to ensure HP’s long-term growth. Track trends with help from front-end units.
COMPUTERS 57% of annual production JOBS Focus on future success by making computers that companies and consumers want, with sales input from front-end
CROSS-COMANY INITIATIVES Personnel from the frontand back-end groups collaborate on projects aimed at sniffing out new markets what will create growth.
DIGITAL IMAGING Make photos, drawings, and videos so easy to create, store and send as e-mail.
WIRELESS SERVICES Develop wireless technologies that will fuel sales of HP-made devices, ranging from handhelds to servers.
COMMERCIAL PRINTING Divert printing jobs from offset presses to Net-linked HP printers
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The Common Eight Different Options for Organization Structure 1. 2. 3. 4. 5. 6. 7. 8.
The Headquarters Structure The Centerless – Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure – Combinations of the above seven
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http://macy.ba.ttu.edu/5491 Week #11organizational structure 1
Inputs
TRANSFORMATION
Environmental Drivers 1. External/ Global Business Environment
THE ORGANIZATION DESIGN PUZZLE: HIGH PERFORMANCE LEARNING ORGANIZATION
B.Vision Direction (VDSP) C. Organizational Strategies D. Business Models E. Labor (Employee) Management Mutuality F. Transformation/ Change Processes
Results From High Performance / Exemplar Organizations
1. Macro Organizational Structures
2.Internal Environment A.Corporate, Business, Worksite And Individual: Capabilities And Barriers (Culture)
Outputs
8. Shared Leadership & Decision Making Systems 7. Recognition and Financial Reward Systems
Organizational Effectiveness
2. The Job/work
Interdependence and Design “FIT”
6. People and Human Resource Systems
3. Technologies
1. Customers 2. Financial/ Business 3. Employees
4. Information and Knowledge Systems 5. Micro Organization Structures: Team Design
4. Organizational Innovation 5. Societal
Organizational Processes (Individual, Group, Organizational and Business Processes (Total Quality, Business Processes, etc.)
(Feedback)
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.
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The Common Eight Different Options for Organization Structure 1. 2. 3. 4. 5. 6. 7. 8.
The Headquarters Structure The Centerless – Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure – Combinations of the above seven
http://macy.ba.ttu.edu/5491 Week #11organizational structure 3
OST Eight TRANSFORMATION Categories - 1 MACRO STRUCTURE
1. CORPORATE Office 2. S.B.U. (Global and Regional) 3. Value Chain: Demand and Supply sides 4. 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 Labor •Vertical and/or Horizontal Structure
Today’s Focus http://macy.ba.ttu.edu/5491 Week #11organizational structure 4
Traditional Organization Power Knowledge
Information Rewards
Outcomes = Lower Performance (3.8% Financial Improvement Per Year)
Performance
High Performance Work System #1 Macro Structure #5 Micro Structure #2 Job/Work #8 Shared Leadership # 6 Human Resource Systems
Power Knowledge
Information Rewards
Performance
#4 IS/IT #3 Technologies #7 Recognition & Financial Reward Systems Outcomes = Higher Performance (10% Financial Improvement Per Year)
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Organization Structure is about: - Power and Control and the Re-distribution of Power and Control (Less Layers -fewer chiefs) - Decision Making at the
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m m
g in ak M
Co
on si ci De
un ic at io n
s
Traditional Organization Environment
Boundaries of the System
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) Week #11organizational structure 7 http://macy.ba.ttu.edu/5491
Organization Structure is about: - Effective Communication - Effective Coordination - Speed/Responsiveness to the Customer (both internal & external) - Empowerment throughout
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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) SDWT’s to Work Teams Individuals Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 9
Typical Different Levels of 21st Century Macro 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) http://macy.ba.ttu.edu/5491 Week #11organizational structure 10
21st Century Organization Design GBU’s
Markets/ Sales Orgs. MDO’s -Western Europe
-Bus. “B” -Bus. “C”
-Central or Eastern Europe -Middle East & Africa
-Bus. “D”
-Northern Asia
-Bus. “E” -Bus. “F”
-Greater China -North America
-Bus. “ ”
-Latin America
8
-Bus. “A”
-South America -Others
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21st Century Organization Design Global Business Services (GBS) & In/ Outsourcing
Corporate Functions/ Expertise Centers
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21st Century Organization Design GBU’s
Markets/ Sales Orgs. MDO’s -Western Europe
-Bus. “B” -Bus. “C”
-Central or Eastern Europe -Middle East & Africa
-Bus. “D”
-Northern Asia
-Bus. “E” -Bus. “F”
-Greater China -North America
-Bus. “ ”
-Latin America
8
-Bus. “A”
-South America -Others…
Global Business Services (GBS) & In/ Outsourcing Corporate Functions/ Expertise Centers http://macy.ba.ttu.edu/5491 Week #11organizational structure 13
Question: Is your Firm a “Cost Center” or a “Profit Center”? Cost center:
P/L Center:
Emphasis on: – Costs
Emphasis on: •Customer Satisfaction/ Loyalty/ repeat business •Quality •Service •Innovation •Production •Costs http://macy.ba.ttu.edu/5491 Week #11organizational structure 14
Four Key Concepts / Issues of Structure ( to be analyzed for your case)
• Integration • Coordination • Communications • Power & Control http://macy.ba.ttu.edu/5491 Week #11organizational structure 15
Time
6th Century – early 1970
1970’s-Now
1980’s-Now
GO/ Corporate Office
P/L
SBU/ GBU P/L
LOB’s/ Brands/ Products Modified P/L
1990’s-Now
E&T/ Stores/ Countries/Regions
Modified P/L
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1
Creation of a Separate “Company”(sell stock) 8
2 3 4 5
Corporate Office (smaller) Global S.B.U.’s E-Commerce SBU Total Value Chain Design
Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)
6 Global Enterprise Teams (Mini-business with P/L Responsibility) 7
Innovative Changes Structures and Processes
Fifteen Trends in Organizational Design at the Firm Level
Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)
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9 10 11 12 13 14 15
Other Types of Aligned of Enterprise Teams (Product, Channel,or Process) Matrix Enterprise Teams: Product/Channel/ Customer and/or Process Some Centralization - Great DeCentralization Integrative Learning/Coaching and Training Systems (Learning Contract) Innovative Pay Systems (Share the Wealth) Simple & Innovative Business/People Measurement Systems
8
Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)
Innovative Changes Structures and Processes
Fifteen Trends in Organizational Design at the Firm Level
Co-location: Customer, Team and Leaders http://macy.ba.ttu.edu/5491 Week #11organizational structure 18
The Four Main Questions of Horizontal Design Alignment Corporate Design Strategic Business Unit (S.B.U./ G.B.U. Design Supply-Chain/ Product Supply Alignment
Demand/Chain
_____ Source: Barry A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA. http://macy.ba.ttu.edu/5491 (forthcoming) Week #11organizational structure 19
The Typical Five Different Types Organization Structures in Exemplar Organizations (N=102 North America Organizations)
Corporate Office
1. Macro Business Level
2.
S.B.U.’s/GBU’s
3. Business Teams
1, 2, 3, 4, & 5
4.
Product Teams
Value-Chain Design Supply Side
5. Customer Account Teams
Demand Side
(Enterprise Teams)
Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 20
Multi-International Consumer Products Firm: Current Structure – Sept. 2001
Corporate
GBU
Top Management
GBS Core Functions
External Relations * Teams (6)
7 Global Teams Customer Business Teams (130)
Gov’t.
Consumers
Office
Consumer Teams (30)
Key Customers/ Trade
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The Common Eight Different Options for Organization Structure 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 the above seven
Are recommended for Cleansheet Design
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he CENTERLESS CORPORATION The Real World Global Core
Source: Booz-Allen & Hamilton
Power/Control & Governance
Smaller Corporate Hub
Business Units (S.B.U.’s/ Lines of Business/ Markets/Products)
Centralized Services Group
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Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced) Product Distribution
Product Design
Nike Headquarters (Broker) Product Manufacturing
Advertising Accounts Receivable
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Examples of Decentralization (D) and Centralization (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)
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The Question of Centralization and Decentralization Centralized
“Design Fit”
De-Centralized
Not either “Centralized” or “De-Centralized”, but design fit (what is best for the business) B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
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Value Chain Back
Core Technologies
Front
Conceive
Design Develop Procedure Market
Sales Distribute Support
Market (Customer)
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Organization Structure Trends http://macy.ba.ttu.edu/5491 Week #11organizational structure 28
Typical Movement from a “National” Structure to a “Multi-National” Structure High
4
3
Market Share
2 1
5 International/ Centerless Integrated/ Structure Centerless Structure
GBU GBU Structure Structure
SBU SBU Structures Structures
International International Division Division Structure Structure
National National National Structure Structure
Structure
Low Early
Time Time
Very Mature http://macy.ba.ttu.edu/5491 Week #11organizational structure 29
Traditional vs. Innovative System Changes - 1 STRUCTURE :
TALL
FLAT
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Trends in Organizational Shapes
Yesterday
Today
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Traditional vs. Innovative System Changes - 2 TASK ORIENTATION:
INDIVIDUALIST/ SPECIALIST
TEAM/ GENERALIST http://macy.ba.ttu.edu/5491 Week #11organizational structure 32
Traditional vs. Innovative System Changes - 3 DECISION-MAKING:
CENTRALIZED
DECENTRALIZED http://macy.ba.ttu.edu/5491 Week #11organizational structure 33
Traditional vs. Innovative System Changes - 4 PHILOSOPHY:
AUTHORITARIAN
PARTICIPATIVE
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Traditional vs. HPO Changes - 5 PARTICIPATIVE/ EMPOWERMENT PHILOSOPHY:
POWER & CONTROL
REDISTRIBUTION OF POWER AND CONTROL
http://macy.ba.ttu.edu/5491 Week #11organizational structure 35
Four Elements for Structural Design Hierarchical Groupings
Structural Linking Mechanisms Formal Processes and Systems
Informal Organizations http://macy.ba.ttu.edu/5491 Week #11organizational structure 36
Eight Primary Options For Choosing Macro Organizational Structure
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Choosing Macro Organization Structures -1 1. The Headquarters Structure 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-Decentralized Structure Model • Integrated Network • Differentiated Network •S.B.U., LOB’s, and field units is where the Power and Control and Decision Making resides • H.Q. acts as a “holding company” • Communication flows from the S.B.U.’s, LOB’s, and field units; also into H.Q. • Coordination is within and across the S.B.U.’s, LOB’s, and field units • Effectiveness is the goal http://macy.ba.ttu.edu/5491 Week #11organizational structure 38
Choosing Macro Organization Structures -2 3. “Functional Structure”
•Small-size, single-product •Undifferentiated market •Scale or expertise within the function •Long product development and life cycles •Common standards 4. “Product Structure”
•Product or Groups of Products focused •Multiple products for separate customers •Short product development and life cycle •Minimum efficient scale for functions or outsourcing http://macy.ba.ttu.edu/5491 Week #11organizational structure 39
Choosing Macro Organization Structures - 3 5. “Market (Customer) Structure”
•Key market (customer) segments •Products and/or services unique to segment •Buyer (customer) strength •Customer knowledge advantage •Rapid customer service and product cycles •Minimum efficient scale in functions or outsourcing 6. “Geographical Structure”
•Low value-to-transport cost ratio •Service delivery on-site •Closeness to customer for delivery or support •Perception of the organization as “local” (not global) •Geographical market (customer) segments needed 7. “Process Structure”
•Best seen as an alternative to the functional structure •Potential for new processes and radical change to processes •Reduced working capital •Need for reducing process cycle times http://macy.ba.ttu.edu/5491 Week #11organizational structure 40
Choosing Macro Organization Structures - 4 8. “Hybrid Structure Model”
• Best seen as a combination option to the above seven different types of 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, LOB’s: 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) http://macy.ba.ttu.edu/5491 Week #11organizational structure 41
Dell’s Fast-Cycle Segmentation In 1994, Dell was a $3.5 billion company
Small customers (Business and consumer)
Large customers
In 1996, $7.8 billion Large companies
Government and education
Midsize companies
Small customers
In 1999, $18 billion Global enterprise accounts
Large companies
Midsize companies
Federal
State and local
Education
Small companies
Consumers
http://macy.ba.ttu.edu/5491 Week #11organizational structure 42
The Headquarters Structure 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 • Usually, early on in the Organizational Life Cycle
Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
http://macy.ba.ttu.edu/5491 Week #11organizational structure 43
The Headquarters Model
Headquarters
Field A
Field B
Field C http://macy.ba.ttu.edu/5491 Week #11organizational structure 44
Centralized Headquarters Model A
B H.Q.
F
Mainly Flows of Goods
C E
D
Tight, Simple Controls; (key strategic decisions made centrally)
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CHARACTERISTICS OF CENTRALIZED HEADQUARTERS MODEL Strategic Approach
Global
Key Strategic capability
Global scale efficiency
Configuration of assets and capabilities
Centralized and globally scaled
Role of Global operations Implementing
parent company strategies
Development and diffusion of knowledge Information and Knowledge developed and retained at the center; Not in business/product units
8
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A 2 nd Option: Coordinated Headquarters Model
A
B
Mainly Knowledge Flows (Technology products, processes, systems
H.Q. F
C
E
D Formal System controls; (planning, budgeting, replicating parent company administrative system 5
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2. The Centerless- Decentralized Structure Model • S.B.U.’s, LOB’s and field units is where the Power and Control and Decision Making resides (Networked) • H.Q. acts as a “holding company” • Communication flows from the S.B.U.’s, LOB’s, and field units; also into H.Q. (Networked) • Coordination and integration is within and across the S.B.U.’s, LOB’s, and field units (Networked) • Effectiveness is the goal
http://macy.ba.ttu.edu/5491 Week #11organizational structure 48
Centerless-Decentralized Structure Mainly Financial Flows (Capital out; dividends back)
Headquarters: Loose, simple Controls; (Strategic decisions decentralized) http://macy.ba.ttu.edu/5491 Week #11organizational structure 49
The Peer-to-Peer Model HQ Unit Peer - 1
HQ
HQ
Unit Peer - 2
Unit Peer - 2
HQ Unit Peer - 3 http://macy.ba.ttu.edu/5491 Week #11organizational structure 50
CHARACTERISTICS OF CENTERLESS-DECENTRALIZED STRUCTURE Strategic Approach
Key Strategic capability
Configuration of assets and capabilities
Decentralized Multi- National -national Responsive- and nationally -ness self-sufficient (very local)
Role of Global operations
Sensing & exploiting local opportunities
Development and diffusion of knowledge
Information and Knowledge developed and retained within each global business/ product unit
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Integrated Network Model Distributed, Specialized Resources and capabilities
Complex Process of Coordination and cooperation in an environment of Shared Decision Making
Large Flows of Components, Products, Resources, People, Information and Knowledge Among Interdependent (Networked) Units
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Differentiated Network Structure • A recent innovation in organizational architecture is the use of differentiated network structures. • A network structure design is a cluster of different Organizations (Units, S.B.U.’s, LOB’s) whose actions are coordinated by contracts and/or mutual agreements rather than through a formal hierarchy. http://macy.ba.ttu.edu/5491 Week #11organizational structure 53
Re-conceptualizing the Structure of an Multi-National Corporation as a Differentiated Network Differentiated structures within each S.B.U./Subsidiary S.B.U./SUBSIDIARY 2
S.B.U. /SUBSIDIARY 1
Inter-linkages across Business Units
Much Smaller Headquarters
S.B.U./SUBSIDIARY 4 ____________________________ Source: B.A. Macy, Successful Strategic Change, Berrett-Koehler Publishers, San Francisco, CA (forthcoming)
Differentiated relationships between the headquarters and each Business Unit
S.B.U./SUBSIDIARY 3 http://macy.ba.ttu.edu/5491 Week #11organizational structure 54
Nike: Another Type of Differentiated Network (everything outside Nike HQ is outsourced) Product Distribution
Product Design
Nike Headquarters (Broker) Product Manufacturing
Advertising Accounts Receivable
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The Typical Structure Path for a Multi-National Corporations High
Global Matrix
Worldwide S.B.U.
Foreign Product Diversity
(Differentiated Network)
Alternative Path #2 Alternative Path #1
Regional S.B.U.
International Division Low Foreign Revenue as a Low Percentage of Total Revenue Source: Stepford & Wells, 1972
High
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he CENTERLESS CORPORATION The Real World Global Core
Source: Booz-Allen & Hamilton
Power/Control & Governance
Smaller Corporate Hub
Business Units (S.B.U.’s/ Lines of Business/ Markets/Products)
Centralized Services Group
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3. “Functional Structure” •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 http://macy.ba.ttu.edu/5491 Week #11organizational structure 58
Functional Organization Structure General manager
Finance
Research and development
Human resources
Operations
Product marketing
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Hybrid Beatrice International: One Functional Automobile Products Business
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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
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Moving to a Product Divisional (S.B.U., LOB) Structure: •The structure adopted to solve the control, communication, coordination and integration problems of functional structures (many kinds of products, many different locations, many types of customers/clients) is the divisional or S.B.U. structure. http://macy.ba.ttu.edu/5491 Week #11organizational structure 62
• Product Divisional = S.B.U. structure—a structure in which functions are grouped together according to the specific demands of products,markets, or clients/ customers. • The type of divisional (S.B.U.) structure selected is driven by the specific type of control, communication, coordination and/or client/customer problems experienced. http://macy.ba.ttu.edu/5491 Week #11organizational structure 63
Product Group Structure of a Consumer Products Company
CEO Corp. Headquarters Staff
Toiletries S.B.U.
Soap S.B.U.
Paper S.B.U.
Food S.B.U.
R&D Towel Tissue Diapers Sales http://macy.ba.ttu.edu/5491 Week #11organizational structure 64
Product Structure CEO
Finance
Electronic instruments
R&D
Operations
Human resources
Medical instruments
Computers
Marketing http://macy.ba.ttu.edu/5491 Week #11organizational structure 65
H. J. Heinz Product Division; ( S.B.U.) Structure CEO
Vice President Sales and Marketing
Vice President Research and Development
Vice President Materials Management
Vice President Finance
PDM
PDM
PDM
PDM
Canned Soups Division
Frozen Vegetable Division
Frozen Entrees Division
Baked Goods Division
Centralized support functions Divisions/S.B.U.’s http://macy.ba.ttu.edu/5491 Week #11organizational structure 66
• Multidivisional – S.B.U. Structure —a structure in which staff/support functions are decentralized and placed in self-contained divisions. • Typically used by an organization whose products are very different and that operates in several different industries. • Some staff/support functions might remain centralized at the H.Q. (e.g., both a centralized R&D and a decentralized R&D) http://macy.ba.ttu.edu/5491 Week #11organizational structure 67
Multidivisional – S.B.U. Structure: G.E., I.B.M., Matsushita CEO
Corporate Headquarters Staff
Senior Corporate VP’s
S.B.U./ Divisional GM’s/ Presidents
Senior VP
Senior VP
Senior VP
Senior VP
Marketing
Finance
Materials
Research and
Management
Development
Division A
Division B
Division C
Division D
Support functions
Support functions
Support functions
Support functions
Functional Managers
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Product Team Structure: Xerox, Hallmark and Chrysler CEO
Functions
Vice President Research and Development
Vice President Sales and Marketing
Vice President Manufacturing
Vice President Materials Management
Vice President Finance
Product Development Teams PTM
PTM
PTM
Product Division
Product Division
Matrix Product Division
Functional specialist PTM Product Team Manager
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Hybrid Product and Function Structure Commercial airplane S.B.U.
Product 1: Narrow body
Engineering Quality
Product 2: Wide body
Product 3: Central fabrication
Operations
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Apple Before and After Restructuring Channel: Dealers Product 1: Desktops Mass retailers Mac
Dealers
Product 2: Laptops Direct sales Product 3: Palmtops Mail Order
Before Design
After Design http://macy.ba.ttu.edu/5491 Week #11organizational structure 71
1
Creation of a Separate “Company”(sell stock) 8
2
Corporate Office (smaller)
3
Global S.B.U.’s
4
M&A and JV
5 6
E-Commerce SBU (inside or outside firm)
7 8
Total Value Chain Design
Innovative Changes Structures and Processes
Fourteen Trends in Organizational Design at the Firm Level
Distributed IT Systems (SupplierOrganization Customer (SAP/EDI)
Global Enterprise Teams (Mini-business with P/L Responsibility)
Regional Customer Enterprise Teams (Mini-Business with P/L Responsibility)
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5. “Market (Customer) Structure” Model •Key market (customer) segments •Products and/or services unique to segment •Buyer (Customer) strength •Customer knowledge advantage •Rapid customer service and product cycles •Minimum efficient scale in functions or outsourcing
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Market (Customer) Structure • When an organization experiences control, communication, coordination, and integration 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 skills and activities with different client/customer needs. http://macy.ba.ttu.edu/5491 Week #11organizational structure 74
Market (Customer) Segments and Lateral Functions S.B.U. General manager
Sales/marketing
Health
Information technology
Financial services
Finance
Human Resources
Governments
Operations
Distribution
Sales
Sales
Sales
Sales
Marketing
Marketing
Marketing
Marketing
Information technology Installation and repair Network operations
Information technology Installation and repair Network operations
Information Information technology technology Installation Installation and repair and repair Network Network operations operations http://macy.ba.ttu.edu/5491 Week #11organizational structure 75
Mellon Bank Market Structure CEO
Central Support Functions
Commercial Division
Consumer Division
Government Division
Corporate Division
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A Front-end Focus •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. http://macy.ba.ttu.edu/5491 Week #11organizational structure 77
Front-End Structure CEO Staff Paper group
Toiletries group
Soup group
Front end
Regional team
Customer team Finance Operations
Information technology
Sales
Distribution
Marketing
Operations
Sales
Marketing
Vons
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Dell’s Fast-Cycle Segmentation In 1994, Dell was a $3.5 billion company
Small customers (Business and consumer)
Large customers
In 1996, $7.8 billion Large companies
Government and education
Midsize companies
Small customers
In 1999, $18 billion Global enterprise accounts
Large companies
Midsize companies
Federal
State and local
Education
Small companies
Consumers
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Three Potential Sources of Leverage in Leveraged Business Groups Back Back (Offering) (Offering)
•Creation of products/offerings •“Platforms for manufacturing products
•Technologies underlying products
Middle Middle Infrastructure Infrastructure
•Means used to produce and deliver products and services to customers
Front Front (Market/Customer) (Market/Customer)
•How the Business goes to market?
•How the organization responds to the customer? •The customers interface – typically Enterprise Teams
Each component is a potential source of http://macy.ba.ttu.edu/5491 leverage Week #11organizational structure 80
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
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Geographic Structure • When an organization experiences control, communication, coordination and integration problems that are a function of geography, a geographic divisional (S.B.U., LOB) structure is used. • Such a structure organizes divisions/ S.B.U./LOB’s according to the requirements of different locations (Local). http://macy.ba.ttu.edu/5491 Week #11organizational structure 82
Geographical (Pre-Restructuring)
CEO Industrial Gases
AFROX AFROX
(South (SouthAfrica) Africa)
CIG CIG
(Australia) (Australia)
U.K. U.K.Gases Gases
AirCo AirCo (U.S.A) (U.S.A)
North North Pacific Pacific
Process Process Plants Plants
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Geographical Structural Change (PostRestructuring) CEO Industrial Gases
South SouthAfrica Africa
Australia Australia
Europe Europe
Americas Americas
North North Pacific Pacific
Process Process Plants Plants
Food Food
Global Market Sectors
Chemicals Chemicals
Electronics Electronics
Steel Steel
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Geographic Structures: Crown Cork & Seal, Neiman Marcus and Wal-mart
Regional Operations
Regional Operations
Individual stores
CEO Central Support Functions
Regional Operations
Regional Operations
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Apple: Geographical Structure CEO John Sculley
Apple Products
Apple USA
Sales Service and Marketing To Regions
Apple Europe
Apple Pacific
Europe West
Canada
Europe North
Australia
France
Japan
South Europe
Latin America Far East
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Geographical Structural Design: Xerox 1991 (Before) Chairman
Research Research
Development Development and andManufacturing Manufacturing
World WorldWide Wide marketing marketing
U.S. U.S.Operations Operations (Sales (Salesand and Service) Service)
Marketing Marketingand and Customer Customer Operations Operations
Chief ChiefStaff Staff Officer Officer
Rank RankXerox Xerox
American American Operations Operations
Chief ChiefFinancial Financial Officer Officer
Other Other Other Geographic Other Geographic Other Other Geographic Other Other Operating Units Geographic Operating Units Geographic Geographic Operating Units Geographic Geographic Operating Units Operating Operating Units Units Operating Operating Units Units
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Business BusinessDivision Division11
Technology Management Process
Business BusinessDivision Division22
Business BusinessDivision Division33
Customer Operations Divisions
Business BusinessDivision Division44
Business BusinessDivision Division55 Strategic Services
Markets/Customers
Technologies
Xerox 1992: Hybrid Organization Structure (After)
Governance http://macy.ba.ttu.edu/5491 Week #11organizational structure 88
7. “Process Structure” •Best seen as an alternative to the functional structure •Potential for new processes and radical change to processes •Reduced working capital •Need for reducing process cycle times
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Process Organization Structure General manager
New product development process
Order fulfillment process
New product teams
Product teams
Customer acquisition and maintenance
Customer teams http://macy.ba.ttu.edu/5491 Week #11organizational structure 90
Work Flows Across Functional Structure Scarce resource: management time
General manager
Finance
Product development
Sales and marketing
Operations Human resources
Work flow process to customer http://macy.ba.ttu.edu/5491 Week #11organizational structure 91
Lateral Processes Across Departments General manager
Lateral process
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A Generic Horizontal Organization with Multiple Core Process Groups Vice President
General Manager R&D
General Manager Operations
Manager
Process Owner Team Process Owner Team Process Owner Team
Manager
General Manager Strategy
Manager
CORE PROCESS GROUP
Team 1
Team 2
Team 3
CORE PROCESS GROUP
Team 1
Team 2
General Manager Finance
Team 3
Performance Objective
Performance Objective
CORE PROCESS GROUP
Team 1
Team 2
Performance Team 3 Objective http://macy.ba.ttu.edu/5491 Week #11organizational structure 93
Process Structure Reengineering Functional Structures: Reengineering is the process of redesigning how tasks are bundled into roles and functions to improve organizational effectiveness.
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Process Structure • Reengineering involves shifting the focus from functions isolated from each other into horizontal/lateral business processes. • A business process is any activity that cuts across functional boundaries. -Order fulfillment -Inventory control -Product design - R&D http://macy.ba.ttu.edu/5491 Week #11organizational structure 95
Example Business Processes & Teams Top Management
Process Coordinator
Team
Team
Team
New Product Development Process Process Coordinator
Process Coordinator
Team
Team
Team
Order Fulfillment Process Team
Team
Procurement, Logistics process
Team
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8. Hybrid Structure Model – Combinations of Some of the above Seven Structural Types • Best seen as a combination option to the other seven different types of structure. • A combination of one to three or more of the above seven types of structure. • Perception of the organization as being both “global” and “local”. • Horizontal S.B.U.’s, LOB’s: 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) http://macy.ba.ttu.edu/5491 Week #11organizational structure 97
Organization Form Options (or Grouping Alternatives)
1. 2.
Activity Activity
Output Output
3.
User/Customer User/Customer
4.
Multifocused Multifocused Organization Organization
•Function •Work Process •Knowledge/skills/discipline •Time •Product •Service •Project •Market segment •User/Customer need •Geography
•Any Combination of Activity/Output/User http://macy.ba.ttu.edu/5491 Week #11organizational structure 98
Grouping by Output (AT&T Early 1990’s)
Chairman
Communications Communications Services ServicesGroup Group
Communications Communications Products ProductsGroup Group
Computer Computer(NCR) (NCR)
Network NetworkSystems Systems Group Group
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ABB (Simplified Structure)-1 CEO (Percv Bamevik) (previous CEO – Thought up this structure) Executive Committee
Power Power Transformers Transformers
Power Power Generation Generation
Robots Robots
47 47Other Other Business BusinessAreas Areas
Germany Germany
National Companies
U.S.A U.S.A
Norway Norway 137 137Other Other National National Companies Companies http://macy.ba.ttu.edu/5491 Week #11organizational structure 100
ABB: Four Types of Organization Structures - 2 Corporate Office
3 Regions and 4 Businesses Areas (BA’s) B Regions-National Companies
Corporate Structures
Global Business Areas
11
1 1
22
33
2
2
3
3
4
4
Company Presidents
C
Local Country (some are also Country Managers) - 1 or 2 levels Companies and 5,000 Profit Centers Many Profit D (lead by Profit Center Managers; Center Structures 3 levels to lowest person)
Tight/Clear Accountability/Responsibility Through a Single Financial Performance Measurement System
A
(Very Small)
________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 101
ABB - Fall of 1998 - 3 What They Did: • Break-up existing regional (local) S.B.U.’s into smaller, more focused global business S.B.U.’s • 5,000 P/L Centers Why? • 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, http://macy.ba.ttu.edu/5491 CA (forthcoming) Week #11organizational structure 102
ABB-4 • The fundamental building block of this Company are 5,000 small profit centers ($1012MM Sales/40-50 People). Resources are placed within these units. There are only 150 Corporate staff (centerless – decentralized holding company). • H.Q. has 7/24/365 “real-time” information system across the “A, B,C, & D” parts of their structure (all have four common measures)
slide1 http://macy.ba.ttu.edu/5491 Week #11organizationalabb-2-28 structure 103
Asea, Brown, Boveri (ABB): One Business Area: Relay Business Overview - 5 Corporate
Regions
4 Global Business Areas
3 Regions
Business Head Worldwide Relay
PresidentUS Power
Local/Country Specific B.A. Macy, Successful Strategic Change, San Francisco: California: Berret-KoehlerPublisherss (forthcoming)
General ManagerRelays Profit Centers
Corporate
Capability Developer
Entrepreneur
abb-2-28 slide5 http://macy.ba.ttu.edu/5491 Week #11organizational structure 104
ABB-10 The Partnership Between Financial Wealth and Changes in Organization Structures, Systems and Processes Corporate Office Small
Global Businesses
Regions of the World
Think Globally (Matrix)
Act Locally (Matrix)
(ABB - 150 Xerox Europe - 300)
Local Control
One Customer Contact Point
Customers
• Many • Enterprise Rapidly “Companies” Units/Teams Changing (ABB-1,000) (CATS) Needs, • Many Profit Wants, & Centers Desires (ABB -5,000) • Tight The Mirror Accountability/ Responsibility Concept • Alignment
________________ Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 105
Another Hybrid: Procter & Gamble (P&G)
http://macy.ba.ttu.edu/5491 Week #11organizational structure 106
P&G’s Organization Structure: 2001 Corporation Functions
Idea Innovation
>18 mos. < 18 mos. GBU CBD (Sales) (SBU’s) MDO
Product P&L
Global MDO/ CBD Teams
GBS
Country MDO
PRODUCTION/PROMOTION CUSTOMERS/CONSUMERS
F U N C T I O N S
• Marketing • R&D • IT • HR • Sales • Product Supply • Finance
CBD Teams
Retail Customers http://macy.ba.ttu.edu/5491 Week #11organizational structure 107
The Key Pillars of a Horizontal Organization
Demand Organization
Fulfillment Organization
Global Sales Organization
Retail Sales/ Customers
Consumers
Service Organization Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 108
Enterprise Units: The “Mirror” Design Concept The “Mirror”: One Contact Point Corporate Office
The Various Global SBU’s
Enterprise Units/ Team(s)
Customers/ Consumers Retail Stores
1 2 3 4 5 6 7 etc. (feedback) Source: B.A.Macy, Successful Strategic Change Berrett-Koehler Publishers, San Francisco, CA (forthcoming) http://macy.ba.ttu.edu/5491 Week #11organizational structure 109
P&G’s Enterprise Teams (Customer Business Development)
GBS
External Relations * Teams
Core Functions
67% Customer Teams * (Exemplar)
Customers/ Trade/ Retail Stores
Consumers
Customer *Teams
GBU
Gov’t. Dec. 2000
Note: GBU’s = Global S.B.U.’s GBS = Global Business Services
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Another Hybrid Example – HP (from a Product Structure to A Hybrid Model) http://macy.ba.ttu.edu/5491 Week #11organizational structure 111
THE OLD HP: 83 Product Structures Each product unit was responsible for its own profit/loss performance
CEO
HOME PCs, HANDHELDS, LAPTOPS
SCANNERS, LASER PRINTERS, PRINTER PAPER
EXECUTIVE COUNCIL
CONSULTING SERCURITY SOFTWARE, UNIX SERVERS
INK CARTRIDGES, DIGITAL CAMERAS, HOME PRINTERS http://macy.ba.ttu.edu/5491 Week #11organizational structure 112
Carly to HP: Snap to It = Three Phase Plan for Transition NOW 2000: Improve growth and profits in core businesses - CONSOLIDATE Folded HP’s 83 product divisions into four units: two product development units that work with two sales and marketing groups-one aimed at consumers, the other corporations. - SET STRATEGY Create a nine-person Strategy Council to allocate resources to the best opportunities rather than leaving strategy to product chieftains (see pages 195) . - WHACK COSTS Lower expenses by $1 billion by revamping internal processes to tap the power of the Web.
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THE NEW HYBRID HP CARLY FIORINA STRATEGY COUNCIL Nine fast-rising managers who advise the executive council on allocating money and people to growth initiatives.
•AUTHORITY •RECOMMENDATIONS •IDEAS & INNOVATIONS •PRODUCTS & INFORMATION
EXECUTIVE COUNCIL Eight top lieutenants, including heads of the four front-and-back-end groups.
FRONT END
FRONT END
CORPORATE SALES $34 billion in annual revenues JOB Meet near-term financial targets by selling technology solutions to corporate clients. Keep back-end units abreast of what’s, how’s.
CONSUMER SALES $15 billion in annual revenues JOB Sell consumer gear with focus on meeting current-year earnings and revenue goals. Let back end know of must-have products and features
BACK END
FRONT END
PRINTERS 43% of annual production JOB Build new printing and imaging products to ensure HP’s long-term growth. Track trends with help from front-end units.
COMPUTERS 57% of annual production JOBS Focus on future success by making computers that companies and consumers want, with sales input from front-end
CROSS-COMANY INITIATIVES Personnel from the frontand back-end groups collaborate on projects aimed at sniffing out new markets what will create growth.
DIGITAL IMAGING Make photos, drawings, and videos so easy to create, store and send as e-mail.
WIRELESS SERVICES Develop wireless technologies that will fuel sales of HP-made devices, ranging from handhelds to servers.
COMMERCIAL PRINTING Divert printing jobs from offset presses to Net-linked HP printers
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The Common Eight Different Options for Organization Structure 1. 2. 3. 4. 5. 6. 7. 8.
The Headquarters Structure The Centerless – Decentralization Structure The Functional Structure The Product Structure The Market (Customer) Structure The Geographical Structure The Process Structure The Hybrid Structure – Combinations of the above seven
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