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Organizational Organizational StructuresStructures
BOH4MBOH4M
OrganizingOrganizing
Deciding how best to group Deciding how best to group organizational activities and resourcesorganizational activities and resources
Formal vs. InformalFormal vs. Informal
Formal StructureFormal Structure The way that the organization if configuredThe way that the organization if configured Defines hierarchy, chain of command, work Defines hierarchy, chain of command, work
groups, etc.groups, etc.
Informal StructureInformal Structure The unofficial working relationships within The unofficial working relationships within
the organizationthe organization i.e. who hangs out with whoi.e. who hangs out with who
Functional DivisionsFunctional Divisions
The most common structureThe most common structure Jobs are grouped together that involve the Jobs are grouped together that involve the
same type of activitysame type of activity Marketing, finance, manufacturing, HR, etc.Marketing, finance, manufacturing, HR, etc.
Pros: Managers need only be familiar with one Pros: Managers need only be familiar with one set of skills, coordinating departmental set of skills, coordinating departmental activities easyactivities easy
Cons: Decision making can become Cons: Decision making can become slow/bureaucratic in larger organizations, slow/bureaucratic in larger organizations, employees may focus too narrowly on their employees may focus too narrowly on their departmentdepartment
4 - 4 - 55
A functional structure is the bedrock of horizontal differentiation. It is the first “structure” that organizations adapt as they grow.
Research andDevelopment
Sales andMarketing
Manufacturing Materials Management
Finance
CEOFunctional Structure
Product DivisionsProduct Divisions
Grouping activities around product groupsGrouping activities around product groups ExamplesExamples
GM, Chevrolet, CadillacGM, Chevrolet, Cadillac Coke, Sprite, DasaniCoke, Sprite, Dasani
Pros: easy to coordinate all activities Pros: easy to coordinate all activities associated with a product, quicker decision associated with a product, quicker decision making easy to assess performacemaking easy to assess performace
Cons: too much focus on own product, higher Cons: too much focus on own product, higher admin costsadmin costs
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Product Division Structure
Vice PresidentSales and Marketing
Vice President Research and Development
Vice President Materials
Management
CEO
Vice President Finance
CannedSoups
Division
PDM
FrozenVegetableDivision
PDM
FrozenEntreesDivision
PDM
BakedGoods
Division
PDM
Centralized support functions
Divisions4-19
Geographic DivisionsGeographic Divisions
Grouped based on the area servedGrouped based on the area served Examples:Examples:
North America, Europe, Asia, etc.North America, Europe, Asia, etc. Ontario, Quebec, Maritimes, etc.Ontario, Quebec, Maritimes, etc.
Pros: Can tailor operations to unique Pros: Can tailor operations to unique demands of each marketdemands of each market
Cons: ExpensiveCons: Expensive
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Geographic Structure
Regional Operations
Regional Operations
Regional Operations
Regional Operations
CEO
Central Support Functions
Individualstores
4-31
Customer DivisionsCustomer Divisions
Grouped based on customer served or Grouped based on customer served or distribution channeldistribution channel
Examples:Examples: Industrial Sales, Consumer SalesIndustrial Sales, Consumer Sales Vending machines, retail, restaurantsVending machines, retail, restaurants
Pros: can create groups oriented to serving Pros: can create groups oriented to serving unique needs of specific customersunique needs of specific customers
Cons: ExpensiveCons: Expensive
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Market Structure
CommercialDivision
ConsumerDivision
GovernmentDivision
CorporateDivision
CEO
Central Support Functions
Which structure would Which structure would make the most sense?make the most sense?
AppleApple NikeNike McDonaldsMcDonalds NokiaNokia PepsiPepsi
The Silo EffectThe Silo Effect
The main problem with a divisional The main problem with a divisional structure is that grouping people together structure is that grouping people together means you are isolating them from the means you are isolating them from the other groupsother groups
This means that interdivisional This means that interdivisional communication is hard, and people tend communication is hard, and people tend to only focus on their own groupto only focus on their own group
Matrix StructureMatrix Structure
Attempt to avoid the Silo effect by inserting Attempt to avoid the Silo effect by inserting horizontal lines of communication into the horizontal lines of communication into the structurestructure
Ex: grouping people by function and customer Ex: grouping people by function and customer divisiondivision
Pros: better interdepartmental communication Pros: better interdepartmental communication and coordinationand coordination
Cons: more bosses to report to, requires well Cons: more bosses to report to, requires well organized information systemsorganized information systems
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Matrix StructureCEO
Vice PresidentEngineering
Vice PresidentFinance
Vice PresidentPurchasing
Vice PresidentSales and Marketing
Vice President Research and Development
Product AManager
Product BManager
Product CManager
Product DManager
Product Team
Two-boss employee
Flat vs. Tall StructuresFlat vs. Tall Structures
An organization with lots of levels of An organization with lots of levels of authority, and one where managers have authority, and one where managers have relatively few people reporting directly to relatively few people reporting directly to them is “tall”them is “tall”
An organization with few levels of An organization with few levels of authority, and where managers have authority, and where managers have large spans of control is “flat”large spans of control is “flat”
Pros/Cons?Pros/Cons?
3 Types of Ownership3 Types of Ownership
Sole ProprietorshipSole Proprietorship PartnershipPartnership CorporationCorporation
Organization Structures Organization Structures of a Corporationof a Corporation
Ownership of a corporation is controlled by the Ownership of a corporation is controlled by the company’s shares or stockscompany’s shares or stocks
Usually for each share, the owner get one Usually for each share, the owner get one vote…10 shares = 10 votesvote…10 shares = 10 votes
A proxy (substitute or stand-in) contract can be A proxy (substitute or stand-in) contract can be usedused
Proxy contracts allows the votes of one Proxy contracts allows the votes of one shareholder to be cast by another shareholder shareholder to be cast by another shareholder (given them more power)(given them more power)
Public versus Private Public versus Private CorporationsCorporations
Shares of a public corporation can be Shares of a public corporation can be purchased by anyone on one of the purchased by anyone on one of the major stock exchanges (TSX, NYSE, major stock exchanges (TSX, NYSE, NASDAQ)NASDAQ)
Shares of a private corporation limited Shares of a private corporation limited and can not be purchased by the and can not be purchased by the public…they are only available to owner’s public…they are only available to owner’s family members or employees of the family members or employees of the corporationcorporation
Shareholders and the Shareholders and the Executive StructureExecutive Structure
Because shareholders’ votes control the Because shareholders’ votes control the corporation they are above the corporation they are above the Chairperson of the Board in the executive Chairperson of the Board in the executive structurestructure
It is important to note that the It is important to note that the chairperson usually has the most shares chairperson usually has the most shares and therefore controls the company and therefore controls the company through her votesthrough her votes
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