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Chapter 6Chapter 6Designing Designing Organizational Organizational Structure:Structure:Specialization and Specialization and CoordinationCoordination
Functional StructureFunctional StructureFrom Functional to Divisional StructureFrom Functional to Divisional StructureDivisional Structure I: Product StructuresDivisional Structure I: Product Structures
Divisional Structure II: Geographic StructureDivisional Structure II: Geographic StructureDivisional Structure III: Market StructureDivisional Structure III: Market StructureMatrix StructureMatrix Structure
Network Structure and the boundary-less organizationNetwork Structure and the boundary-less organization
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Organizational Theory
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
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Organizational Theory
Reengineering Functional Structures
Reengineering is the process of redesigninghow tasks are bundled into roles and functions to improve organizational effectiveness.
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Organizational Theory
Before and After Example of ReengineeringA. Before
Manufacturing Purchasing ProductionControl
Distribution Marketing
CEO
Improving Integration in a Functional Structure by Creating a Materials Management Function
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Organizational Theory
Before and After Example of ReengineeringB. After
(continued)
Manufacturing MaterialsManagement
Marketing
CEO
Purchasing ProductionControl
Distribution
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Organizational Theory
Moving to a Divisional Structure
The structure adopted to solve the control problems of functional structures
(many kinds of products,many different locations,
many types of clients)
is the divisional structure.
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Organizational Theory
Divisional structure—a structure in which functions are groupedtogether accordingto the specific demands of products,markets, or customers.The type of divisional structure selected
is driven by the specific type of control problem experienced.
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Organizational Theory
Divisional Structure I: Three Kinds ofProduct Structure
A product structure is a divisional structurein which products are grouped into separate divisions, according to theirsimilarities or differences.
There are three different types of product structures seen in organizations.
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Organizational Theory
Product Division Structure—a structure in which centralized support functions service the needs of a number of different product lines.
Typically used by organizations whose products are broadly similar and aimed at the same market.
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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
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Organizational Theory
Multidivisional Structure—a structure inwhich support functions are placedin self-contained divisions.
Typically used by an organization whose products are very different and that operates in several different industries.
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Multidivisional Structure.
Corporate
Managers
CEO
Divisional
Managers
Senior VP
Marketing
Senior VP
Finance
Senior VP
Materials
Management
Senior VP
Research and
Development
Functional
Managers
Corporate Headquarters Staff
Division B
Support functions
Division D
Support functions
Division A
Support functions Support functions
Division C
4-21
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Organizational Theory
Product Team Structure—a divisional structure in which specialists from the support functions are combined into product development teams.
Typically used by an organization whose products are very technologically complexor whose characteristics change rapidlyto suit customer needs.
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Product Team Structure.
ProductDivision
Product Division
CEO
Functions
Product
Development
Teams
Product Division
Vice President
Research and
Development
Vice PresidentSales and
Marketing
Vice President Manufacturing
Vice PresidentFinance
Functional specialist
Vice PresidentMaterials
Management
PTM Product Team Manager
PTM PTM PTM
4-29
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Organizational Theory
Divisional Structure II: Geographic Structure
When an organization experiences control problems that are a function of geography, a geographic divisional structure is used.
Such a structure organizes divisions according to the requirements of different locations.
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Geographic Structure
Regional Operations
Regional Operations
Regional Operations
Regional Operations
CEO
Central Support Functions
Individualstores
4-31
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Organizational Theory
Divisional Structure III: Market Structure
When an organization experiences control problems that are a function of the differences in the various customer groupsbeing served, a market structure is used.
Such a structure aligns functional skills andactivities with different customer needs.
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Market Structure
CommercialDivision
ConsumerDivision
GovernmentDivision
CorporateDivision
CEO
Central Support Functions
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Organizational Theory
Matrix Structure
The search for better and faster ways todevelop products and meet customer needsled to the matrix structure.
A matrix structure groups people and resources in two ways simultaneously:-by function and -by product
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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
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Organizational Theory
A multidivisional matrix structure provides formore integration between corporate and divisional managers and between divisional managers.
This structure makes it easier for top executives from the divisions and fromcorporate headquarters to coordinateorganizational activities.
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Multidivisional Matrix Structure
CEO
Senior Vice PresidentMarketing
Senior Vice PresidentFinance
Senior Vice President Research and Development
Senior VicePresidentMaterials Management
AutomobileProductsDivision
PersonalComputerDivision
ConsumerElectronicsDivision
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Organizational Theory
A recent innovation in organizational architecture is the use of network structures.
A network structure is a cluster of different organizations whose actions are coordinated by contracts and agreementsrather than through a formal hierarchy.
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Organizational Theory
Network structures often result from outsourcing.
Outsourcing is the process of moving activities that were previously performed inside the organization to the outside (where they are done by other companies).
