Organizational Structure
and Controls
2000 South-Western College Publishing
Structure Types
All organizations require some form of organizational
structure to implement and manage their strategies
Firms frequently alter their structure as they grow in
size and complexity
Three basic structure types:
Simple Structure
Functional Structure
Multi-divisional Structure (M-form)
Strategy & Structure
Growth Patterns
Multidivisional
Multidivisional
Structure
Structure
Sales
Sales Growth
Growth Coordination
Coordination
and
and Control
Control Problems
Problems
Efficient
Efficient implementation
implementation
of
of formulated
formulated strategy
strategy
Functional
Functional
Structure
Structure
Sales
Sales Growth
Growth Coordination
Coordination
and
and Control
Control Problems
Problems
Efficient
Efficient implementation
implementation
of
of formulated
formulated strategy
strategy
Simple
Simple
Structure
Structure
Simple Structure
Owner / Manager
Owner/Manager makes all major decisions
directly and monitors all activities
Difficult to maintain this structure as
the firm grows in size and complexity
Functional Structure
First stage beyond a Simple Structure
Appropriate for single or dominant-business firms
Allows specialization of tasks
* Production
* Finance
* Engineering
* Accounting
* Sales & Marketing
* Human Resources
Overcomes information processing limits of
single owner/manager
Functional department heads report to Chief
Executive Officer who integrates decisions and
actions from a company-wide point of view
Risks conflicts between myopic function managers
Functional Structure
Chief Executive Officer
Corporate
R&D
Finance
Corporate
Finance
Strategic
Planning
Production Engineering
Corporate
Marketing
Accounting
Corporate
Human
Resources
Sales &
Marketing
Human
Resources
Functional Structure for
Cost Leadership Strategy
Office of the President
Operations is main function
Process engineering is
emphasized rather than new
product R&D
Formalized procedures allow
Centralized
Staff
Relatively large
centralized staff
coordinates
functions
for low-cost culture
Structure is mechanical; job
roles are highly structured
Engineering Marketing
Operations
Personnel
Accounting
Functional Structure for
Differentiation Strategy
President and
Limited Staff
R&D
New Product
Marketing
R&D
Marketing
Operations
Human
Resources
Finance
Marketing is the main function for tracking new product ideas
New product R&D is emphasized
Most functions are decentralized
Formalization is limited to foster change and promote new ideas
Overall structure is organic; job roles are less structured
Multi-Divisional Structure
Each division is operated as a separate business
Appropriate for related-diversified businesses
Key task of corporate managers is exploiting synergies
among divisions
Managers use a combination of strategic controls and
financial controls
Managers try to strike a balance between:
Competing among divisions for scarce capital resources
Creating opportunities for cooperation to develop synergies
The goal is to maximize overall firm performance
Multi-Divisional Structure
The decision-making of managers in a MultiDivisional structure may be:
Centralized or Decentralized
Bureaucratic or Non-bureaucratic
Balance on these dimensions may change over time
Structure will evolve over time with:
Changes in strategy
Degree of diversification
Geographic scope
Nature of competition
Multi-Divisional Structure
Chief Executive Officer
Corporate
R&D
Division
Finance
Corporate
Finance
Strategic
Planning
Division
Production Engineering
Corporate
Marketing
Corporate
Human
Resources
Division
Accounting
Sales &
Marketing
Division
Human
Resources
SBU Form
Related-Linked Strategy
President
President
Corporate
R&D
Strategic
Business
Unit A
Corporate
Finance
Strategic
Planning
Strategic
Business
Unit B
Division
Division
Division
Corporate
Marketing
Strategic
Business
Unit C
Division
Corporate
Human
Resources
Strategic
Business
Unit D
Division
Division
Structural integration exists among divisions within SBUs, but not across SBUs
Each SBU may have its own budget for staff to foster integration
Corporate headquarters staff serve as consultants to SBUs and divisions
Competitive Form
Unrelated /Holding Company Strategy
President
President
Legal
Affairs
Division
Finance
Division
Division
Auditing
Division
Division
Corporate headquarters has a small staff
Finance and auditing are the most prominent functions in the headquarters
Divisions are independent and separate for financial evolution purposes
Divisions retain strategic control, but cash is managed by the corporate office
Divisions compete for corporate resources
Multi-Divisional Structure
The choice between centralization and decentralization
is frequently based on the business-level strategy
implemented in each division
Differentiation
Cost Leadership
Decentralization
Centralization
Complex Multi-Divisional structure firms may be
simultaneously centralized and decentralized ,
depending upon the various business-level strategies
employed throughout the firms individual businesses
Multi-Divisional structure firms use a combination of:
Strategic Controls
Financial Controls
Evolution of Multi-Divisional Structure
Chief
Chief Executive
Executive Officer
Officer
Corporate
Corporate Office
Office (Staff)
(Staff)
North
America
Europe
Asia
Latin
America
Product A
Product B
Product C
Product D
Africa
Australia
A Structural evolution based on Geographic lines usually
implies a Multi-Domestic International Strategy
Implementation of a Multidomestic Strategy
Worldwide
Geographic
Area
Structure
United
United
States
States
Asia
Asia
Latin
Latin
America
America
Multinational
Multinational
Headquarters
Headquarters
Australia
Australia
Europe
Europe
Middle
Middle
East/
East/
Africa
Africa
Green circles indicate decentralization of operations
Emphasis is on differentiation by local demand to fit a culture
Corporate headquarters coordinates financial resources among
independent subsidiaries
The organization is like a decentralized federation
Evolution of Multi-Divisional Structure
Chief
Chief Executive
Executive Officer
Officer
Corporate
Corporate Office
Office (Staff)
(Staff)
Product A
Product B
Product C
Product D
A Structural evolution based on Product lines
usually implies a Global International Strategy
Implementation of a Global Strategy
Worldwide
Product
Divisional
Structure
Worldwide
Worldwide
Products
Products
Division
Division
Worldwide
Worldwide
Products
Products
Division
Division
Worldwide
Worldwide
Products
Products
Division
Division
Multinational
Multinational
Headquarters
Headquarters
Worldwide
Worldwide
Products
Products
Division
Division
Worldwide
Worldwide
Products
Products
Division
Division
Worldwide
Worldwide
Products
Products
Division
Division
Green circle indicates centralization to coordinate information
flow among worldwide products
Headquarters uses many intercoordination devices to facilitate
global economies of scale and scope
Headquarters also allocates financial resources cooperatively
The organization is like a centralized federation
Strategic Networks
A Strategic Network is a grouping of organizations
that has been formed to create value through
participation in an array of cooperative arrangements,
such as a strategic alliance
A Strategic Center Firm often manages the network
The Strategic Center Firm identifies actions that
increase the opportunity for each firm to achieve
success through its participation in the network
The Strategic Center Firm creates incentives that
reduce the probability of any single firm taking
advantage of its network partners
A Strategic Network
Network Firms
Strategic
Strategic
Center
Center
Firm
Firm
Strategic Center Firms Critical Functions
Strategic Outsourcing
Capability Development
Technology Sharing
Building Linkages to
Facilitate Learning
Strategic
Strategic
Center
Center
Firm
Firm
Strategic Outsourcing
Strategic
Strategic
Center
Center
Firm
Firm
Center firm coordinates outsourcing among partners,
initiates actions and coordinates problem solving
Strategic Center Firms Critical Functions
Strategic Outsourcing
Capability Development
Technology Sharing
Building Linkages to
Facilitate Learning
Strategic
Strategic
Center
Center
Firm
Firm
Capability and Technology
Strategic
Strategic
Center
Center
Firm
Firm
Center firm attempts to develop each partners core
competencies and provides incentives for network firms to
share their capabilities and competencies with partners
Strategic center firm manages the development and sharing
technology-based ideas among network partners
Strategic Center Firms Critical Functions
Strategic Outsourcing
Capability Development
Technology Sharing
Building Linkages to
Facilitate Learning
Strategic
Strategic
Center
Center
Firm
Firm
Building Linkages to Facilitate Learning
Strategic
Strategic
Center
Center
Firm
Firm
Strategic center firm emphasizes to partners the need to build
linkages between value chains and networks of value chains.
The strategic network seeks to develop a competitive
advantage in primary or support activities
Partes Bsicas de una
Organizacin
IDEOLOGA
pice Estratgico
Tecnoestructura
Linea
Intermedia
Personal
de Apoyo
Ncleo de Operaciones
Fuente: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297;
and Henry Mintzberg, Organization Design: Fashion or Fit? Harvard Business Review 59 (Jan. Feb. 1981): 103-116.
Formas de Organizacin
La
La
La
La
La
La
La
Organizacin
Organizacin
Organizacin
Organizacin
Organizacin
Organizacin
Organizacin
Empresarial
Mquina
Profesional
Diversificada
Innovadora
Misionaria
Poltica
Impulsos por tipos de
configuracin
CONFIGURACI
N
PRINC
MECANISMO DE
COORDINACIN
PARTE CLAVE DE
IMPULSOS
LA ORGANZACIN
Empresarial,
nuevos
negocios
Supervisin
directa
pice Estratgico
Liderazgo,
Direccin
Mquina,
banco,
manufacturas
Procesos
Standard
Tecnoestructutra
Racionalizacin,
Eficiencia
Profesional,
consultoras
Habilidades
Standard
Operaciones
Profesionalizaci
n; Destreza
Diversificada,
mltip.
Negocios
Produccin
Standard
Linea Intermedia
Fragmentacin,
Concentracin
Innovadora,
Inv &
Desarrollo
Adaptacin
mutua
Apoyo
Colaboracin,
Aprendizaje
Misionaria,
Normas Standard
Ideologa
Descentralizacin
