Organization Design: Creating Strategic and Agile Organizations
Donald L. Anderson
Chapter 4
Structure
Connecting Strategy and Structure
Strategy Influences Structure
Structure is one method for executing and implementing strategy
Certain structures are better suited to particular strategies
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How Structure Influences Strategy
Structure follows strategy
Structure determines how information is processed and acted upon
Two-way flow
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Dimensions of Organization Structure
Departmentalization or groupings
Shape/configuration
Centralization/Decentralization
Division of labor and specialization
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Departmentalization or Groupings
Purpose:
Establishes a common system of supervision among positions and units
Typically requires positions and units to share common resources
Creates common measures of performance
Encourages mutual adjustment
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Structure Options
Functional
Product
Geographic
Customer/market
Process
Network
Front-back
Matrix
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LO 4-1: Different options for structuring organizations into departments or groupings
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Functional Structure
Organized function or types of work
Streamline decision making
Interdepartmental coordination
Complexity
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Anderson, Organization Design
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Product Structure
Responsibilities are divided by product
Coordination and focus within unit
Duplication of work
Lack of shared knowledge
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Customer/Market Structure
Organized by market segments of customer population
Focus on customers’ unique needs
Understanding specific markets
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Anderson, Organization Design
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Geographic Structure
Organized by location
Facilitates regional specialization
Appear as local company
Expensive to duplicate resources
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Process Structure
Organized by process steps:
Breaks down traditional hierarchy
Cross-functional, self-managed teams
“Boundaryless”
Difficult for different management structures to coexist
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Anderson, Organization Design
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Network Structure
Reduces organization’s functions to its central competencies
Four characteristics:
Vertical disaggregation
Brokers
Market mechanisms
Full disclosure information systems
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Anderson, Organization Design
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Vertical disaggregation: The separation of product development, manufacturing, shipping and logistics into unique activities performed by different organizations.
Brokers: A hub-and-spoke model where one or more parties brings the network together.
Market mechanisms: Market needs and contracts for services hold the network together.
Full-disclosure information systems: “Broad-access computerized information systems are used as substitutes for lengthy trust-building processes based on experience” (p. 65).
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Network Structure
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Front-Back Structure
Hybrid structure
Customer structure on front end
Product structure on back end
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Front-Back Structure
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Front-Back Structure
Motivations:
Customers can buy all products
Customers want a sourcing partnership
Customers want a single point of contact
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Front-Back Structure
Customers want solutions and systems
Opportunities for cross-selling and bundling
Value-added is increasingly customer specific
Superior knowledge about customers and customer segments
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Matrix Structure
Organization maintains dual perspectives
Function and geography
Product and customer
Equal balance
Employees report directly to two managers
Potential for role conflict and power struggle
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Matrix Structure
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Matrix Structure
Conditions:
Pressures for multiple areas of focus
Work is especially complex or interdependent
Resources need to be shared for maximum efficiency
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Advantages and Disadvantages of Structure Types
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LO 4-2: The advantages and disadvantages of each of those structure types
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Advantages and Disadvantages of Structure Types
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LO 4-2: The advantages and disadvantages of each of those structure types
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Advantages and Disadvantages of Structure Types
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LO 4-2: The advantages and disadvantages of each of those structure types
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Choosing a Structure and Evaluating the Options
Considerations:
Maximizing resource utilization
Specialization and economics of scale
Measurement and control issues
Development of individuals and the organization’s capacity to use its human resources?
Final output of the organization?
Responsiveness important competitive demands?
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Principles of Structure
Wide span of control:
Add more people per manager or unit
Flatter hierarchy with fewer managers and layers
Narrow span of control:
Assign fewer people per manager
Increasing number of managers and layers in the hierarchy
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Shape/Configuration: Span of Control and Layers
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LO 4-3: How structure includes other decisions such as span of control and centralization
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Factors Influencing Span of Control
Employee
Manager
Work
Organizational
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Employee factors:
Employee experience
Employee independence
Manager factors:
Competence in delegation and coaching
Diversity of responsibilities
Work factors:
Interdependence of work
Work complexity
Predictability of work cycles
Organizational factors:
Geographic dispersal of team
Amount of turnover
Amount of change
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Distribution of Power: Centralization/Decentralization
Centralization:
Create standard processes
Economies of scale
Shared knowledge and trust
Decentralization:
Responsive to customer needs
Speed
Allows experimentation
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Distribution of Power: Centralization/Decentralization
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Distribution of Power: Centralization/Decentralization
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Division of Labor and Specialization
Less specialization:
Greater rewards and satisfaction with job
Less burnout due to repetition
Ability to learn other job tasks
More specialization:
More departments
Narrower scope of work
Depth of knowledge
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Connecting Strategy and Structure: Revisited
Strategy and structure are intertwined:
Defender strategy benefits from functional structure
Operational excellence companies benefit from centralized functions
Organizational structure is most visible aspect of design
Choice of structure should be drive by strategy
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LO 4-4: How different strategy choices affect structure options
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