Title: MGT 5391: Session
1MGT 5391 Session 8Organizational
Re-structuring and Renewal Strategies
2Inputs
Outputs
TRANSFORMATION
Environmental Drivers
Results From High Performance / Exemplar
Organizations
1. External/ Global Business Environment
THE ORGANIZATION DESIGN PUZZLE
HIGH PERFORMANCE LEARNING ORGANIZATION
1. Macro Organizational Structures
Organizational Effectiveness
2.Internal Environment
8. Shared Leadership Decision Making Systems
A.Corporate, Business, Worksite And Individual
Capabilities And Barriers (Culture)
Interdependence and Design FIT
1. Customers 2. Financial/ Business 3.
Employees 4. Organizational Innovation
5. Societal
2. The Job/work
7. Recognition and Financial Reward Systems
3. Technologies
6. People and Human Resource Systems
4. Information and Knowledge Systems
B.Vision Direction (VDSP)
5. Micro Organization Structures Team Design
C. Organizational Strategies
D. Business Models
Organizational Processes (Individual, Group,
Organizational and Business Processes (Total
Quality, Business Processes, etc.)
E. Labor (Employee) Management Mutuality
(Feedback)
Figure 1. High performing organizations Overall
open systems model of critical components
F. Transformation/ Change Processes
________________ Source Modified from Macy, et
al., (1995). Presented to the National Academy
of Management, Vancouver, Canada, August.
3Quiz 3 Mgt 5391, April 4th, 2005
- Name 5 of the 8 common types of Organization
Structure (each type worth 5 points). - Place a simple, short and sweet explanation for
each type.
4The Common Eight Different Options
for Organization Structure
- 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
5Why Organizational Renewal / Re-invention/Re-struc
turing
Inadequate Financial Control
Uncontrollable Costs Or Too High Costs
Over-expansion or Too Rapid Growth
Poor Management
Slow or No Response To Significant External Or
Internal Changes
New Competitors
Unpredicted Shifts In Consumer Demand
6Twenty-five Trends in Organizational Design at
the Firm and S.B.U. Levels
1
Creation of Separate Companies from S.B.U.s
(sell stock)
2
Corporate Office (significantly smaller)
3
Joint Ventures
4
Development of Shared Vision Direction Core
Values, Philosophies, Principles, etc.
Global S.B.U.s (4 levels - average 16 ) and
Global Business Services
5
6
Some Centralization - Great De-Centralization
10
7
Larger Span of Control (132)
8
Top to Top on-going Relationships from Firm
Leadership to key Customer Leadership
Distributed IT Systems (Supplier- Organization- Cu
stomer) (SAP/EDI/ Consilient E-Commerce)
Creation of E-Learning Systems between Suppliers,
the Firm (all employees) and Customers
9
11
Creation of Dot.coms (going outside - separate
company) - Entrepreneurial Design
12
Creation of S.B.U. Dot.coms (coming inside)
Innovative Changes Structures, Systems, and
Processes
Total Value Chain Organizational Design Demand
Side and Product Supply
13
14
Global Customer Enterprise Teams (Mini-Business
with P/L Responsibility)
Regional Customer Enterprise Teams (Mini-Business
with P/L Responsibility)
15
Other Types of Aligned Enterprise Teams (Product,
Channel, or Process)
16
Teams at ALL Levels
17
Targeted Selection Assessment, Selection and
Hiring System
18
Both Horizontal and Vertical Systems and Processes
19
Integrative Learning/Coaching/Training and Career
Development Systems
20
Innovative and Multiple Pay Systems Profit
Sharing and Stock Options
21
Structural Change
Simple Innovative Business/People/Customer
Measurement Systems
22
Co-Location of Leadership / Key Members
23
Widespread Information and Knowledge Sharing
Access and Usage
24
Direct Employee Involvement with Organization
Design and Redesign
25
B. A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
7Eight Primary Options For Choosing
Macro Organizational Structure
8Choosing 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., LOBs, 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, LOBs,
and - field units also into H.Q.
- Coordination is within and across the S.B.U.s,
LOBs, - and field units
- Effectiveness is the goal
9Choosing 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
10Choosing 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
11Choosing 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, LOBs Integrated/Differenti
ated 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)
12The 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)
13The Headquarters Model
Headquarters
Field A
Field B
Field C
14Centralized Headquarters Model
B
A
Mainly Flows of Goods
H.Q.
C
F
D
E
Tight, Simple Controls (key strategic decisions
made centrally)
15- The Centerless- Decentralized
- Structure Model
- S.B.U.s, LOBs 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, LOBs,
- and field units also into H.Q. (Networked)
- Coordination and integration is within and
across - the S.B.U.s, LOBs, and field units
(Networked) - Effectiveness is the goal
16Centerless-Decentralized Structure
Mainly Financial Flows (Capital out dividends
back)
Headquarters Loose, simple Controls (Strategic
decisions decentralized)
17The Peer-to-Peer Model
HQ
Unit Peer - 1
HQ
HQ
Unit Peer - 2
Unit Peer - 2
HQ
Unit Peer - 3
18Integrated Network Model
Distributed, Specialized Resources and
capabilities
Large Flows of Components, Products, Resources,
People, Information and Knowledge Among
Interdependent (Networked) Units
Complex Process of Coordination and cooperation
in an environment of Shared Decision Making
19Differentiated 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,
- LOBs) whose actions are coordinated
- by contracts and/or mutual agreements
- rather than through a formal hierarchy.
20The Typical Structure Path for a Multi-National
Corporations
High
Global Matrix
Worldwide S.B.U.
(Differentiated Network)
Alternative Path 2
Foreign Product Diversity
Alternative Path 1
Regional S.B.U.
International Division
Low
Foreign Revenue as a Percentage of Total Revenue
Low
High
Source Stepford Wells, 1972
213. 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
22Functional Organization Structure
General manager
Finance
Human resources
Research and development
Operations
Product marketing
234. 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
24- Product Divisional S.B.U. structurea
- 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.
25Product 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.
RD
Towel
Tissue
Diapers
Sales
265. 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
27Market (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.
28Market (Customer) Segments and Lateral Functions
S.B.U. General manager
Finance
Operations
Sales/marketing
Information technology
Human Resources
Health
Financial services
Governments
Distribution
Sales
Sales
Sales
Sales
Marketing
Marketing
Marketing
Marketing
Information technology
Information technology
Information technology
Information technology
Installation and repair
Installation and repair
Installation and repair
Installation and repair
Network operations
Network operations
Network operations
Network operations
29Mellon Bank Market Structure
30Dells Fast-Cycle Segmentation
Large customers
Small customers (Business and consumer)
In 1994, Dell was a 3.5 billion company
In 1996, 7.8 billion
Large companies
Midsize companies
Government and education
Small customers
In 1999, 18 billion
Consumers
Small companies
Education
State and local
Federal
Midsize companies
Large companies
Global enterprise accounts
316. 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
32Geographic 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./LOBs according to the
- requirements of different locations (Local).
33Geographical (Pre-Restructuring)
CEO Industrial Gases
AFROX (South Africa)
Process Plants
North Pacific
AirCo (U.S.A)
U.K. Gases
CIG (Australia)
34Geographical Structural Change (Post-Restructuring
)
CEO Industrial Gases
South Africa
Process Plants
North Pacific
Americas
Europe
Australia
Food
Chemicals
Global Market Sectors
Electronics
Steel
357. 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
36Process Organization Structure
General manager
New product development process
Order fulfillment process
Customer acquisition and maintenance
New product teams
Product teams
Customer teams
37- 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, LOBs Integrated/Differenti
ated - 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)
38ABB (Simplified Structure)-1
CEO (Percv Bamevik) (previous CEO Thought up
this structure)
Executive Committee
Power Transformers
Robots
Power Generation
47 Other Business Areas
Germany
U.S.A
National Companies
Norway
137 Other National Companies
39ABB Four Types of Organization Structures - 2
Corporate Office
A
(Very Small)
B
3 Regions and 4 Businesses Areas (BAs)
Regions-National Companies
1
2
3
1 2 3
1 2 3 4
1
Global Business Areas
2
Corporate Structures
Tight/Clear Accountability/Responsibility
Through a Single Financial Performance
Measurement System
3
4
C
Company Presidents
Local Country Companies and Many Profit Center
Structures
(some are also Country Managers) - 1 or 2 levels
5,000 Profit Centers (lead by Profit Center
Managers 3 levels to lowest person)
D
________________ Source B.A.Macy, Successful
Strategic Change Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
40Another Hybrid Procter Gamble (PG)
41The Key Pillars of a Horizontal Organization
Global Sales Organization
Retail Sales/ Customers
Demand Organization
Fulfillment Organization
Consumers
Service Organization
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)