Organizational structure specifies the firms

formal reporting relationships, procedures,

controls, authority and decision-making
processes.
Compare & Contrast
Characteristics
Advantages
Disadvantages

Simple
Functional
Multidivisional
Matrix




The flat structure is common in enterprenerial
start-ups, university spin offs or small companies
in general. As the company grows, however, it
becomes more complex and hierarchical, which
leads to an expanded structure, with more levels
and departments.
Starbucks
Procter & Gamble
Toyota
Unilever
Organizational Circle: Moving back to flat
One of the newest organizational structures developed in
the 20th century is team. In small businesses, the team
structure can define the entire organization.
formed at the beginning of product development
process and continued throughout implementation
speeds innovation and customer responsiveness
stronger in highly dynamic industries
Whole Foods Market
Xerox
Motorola
DaimlerChrysler
Team Structure

Another modern structure is network. While business
giants risk becoming too clumsy to proact, act and react
efficiently, the new network organisations contract out
any business function, that can be done better or more
cheaply.
Core group of experts manages the outsourcing process
closely
This forms a hub & spoke type of organization consisting
of many contracts
Could create a control problem with contract
organizations
H&M
Network Structure
.
The most radical concept in today's organisational
design is the concept of 'boundarylessness', which
seeks to overcome traditional boundaries between
layers of management (vertical), functional areas
(horizontal), as well as geographic boundaries.
Some claim the boundaryless structure is a
combination of team and network structures, with
the addition of temporariness.
Ikea
Boundaryless structure
A special form of boundaryless organisation is virtual. It
works in a network of external alliances, using the
Internet. This means while the core of the organisation
can be small but still the company can operate globally be
a market leader in its niche. According to Anderson,
because of the unlimited shelf space of the Web, the cost
of creahing niche goods is falling dramatically. Although
none sell in huge numbers, there are so many niche
products that collectively they make a significant profit,
and that is what made highly innovative Amazon.com so
successful.
Amazon.com
Virtual Structure
Organizational Structure
Slides 14-23 Extensive Reading Material
Building blocks of organizational structure are:
Differentiation - allocation of people to tasks
vertical - distribution of decision-making
(levels)
horizontal - distribution of functions
I ntegration - coordination between people or
functions or divisions or companies.
Differentiation + Integration = Bureaucratic
Costs (time spent in meetings, # of managers)
Vertical differentiation:
Reporting relationships that link people, tasks and
functions
appropriate # of levels
appropriate span of control
determines if a structure is flat or tall
Tall structures
impede communication & coordination
raise bureaucratic costs
distort information (intentional & non-intentional)
decreases motivation
too many middle managers (structure begets structure)
Vertical differentiation:
Centralization:
easier coordination of activities
decisions fit organizational strategy
speedy decision making
Decentralization:
reduces overload for TMT (can focus on
strategy)
ee motivation & accountability increase
fewer managers are needed - flatter
structure
Organizational Structure
Horizontal differentiation
The degree to which you separate tasks or skills
in the organization (specialization or
functionalization).

Many organizational forms:

Functional Multi-Divisional Matrix Team Network ?


Mechanistic Organic

Mechanistic vs. Organic
Feature Mechanistic Organic
Task Definition Rigid and highly specialized Flexible and less narrowly
defined
Coordination and
Control
Rules and directives vertically
imposed
Mutual adjustment, common
culture
Communication Vertical Vertical and horizontal
Knowledge Centralized Dispersed
Commitment and
Loyalty
To immediate supervisor To the organization and its
goals
Environmental
Context
Stable with low technological
uncertainty
Unstable with significant
technological uncertainty and
ambiguity
Common success criteria for organizational
structures are:
Decentralized reporting
Flat hierarchy
High transient speed
High transparency
Permanent monitoring
Rapid response
Shared reliability
1. New Group Headquarters to Function as Hub for Group Strategy
1) Global Hub (GH) as Sony Group HQ
2) Management Platform for Global Staff Support
3) Electronics HQ for Related Businesses
a. Reorganizing Network Companies (NCs) for the broadband era
b. Introducing horizontal platform concept
2. Electronics Businesses Strengthened: Pursuing a Ubiquitous Value
Network
1) Developing Hardware for the Ubiquitous Value Network
2) Constructing a Network Platform
Establishing a center to promote a common network platform for the entire group
3) Strengthening Internet/Communication Services
4) Creating New Forms of Entertainment to Integrate Hardware, Content and
Services
3. Network-Based Content Distribution: Key for Entertainment Business
and Financial Services
1)Broadband Entertainment Content
a. Digital distribution of films
b. Digital distribution of music
2) Development of Network Compatible Financial Services
a. Establishing a net bank
b. Electronic money service


Sony Group Structure


Part II Reading:
Time for the big small company
big small company
the dream is to marry the control of an established
company with the responsiveness of a start-up.
Operating processes define how a company produces,
sells, distributes and supports its products and
services. (para.2)
Management processes in such companies are also
hampered by the time it takes to recognize that
change is needed. (para.3)
IT co-ordinates complex fast-cycle operating
processes and, more importantly, gives decision-
makers quick access to detailed, real-time
information about operations and market
performance. (para.5)

Management processes in such companies are
also hampered by the time it takes to recognize
that change is needed. (para.3)
IT co-ordinates complex fast-cycle operating
processes and, more importantly, gives
decision-makers quick access to detailed, real-
time information about operations and market
performance. (para.5)
Questions
What are the advantages and disadvantages of
each company structure?
Hierarchical structure
Advantages
High level of control
Disadvantages
Workers lack the authority and motivation to
improve process.
Managements response time is slow.
Only suitable for stable business environment.
Entrepreneurial structure
Advantages
Totally centralized authority and direct control
between owner and employees ensure
responsiveness to external changes.
Disadvantages
Only suitable for small companies
I nformation age structure
Advantages
Allows speed of response within a large complex
structure. Retains control but gives quick access
to information.
Employees can constantly refine their actions and
strategies.
Organization control is dynamic.
Disadvantages
Although IT makes all these advantages possible,
it cannot motivate people to use the information
they have.
Hierarchical company
Channels of communication
Nimble
Responsiveness
Budgeting
Standardization
Hamper
Entrepreneurial organization
Flexibility
Real-time
Refine
Agility
Vocabulary












Questions for next calss
Why do companies want to go public?

Why do ordinary people buy stocks and
securities?

What are indicators of stock market?