Key Points Structure Understand key decisions in structuring

Key Points: Structure • Understand key decisions in structuring an organization • Understand basic types of structure • Strategy and structure should match • Generic business-level strategies • Corporate-level strategies Norman, BUS 4385

Organizational Structure • Definition: a firm’s formal role configuration, procedures, governance and control mechanisms, and authority and decision making processes • Key Decisions • Which, if any, decision-making should be centralized and which, if any, should be decentralized? • How should tasks be divided? • How should the various parts of a company be integrated? • What form(s) of controls should be used to evaluate a firm’s performance? • Financial: use of objective criteria • Strategic: use of long-term and strategically relevant subjective criteria Norman, BUS 4385

Types of Structure • Simple structure: owner-manager makes all major decisions and monitors all activities • Functional structure: CEO and small corporate staff with functional line managers in main areas such as production, accounting, marketing, engineering, and human resources • Project/Product group structure: cross-functional teams are responsible for individual projects or product lines • Multidivisional structure: separate operating divisions for each business act as profit centers and are delegated responsibility for day-to-day operations Norman, BUS 4385

Structure and Business-Level Strategy Cost Leadership Differentiation • • Centralized Formalized (rules & procedures) Emphasis on cost control Emphasis on process innovation Decentralized Flexible Job roles less structured Emphasis on product innovation How would you structure an organization implementing an integrated low-cost/differentiation strategy? Norman, BUS 4385

Structure and Corporate-Level Strategy Related-Constrained • Tight links between business units • Some activities likely to be centralized (e. g. , marketing, distribution, R&D) • Strategic controls that emphasize overall firm performance • Culture emphasizes cooperative sharing HQ BU BU Norman, BUS 4385

Structure and Corporate-Level Strategy Related-Linked • Several groups that include closely related businesses • Tight links between businesses in the same group • Each group is a profit center • Strategic controls that emphasize overall group performance • Financial controls imposed by HQ on each group Group A HQ Group B BU BU BU Norman, BUS 4385

Structure and Corporate-Level Strategy Unrelated • • Small HQ staff Each business operates independently Financial controls--set financial goals for each business Divisions compete for corporate resources HQ BU BU Norman, BUS 4385