Six Organization Shapers

New competition shift power to

buyers design around
customer!

Designing
Organizations

Buyer
Power

Customers
expect fast
delivery. Speed
is a force of
decentralization for
decision-making

z
z
z

Multiple
Dimensions

Change

Design with staff

to handle the
Internet
communication

Organize by
functions, products,
geography, customer
segments, channels and
processes
2

An organization design that facilitates

z

The Internet

Organization

The Star Model

Competitive Advantage
z

Variety &
Solutions

Speed

Environment changes
fast, requiring
management to relearn
and re-decide often. So
need to design to cater to
change

JAY R. GALBRAITH

Increase customizable product

and service variety in response
to buyer power

By Jay R. Galbraith

Strategy

Variety,
Change,
Speed, and
Integration

Direction

People

Structure
Power

Skills/Mindsets

is a source of competitive advantage

It is difficult to execute but also difficult to
copy

Rewards

Process

Motivation

Information

The Star Model

z

Structure

Strategy
z
z
z

z
z

Is the companys formula for winning!

Goals, mission, objectives, values
Delineates products, markets, value proposition,
competitive advantage
First part of the model to be addressed
Establishes criteria for choosing among different
organizational forms
Drives resource allocation

Specialization
z

Centralization vs. decentralization

Departmentalization
z

Span of control flat vs. tall structures

Distribution of power
z

Type and number of job specialties

Shape

Function, product, process, market or geography

Rewards

Processes
z

Vertical processes

Horizontal (or lateral) processes

z
z
z

Purpose
z

Business planning, budgeting, resource allocation

decisions

Some Issues
z

Designed around the work flow

Cross functional
Value chain emphasis

z
z

To align the goals of the employees with the goals

of the organization
Individual vs. Team
Function vs. Cross function (citizenship)
Monetary vs. Non-monetary rewards

Rewards must be congruent with other parts

of organization design

Implications

People
z

Human resources
z
z

Structure usually overemphasized

Processes, rewards, and people are becoming

more important

Recruiting, selection, rotation, training,

development
Creating the skills and mind-sets needed to
implement the strategy

Must also develop organizational capabilities

z

Structure is only one facet of design

Congruence
z
z

Flexibility, ability to work with others

Knowledge management

status and power issues

Different strategies lead to different organizations!

All policies must be aligned and in harmony

Matching strategy and

structure

10

Matching strategy and

structure
z

Specialization
z

Trend toward less specialization and more job

rotation in low skill tasks
z

Trend towards wider spans and flatter structures

Conference board study

better speed, motivation, coordination. Why?

More specialization in high skill tasks

z

Shape

It is difficult to read academic papers even in the same

field or sub-field

11

Faster decisions, lower overheads

Found span of control from 0-127
Modes at 7 (traditional), 17 (sales), and 75 (selfmanaging teams)
Function of: experience, work similarity, independence
of workers, ease of measurement

12

Matching strategy and

structure
z

Matching strategy and

structure
z

Distribution of Power
z
z

Departmentalization
z

Centralization vs. decentralization

But, also includes horizontal distribution of power
among departments
Power shifting from accountants and production
to sales, marketing, purchasing(!?)
When 80% of parts are outsourced, purchasing
becomes important

Suggest departments arise when org size>24

Consider:
z
z
z
z
z
z

13

Functional
Product
Market
Geographical
Process
Hybrid

What are the (dis)advantages of each?

14