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10

Creating Effective
Organizational Designs
McGraw-Hill/Irwin
Strategic Management: Text and Cases, 4e

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

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Traditional Forms of
Organizational Structure
Organizational structure refers to formalized patterns
of linking interactions
Structure provides a means of balancing two
conflicting forces
- Need for the division of tasks into meaningful groupings
- Need to integrate the groupings for efficiency and
effectiveness

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Simple Structure
Simple structure is the oldest and most common
organizational form
- Direct supervision of all tasks
- Decision making is highly centralized

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Functional Structure
Functional Structure is found where there is a single or closely
related product or service, high production volume, and some
vertical integration

Advantages?
Adapted from Exhibit 10.2 Functional Organizational Structure

Disadvantages?

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Dominant Growth Patterns


of Large Corporations

Adapted from Exhibit 10.1 Dominant Growth Patterns of Large Corporations


Source: Adapted from J. R. Galbraith and R. K. Kazanjian, Strategy Implementation: The Role
of Structure and Process, 2nd ed. (St. Paul, MN: West Publishing Company, 1986), p. 139.

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Divisional Structure
Organized around
products, projects, or
markets

Divisions are relatively autonomous and


consist of products and services that are
different from those of other divisions
Adapted from Exhibit 10.3 Divisional Organizational Structure

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Divisional Structure

What are some advantages of the divisional structure?

What are some disadvantages of the divisional


structure?

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Divisional Structure
Strategic business unit (SBU) structure

Divisions with similar products, markets, and/or technologies


are grouped into homogenous SBUs

Appropriate when the businesses in a corporations portfolio


do not have much in common

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Matrix Structure

Adapted from Exhibit 10.4 Matrix Organizational Structure

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Matrix Structure

A combination of the functional and divisional


structures
Individuals who work in a matrix organization become
responsible to two managers
Some advantages and disadvantages of matrix
structure?

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Boundaryless Organizational Designs


Boundaries that place limits on organizations
Barrier-free type
of organization

Permeable internal boundaries

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Boundaryless Organizational Designs


Boundaries that place limits on organizations
Barrier-free type
of organization

Permeable internal boundaries

Outsources non-vital functions

Modular type of
organization

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Boundaryless Organizational Designs


Boundaries that place limits on organizations
Barrier-free type
of organization

Permeable internal boundaries

Outsources non-vital functions


Virtual type of
organization

Modular type of
organization

Continually evolving network of


independent companies linked together

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Boundaryless Organizations:
Making Them Work

What are some factors facilitating effective


coordination and integration of boundaryless
structures?

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Other
Two contradictory challenges faced by firms
- Adaptability
- Alignment

International Organizations
- Strategy
- Product Diversity
- % Foreign Sales

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