Chapter One Company Structure Organizational structure specifies

Chapter One Company Structure • Organizational structure specifies the firm’s formal reporting relationships, procedures, controls, authority and decision-making processes.

Compare & Contrast • Characteristics • Advantages • Disadvantages • • Simple Functional Multidivisional Matrix

Organizational Circle: Moving back to flat • 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. ØStarbucks ØProcter & Gamble ØToyota ØUnilever

Team Structure Ø One of the newest organizational structures developed in the 20 th 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 ü Whole Foods Market ü Xerox ü Motorola ü Daimler. Chrysler

Network Structure Ø 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 Ø H&M

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Boundaryless structure Ø 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. ü Ikea

Virtual Structure Ø 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. ü Amazon. com

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 – Integration - 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 Mechanistic Multi-Divisional Matrix Team Network ? Organic

Mechanistic vs. Organic Feature Task Definition Mechanistic Rigid and highly specialized Coordination and Rules and directives vertically Control imposed Communication Knowledge Flexible and less narrowly defined Mutual adjustment, common culture Vertical and horizontal Centralized Dispersed Commitment and To immediate supervisor Loyalty Environmental Context Organic Stable with low technological uncertainty To the organization and its goals 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

Sony Group Structure 1. New Group Headquarters to Function as Hub for Group Strategy 1) 2) 3) a. b. Global Hub (GH) as Sony Group HQ Management Platform for Global Staff Support Electronics HQ for Related Businesses Reorganizing Network Companies (NCs) for the broadband era 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

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 decisionmakers 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. – Management’s 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

Information 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.

Vocabulary • • • Hierarchical company • Channels of communication • Nimble • Responsiveness • Budgeting • Standardization • Hamper • Entrepreneurial organization • Flexibility • Real-time • Refine • Agility • 金字塔结构公司 沟通渠道 灵活的 快速应变 预算 规范化 妨碍 创业机构 灵活性 实时的 优化 敏捷

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?