Organizational members and units are grouped into functional departments such as marketing and production.
Coordination is required across all departments.
Design approach resembles functional departmentalization in its advantages and disadvantages.
Functional or U-Form Design for a Small Manufacturing Company Figure 12.1 CEO Vice president, operations Vice president, marketing Vice president, finance Vice president, human resources Vice president, R&D Scientific director Labor relations director Plant human resource manager Controller Accounting supervisor Regional sales managers District sales managers Plant managers Shift supervisors Lab manager
Organization consists of a set of unrelated businesses with a general manager for each business.
Holding-company design is similar to product departmentalization.
Coordination is based on the allocation of resources across companies in the portfolio.
Design has produced only average to weak financial performance; has been abandoned for other approaches.
Conglomerate (H-Form) Design at Pearson PLC Figure 12.2 CEO Publishing operations Entertainment operations Oil services operations Fine china operations Periodicals operations Investment banking operations
Employees are uncertain about reporting relationships.
Managers may view design as an anarchy in which they have unlimited freedom.
The dynamics of group behavior may lead to slower decision making, one-person domination, compromise decisions, or a loss of focus.
More time may be required for coordinating task-related activities.
A Matrix Organization Figure 12.4 Employees CEO Project manager B Project manager C Vice president, engineering Vice president, production Vice president, finance Vice president, marketing Project manager A
How to design a firm to deal most effectively with international forces and to compete in global markets:
Create an international division?
Establish an international operating group?
Make international operations an autonomous subunit?
Common Organization Designs for International Organizations Figure 12.5a CEO A. Separate International Division Production Marketing Finance International division B. Location Departmentalization North American operations European operations Asian operations CEO
Common Organization Designs for International Organizations (cont’d) Figure 12.5b D. Multidivisional Structure CEO Subsidiary A (in Germany) Subsidiary C (in France) Subsidiary E (in Taiwan) Subsidiary D (in Japan) Subsidiary B (in United States) C. Product Departmentalization Product manager A CEO Product manager B Product manager C Asia North America Europe
The simple structure uses direct supervision as its primary coordinating mechanism, has as its most important part its strategic apex, and employs vertical and horizontal centralization. Relatively small corporations controlled by aggressive entrepreneurs, new government departments, and medium-sized retail stores are all likely to exhibit a simple structure. These organizations tend to be relatively young. The CEO (often the owner) retains much of the decision-making power. The organization is relatively flat and does not emphasize specialization. Many smaller U-form organizations are structured in this fashion. Trilogy Software would be an example of a firm using this approach.
The machine bureaucracy uses standardization of work processes as its prime coordinating mechanism; the technostructure is its most important part; and limited horizontal decentralization is established. The machine bureaucracy is quite similar to Burns and Stalker’s mechanistic design discussed in Chapter 12 of Griffin’s Management , Seventh Edition. Examples include McDonald’s and most large branches of the U.S. government. This kind of organization is generally mature in age, and its environment is usually stable and predictable. A high level of task specialization and a rigid pattern of authority are also typical. Spans of management are likely to be narrow, and the organization is usually tall. Large U-form organizations are also likely to fall into this category.
The third form of organization design suggested by Mintzberg is the professional bureaucracy . Examples of this form of organization include universities, general hospitals, and public accounting firms. The professional bureaucracy uses standardization of skills as its prime coordinating mechanism, has the operating core as its most important part, and practices both vertical and horizontal decentralization. It has relatively few middle managers. Further, like some staff managers, its members tend to identify more with their professions than with the organization. Coordination problems are common.
The divisionalized form , Mintzberg’s fourth design, exhibits standardization of output as its prime coordinating mechanism, the middle line as its most important part, and limited vertical decentralization. This design is the same as both the H-form and the M-form described earlier. Limited and Disney are illustrative of this approach. Power is generally decentralized down to middle management—but no further. Hence each division itself is relatively centralized and tends to structure itself as a machine bureaucracy. As might be expected, the primary reason for an organization to adopt this kind of design is market diversity.
The adhocracy uses mutual adjustment as a means of coordination, has at its most important part the support staff, and maintains selective patterns of decentralization. Most organizations that use a fully-developed matrix design are adhocracies. An adhocracy avoids specialization, formality, and unit of command. Even the term itself, derived from “ad hoc,” suggests a lack of formality. Sun Microsystems is an excellent example of an adhocracy.