International dimensions of organizational structures
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Presentation to Communications in Multinational Corporations class (Kennesaw State University Master of Integrated Global Communications program) on the kinds of organizational structures that international companies adopt, based on a chapter from International Management: A Cultural Approach by Carl Rodriguez. See LinkedIn article at https://www.linkedin.com/pulse/organizational-structure-its-impact-wendy-kalman/
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International dimensions of organizational structures
- 1. From International Management: A Cultural Approach by Carl Rodrigues, Chapter 6: International Dimensions of Organizational Structures Wendy Kalman February 12, 2019 COMM 7500: Communications in Multinational Corporations Kennesaw State University, MPA/MAIGC program
- 2. Learning objectives 2 Describe the basic traditional international organizational structures Present the advantages and disadvantages of each structure Discuss contemporary thinking on structuring international organizations Discuss the impact of the Internet on international organizational structures
- 3. The functional structure • Functions are the focus • Works better for smaller firms • Domestic and foreign product managers might be one and the same person • Large multinationals (especially with multiple product lines) rarely use this at the corporate level, but can within regions, divisions or subsidiaries 3
- 4. The functional structure Advantages • Emphasis on functional expertise • Tight control • Prevents “we” versus “them” conflicts (no conflicting P&L centers) 4
- 5. The functional structure Disadvantages • Weak regional coordination (dispute resolution elevated to corporate level where expertise doesn’t reside) • Multiproduct firms become top heavy, i.e., expert product managers for each • International sales not given sufficient attention 5
- 6. The international division • Export departments grow into international divisions • These may have their own functional staffs, like marketing, R&D, etc. 6
- 7. The international division Advantages • Focused international responsibility and authority • International executive development • A say in strategy/policy setting and in acquiring necessary resources • Company-wide view of international operations (since multiple products) • Top management is cognizant of consequences 7
- 8. The international division Disadvantages • Bottleneck • Exports slowdown • Conflict between employees in domestic and international divisions • International versus other divisions (if profit higher on international side, product divisions may gang up) • International manager spread too thin 8
- 9. The foreign subsidiary structure • Increased demand, foreign government’s mandate, changing conditions in home market may lead to ending exporting and establishing local manufacturing facilities • Foreign subsidiaries are treated as an entity; firms apply a multidomestic strategy – local autonomy 9
- 10. The foreign subsidiary structure Advantages • Autonomy of affiliates • Direct top management involvement 10
- 11. The foreign subsidiary structure Disadvantages • Diffuseness of international responsibility – without a center for international responsibility, too many groups are reporting to the board; clarity and focus get lost • Potential unwieldiness – items which could be resolved by experts may get pushed to the board 11
- 12. The product division structure • Each product division has its functional, environmental, sales and manufacturing responsibilities. • Internationally, it may have morphed from export strategy to export division to foreign subsidiaries, which could lead to multiple foreign subsidiaries in the same territory. This brings product operations together. 12
- 13. The product division structure Advantages • Product and technology emphasis • Worldwide product planning • Conflict minimized 13
- 14. The product division structure Disadvantages • Weakness in worldwide know-how • Inherent weakness of multiproduct systems • Division managers often lack international skills • Foreign coordination problems 14
- 15. The regional structure • Generally, firms with low technology and high marketing orientation use this as might with too large foreign subsidiary or foreign product structures, e.g., pharma, food, oil • Typically responsible for their own production and marketing 15
- 16. The regional structure Advantages • Decentralization • Adaptation • Single management units possess regional knowledge 16
- 17. The regional structure Disadvantages • Weak worldwide product emphasis and technical knowledge • Technology transfer barriers • Policy barriers • Costly application • Weak communication 17
- 18. The matrix structure • Ideal corporation is both decentralized (decision-making and development) and centralized (corporate strategy and visions, coordinated global activities and capitalization of synergies and economies of scale). Scrapped by some companies though. • Functional managers assign staff to the product side; staff leaders responsible to both. If staff leaders cannot resolve conflicts, they go to the general managers, then VPs, then CEO. 18
- 19. The matrix structure Advantages • Coordination and cooperation across subunits enable efficient use of resources, allowing quick responses to global competition • Overall global corporate performance is highlighted • Many internal conflicts resolved at lowest possible level, others pushed up 19
- 20. The matrix structure Disadvantages • Worldwide responsibility may go to product managers with weak international experience • Tendency to create excessive paperwork • Dual boss cross communication costly and complex • Matrix group decision making process not quick 20
- 21. Other options • Contractual alliance structure (strategic partnerships) • Network agreements (subcontracting, sometimes interconnected) • Mixed (hybrid) structure • Flat structure (15-layer versus 3-layer company, costlier and less creative) • Organic vs mechanistic • Adaptable management 21 www.secretgeek.net/image/dilbert_centralize_decentralize.png
- 22. The internet, IT and structure Flexibility • Internet allows senior management to reach more employees more directly, contributing to flatness • Tech allows small companies (under a functional structure) to access same global info as big ones, and via e-commerce can compete with them too • Companies under an international division structure and companies with many regional offices can manage more effectively from a single or far fewer locations • Larger companies can revert to functional structures 22
- 23. The internet, IT and structure Challenges • Flow of information and communications Guidelines for the relationship of domestic, international and senior corporate organization: • Planning and decision-making to be done by those with breadth of functional, geographic and/or product knowledge and responsibility to develop unified strategy • Channels for flow of important info has to be direct and short • Inside experts need to be available and used (and I’d add, easily identified!) 23
- 24. The internet, IT and structure An international organizational structure must allow for: • Development and communication of a clear corporate vision • Effective management of human resource tools to broaden individuals’ perspectives and develop identification with corporate goals • Integration of individual thinking and activities into a broad corporate agenda Technology enables information flow globally and connects sales, production and delivery across border and time zones. To this, I add investing in training and culture is key. 24
- 25. Discussion questions 1. What kind of structure would you say the company or organization you work for has? 2. Are there areas in which its structure is weak? 3. With the introduction of social media tools for the workplace, like Teams and Yammer, and with the move to the cloud, how can companies prevent overload of technology-enhanced flow of information? 25
Editor's Notes
- First three I group together on the next six slides, where we look at the traditional and contemporary structures the book concentrates on. Last one, we discuss after a quick round up of other concepts covered.
- The functional structure is a basic and often seen in smaller companies or in individual divisions or regions of larger companies. The person handling domestic operations may also handle international sales, especially if there aren’t many. ADV: unified DIS: Firms with many products need manager with expertise in different products or separate functional mgrs for each. Top heavy.
- The functional structure is a basic and often seen in smaller companies or in individual divisions or regions of larger companies. The person handling domestic operations may also handle international sales, especially if there aren’t many. ADV: unified DIS: Firms with many products need manager with expertise in different products or separate functional mgrs for each. Top heavy.
- The functional structure is a basic and often seen in smaller companies or in individual divisions or regions of larger companies. The person handling domestic operations may also handle international sales, especially if there aren’t many. ADV: unified DIS: Firms with many products need manager with expertise in different products or separate functional mgrs for each. Top heavy.
- Company has more and more intl sales and devotes an export department which then grows into an intl div, and the more sales grow, the more they need their own infrastructure. ADV: improves the positon of Intl sales vis-à-vis the entire company, but DIS as an add-on, sr mgr covering too much and pitted against larger staffed domestic div
- Company has more and more intl sales and devotes an export department which then grows into an intl div, and the more sales grow, the more they need their own infrastructure. ADV: improves the positon of Intl sales vis-à-vis the entire company, but DIS as an add-on, sr mgr covering too much and pitted against larger staffed domestic div
- Company has more and more intl sales and devotes an export department which then grows into an intl div, and the more sales grow, the more they need their own infrastructure. ADV: improves the positon of Intl sales vis-à-vis the entire company, but DIS as an add-on, sr mgr covering too much and pitted against larger staffed domestic div
- There may be legal or other reasons for creating separate entities. ADV: autonomy, but DIS: with multiple foreign subsidiaries, too separate and disparate, cohesiveness may be lost, too many chiefs, no one place to resolve issues except at the board level
- There may be legal or other reasons for creating separate entities. ADV: autonomy, but DIS: with multiple foreign subsidiaries, too separate and disparate, cohesiveness may be lost, too many chiefs, no one place to resolve issues except at the board level
- There may be legal or other reasons for creating separate entities. ADV: autonomy, but DIS: with multiple foreign subsidiaries, too separate and disparate, cohesiveness may be lost, too many chiefs, no one place to resolve issues except at the board level
- Diversified companies may use this, where organization is now based product. Feels like we’ve gone back to a functional org chart, but now there are a multiplicity of them. ADV: Brings global expertise together for the product. DIS: Deep knowledge about all territories may be very uneven, or even lost. Corporate managers may receive conflicting demands from the different products’ management. Intl mgrs sometimes picked based on domestic success and that doesn’t translate.
- Diversified companies may use this, where organization is now based product. Feels like we’ve gone back to a functional org chart, but now there are a multiplicity of them. ADV: Brings global expertise together for the product. DIS: Deep knowledge about all territories may be very uneven, or even lost. Corporate managers may receive conflicting demands from the different products’ management. Intl mgrs sometimes picked based on domestic success and that doesn’t translate.
- Diversified companies may use this, where organization is now based product. Feels like we’ve gone back to a functional org chart, but now there are a multiplicity of them. ADV: Brings global expertise together for the product. DIS: Deep knowledge about all territories may be very uneven, or even lost. Corporate managers may receive conflicting demands from the different products’ management. Intl mgrs sometimes picked based on domestic success and that doesn’t translate.
- Each region looks after multiple products, makes them locally, responsibility is territorial. ADV: Decentralization means decisions can be made more quickly, more relevantly, more locally. DIS: Flipside is that technical knowledge is spread out, so global perspective may be hard to get. Employee loyalty may be to the region and not to “corporate” and because there may be differences in culture or how things are done, any global rollout of tech or anything else may be met with resistance. Inconsistent corporate policies may differ region to region. Duplication of some kinds of functions is costly. Communications and issues that ought to be elevated to corporate may not get there.
- Each region looks after multiple products, makes them locally, responsibility is territorial. ADV: Decentralization means decisions can be made more quickly, more relevantly, more locally. DIS: Flipside is that technical knowledge is spread out, so global perspective may be hard to get. Employee loyalty may be to the region and not to “corporate” and because there may be differences in culture or how things are done, any global rollout of tech or anything else may be met with resistance. Inconsistent corporate policies may differ region to region. Duplication of some kinds of functions is costly. Communications and issues that ought to be elevated to corporate may not get there.
- Each region looks after multiple products, makes them locally, responsibility is territorial. ADV: Decentralization means decisions can be made more quickly, more relevantly, more locally. DIS: Flipside is that technical knowledge is spread out, so global perspective may be hard to get. Employee loyalty may be to the region and not to “corporate” and because there may be differences in culture or how things are done, any global rollout of tech or anything else may be met with resistance. Inconsistent corporate policies may differ region to region. Duplication of some kinds of functions is costly. Communications and issues that ought to be elevated to corporate may not get there.
- In general, managers from regional and functional sides work with product manager. This may be a way to address the weaknesses of organizing by region, by product, or in any of the earlier domestic vs intl ways. For truly global companies, this may be the best way to go (though Latin America doesn’t have these since power sharing isn’t wanted). ADV: Cooperation and coordination, but DIS: Individual product mangers may not have the global perspective needed; the duality of the structure makes decision-making a bit cumbersome
- In general, managers from regional and functional sides work with product manager. This may be a way to address the weaknesses of organizing by region, by product, or in any of the earlier domestic vs intl ways. For truly global companies, this may be the best way to go (though Latin America doesn’t have these since power sharing isn’t wanted). ADV: Cooperation and coordination, but DIS: Individual product mangers may not have the global perspective needed; the duality of the structure makes decision-making a bit cumbersome
- In general, managers from regional and functional sides work with product manager. This may be a way to address the weaknesses of organizing by region, by product, or in any of the earlier domestic vs intl ways. For truly global companies, this may be the best way to go (though Latin America doesn’t have these since power sharing isn’t wanted). ADV: Cooperation and coordination, but DIS: Individual product mangers may not have the global perspective needed; the duality of the structure makes decision-making a bit cumbersome
- 1. Other ways to work in foreign markets include join ventures for limited duration strategic partnerships. DIS is that one partner may walk away with the skills and knowledge; honesty of intent matters. 2. Could be subcontracting to many different smaller entities or working with an established alliance of suppliers or body of expertise. 3. Mix and match, with different kinds of structures in different regions or divisions. 4. Regardless of structure, good to work towards. More layers is more cumbersome. Internet helps, will address next. 5. Organic structures give employees discretion in defining roles, seen more in smaller companies and those producing very specialized products. Mechanistic is more rigid. 6. Cartoon may spoof, but the point is management has to be willing to evaluate and reorganize if needed. Caveat is that it is expensive and a lot of work, and so much thought ought to be given to pros and cons of any such moves.
- The internet has changed things.
- The challenge is large because info has to flow to – and be received by – the correct people, and that isn’t always easy as companies get larger and larger. The three points that Rodrigues outlines are less guidelines, actually, and more descriptive in nature. Achieving these is the challenge. In large multinationals that have grown by M&A to cover dozens of countries and services offered, is that figuring out who the person is that would have the information you don’t even realize you need is next to impossible. And that all the technology in the world won’t change that if the culture isn’t fostered that encourages usage of platforms and making knowledge more available than just beyond the people you normally work with.
- To this I would also add that people in regional or functional divisions or subsidiaries may not actually pay attention to corporate company-wide communications because they either consider it noise or think it doesn’t apply to them. The risk when getting too big is losing the sense of individual connections.