Identify sources and effects of power on organizational structures and recommend how to evaluate organizational design/strategy in a global operations environment. In the early 2000s, Walt Disney CEO Michael Eisner came under increasing criticism for the company’s falling performance and for the way that he had centralized decision making so that all important decisions affecting the company had to have his approval. He began to lose the support of the board of directors, especially of Roy Disney, who as a member of the founding family commanded a great deal of support. However, the majority of Disney’s board of directors had been handpicked by Eisner, and he was able to control the agenda until the company began to incur major losses in the mid 2000s. Poor performance weakened Eisner’s position, but so did his personal relationship with Steve Jobs, who was the CEO and major owner of Pixar, the company that had made most of Disney’s recent blockbuster movies such as Toy Story, Cars, and so on. After Jobs threatened to find a new distributor for Pixar’s movies when its contract with Disney expired in 2007 because of the personal antagonism between himself and Eisner, Disney’s board decided to act. Eisner was encouraged to become chair of Disney and to allow his handpicked successor, Bob Iger, assume control of the company as its CEO. Iger owed his rapid rise at Disney to his personal relationship with Eisner, who had been his mentor and loyal follower. Iger had always suggested new ways to improve Disney’s performance but had never confronted Eisner—always a dangerous thing to do if a manager wants to become the next CEO! Once Iger became CEO in 2006, pressure was applied to Eisner, who soon decided to resign as Disney’s chair; then Iger negotiated the purchase of Pixar by Disney that resulted in Steve Jobs becoming its biggest stockholder. Disney was still performing poorly, but now that Iger was in total control and no longer under the influence of Michael Eisner, he adopted a plan to change the way Disney operated. As COO of Disney under CEO Michael Eisner, Iger recognized that Disney was plagued by slow decision making that had led to many mistakes in putting its new strategies into action. Its Disney stores were losing money; its Internet properties were flops; and even its theme parks seemed to have lost their luster as few new rides or attractions were introduced. Iger believed one of the main reasons for Disney’s declining performance was that it had become too tall and bureaucratic under Iger, and its top managers were following financial rules that did not lead to innovative strategies. One of Iger’s first moves to turn around Disney’s performance was to dismantle its central “strategic planning office,” which was composed of several levels of top managers who were responsible for sifting through all the new ideas and innovations sent up by Disney’s different business divisions, for example, its theme parks, movies, and gaming divisi.

1. Identify sources and effects of power on organizational structures and recommend how to
evaluate organizational design/strategy in a global operations environment.
In the early 2000s, Walt Disney CEO Michael Eisner came under increasing criticism for the
company’s falling performance and for the way that he had centralized decision making so that
all important decisions affecting the company had to have his approval. He began to lose the
support of the board of directors, especially of Roy Disney, who as a member of the founding
family commanded a great deal of support. However, the majority of Disney’s board of directors
had been handpicked by Eisner, and he was able to control the agenda until the company began
to incur major losses in the mid 2000s. Poor performance weakened Eisner’s position, but so did
his personal relationship with Steve Jobs, who was the CEO and major owner of Pixar, the
company that had made most of Disney’s recent blockbuster movies such as Toy Story, Cars,
and so on.
After Jobs threatened to find a new distributor for Pixar’s movies when its contract with Disney
expired in 2007 because of the personal antagonism between himself and Eisner, Disney’s board
decided to act. Eisner was encouraged to become chair of Disney and to allow his handpicked
successor, Bob Iger, assume control of the company as its CEO. Iger owed his rapid rise at
Disney to his personal relationship with Eisner, who had been his mentor and loyal follower. Iger
had always suggested new ways to improve Disney’s performance but had never confronted
Eisner—always a dangerous thing to do if a manager wants to become the next CEO!
Once Iger became CEO in 2006, pressure was applied to Eisner, who soon decided to resign as
Disney’s chair; then Iger negotiated the purchase of Pixar by Disney that resulted in Steve Jobs
becoming its biggest stockholder. Disney was still performing poorly, but now that Iger was in
total control and no longer under the influence of Michael Eisner, he adopted a plan to change
the way Disney operated.
As COO of Disney under CEO Michael Eisner, Iger recognized that Disney was plagued by slow
decision making that had led to many mistakes in putting its new strategies into action. Its
Disney stores were losing money; its Internet properties were flops; and even its theme parks
seemed to have lost their luster as few new rides or attractions were introduced. Iger believed
one of the main reasons for Disney’s declining performance was that it had become too tall and
bureaucratic under Iger, and its top managers were following financial rules that did not lead to
innovative strategies.
One of Iger’s first moves to turn around Disney’s performance was to dismantle its central
“strategic planning office,” which was composed of several levels of top managers who were
responsible for sifting through all the new ideas and innovations sent up by Disney’s different
business divisions, for example, its theme parks, movies, and gaming divisions. After a lengthy

2. decision-making process, they then decided which proposals should be presented to Eisner.
Iger saw the strategic planning office as a bureaucratic bottleneck that reduced the number of
ideas coming from below; he dissolved the office, reassigned the best managers back to their
different business units, and retired the rest.50 The result of cutting out these unnecessary layers
in Disney’s hierarchy has been that more new ideas are generated by its different business units
and the level of innovation has increased. Divisional managers are more willing to speak out and
champion their ideas when they know they are dealing directly with CEO Iger and not with an
office of bureaucrats concerned only with the bottom line.51 Disney’s performance has
improved steadily under Iger; in 2010, it announced much improved revenues and profits and a
new venture—Disney acquired Marvel, the company that owned the rights to such characters as
Spider-Man, X-Men, and the Hulk—so many new kinds of rides and movies may be expected in
the future.52 In 2011, it announced new agreements with Apple and other companies such as
Google and Amazon to stream its huge video library to customers online and to make them
available for download using cloud computing so that users can access them using any mobile
computing device.
Solution
One of the sources of conflict that plagued Walt Disney was Organizational conflict.
Organizational conflict is defined as “the clash that occurs when the goal-directed behavior of
one group block or thwarts the goals of another” (Jones, 391). When CEO Michael Eisner
“began to lose the support of the board of directors” because of the “company’s falling
performance and for the way that he centralized decision-making” it created an organizational
conflict (Jones, 414).
Another source of conflict that plagued Walt Disney was conflict aftermath. Conflict aftermath
“affects the way both parties perceive and react to future episodes” (Jones, 399). The relationship
between Eisner and CEO and major owner of Pixar, Steve Jobs, was a personal one and one that
Jobs believed would allow him to stay with Disney as a distributor. In 2007, Jobs threatened to
find a new distributor. Eisner became the chair and named his replacement as Bob Iger. When
Iger became CEO of Disney he was able to acquire Pixar. It wasn’t until Iger became CEO that
Jobs was willing to stick with Disney.
The same reason could be argued for organizational politics. Organizational politics is defined as
“activities taken within organizations to acquire, develop and use power and other resources to
obtain one’s preferred outcomes in a situation in which there is uncertainty or disagreement
about choices” (Jones, 407). Once Iger became CEO he was able to negotiate the purchase of
Pixar from Jobs. Eisner was basically forced out of his position as CEO and convinced to

3. become chair of Disney. Once he was “out of the way” it was easier for the company to have
control over its future.
In order for Iger to solve the conflicts he had to apply organizational power. Organizational
power is defined as “the ability of one person or group to overcome resistance by others to
resolve conflict and achieve a desired objective” (Jones, 401). When Iger took over as CEO he
made some drastic changes to the organizational structure. He wanted to get rid of the
“bottleneck” approach that had been used before so he “dismantled” Disney’s central strategic
planning office. By using his authority to make changes he was able to retain control over the
resources and direct them into generating innovation.
Work Cited
Jones, Gareth R. Organizational Theory, Design, and Change. Seventh ed. Upper Saddle River,
NJ: Pearson, 2013. Print.