This document discusses organizational structure and its relationship to strategy implementation. It begins by outlining the learning objectives, which are to understand the importance of structure, traditional structure types, implications of international operations, and new organizational forms. It then defines organizational structure and discusses how it balances division of labor with integration. Common determinants of structure are described, including the environment, strategy, technology, and human resources. The advantages and disadvantages of functional, divisional, and matrix structures are outlined. Finally, it presents a model of the typical growth phases that large corporations go through and how their structure changes accordingly.

1. Chapter
Ten
Implementing Strategy:
Creating Effective
Organizational Designs

2. CHAPTER 10
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
After studying this chapter, you should have
a good understanding of:
• The importance of organizational structure and the concept of the
“boundary-less” organization in implementing strategies
• The growth patterns of major corporations and the relationship
between a firm’s strategy and its structure
• Each of the traditional types of organizational structure—simple,
functional, divisional, and matrix
• The relative advantages and disadvantages of traditional
organizational structures
• The implications of a firm’s international operations for
organizational structure
• The different types of boundary-less organizations—barrier-free,
modular, and virtual—and their relative advantages and
disadvantages
Learning
Objectives
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3. Dr.PHEA V., 2010
Organizational structure
(overview)
• Organization structure
– Defines how tasks are allocated
– Specifies reporting relationships
– Defines formal coordinating mechanisms
and interaction patterns

4. Dr.PHEA V., 2010
Organizational structure
(overview)
• Balances two conflicting forces
– Need for division of tasks into meaningful
groupings: division of labor
– Need to integrate groupings for
effectiveness and efficiency
• Changes in response to organizational
growth

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Factors Affecting Organizational Design
Environment
Strategy
Human
Resources
Technology
Determine design
or organizational
structure
Determine design
or organizational
structure
Figure 8.1

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Determinants of Structure
The environment: The quicker the
environment changes, the more problems face
managers.
Structure must be more flexible when
environmental change is rapid.
Usually need to decentralize authority
(lower- level managers).
 Determinant _детерминант, решающий/определяющий фактор

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Factors That Influence the Amount
of Centralization and Decentralization
© Prentice Hall, 2002 10-10-99

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Determinants of Structure
Strategy: Different strategies require the use of
different structures:
A differentiationdifferentiation strategystrategy (three generic )
needs a flexible structure, low cost may need a
more formal structure.
Increased vertical integrationvertical integration (Backward &
forward vertical integration) or diversificationdiversification
(Related & unrelated diversification) also requires
a more flexible structure.

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Determinants of Structure
 Technology: The combination of skills, knowledge, tools,
equipment, computers and machines used in the
organization.
 More complex technology makes it harder for managers to
regulate the organization . But benefit from Technology
Managers can be measured by:
 Task Variety(type): new problems a manager encounters.
 Task Analyzability: programmed solutions available to a
manager to solve problems.
 High task variety and low analyzability present many
unique problems to managers.
 Flexible structure works best in these conditions.
 Low task variety and high analyzability allow managers
to rely on established procedures.

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Technology & People
Small Batch Technology: produces small quantities of
one-of-a-kind products.
 Based on the skills of the workers who need a flexible
structure.
Mass Production Technology: automated machines make
high volumes of standard products.
 Workers perform repetitive tasks so a formal structure
works well.
Continuous Process Technology: totally mechanized
systems of automatic machines.
 Workers must watch for unexpected problems and react
quickly. A flexible structure is needed here.

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Determinants of Structure
Human Resources: the final factor affecting
organizational structure.
 Higher skilled workers who need to work in teams
usually need a more flexible structure.
 Higher skilled workers often have professional norms
(CPA’s, physicians).
 Human resource management (Factors to Consider
in assessing a firm’s Support activities)

12. Human resource management
• Effective recruiting, development, and
retention mechanisms for employees
• Quality relations with trade unions
• Quality work environment to maximize
overall employee performance and
minimize absenteeism
• Reward and incentive programs to
motivate all employees
Dr.PHEA Vanna 2010

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Conclusion
Managers must take into account all four factors when
designing the structure of the organization.

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Job Design
Job Design: group tasks into specific jobs(Teams).
 Results in a division of labor between workers that is
tradeoff between effective and efficiency.
 Good regulation is about balancing risks and costs
 Job simplification: reduction of the tasks each worker
performs.
 Too much and boredom results.
 Job enlargement: increase tasks for a given job to reduce
boredom.
 Job enrichment: increases the degree of responsibility a
worker has over a job.
 can lead to increased worker involvement(e.g. F&D structures).

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Job Characteristics Model
Skill Variety
Task Identity
Task Significance
Skill Variety
Task Identity
Task Significance
AutonomyAutonomy
FeedbackFeedback
Meaningfulness
of work
Meaningfulness
of work
ResponsibilityResponsibility
for Workfor Work
OutcomesOutcomes
ResponsibilityResponsibility
for Workfor Work
OutcomesOutcomes
Knowledge ofKnowledge of
results ofresults of
workwork
Knowledge ofKnowledge of
results ofresults of
workwork
HighHigh::
MotivationMotivation
PerformancePerformance
SatisfactionSatisfaction
HighHigh::
MotivationMotivation
PerformancePerformance
SatisfactionSatisfaction
Figure 8.2
Inputs OperationsOperations OutputsOutputs

16. Simple structure
• Low departmentalization(F&D Structures)
• Wide spans of controlspans of control
• Authority centralized in a single person
• Low formalization( interrelationship )
Dr. PHEA Vanna

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20
Tall structure/
Narrow span of control
Flat structure/
Wide span of control
Adapted from McShane & Von Glinow. (2003). Organizational Behavior (2nd ed). McGraw-Hill Irwin.

18. Dr. PHEA Vanna
Simple structure
• Start ups and small firms
• Centralized in owner-manager
– “walk around management”
– Strategic controls at corporate level
• Flexible(S is following S), innovative, responsive
• Most appropriate for focused business
level strategies

19. Dr. PHEA Vanna
Functional Structure
Chief Executive
Officer or President
Manager
Production
Manager
Purchasing
Manager
Marketing
Manager
R&D
Manager
HR
Manager
IT
Lower-level managers, specialists, and operating personnel

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Divisional Structures
A division is a collection of functions (cross-
functional Management)working together to
produce a product.
 Divisions create smaller, manageable parts of a firm.
 Divisions develop a business-level strategy to compete.
 A division has marketing, finance, and other functions.
 Functional managers report to divisional managers who then report
to corporate management(Top M.).
 Product structure: divisions created according to the type
of product or service.
 Geographic structure: divisions based on the area of a
country or world served.
 Market structure: divisions based on the types of
customers served.

21. Dr. PHEA Vanna
Product A Product B Product C Product D
The Divisional Structure
Chief Executive OfficerChief Executive Officer
Corporate Office (Staff)Corporate Office (Staff)

22. Dr. PHEA Vanna
Variations of divisional
structure
• Strategic business unit (SBU)
• Holding company (conglomerate)
 конгломерат ( корпорация, объединяющая предприятия,
принадлежащие различным отраслям экономики и не
связанные производственной кооперацией )

23. Dr. PHEA Vanna
SBU form of divisional
structure

24. Dr. PHEA Vanna
Holding company structure

25. Dr. PHEA Vanna

26. CHAPTER 10
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
Functional, Divisional, and Matrix
Structures: Advantages and Disadvantages
Advantages Disadvantages
• Pooling of specialists enhances coordination and control
• Centralized decision making enhances an organizational perspective
across functions
• Efficient use of managerial and technical talent
• Career paths and professional development in specialized areas are
facilitated
• Differences in functional area orientation impede communication
and coordination
• Tendency for specialists to develop short-term perspective and
overly narrow functional orientation
• Functional area conflicts may overburden top level decision
makers
• Difficult to establish uniform performance standards
Functional Structure
Exhibit 10.5
Advantages Disadvantages
• Increases strategic and operational control, permitting corporate-level
executives to address strategic issues
• Quick response to environmental changes
• Increased focus on products and markets
• Minimizes problems associated with sharing resources across
functional areas
• Facilitates development of general managers
• Increased costs incurred through duplication of personnel,
operations, and investment
• Dysfunctional competition among divisions may detract from
overall corporate performance
• Difficulty in maintaining uniform corporate image
• Overemphasis on short-term performance
Divisional Structure
Advantages Disadvantages
• Increases market responsiveness through collaboration and synergies
among professional colleagues
• Allows more efficient utilization of resources
• Improves flexibility, coordination, and communication
• Increases professional development through broader range of
responsibility
• Dual reporting relationships can result in uncertainty regarding
accountability
• Intense power struggles may lead to increased levels of conflict
• Working relationships may be more complicated and human
resources duplicated
• Excessive reliance on group processes and teamwork may impede
timely decision making
Matrix Structure
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27. CHAPTER 10
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
Exhibit 10.1 Growth Patterns of Large Corporations
Phase 1
Strategy: Low revenue base; simple product-market scope
Structure: Simple
Phase 2
Strategy: Increase in revenues; engage in vertical integration (backward
and/or forward)
Structure: Functional
Phase 3
Strategy: Expand into new, related product-markets and/or geographical
areas
Structure: Divisional
Phase 4
Strategy: Expand into international markets
Structure: International Division, Geographic Area, Worldwide Product
Division, Worldwide Functional, or Worldwide Matrix
Phase 1
Strategy: Low revenue base; simple product-market scope
Structure: Simple
Phase 2
Strategy: Increase in revenues; engage in vertical integration (backward
and/or forward)
Structure: Functional
Phase 3
Strategy: Expand into new, related product-markets and/or geographical
areas
Structure: Divisional
Phase 4
Strategy: Expand into international markets
Structure: International Division, Geographic Area, Worldwide Product
Division, Worldwide Functional, or Worldwide Matrix
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Thank you
Q & A