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W.L. Gore & Associates’ Structure
C H A P T E R
Organizational Structure and Design
W. L. Gore & Associates Inc. has a team-based organizational structure that eliminates the traditional hierarchy and decentralizes authority. The maker of GoreTex fabric, electronics, industrial, and medical products was deliberately structured around teams responsible for their own projects and work processes. ©W.L. Gore & Associates
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McGraw-Hill/Irwin
Division of Labor
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Forms of Work Coordination
Subdivision of work into separate jobs assigned to different people
Informal communication Sharing information High media-richness Important in teams
Potentially increases work efficiency
Formal hierarchy Direct supervision Common in larger firms Problems -- costly, slow, less popular with young staff
Necessary as company grows and work becomes more complex
Standardization Formal instructions Clear goals/outputs Training/skills ©W.L. Gore & Associates
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Coordinating Work at ORBIS
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Elements of Organizational Structure
Departmentalization
Organizational Structure Elements
©AP Photo/Ken Bilbert
During operations on board the ORBIS Flying Eye Hospital, these medical professionals coordinate to some extent through informal communication. However, much of the operation occurs without discussion because team members also coordinate through standardization of skills.
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Span of Control
Formalization
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Centralization
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Span of Control
Centralization and Decentralization
Number of people directly reporting to the next level
Centralization
Assumes coordination through direct supervision
Wider span of control possible:
with other coordinating methods employees perform similar tasks employee skills are standardized tasks are routine
Moving to flatter structures
Formal decision making authority is held by a few people, usually at the top
Decision making authority is dispersed throughout the organization
Decentralization McShane/Von Glinow OB 3e
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Formalization
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Mechanistic vs. Organic Structures
Causes
As firms get older, larger, and more regulated
Organic
Mechanistic
Problems
Reduces organizational flexibility Work rules can undermine productivity Employee alienation, powerlessness Rules become focus of attention
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Effects of Departmentalization
• Narrow span of control
• Wide span of control
• High formalization
• Little formalization
• High centralization
• Decentralized decisions
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Alaska Chip Co’s Simple Structure
1. Establishes work teams and supervision structure
The Alaska Chip Company is typical of small firms with a simple organizational structure. It has few employees, minimal hierarchy, and centralized decisions made by cofounder Ralph Carney (shown here) and his wife.
2. Creates common resources, measures of performance, etc 3. Coordination through informal communication
©T.Bradner/Alaska Journal of Commerce
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Features of Simple Structures Minimal hierarchy -- staff reports directly to owner
Functional Organizational Structure Organizes employees around specific knowledge or other resources (marketing, production)
Roles are fairly loosely defined for flexibility
CEO
Informal communication for coordination Centralized structure -owner makes most decisions
Finance
Production
Marketing
©T.Bradner/Alaska Journal of Commerce
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Evaluating Functional Structures
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Divisional Structure Organizes employees around outputs, clients, or geographic areas
Benefits
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Supports professional identity and career paths Permits greater specialization Easier supervision --similar issues Creates an economy of scale --common pool of talent
CEO
Limitations
More emphasis on subunit than organizational goals Higher dysfunctional conflict Poorer coordination -- requires more controls
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Consumer Products
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Lighting Products
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Product Structure
Market Structure
Product focus Multiple products for separate customers Short product development and life cycle Minimum efficient scale for functions OR outsourcing
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Medical Systems
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Important market segments Product or service unique to segment Buyer strength Customer knowledge advantage Rapid customer service and product cycles Minimum efficient scale for functions OR outsourcing
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Geographical Structure
Low value to transport cost ratio Service delivery on site Closeness to customer for delivery or support Perception of the organization as local Geographical market segments needed
Evaluating Divisional Structures Benefits
Building block structure -- accommodates growth Better coordination in diverse markets Limitations
Duplication, inefficient use of resources Specializations are dispersed, creating silos of knowledge
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Process Structure
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Processes
Best seen as alternative to functional or divisional structures Potential for new processes and radical change to processes Reduced working capital Need for reducing process cycle times
Most of the activity in an organization does not follow the vertical hierarchical structure
Structure only address primary focus (e.g. segments)
Rationale
All the dimensions not handled by the structure require coordination through lateral management processes (i.e. across departments)
Need to coordinate responses to:
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Observations about Process Lateral processes
‘general management equivalents’
Variety & Change
-> more decentralization No functional management can handle multiple products in multiple markets
Interdependence & Speed
-> more cross-department coordination Internet and need for CRM increases this force
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Governments, regulators, customers, functions, vendors, products, strategic partners, unions, regulators, technologies, solutions
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Costs and Benefits of Laterality Benefits
Make more decisions Make different kinds of decisions Make better and faster decisions
Costs
Loss of top management control Time involved in cross-functional work Increased conflict
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Five Types of Lateral Processes
Matrix Structure (Project-based) Employees ( )are temporarily assigned to a specific project team and have a permanent functional unit
Voluntary (or informal) - coordination E
CEO
Formal group
Engineering
Full- time integrators
Project managers, brand managers, process managers etc. Level of coordination grows but so does cost and difficulty of implementation
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Evaluating Matrix Structures Benefits
Uses resources and expertise effectively Improves communication,flexibility, innovation Focuses specialists on clients and products Allows interaction within specialty across groups Limitations
More coordination required within group Two bosses dilutes accountability More conflict, organizational politics, and stress
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Project A Manager Project B Manager
Matrix organization
Design
Marketing
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Team-Based Structure Features Self-directed work teams
Project C Manager McShane/Von Glinow OB 3e
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Flight Center’s Team-Based Structure Flight Center has a “tribal” team-based structure that organizes people around families, villages and tribes. This tribal structure seems to work well in an industry that has to pay attention to local markets and change quickly in a dynamic industry.
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AAP Image/Dave Hunt
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Network Organizational Structure Call Center Firm (India)
Product Design Firm (France)
Teams organized around work processes
Core Firm (U.S.A.)
Very flat span of control Very little formalization Usually found within divisionalized structure
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AAP Image/Dave Hunt
Advertising Firm (U.K.)
Manufacturing (Malaysia) Accounting Firm (U.S.A.)
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Types of Organizational Technology
High Analyzability
Low Analyzability
Dynamic Assembly Line
Engineering Projects
Skilled Trades
Scientific Research
Low Variety McShane/Von Glinow OB 3e
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Diverse
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Integrated
• Variety of products, clients, regions • Divisional form aligned with the diversity
Hostile
• Single product, client, place • Use functional structure, or geographic division if global
• Plenty of resources and product demand • Less need for organic structure
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• Steady conditions, predictable change • Use mechanistic structure
Complex
Simple
• Many elements (such as stakeholders) • Decentralize
• Few environmental elements • Less need to decentralize
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Organizational Strategy Structure follows strategy Differentiation strategy
Providing unique products or attracting clients who want customization
Munificent
• Competition and resource scarcity • Use organic structure for responsiveness
Stable
• High rate of change • Use team-based, network, or other organic structure
High Variety
External Environment & Structure (con’t)
McShane/Von Glinow OB 3e
External Environment & Structure
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Cost leadership strategy
Maximize productivity in order to offer competitive pricing
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Organization Design and Executive Leadership
Organization Design and Executive Leadership
Organization Design decisions significantly affect the Executive’s unit. By choosing who decides and by designing the processes influencing how things are decided, the Executive shapes every decision made in the unit.
The leader becomes less of a decision maker and more of a decision shaper.
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Case: Your Company State your mission, vision, and strategy Do an organizational assessment vis-à-vis organizational shapers and the STAR Model Recommend:
A revised structure A reward and motivation system, and A people strategy
that will support your strategies and ensure the continuous competitiveness of Your Company
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