Product Organizational Structure

By: Joe Iaconis

What do Procter & Gamble, Boeing, Hewlett-Packard, and Sony all have in common?  If you guessed that they were companies with well-developed product structures, then you were correct! As defined in Organizational Behavior by Colquitt, Lepine, and Wesson, “Product structures group business units around different products that the company produces.”   Product lines mainly consist of product lines within one organization.  Sticking with the Sony example, the common consumer knows that Sony is an electronics brand.  Within electronics though, Sony sells video game consoles, digital cameras, televisions, blu-ray players, cell phones, and laptops.  Sony saturated the product market of electronics by creating a variety of product lines.  Sure Sony as multiple variations of video game consoles, televisions, laptops etc. but they were able to narrow their products down into different product lines and structure them more.  By doing this, they can continue to run every day operations as a company without feeling overwhelmed.  While making every product line a division, Sony is now able to assign them with the responsibilities of manufacturing, marketing, and separate research and development for the product division.  Organizational Behavior also states, “Shifting the sales force into three different product-based divisions allows the sales people to concentrate on a core set of products [as well as reinvigorating the sales force]” (Colquitt, Lepine & Wesson, 2011).

The one main concern about product structures within organizations is the level or similarity between the two products.  Sure a digital camera is completely different compared to a video game console; a digital camera and digital video camera are very similar and should not be split up into two separate product lines.  Organizational Behavior gives two fantastic examples in my opinion. The first example is the product structures of Mattel.  After CEO Robert Eckert took over, he decided to analyze the product lines and noticed that Mattel had four different product lines/ product structures.  Those product structures consisted of: Boy’s Brands, Girl’s Brands, American Girl line, and Fisher-Price.  Most would assume that those structures are all fair and organized well.  Eckert found that the brands were essentially competing against one another.  Rather than seeing all these different brands killing each other off through a survival of the fittest, the CEO decided to combine three of the four divisions and pushed a “One Mattel” viewpoint.  The second example discussed in the book was with Fiat-Chrysler.  The companies CEO Sergio Marchionne recognized that the brands Chrysler has control over (Dodge, Jeep, and Chrysler) were all competing against one another for the consumer.  Rather than combining the divisions like Mattel did in the previous example, Marchionne hopes that the competition will help all three brands and possibly turn the entire Fiat-Chrysler organization around.

By doing some research I discovered a new term involving Organizational Structure and that term is structural inertia.  Accounting to the Journal of Economics & Management Strategy, “It is well known from some empirical studies that firms exhibit structural inertia, that is their organizational structure is rarely altered unless they experience a crisis that affects their ability to survive” (Hur, and Riyanto, 2012).  Going back to the previous examples with Mattel and Ford Motor Company, it seems that structural inertia may not be as rare as the article states.  In my opinion, I would change the structure as the market for my organizations product changed.  Just like Mattel.

Continuing my own research I stumbled across a very in depth article by Management Sciences.  They investigated how different organizational and system setups impact the alignment of product design interfaces and team interactions when it comes to products.  “Our results show not only that the likelihood of misalignment is greater across organizational and system boundaries, but also that weak and strong interfaces may be equally affected by boundary effects, that indirect interactions are an important coordination mechanism within boundaries, and that system modularity may prevent the alignment of interfaces and interactions across boundaries” (Sosa, Eppinger, and Rowles 2004).  Their research agrees with my opinions in the previous paragraph.  Most organizations either change their product alignment structure or are just in the wrong structure to begin with.  Misalignment doesn’t sound like a rare thing in this day in age.

Conclusion

Product structures are a vital part of any organization is this crazy, unpredictable world we all live in.  With changes happening more and more in today’s market, placing your organization’s product in the correct market with the best structure can be much more difficult than expected.  I think the best way to set up a product structure is to roll with the punches and go with the flow of the market and adjust accordingly.  I know I keep going back to the Mattel example that was previously stated but I think that rings true.  Try to realize early enough that the structure of a product needs to be changed and adapt your organization to the changes.  Whether it’s condensing product lines, expanding on them, or in Chrysler’s case, let them compete with each other, do whatever it takes to get the upper hand on the competition.

Colquitt, J. A., Lepine, J. A., & Wesson, M. J. (2011).Organizational behavior. (2nd ed.). New York, NY: McGraw-Hill Irwin.

Hur, J. and Riyanto, Y. E. (2012), Organizational Structure and Product Market Competition. Journal of Economics & Management Strategy, 21: 707–743. doi: 10.1111/j.1530-9134.2012.00340.x

Sosa, M. E., Eppinger, S. D., & Rowles, C. M. (2004). The misalignment of product architecture and organizational structure in complex product development. Management Science, 50(12), 1674-1689. Retrieved from http://search.proquest.com/docview/213167364?accountid=12924

Elements of Organizational Structures

By: Brittany Ziegelbaur

When thinking about organizational structure, many people typically think of it is as being one idea or one technique that a business uses.  But, in actuality, organizational structures are formed through many different elements.  It is also important to keep in mind that there is not a right or wrong structure for a business.  Each business has different strengths and limitations in which they need to work with as a company (Hunter, 2002).  In an article written by Judy Hunter, from the Canadian School of Management, she stated that organizations typically have more than one organizational structure that work in sync with one another (Hunter, 2002).  There are challenges, however, to incorporating all of these elements into an effective organization structure.  Research has found a functional dependency between the mission work environment and the implemented organizational design (Levchuk, Levchuk, Jie Luo, Pattipati, & Kleinman, 2002).  It has been concluded that organizational design had a large dependency on the mission parameters of the business (Levchuk et al., 2002).  This is why it is so important to evaluate the many different elements of organizational structures before implementing one into the business.   

When designing an organizational structure for a business it is important to consider two important aspects: stability and complexity.  Stability, in this sense, is how the business reacts when unplanned events occur and how the business deals with the situation (Hunter, 2002).  Complexity on the other hand refers to the amount of knowledge that employees need to know about the business environment.  Some elements of knowledge include information on the market, competitors, and suppliers of the business.  If there is little knowledge to be known about the business, it is considered to be a simple environment.  Dynamic environments are a lot more complex in terms of the amount of knowledge that employees must deal with (Hunter, 2002). 

Once managers have discovered the levels of stability and complexity in the business, they have to look at the many different options for designing an organizational structure that will best suit the particular business.  One main element to consider is the level of differentiations of operational transformations.  To put this in a clearer term, this is referring to the “making”, “preparing”, and “supporting” of a product or service for a business (Achterbergh & Vriens, 2010).  The “making” section refers to the actual process of producing the product or service.  “Preparing” refers to the process of providing the necessary tools and steps for performing the task.  For example: scheduling work, ordering materials, etc. (Achterbergh & Vriens, 2010).  The last step, “supporting”, involves the tasks that are not specifically related to the production of a product.  Some of these tasks include maintenance, human resources planning, and technical support (Achterbergh & Vriens, 2010).  The decision for a business at this point is whether it will integrate all of these steps into one unit, or have independent departments working with each segment.  The level of differentiation of operational transformation is maximal if they business segments the tasks into their own groups, and is minimal if they integrate them all into one (Achterbergh & Vriens, 2010).

Another common element to distinguish for the business is the level of specialization.  When referring to specialization in the work place, we are discussing the act of splitting tasks into smaller sub-tasks.  Within the work place, specialization increases as operational transformations are split up into smaller, more separated tasks (Achterbergh & Vriens, 2010).  This also means that the more integrated the operational transformations become, the less specialized the tasks of the business are (Achterbergh & Vriens, 2010).  There are also several other key elements to consider when designing an organizational structure for a business.  These are examined in the research study below.

In 2001, Judy Hunter conducted a research study to examine the structural and contextual elements of six different businesses that were in different stages of their business life cycle.  The study first found four common determinants of contextual elements of organizational structure.  These four common elements were (Hunter, 2002):

• ·      All the firms had fluidity and flexibility in their structure.
• ·      The strategies that the companies used were largely emergent.
• ·      They had a high level of function and work specialization within the company.
• ·      They were able to adapt to the demand of the customers through the flexibility of the roles and tasks within the company.

After assessing the results of the structural elements, Judy found correlation with the strategies used by the businesses and the stage of that business in their business life cycle (Hunter, 2002).  The following elements were found common for businesses in the start up stage of the business life cycle (Hunter, 2002):

• ·      Decisions were made based off of standard operating procedures.
• ·      Reporting relationships involve a dual chain of command.
• ·      The businesses used informal, vertical, and horizontal forms of communication.
• ·      They coordinate work through teams in the work place.
• ·      Businesses are distinguished as a small and simple organization.

A few of the common elements found for businesses in the early growth stage were (Hunter, 2002):

• ·      They had centralized authority.
• ·      Decisions made by standard operating procedures.
• ·      Work was coordinated by direct supervision. 

The companies from the study that were in the mature stage had most of the same qualities as businesses in the early growth stage, in terms of reporting relationships, decision making, coordination of work, and communication.  They differ from businesses in the early growth stage in terms of complexity and distinguished characteristics (Hunter, 2002).  These are specifically listed below (Hunter, 2002).

• ·     They had decentralized reporting relationships.
• ·      Their communication was regulated along formal lines.
• ·      They coordinated work by standardized outputs.

All of the elements that have been discussed above are important to consider when designing an appropriate organizational structure for a business.  As I mentioned before, there is no certain way a business should go about creating a structure to fit their business, but it is important to know the key elements and goals that the business hopes to reach.  By evaluating the business properly, business professionals can create a functional organizational structure that implements the proper key elements to help the business succeed.

References

Achterbergh, J. and Vriens, D.  (2010).  Organizations: Social Systems Conducting Experiments.  Springer.

Hunter, J. (2002). Improving organizational performance through the            use of effective elements of organizational structure. International Journal of Health        Care Quality Assurance, 15(4), XII-XXI. Retrieved from     http://search.proquest.com/docview/229644561?accountid=129            24                  

Levchuk, G.M., Levchuk, Y.N., Jie Luo, Pattipati, K.R., Kleinman, D.L. (2002).       Normative design of organizations. II. Organizational structure.  IEEE    Transactions on Systems, Man and Cybernetics, Part A: Systems and Humans,     32(3). 360-375.             http://ieeexplore.ieee.org.huaryu.kl.oakland.edu/stamp/stamp.jsp?tp=&arn  umber=1046068

Restructuring

By: Jessica Kotcher

                After reading many of the previous blog posts, it is safe to say that the organizational structure and its elements provide a solid foundation for which organizational behavior is based upon.  The different elements and processes of organizational structure make it easier to run a successful organization in an efficient manner.  Although we’ve talked about many of the processes and concepts that keep organizations running smoothly, we have not touched on the process of restructuring an organizations structure.  Restructuring an organization is just that, changing an organizations structure.  According to my Organizational Behavior text, “Restructuring has a small negative effect on task performance”. (Colquitt, Lepine, Wesson, 2011)  This is because changes in specialization, centralization, and/or formalization could potentially cause uncertainty on how an employee is expected to perform at their job.  Restructuring is not considered to be an easy task.  “Business leaders who have been involved in any aspect of a restructuring understand the difficulty of crafting a successful solution.”(Recardo, Heather, 2012)

                Restructuring can bring up questions in the work place, and many employees will be unsure of the tasks that they are responsible for performing.  Restructuring could potentially set an organization back in quality of work ethic because employees are uncertain.   It also says that “Restructuring has a more significant negative effect on organizational commitment.”(Colquitt, Lepine, Wesson, 2011)  Commitment is said to be lower in organizations that go through the process of restructuring.  Restructuring causes concern for employees and employees could potentially be worried of losing their jobs all together.  Many organizations that are restructuring today are “flattening” their organization.  This means that they are trying to show their investors that they are reducing their costs to become a more profitable company.  Ultimately this is what a company, and its investors want, profit.  Although flattening can result in a less costs, and more profit, that comes at a price for the employees.  Flattening usually requires an organization to lay off several of its managers.  Many companies in past years had no choice but to restructure their organization.  “As money has become less accessible, companies have had difficulty refinancing their operations. But although 2008 will see an increase in insolvencies, restructuring will remain the norm for troubled companies.”(Restructuring, 2008)  Restructuring is a process that could also be referred to as “Rebuilding”.  Rebuilding an organization sometimes results in changes with the types of employees they hire, and type of business or market the company wants to be involved in.   This causes employees to become less committed, knowing that their jobs could potentially be on the line, for people that are better suited for the position. 

                Restructuring can also be a very effective process. Let’s look at it this way; a business that needs restructuring is a business that was most likely facing problems, for example, losing profits and revenue.  Restructuring can “revamp” an organization in a whole new light.  Restructuring how an organization runs day to day, is not the only changes it can make.  It can also make changes such as, who is running the organization, and what their goals and objectives are.  An organization may change from a product-based structure to a function structure, or even to a geographic structure.   One way to help support the company is to help manage those remaining employees, otherwise known as “layoff survivors”.  The layoff survivors may or may not experience guilt for those who lost their jobs.  It is important to make sure these employees know that they still have a voice in the company, and that their suggestions and opinions matter.  While researching the idea of restructuring, I found some interesting tips for managers in this situation.  “Many managers are promoted into management because they were good personal producers in their departments. In many cases, personal production is still part of the manager's job - but so are coaching and motivating employees, providing strategic direction for the business unit.” (Baranoff, 2011)

It is important for managers and existing employees to remember that restructuring is meant to convey a positive new environment for the organization.  Although restructuring can cause stress and hardship for some, it can also bring light and new incentives for people to want to work there.    

http://onlinelibrary.wiley.com.huaryu.kl.oakland.edu/doi/10.1002/joe.21470/abstract?globalMessage=0

Restructuring. (2008). International Financial Law Review, , 1. Retrieved from http://search.proquest.com/docview/233193203?accountid=12924

Baranoff, Robert M, MBA,F.L.M.I., L.L.I.F. (2011). Restructuring management. LIMRA's MarketFacts Quarterly, 30(1), 112-112,111. Retrieved from http://search.proquest.com/docview/865045905?accountid=12924

Centralization

By: Jessica Kotcher

                Throughout this blog, we have referenced different elements of the organizational structure.  I am now going to focus on the concept centralization.  Centralization is a very simple concept that can result in many different outcomes in the organization structure.  Centralization is the element of the Organizational Structure that refers to where decisions are formally made in an organization.  Organizations or companies can have many different regulations that they stand by and follow.  Every organization can be different, and that is why centralization can become so unique throughout businesses across the world.  For example, Wal-Mart is a company that has to have a certain level of centralization at all times.  In a recent article written in January, Times Magazine had an article about Wal-Mart and just how big the brand has become.  It read, “Wal-Mart's centralization of power at its headquarters in Bentonville, Ark., could produce agitation among the managers of its stores, who have traditionally been granted considerable independence in stocking what locals want.” (Saporito,Bentonville, 2013)  Because the chain of stores is so widely known, it is always changing how its operations are run, and centralization is a big part of this.  

                Some companies are considered to be a highly centralized structure when only top managers within a company have the authority to make an executive or final decision.  Companies that are considered a small business, and are perhaps family oriented businesses use this concept.  Small businesses are a large portion of the business world out there and small business owners aren’t going to give their authority to lower ranked employees easily, nor do they need to.  I work for a company that is considered a small business, and also happens to be a family owned business.  The company only has about 20 employees in the office; therefore the two owners leave it up to themselves to make executive decisions that affect the company’s future.   Although the company is centralized with important and executive decisions, the organization has also decentralized different departments.  This is a way for the President and Vice President of the company to take a break, and not have to make every single small decision that may affect the company’s future.  This way the various different departments of the company are running smoothly, and everyone is on the same page.  

                When a company shows that decision making in their company can be pushed down to lower level employees, they possess a decentralized structure.  This concept is used more often in companies that continue to grow larger and expand their clientele, or service. This tends to be a good sign because that means that the top management doesn’t have time to make every little decision that may or may not affect the company greatly.  There are many ways to try and control decentralized companies and for top management to make sure that their employees are working efficiently.  Management first has to start out by putting people in charge that they can trust.  If management does not have trust with their employee to make executive decisions, then they should probably not be in that position.  It is also very important that management has meetings with their employees to make sure that everyone is on the same page.  It is important for the employees to know exactly what management is looking for of the company, and how every decision can affect the company’s future, whether it is good or bad.  An example of a company that engages in a decentralized structure would be a big company like, the department store, Macy’s or Wal-Mart, which I previously stated.  The decentralized structure makes it possible for people other than the CEO’s to make executive decisions. Many organizations are moving toward decentralized structures rather than centralized structures.  

                While researching this concept, and looking for different perspectives on centralization, as well as decentralization, I came across an article called, “Men, Women, and Leadership Centralization in Groups over Time”.  In this article is summarized the following four points:

• “Women, more than men, preferred equality norms in groups 
• All-male and majority-male groups had relatively centralized leadership structures
• All-female groups had relatively decentralized leadership structures
• Balanced and majority-female groups were relatively centralized at the onset of group interaction but decreased in centralization over time.” (Berdauhl, Anderson, 2005)

What I found interesting in those statements was that all-male and majority male groups tend to have more of a more centralized leadership structure and all-female groups have more of a decentralized environment.  I am not sure if this is because men want to have the control, and are unable to give up some of their “power” as easily as women might do.  Or perhaps women are just more comfortable with others handling problems that are not top priority to them.  This article doesn’t particularly have an exact answer to why this is, but it is interesting to look at the statistics of different organizations and see how men run organizations versus how women run their organizations.  

                I also learned that many people have their different opinions about centralization versus decentralization.  According to a book I found called, Daedalus, the author describes his opinion on the idea of structure in a business, more specifically the political structure.  It reads, “I believe that the way you create structures affects the behavior of people; that the constraints of structure shape actions, even those of people who kick over the traces of reaction.” (Daedalus, 2000) This is a different aspect of how centralization and decentralization can affect those involved.  The behavior of the people that the centralization and decentralization is affecting is something that an executive has to watch.  If their behavior is negative, then perhaps the changes that were previously made need to be altered to better the employee’s opinion of the organization.  This just shows how important the concept of Centralization is, in any organization. 

http://www.time.com/time/magazine/article/0,9171,1004006-1,00.html

 

Berdahl, J. L., & Anderson, C. (2005). Men, women, and leadership centralization in groups over time. Group Dynamics: Theory, Research, and Practice [PsycARTICLES], 9(1), 45-45. doi: http://dx.doi.org/10.1037/1089-2699.9.1.45

Daedalus , Vol. 96, No. 3, Toward the Year 2000: Work in Progress (Summer, 1967), pp. 680-690