Yeirang Lee- Application Assignment #3

Yeirang Lee

Application Assignment #3

Article # 2

Organization Management

            As the readings suggest, organization structure – functional, divisional, matrix, horizontal, network, virtual network, and hybrid – must be applied into different environments and each structure is best in different organizations. In order to understand better which structure fits which, I believe looking at the needs of the organization is critical, and by understanding this, you can fixate a balance of horizontal and vertical coordination. In this essay, I will be elaborating on the different organizational structures and how these structures create advantages and disadvantages for companies.

            First is the functional structure. In this structure, companies organize groups and jobs based on their task in order for the workers to concentrate on their job. Amazon’s Jeff Bezos used functional structure in Amazon.com, where he wanted to connect employees to customers using the internet. Amazon was a company that produced internet software at a few production sites and markets to similar types of customers.  To cater to their specific customers, he created to groups, R&D and the information department. The R&D department focused on developing in-house internet software, while the information department used the software to interact with the customers. Then Bezos added the financial and strategic planning department. By dividing the company into functional groups, Amazon was able to recruit experienced workers and managers in the specific field, gain competitive advantage, develop consistent core competences, and monitor workers through peer supervision. However, as a disadvantage, Amazon faced issues where communication was lacking between groups, overall cost and contribution of each function is difficult to assess, and flexibility is limited. Thus, like Johnson and Johnson, they have to constantly remind themselves that they are all working for the same company.

            Second is the divisional structure. The divisional structure focuses on organization divisions based on product, services, projects, and other organizational outputs, and creates a decentralized decision making process because authority converges at lower levels. Heinz has product divisions based on its manufacturing facilities/products and a manager who coordinates with support functions like marketing, finance, and human resources. This way, group differentiations are increased and support functions are centralized at lower levels of authority. However, Heinz divisional structure does not allow effective coordination across the different groups and makes integration difficult.

            Third is the geographic structure, in which organizations are divided based on region and location. Companies who adapt to this structure focuses on its goals and capabilities to cater to the local needs of the regional customers. Walmart divided its organization tasks into regions, including international tasks, and this gave employers and managers to play are more critical role in the organization’s regional product mix to maximize sales. However, like the divisional structure, Walmart eliminates economies of scale between the regional departments and does not use all of its resources as best as possible.

            Fourth is the matrix structure. The matrix structure is characterized as a combination of geography, divisional, and functional structure that has a strong form of horizontal linkage, where a dual hierarchy are at the core. It works best when companies have both a functional and product goal. Home Depot is divided between corporate and division managers. Division managers exchange information and coordinate activities with corporate managers, while corporate managers analyze divisional performance and design action plans.  This way, cost and quality of Home Depot products are secured and monitored, constant communication allows it adapt to changes, and employee skills are utilized. However, challenges include conflict over resources, lack of bureaucratic structure, and informal hierarchies form in uncertainty.

            Fifth, horizontal structure concentrates on the core processes of reconfiguration of an organization. The goal is to shift the current input and output process and change internally and horizontally, which often involve teams. Horizontal structure works well with organizations that have to change fast to meet the demands of the customers. A very good case is the article we all read on W.L. Gore and Associates. A new way of management inspired by Douglas McGregor’s  The Human Side of Enterprise, Bill Gore launched his new company W.L. Gore & Associates with a horizontal structure and created a 1.25 billion dollar revenue company. Gore was able to pragmatically and efficiently include empowerment in his management strategy, where the core of its projects were initiated and organized by the workers. With the principles of fairness, commitment, freedom, and waterline, Bill Gore was able to create a horizontal structure that was able to persevere through different economic environments and overcome various challenges. Because of his company was centered on research and developing new products, I believe his management structure fit well.

            Sixth is the virtual network structure that largely focuses on the outsourcing of work. Many companies need to adjust fast and do not have the resources and skills it needs, and thus looks for other specialized companies to outsource its work. When a company outsources its work, it shifts its organizational structure, where the work is centered on the smaller head organizations. Dell outsourced a large number of its customer service to India, and rather than managing it from its headquarters, the Dell India office manages a large portion of their activities. For Dell, language and culture barrier has been a critical issue for fulfilling its mission.

            By analyzing the different structures, we can understand that these structures have distinct features that are hard to identify but control different levels of horizontal and vertical coordination/management within an organization. From a functional structure which is the most centralized to the virtual network structure which is the most decentralized process, the structure plays a significant role to accomplish the goals of the company. However in reality, most companies portray a hybrid of these structures and the complexity of today’s organizations and markets have challenged the theories we have learned today. I believe more and more shifts and changes are needed within organizations to adapt to new technologies, competition, and changing demands of the customers. Although I classified many of these organizations in different structures, I have done so to portray examples of these theories to get a better understanding that the base and core of these structures are different.

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Gould,M. & Campbell, A. (2002) "Do You Have a Well Designed Organization?" Harvard Business Review.

Guy Morgan, Kwang Ryu, Philip Mirvis, (2009) "Leading corporate citizenship: governance, structure, systems", Corporate Governance, Vol. 9 Iss: 1, pp.39 – 49

Daft, R. (2007) "Fundamentals of Organizational Structure." Organization Theory and Design (9th ed.), pp. 88-125 (Chapter 3)

Townsend, D. R. & Harder, J. (2000). W.L. Gore & Associates [Case no. UVA-OB-0700]. Charlottesville: Darden Business Publishing.