What is an Organization

Structure
= The framework of Activities
A sales organization defines duties, roles, rights, and
responsibilities of sales people engaged in selling
activities meant for the effective execution of the sales function.
What is the purpose of O.S.
Define the Role and Responsibility
Define the Line of Authority
Establish lines of communication
Provide for coordination and balance
Proper work distribution and removes ambiguity
How Organizational
Design Increases
Profitability

Enhances a company’s

11-3
Building Blocks of Organization Structure
Formalization
Centralisation
Departmentalisation
Chain of Command
Span of control
Four basic type of organisation Structure
are
Formal and informal
Tall and Flat
Line and staff
Centralized and Decentralized
Horizontal and Vertical
FIGURE 4.2 COMPUTE CORPORATION’S LINE ORGANIZATION

L ew is S to n er
P r esid en t-O w n er

Ja k e P r es to n
V ice P r esid en t o f S a les

T w o S a lesp eo p le
FIGURE 4.3 ALARM SYSTEM CORPORATION’S FUNCTIONAL ORGANIZATIONAL DESIGN

L in e Joh n A b b ott
V ice P r es id en t o f M a r k etin g

S ta ff
Jo h n F ried m a n P ete L ik er t
C h a r les T h o m p s o n
A d v er tisin g/ P r o m o tio n M a r k et R es ea r ch
S a les M a n a ger
M a n a ger M a n a ger

T en S a les p eo p le
Centralization or
Decentralization
Authority patterns in organizations:
 Centralized
 Decision making retained in the
hands of upper-level managers.
Decentralized
 Decisions delegated to lower
levels in the organization.

11-8
 Centralization (Structural)
Choice?
Advantages of Advantages of
decentralization centralization
 Reduced information  Easier coordination of
overload on upper organizational activities.
managers.  Decisions fitted to broad
 Increased motivation organizational
and accountability objectives.
throughout  Exercise of strong
organization. leadership in crisis.
 Fewer managers; lower  Faster decision making
bureaucratic costs. and response.

Copyright © 2001 Houghton Mifflin Company. All rights

reserved. 11-9
 Horizontal Differentiation
Focus is on division and grouping of tasks to meet
business objectives.
Simple structure:
Characteristic of small entrepreneurial companies.
Entrepreneur takes on most managerial roles.
No formal organization arrangements.
Horizontal differentiation is low.

Copyright © 2001 Houghton Mifflin Company. All rights

reserved. 11-10
 Vertical Differentiation
Span of control (division of authority)
The number of subordinates that a single manager
directly manages.
Organizational hierarchy choices
Flat structures
 Few organizational levels
 Wide spans of control

Tall structures
 Many organizational levels
 Narrow spans of control

Copyright © 2001 Houghton Mifflin Company. All rights

reserved. 11-11
FIGURE 4.4 TEXTRON CHEMICAL CORPORATION GEOGRAPIC SPECIALIZATION

M a n a g e r ia l V ic e P r e s id e n t
L evel o f M a r k e t in g
Functional
Types of Departmentalization
Product N a t io n a l S a le s
M an ager
Geographical
O p e r a t in g
Process
L evel
E a s t e r n D iv is io n a l C e n t r a l D iv i s i o n a l W e s t e r n D iv i s i o n a l
Customer
S a le s M a n a g e r S a le s M a n a g e r S a le s M a n a g e r

7 R e g io n a l S a le s 6 R e g io n a l S a le s 5 R e g io n a l S a le s
M an agersA M an ag ersA M an agers A

3 5 D is t r ic t S a le s 3 0 D is t r ic t S a le s 2 5 D is t r ic t S a le s
M an agersB M an agers
B
M an ag ers B

2 4 0 S a le s p e o p le C
2 4 0 S a le s p e o p le C
2 0 0 S a le s p e o p le C
FIGURE 4.5 MULTIPLE DESIGN FACTORS

P r e s id e n t

F u n c t io n a l V ic e P r e s id e n t V ic e P r e s id e n t V ic e P r e s id e n t
P r o d u c t io n M a r k e t in g E n g in e e r in g

G e o g r a p h ic U .S . I n t e r n a t io n a l
M a r k e t in g M a r k e t in g
M an ager M an ager

C u sto m e r C o n su m er I n d u s t r ia l I n t e r n a t io n a l
G oods G oods S a le s
M an agers M an agers M an ager

P ro d u ct S o ap P ro d u c ts P a p e r P ro d u c ts F o o d P ro d u c ts L a t in A s ia n a n d
E u ro p ean
D iv is io n a l D iv is io n a l D iv is io n a l A m e r ic a n A f r ic a n
D iv is io n
M an ager M an ager M an ager D iv is io n D iv is io n

E a ste rn C e n tral W estern

S a le s S a le s S a le s
D iv is io n D iv is io n D iv is io n
FIGURE 4.6 CROSS-FUNCTIONAL SELLING TEAM

C u sto m e r

T e c h n ic a l
S a le s M a r k e t in g M a n u f a c t u r in g
Su p p o rt
S u p p lie r S e llin g T e a m
Factors Affecting Organizational Design

Environment

Strategic Determine
Determinedesign
design
or Technology
Plan ororganizational
organizational
structure
structure

Culture
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.
Determinants of Structure
Strategy: Different strategies require the use
of different structures.
A differentiation strategy needs a
flexible structure, low cost may need a
more formal structure.
 Technology: The combination of skills, knowledge, tools, equipment,
Determinants ofused
computers and machines Structure
in the organization.
 More complex technology makes it harder for managers to regulate the
organization. Technology can be measured by:
 Task Variety: 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.
  Small Batch Technology: produces small quantities of
Technology
one-of-a-kind&products.
People
 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.

 Human Resources: the final factor affecting
Determinants of Structure
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).

Managers must take into account all four factors

(environment, strategic plan, technology and culture)
when designing the structure of the organization.
Departmentalization
Contemporary
Traditional view:
view:
Customer
Jobs have to
departmentalization
be grouped back together
is highly popular
Cross-functional
Most organizations
teams
will are
usebeing
a combination
used in addition
of types
to rigid functional departmentalization
A Sample of Pier 1’s Functional Structure

C la r k J o h n s o n
C EO

E x e c . V .P . S e n io r V . P . S e n io r V . P .
F in a n c e & A d m in . S to re s L o g is t ic s

V .P . T a x V . P . C o n t r o lle r V .P .
D is t r ib u t io n

V .P . M IS D ir e c t o r
C o r p . P la n n in g D ir e c t o r
T r a n s p o r t a t io n
Product Structure

CEO
C o r p o r a tio n

C o rp o ra te
M a n a g e rs

W a s h in g M a c h in e L ig h tin g T e le v is io n
D iv is io n D iv is io n D iv is io n
Geographic Structure

CEO
C o r p o r a tio n

C o rp o r a te
M a n a g e rs

N o rth e rn W e s te rn S o u th e rn E a s te rn
R e g io n R e g io n R e g io n R e g io n
Market Structure

CEO
C o r p o r a tio n

C o rp o ra te
M a n a g e rs

L a r g e B u s in e s s S m a ll B u s in e s s E d u c a tio n a l In d iv id u a l
C u s to m e rs C u s to m e rs In s titu tio n s C u s to m e rs
Matrix & Product Teams
 Matrix structure: managers group people by function and
product teams simultaneously.
 Results in a complex network of reporting relationships.
 Very flexible and can respond rapidly to change.
 Each employee has two bosses which can cause problems.
 Functional manager gives different directions than

product manager and employee cannot satisfy both.

 Product Team Structure: no 2-way reporting and the
members are permanently assigned to the team and
empowered to bring a product to market.
Matrix Structure

CEO

Func.
Managers

Sales Design Production

Team Managers

Product
team A

Product
team B
Product Team
Product
team C

= two boss employee

Hybrid Structures
Many large organizations have divisional structures
where each manager can select the best structure for
that particular division.
One division may use a functional structure, one
geographic, and so on.
This ability to break a large organization into many
smaller ones makes it much easier to manage.
Globalization
21st Century
Increasingly Organizational
globalized Trends
sales, manufacturing, research,
management
Movement from direct exports to having sales offices in
different countries to having manufacturing to all functions
spread across the globe
Increasingly globalized labor market
Due to:
reduced cost and improved quality of international
transportation and communication
search for unsaturated markets
exploit regional cost and expertise differences
Diversity
21st Century Organizational Trends
Workforce getting more heterogeneous sexually, racially,
culturally, individually, etc.
Source of both innovation and conflict/communication
problems
Need to cope with different styles of interaction, dress,
presentation, physical appearance
Due to:
changing demographics
globalization of the labor market
Flexible
21st Century
Organizational Organizational
systems Trends
and processes and people that can
respond differently to different situations
Fewer detailed rules and procedures
Greater autonomy, encouragement for initiative
Customizable employment relationships: telecommuting, job
sharing, mommy tracks, pay for skills
Lifetime employability, not lifetime employment
Due to:
differentiated customer needs -- filling them exactly is
source of competitive advantage
increasing diversity in workplace
increased pace of change in technology and markets
Flat
21st Century Organizational Trends
Fewer levels of management,
Workers empowered to make decisions
Fewer differences in responsibility (not in pay) across levels
Due to:
need for speed, which makes it helpful to empower
employees to make decisions, which means fewer managers
are needed
changes in information technology mean less need for the
communication and control functions of middle managers
globalization means intensified competition, which
increases the need to cut costs
Networked
21st Century Organizational Trends
Direct communication across unit & firm boundaries,
ignoring chain of command
Cross-unit team structures
Outsourcing & downsizing
Strategic alliances with competitors and others
Now have firms that are your competitors, customers and
collaborators all at the same time
Networked
21st Century Organizational
Close coordination Trends
among firms (e.g., JIT systems) and
information sharing (open computer systems)
Across the board contact with customers, not just official
boundary spanners
Customization
Decentralization
Due to:
new information technologies, especially groupware,
client-server, distributed computing
fast changing customer needs and competitor offerings
more complicated products require better integration of
manufacturing, design, and marketing functions
Coordinating Functions
To ensure sufficient coordination between functions,
managers delegate authority.
 Authority: the power vested in the manager to make
decisions and use resources.
 Hierarchy of authority: describes the relative
authority each manager has from top to bottom.
 Span of Control: refers to the number of workers a

manager manages.
 Line authority: managers in the direct chain of

command for production of goods or services. Example:

Sales
 Staff authority: managers in positions that give advice

to line managers. Example: Legal

Tall & Flat Organizations
Tall structures have many levels of authority relative to
the organization’s size.
 As levels in the hierarchy increase, communication

gets difficult.
 The extra levels result in more time being taken to

implement decisions.
 Communications can also become garbled as it is

repeated through the firm.

Flat structures have few levels but wide spans of
control.
 Results in quick communications but can lead to

overworked managers.
Minimum Chain of Command
 Managers should carefully evaluate:
 Do they have the right number of middle managers?

 Can the structure be altered to reduce levels?

Centralized v. Decentralized
 Decentralized operations puts more authority at lower
levels and leads to flat organizations.
 Workers must be able to reach decisions.

 Divisions and functions can begin to lose sight of

organizational goals and focus only on their small area.

Integrating Mechanisms
Direct contact: get managers from different divisions or
functions together to solve mutual problems.
Liaison Roles: one manager in each area is responsible for
communication with other areas.
Task Forces: temporary committees formed across divisions
to solve a specific problem.
Cross-functional teams: works much like a permanent task
force that deals with recurring problems.
Matrix structure: already contains many integrating
mechanisms.
Strategic alliance: a formal agreement committing two or
Strategic Alliances
more firms to exchange resources to produce a good.
Network Structure: a whole series of strategic alliances.
 Created between suppliers, manufacturers, and
distributors.
 Toyota and Honda use many such alliances.
 Network structures allow firms to bring resources together
in a boundary-less organization.