Functional organization design
The principal disadvantage of this form of organizational design is that it discourages horizontal communication, that is, across functions. For example, a situation might arise in which a com- pany’s marketing department advertises the benefits of a particular product and delivers a dra- matic salesincrease only to discover it could not fulfill the new orders because production wasn’t prepared to keep up with demand. In another scenario, efforts to cut manufacturing costs might dictate automating part of the production process, but if the finance department had not been informed of this possibility and set aside funds accordingly, the company might not have the money to fund the initiative. To get around this, a company might form cross-functional teams composed of members from each affected functional area. Special task forces might also be estab- lished to tackle a problem that only occurs once such as business-process reengineering. Cross- functional teams are rarely fulltime activities, but must be done in addition to members’ regular jobs and responsibilities.
CHAPTER 2Section 2.6 Organizational Designs and Strategy
Matrix Organizational Design Whereas a functional organizational design is the most common design used by companies, matrix organiza- tional designs are preferred when a company encoun- ters a more specific set of circumstances or challenges. Companies that serve the functions described in the following sections may consider using a matrix organi- zational design.
Many Projects for Clients Companies that provide consulting services or perform research for multiple clients may choose a matrix orga- nizational structure. An example of this is the RAND Corporation, a “think tank” in Santa Monica, Califor- nia, that undertakes research and policy projects for all agencies of the federal government, especially the military, as well as state and local government. RAND is organized by intellectual discipline and by project teams that propose, carry out, and report on par- ticular contracts for individual clients. In effect, any member of the professional staff working there has a “home”—say, in the economics or computer-science group—and works on one or more projects. Most indi- viduals have two or more overseers; but the depart- ment head is more of a resource than a manager, thus removing a potential conflict. Figure 2.2 represents a simple matrix organizational structure.
Producing Distinct Brands or Product Lines A large enterprise that produces many established brands for discrete markets may be suited to a matrix design. Proctor & Gamble, one of the largest and most innovative consumer-product corporations in the world, produces no fewer than 52 brands of beauty and grooming products such as Tampax, Gillette, Oral B, Crest, and Pert, and 46 brands of household-care products such as Tide, Bounty, Pampers, and Comet (Proctor & Gamble, n.d.). Organizationally, every brand is called a global business unit (GBU), which exclusively targets consumers, brands, and competitors worldwide. The GBU is also in charge of the innovation pipeline, profitability, and shareholder returns. Market-development organizations (MDOs) are responsible for being aware of the buy- ers and sellers in every market area Proctor & Gamble competes in, as well as incorporating new GBU-driven workflows into the individual business plans operating in each country. Lastly, Global Business Services (GBS) manages Proctor & Gamble talent and expert partners with the goal of providing business-support services at the lowest costs possible.
Associated Press/Mark Lennihan
A matrix organizational design is usually preferred when a company produces dis- tinct brands or product lines. For example, Proctor & Gamble has 96 brands of prod- ucts, including Tide detergent—one of its most popular brands.
CHAPTER 2Section 2.6 Organizational Designs and Strategy