RAND Corporation matrix organization
Managing International Operations Large multinational corporations with business interests in many countries may be organized in a matrix structure. The organizational matrix could be two-dimensional; think of a spreadsheet in which product managers are column headings and country managers are row headings, or even three-dimensional with the third dimension being disciplines like chemists, engineers, statisti- cians, computer scientists, and so forth. Proctor & Gamble has refined an incredible organizational design for what is a very complex organization, but most such organizations experience many dif- ficulties. Even simple organizations that market only a few products internationally have conflicts with country managers. It is not uncommon for managers employed by international corporations to complain that, although they know their own domestic market and how to run the local office better than the executives at the home office, they still get told how to do their job.
CHAPTER 2Section 2.6 Organizational Designs and Strategy
Divisional Organizational Design Much like functional and matrix organizational designs, the divisional organizational design works better for some companies and industries than others. A divisional organization is most effective when a company is in several businesses. A company with a broad product line or that serves several vertical markets could still be in one business. Honeywell International is an example of a business with a divisional organizational design. Honeywell is an enormous conglomerate that has evolved through numerous mergers and acquisitions. It does business in a variety of industries ranging from defense contracting to consumer products with divisions dedicated to aerospace, automotive products, specialized materials, and research and develop- ment among others.
The test to determine if a divisional organizational structure is the best choice for a company is whether each of the businesses has quite different customers, competitors, and strategies and therefore needs to be run by a separate manager. In such a case, one would find many func- tions such as engineering, sales, and manufacturing duplicated in each business. In a diversified or multi-business company (discussed in Chapter 11), its different businesses can be divisions that still retain the corporate name and have developed organically or “subsidiaries” that have differ- ent names as a result of having been acquired.
The divisions or subsidiaries are considered “line departments” as they continue the chain of com- mand up to the CEO and overall board of directors. Staff departments such as human resources, labor-relations, finance, and legal counsel exist at the corporate office and serve all divisions and subsidiaries. An international department would coordinate the operations of each division in different countries, allowing for contacts that one division had developed to be accessed by the other divisions. As you may well imagine, divisional organizations, while simple in concept, can become complex in an international corporation.
Chief Executive Officer
Staff Departments
Labor Relations Department
International Department
Finance Department
Line Departments
(Divisions)
Electrical Products Division
Medical Products Division
Industrial Products Division
Engineering Sales Manufacturing
Figure 2.3: Divisional organization