1. 1 There are a number of organization designs, including many combinations or hybrids of models. Seven designs are shown below: Process Centered Front End / Back End Product HybridMatrix Geo- graphic Function Appendix A - Background Information on Organizational Design

2. 2 Functional Organizations Description  Activities and employees grouped according to their business function  Rely on functional expertise to support core competencies  Most logical and simple form, focusing on a narrow range of skills / expertise  Applicable when technology is routine, small number of products, and / or if interdependence across functional units is minimally required Strengths  Ideal when specialized resources are required  Can be efficient given economies of scale and cost controls  Collaboration and quality within each function  Supervision easier  Easier to mobilize specialized skills when needed Weaknesses  Difficult to manage when numerous product lines / customer services are offered  Quick action / decisions may be difficult  More difficult to manage performance / accountability relative to contribution to value chain  Loyalty to functional silos may cause lack of coordination / cooperation  Cost reduction and organizational efficiency may be a challenge Appendix A - Background Information on Organizational Design

3. 3 Product Organizations Description  Each unit is responsible for the design, production, and sales of a product / family of products  All resources are directly available to the unit  Each product unit is responsible for planning, within the context of corporate business strategies Strengths  Adaptable to fast-changing external environment  Applicable for global perspectives  Product contribution / revenue / profit are easily calculated  Accountability is clear  Coordination across functions easier, given all resources within a unit are supporting the same product  Speed and often quality of decision making is enhanced Weaknesses  High cost structure due to poor economies of scale  Duplication  Reduced specialization of skill  Difficulty in coordination of multiple products within a single geographic area  Potential conflicts between product unit and business unit interests  Often slower rate of growth than other organizational structures Appendix A - Background Information on Organizational Design

4. 4 Geographic Organizations Description  Geographic regions report directly to the CEO  Each region has full control of all activities within its geographic boundaries  Corporate retains responsibility for strategic planning Strengths  Responsive to geographic demands  Economies of scale possible if regional manufacturing facilities may be shared  Emphasizes geography as a profit center, which demands product development and marketing focused on a geographic area  Quality of local management with respect to customers and markets Weaknesses  Duplication and high overhead cost  Potential conflicts among regions and with corporate headquarters  Product variations and new technologies are not easily transferred  Flow of products to other worldwide markets more difficult  Global business strategy more difficult to implement  Functional areas (R&D, marketing,...) are difficult to coordinate and achieve synergies Appendix A - Background Information on Organizational Design

5. 5 Matrix Organizations Description  Multiple reporting relationships represented by grids and webs  Formal systems of multiple decision making, communications, and balance of power  Common in engineering and project intensive organizations  Multiple contacts are intended to facilitate collaboration and coordination Strengths  May provide simultaneous attention to geography, function, and product  Forces consideration of all factors and may lead to agreement on mid / long-range actions  Multiple expertise focusing on problems  Allocation of scarce resources more efficient  Wide range of communications  Career opportunities for technical specialists to generalize easier than in traditional pyramid structures Weaknesses  Complex and often difficult to manage  Encourages power struggles and political units  High cost  Decision making slow and encourages meeting intensive culture Appendix A - Background Information on Organizational Design

6. 6 Front End / Back End Organizations Description  Some functions focused on customer interaction, while others are focused on product development  Front end: sales, service, software applications; Back end: R&D, engineering, purchasing, manufacturing  Relatively recent model; both ends may have their own P&L  Integration activities and linkages include marketing, business development, information systems  Telecommunications implemented in 19xx’s Strengths  Responds to special customer needs, such as front end education and software applications  Products and services presented in an integrated and interrelated manner to customers  Performance of both ends is easily measured Weaknesses  May have difficulty linking the two ends  Cooperation and coordination may be problematic  Back end may attempt to sell to external markets, front end may provide customers with outsourced products  Flexible accounting and budgeting systems required Appendix A - Background Information on Organizational Design

7. 7 Process-Centered Organizations Description  Business organized horizontally around linked, end to end processes  Foundation is multifunctional teams, often self directed and self managed  Teams, not functions or individual jobs, define the structure  Rewards focused on team performance  Decisions are made at point of contact by empowered employees  Decentralized, with few supervisors  Functional expertise maintained through centers of excellence Strengths  Business outcome, customer focused  Productivity, speed, and quality likely to be improved  Layers of supervision removed resulting in cost reduction  Fewer power bases and political problems  Cost management more effective Weaknesses  Operating culture difficult to change  Roles and responsibilities must be completely redefined, employees trained, and leaders coached  Ability to maintain technical excellence may be more difficult Appendix A - Background Information on Organizational Design

8. 8 Process centered organizations involve a fundamental shift along all of the major axis of a business: ComponentFunctional / TraditionalProcess / Innovative Job definitionSimpleComplex CultureControlEmpower StructureHierarchyFlat UnitsDepartmentTeam FocusBossCustomer MeasurementOutputOutcome CareerPromotionGrowth CompensationPositionValue-added ManagerSupervisorCoach ExecutiveScorekeeperLeader GoalsSharedIncongruent PerspectiveNarrowBroad ValuesProtectiveProductive Source: Appendix A - Background Information on Organizational Design