Chapter 11

Organizational Design: Structure, Culture, and Control

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 The AFI Strategy Framework

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 Chapter 11 Outline (1 of 2)

11.1 Organizational Design and Competitive Advantage

– Organizational Inertia: The Failure of Established Firms
– Organizational Structure
– Mechanistic vs. Organic Organizations
11.2 Strategy and Structure
– Simple Structure
– Functional Structure
– Multidivisional Structure
– Matrix Structure

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 Chapter 11 Outline (2 of 2)

11.3 Organizational Culture: Values, Norms, and Artifacts

– Where Do Organizational Cultures Come From?
– How Does Organizational Culture Change?
– Organizational Culture and Competitive Advantage
11.4 Strategic Control-and-Reward Systems
– Input Controls
– Output Controls
11.5 Implications for the Strategist

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 Learning Objectives
LO 11-1 Define organizational design and list its three components.
LO 11-2 Explain how organizational inertia can lead established firms
to failure.
LO 11-3 Define organizational structure and describe its four
elements.
LO 11-4 Compare and contrast mechanistic versus organic
organizations.
LO 11-5 Describe different organizational structures and match them
with appropriate strategies.
LO 11-6 Describe the elements of organizational culture, and explain
where organizational cultures can come from and how they
can be changed.
LO 11-7 Compare and contrast different strategic control-and-reward
systems.

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 Organizational Design and Competitive
Advantage

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 Organizational Design

• The process of:

– Creating, implementing, monitoring, and modifying…
– The structure, processes, and procedures of an
organization
• Key components:
– Structure
– Culture
– Control

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 Organizational Inertia

• A firm’s resistance to change the status quo

• Can lead to the firm’s subsequent failure
• The pattern of a firm:
– Mastery of the current environment
– Success as measured by financial measurements
– Structures, measures, and systems to manage size
– Organizational inertia results from shifts in the internal and
external environment.

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 Exhibit 11.2 Failure of Firms to Respond to Shifts in
the External or Internal Environments

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 Strategy Highlight 11.1

The Premature Death of a Google-like Search Engine at

Microsoft
•Microsoft had a prototype called Keywords.
– More than a decade earlier than Google
– It was shut down because managers didn’t see it as a viable
business model.
•Microsoft almost acquired this capability.
– But determined Overture Services was overpriced
•Launched their own, Bing, in 2009
•The CEO has admitted impatience.
– Was replaced in 2014

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 Organizational Structure

• A key building block of organizational design

• Determines how the work efforts of individuals and
teams are orchestrated
• Determines how resources are distributed
• Includes four building blocks:
– Specialization
– Formalization
– Centralization
– Hierarchy

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 Specialization

• Describes the degree to which a task is divided into

separate jobs (i.e., the division of labor)
• Larger firms: high degree of specialization
– Ex: Large-firm accountant might do internal auditing
• Smaller ventures: low degree of specialization
– Ex: Small-firm accountant might do:
• Internal auditing
• Payroll
• Accounts receivable
• Financial planning
• Taxes

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 Formalization

• Captures the extent to which employee behavior is

steered by explicit and codified rules and procedures
• Is not necessarily negative
• Often can be necessary for consistent and
predictable results
– Ex. Pilot training
– Ex. Customer service call centers
• Can slow decision making, reduce innovation, and
hinder customer service

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 Centralization

• Refers to the degree to which decision making is

concentrated at the top of the organization
• Example: BP oil spill in 2010
– Decisions made in UK HQ and not on site
– Centralization reduced response time and led to a
prolonged crisis.
• Affects strategic planning:
– Top-down strategic planning takes place in highly
centralized organizations.
– Planned emergence is found in more decentralized
organizations.

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 Hierarchy

• Determines the formal, position-based reporting

lines
• Stipulates who reports to whom
• Span of control:
– The number of employees who directly report to a
manager
– In tall structures: the span of control is narrow.
– In flat structures: the span of control is wide.
• Meaning one manager supervises many employees

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 Mechanistic vs. Organic Organizations

• Mechanistic Organization
– High degree of specialization and formalization
– Tall hierarchies
– Rely on centralized decision making
• Organic Organization
– Low degree of specialization and formalization
– Flat organizational structure
– Decentralized decision making

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 Strategy Highlight 11.2 (1 of 2)

W. L. Gore & Associates: Informality and Innovation

• Inventor of path-breaking new products
– GORE-TEX fabrics, Glide dental floss, and Elixir guitar
strings
– Devoted to innovation, imagination and initiative
– No formal job titles, job descriptions, chains of command,
formal communication channels, written rules or standard
operating procedures
• Use a boundryless organization form
– Everyone is empowered

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 Strategy Highlight 11.2 (2 of 2)

W. L. Gore & Associates: Informality and Innovation

•Organized in project-based teams
– Led by sponsors, not bosses
– Peer control enhances productivity
– Group members evaluate each other’s performance
•This type of culture has been linked to:
– Greater employee satisfaction & retention
– Higher personal initiative & creativity
– Innovation at the firm level

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 Exhibit 11.3 Mechanistic vs. Organic Organizations

Mechanistic Organizations Organic Organizations

• High degree of specialization • Low degree of specialization
Specialization • Rigid division of labor • Flexible division of labor
• Employees focus on narrowly defined tasks • Employees focus on “bigger picture”
• Intimate familiarity with rules, policies, and • Clear understanding of organization’s core
Formalization processes necessary competencies and strategic intent
• Deep expertise in narrowly defined domain • Domain expertise in different areas
required • Generalized knowledge of how to
• Task-specific knowledge valued accomplish strategic goals valued
• Decision power centralized at top • Distributed decision making
Centralization • Vertical (top-down) communication • Vertical (top-down and bottom-up) as well
as horizontal communication
• Tall structures • Flat structures
Hierarchy • Low span of control • High span of control
• Clear lines of authority • Horizontal as well as two-way vertical
• Command and control communication
• Mutual adjustment
• Cost-leadership strategy • Differentiation strategy
Business Strategy • Examples: McDonald’s; Walmart • Examples: W.L. Gore, Zappos

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 Strategy and Structure

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 Firm Strategy & Structure

• Are interdependent
• Impact a firm’s performance
• Changes over time as the firm grow in:
– Size
– Complexity
• Successful new ventures generally grow:
– First by increasing sales
– Then by obtaining larger geographic reach
– Finally by diversifying
• Through vertical integration
• Entering into related and unrelated businesses
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 Exhibit 11.4 Types of Organizational Structure

• Simple
• Functional
• Multidivisional
• Matrix

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 Simple Structure

• Generally used by small firms with low organizational

complexity
• Founders make all the strategic decisions.
• Founders run day-to-day operations.
• Professional managers / sophisticated systems are
not usually in place.

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 Functional Structure

• Employees are grouped into functional areas.

– Based on domain expertise
– Often correspond to distinct stages in the value chain
• R&D, engineering, manufacturing, marketing and sales
• Supporting areas such as HR, finance, and accounting
• Leaders of functional areas report to the CEO.
• Influenced by strategy:
– Cost leadership Mechanistic organization
– Differentiation Organic organization
– Integration strategy Ambidextrous organization

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 Exhibit 11.5 Typical Functional Structure

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 Functional Structure & Business Strategy

• Cost Leadership Strategy

– Using a functional structure allows the cost leader to:
• Nurture and constantly upgrade core competencies
• Differentiation Strategy
– Using a functional structure allows a differentiator to:
• Incorporate decentralized decision making
• Foster and incentivize continuous innovation and creativity
• Blue Ocean Strategy
– To implement a functional blue ocean strategy:
• The firm must be both efficient and flexible
• The firm must control costs & foster creativity
• Mitigate the disadvantages of this approach
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 Disadvantages of Functional Structure

• Frequently lacks effective communication channels

across departments
• The top-level manager must take on the coordination
and integration work.
• It cannot effectively address a higher level of
diversification, which often stems from further
growth.

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 Multidivisional Structure

• Consists of several distinct strategic business units

(SBUs)
– Each with its own profit-and-loss (P&L) responsibility
• Each SBU is operated independently.
• Each is led by a CEO.
– Responsible for the unit’s business strategy
– Responsible for day-to-day operations

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 Exhibit 11.7 Typical Multidivisional Structure

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 Multidivisional Structure & Business Strategy

• Related Diversification
– Cooperative M-Form
• Centralized decision making
• High level of integration at corporate headquarters
• Co-opetition among SBUs

• Unrelated Diversification
– Competitive M-Form
• Decentralized decision making
• Low level of integration at corporate headquarters
• Competition among SBUs for resources

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 Disadvantages of the Multidivisional Structure

• Adds another layer of corporate hierarchy

– Increases bureaucracy, red tape, & duplication of efforts
– Can slow down decision making
• SBUs can end up competing with each other
– Corporate politics and turf wars over resources

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 Matrix Structure

• Firm is organized according to SBUs

– Like in the M-form
• Also has a second dimension of organizational
structure
– Consists of different geographic areas
• Purpose:
– Combine the benefits of the M-form
• Domain expertise, economies of scale, and the efficient processing
of information
– With benefits of the functional structure
• Responsiveness and decentralized focus

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 Exhibit 11.9 Typical Matrix Structure

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 Matrix Structure & Global Strategy

• International Multidomestic
– Multidivisional
• Geographic areas
• Decentralized decision making
• Global Standardization
– Multidivisional
• Product divisions
• Centralized decision making
• Transnational
– Global Matrix
• Centralized and decentralized decision making
• Coordinate geography & products
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 Disadvantages of the Matrix Structure

• Usually difficult to implement

• Creates additional organizational complexity
• Increases administrative costs
• Reporting structures are often not clear.
• Employees can have trouble reconciling goals.
– They have two or more supervisors
• Accountability can be undermined.
– Increased principal-agent problems
• Performance appraisals more difficult
• Can slow decision-making

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 Organizational Culture: Values,
Norms, and Artifacts

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 Organizational Culture

• The collectively shared values and norms of an

organization’s members
• Values: define what is considered important
• Norms: define appropriate employee attitudes and
behaviors
• Expressed through artifacts:
– The design and layout of space: cubicles vs. offices
– Symbols: the type of clothing worn by employees
– Events: what is celebrated and highlighted
– Vocabulary: what stories are told

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 Exhibit 11.11 The Elements of Organizational Culture

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 Where Do Organizational Cultures Come From?

• Founder imprinting
– The founder defines & shapes the culture.
– Can persist for decades after his or her departure
– Examples: Steve Jobs, Walt Disney, Michael Dell, Oprah
Winfrey, Martha Stewart, Bill Gates
• Groupthink
– When opinions combine
– Results when individuals don’t critically evaluate and
challenge a leader’s opinions and assumptions

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 How Does Organizational Culture Change?

• Culture can turn from a core competency into a core

rigidity.
• A firm must hone, refine, and upgrade.
– Because the firm and the environment change
• The primary means of cultural change:
– The board of directors brings in new leadership.
– Leadership is charged to make changes in strategy and
structure.
• Culture is shaped through:
– Organizational structure
– Resource allocation & reward systems
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 Organizational Culture and Competitive Advantage

• Can organizational culture can help a firm gain and

sustain competitive advantage? Yes, IF:
– The culture makes a positive contribution to the firm’s
economic value creation.
– If the culture obeys the VRIO principles
• It can be an effective lever for new ventures:
– It is malleable.
– Firm founders, early-stage CEOs, and venture capitalists
should be proactive:
• Create a culture that supports a firm’s economic value creation

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Two Examples of Culture Affecting Employee Behavior

• Example #1: Southwest Airlines

– Friendly and highly energized employees
• Sing songs, throw peanuts, wear Halloween costumes
– Work across functional and hierarchical levels
– Turn time between flights is only 15 minutes
• Example #2: Zappo’s
– Someone called up Zappo’s to ask where a local pizza could
be delivered to her hotel.
– This type of action can increase the company’s perceived
value & economic value creation.
– Provided “wow” through service!

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 Strategic Control-and-Reward Systems

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 Strategic Control & Reward Systems

• Internal-governance mechanisms
• Put in place to align the incentives of:
– Principals (shareholders)
– Agents (employees)
• Allow managers to:
– Specify goals
– Measure progress
– Provide performance feedback

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 Input Controls

• Seeks to define & direct employee behavior through:

– Explicit, codified rules
– Standard operating procedures
• Considered prior to the value-creating activities
• Example: a budget
– Managers allocate money to R&D projects before they
begin

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 Output Controls

• Seek to guide employee behavior by:

– Defining expected results (outputs), but
– Leaving the means to those results open to individual
employees, groups, or SBUs
• “ROWE” = Results Only Work Environment
• Intrinsic motivation in a task is highest when an
employee has
– Autonomy (what to do)
– Mastery (how to do it)
– Purpose (why to do it)
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 Implications for the Strategist

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 Strategy Implementation

• Requires managers to design and shape:

– Structure
– Culture
– Control mechanisms
• Is iterative and interdependent with strategy
formulation
• Is just as important as strategy formulation

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 Organizational Structures Evolve

• Companies grow and become more complex.

• Different organizational structures get adopted.
– Beginning with a simple structure
– Then a functional structure
– Followed by a multi-divisional or matrix structure
• Organizing for competitive advantage:
– Is a dynamic, not static.

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 Chapter 11 Summary

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 Take Away Concepts (1 of 7)

LO 11-1 Define organizational design and list its three components.

• Organizational design is the process of creating, implementing,
monitoring, and modifying the structure, processes, and procedures of an
organization.
• The key components of organizational design are structure, culture, and
control.
• The goal is to design an organization that allows managers to effectively
translate their chosen strategy into a realized one.

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 Take Away Concepts (2 of 7)

LO 11-2 Explain how organizational inertia can lead established firms to

failure.

• Organizational inertia can lead to the failure of established

firms when a tightly coupled system of strategy and structure
experiences internal or external shifts.
• Firm failure happens through a dynamic, four-step process
(see Exhibit 11.2).

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 Take Away Concepts (3 of 7)

LO 11-3 Define organizational structure and describe its four elements.

•An organizational structure determines how firms orchestrate

employees’ work efforts and distribute resources. It defines how
firms divide and integrate tasks, delineates the reporting
relationships up and down the hierarchy, defines formal
communication channels, and prescribes how employees
coordinate work efforts.
•The four building blocks of an organizational structure are
specialization, formalization, centralization, and hierarchy (see
Exhibit 11.3).

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 Take Away Concepts (4 of 7)

LO 11-4 Compare and contrast mechanistic versus organic organizations.

• Organic organizations are characterized by a low degree of

specialization and formalization, a flat organizational
structure, and decentralized decision making.
• Mechanistic organizations are described by a high degree of
specialization and formalization, and a tall hierarchy that
relies on centralized decision making.
• The comparative effectiveness of mechanistic versus organic
organizational forms depends on the context.

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 Take Away Concepts (5 of 7)

LO 11-5 Describe different organizational structures and match them with

appropriate strategies.
•To gain and sustain competitive advantage, not only must structure follow strategy, but also the chosen organizational
form must match the firm’s business strategy.

•The strategy–-structure relationship is dynamic, changing in a predictable pattern—from simple to functional

structure, then to multidivisional (M-form) and matrix structure—as firms grow in size and complexity.

•In a simple structure, the founder tends to make all the important strategic decisions as well as run the day-to-day
operations.

•A functional structure groups employees into distinct functional areas based on domain expertise. Its different
variations are matched with different business strategies: cost leadership, differentiation, and blue ocean (see Exhibit
11.6).

•The multidivisional (M-form) structure consists of several distinct SBUs, each with its own profit-and-loss
responsibility. Each SBU operates more or less independently from one another, led by a CEO responsible for the
business strategy of the unit and its day-to-day operations (see Exhibit 11.7).

•The matrix structure is a mixture of two organizational forms: the M-form and the functional structure (see Exhibit
11.9).

•Exhibits 11.8 and 11.10 show how best to match different corporate and global strategies with respective
organizational structures.

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 Take Away Concepts (6 of 7)

LO 11-6 Describe the elements of organizational culture, and explain where

organizational cultures can come from and how they can be changed.
•Organizational culture describes the collectively shared values and norms of
its members.
•Values define what is considered important, and norms define appropriate
employee attitudes and behaviors.
•Corporate culture finds its expression in artifacts, which are observable
expressions of an organization’s culture.

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 Take Away Concepts (7 of 7)

LO 11-7 Compare and contrast different strategic control-and-reward

systems.
•Strategic control-and-reward systems are internal governance mechanisms put in
place to align the incentives of principals (shareholders) and agents (employees).
•Strategic control-and-reward systems allow managers to specify goals, measure
progress, and provide performance feedback.
•In addition to the balanced-scorecard framework, managers can use organizational
culture, input controls, and output controls as part of the firm’s strategic control-and-
reward systems.
•Input controls define and direct employee behavior through explicit and codified
rules and standard operating procedures.
•Output controls guide employee behavior by defining expected results, but leave the
means to those results open to individual employees, groups, or SBUs.

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 Key Terms
• Ambidexterity • Matrix structure
• Ambidextrous organization • Mechanistic organization
• Centralization • Multidivisional structure (M-form)
• Exploitation • Organic organization
• Exploration • Organizational culture
• Formalization • Organizational design
• Founder imprinting • Organizational structure
• Functional structure • Output controls
• Groupthink • Simple structure
• Hierarchy • Span of control
• Holacracy • Specialization
• Inertia • Strategic control-and-reward systems
• Input controls

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 Chapter 11 Cases & Exercises

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 Chapter Case 11: Consider This… (1 of 2)

• Zappos – online shoe retailer

• Implementation of holacracy is not going well.
– Holacracy distributes power to self managed teams.
• Reasons why the implementation was difficult:
– Removed paths for clear advancement
– Employee circles introduced paralysis
– Made the organization more political
– 200 employees quit.

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 Chapter Case 11: Consider This… (2 of 2)

• What elements of an organic organization are

apparent from the chapter material?
• What is holacracy, and how does it differ from others
discussed in this chapter?
• Why is Zappos’ experiencing significant
implementation problems with holacracy?
• Do you think that holacracy is good match with
Zappos’ business strategy?

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 My Strategy Exercise:
What Organization Best Suits You?

• It can be helpful to gauge compatibility between

career and personality type.
• Think about your next job and your career plans:
– Review Exhibit 11.3 and circle what appeals to you, cross
out the factors that you don’t like.
– What values are most important to you?
– Which control / reward system discussed in the concluding
section of this chapter do you prefer?

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 Small Group Exercise #1

• You decide to open a small retail shop.

– Concept #1: high end antique store
• Near a coffee shop, items authenticated by an appraiser
– Concept #2: drop-off store for online auctions
• List, sell, and ship the items for a % of the sales price
• Questions to answer:
– What is the business strategy for these concepts?
– How would the structure be different for the concepts?
– What are the cultural differences in the concepts?
– Control-and-reward system differences?

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 Small Group Exercise #2

• Daniel Pink developed the ROWE theory:

– Most powerful motivation occurs when:
• There is an interest in the work
• The work itself has meaning

• Brainstorm ways the university can apply ROWE

– How might this change allocation of resources?
– What impacts would result if the number of desired online
courses increased?
– How might this change your program of study?
– How would you address the pitfalls?
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 End of Chapter 11

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 Strategy Smart Videos

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 Strategy Smart Videos (1 of 6)

• Talent Reviews at GE
• As Discussed with Jeff Immelt & Jack Welch
• Part 1 Link:
– http://www.youtube.com/watch?v=CCVy7OxThGo
• 10:32 Minutes
• Part 2 Link:
– https://www.youtube.com/watch?v=8_mlEWJ_nto
• 6:24 Minutes

©McGraw-Hill Education.
 Strategy Smart Videos (2 of 6)

• Amy Kates, Managing Partner at Kates Kesler

Organization Consulting
• Organization design and how it affects business
innovation
• Link:
– https://www.youtube.com/watch?v=2FbcsfEWEe0
• 2:29 Minutes

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 Strategy Smart Videos (3 of 6)

• Dan Pink
• The Surprising Truth About What Motivates Us
• Link:
– https://www.youtube.com/watch?v=u6XAPnuFjJc
• 10:47 Minutes

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 Strategy Smart Videos (4 of 6)

• Daniel Pink
• TED Talk: The Puzzle of Motivation
• Link:
– https://www.youtube.com/watch?v=rrkrvAUbU9Y
• 18:36 Minutes

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 Strategy Smart Videos (5 of 6)

• How Zappos will run with no job titles

• Aligns with the ChapterCase
• Link:
– https://www.youtube.com/watch?v=-DYigfNJQlg
• 3:44 Minutes

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 Strategy Smart Videos (6 of 6)

• Corporate Culture at Apple

• The cultural artifacts and inferring underlying beliefs
and value structures at Apple
• Link:
– https://www.youtube.com/watch?v=EcHpgsTg458
• 4:35 Minutes

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 Chapter Case 11

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 Chapter Case 11: Zappo’s (1 of 2)

• An online shoe and clothing store

– The world’s largest shoe store
– Also offers handbags, clothing items, eyewear, and
accessories
– Mission: deliver happiness
• Zappo’s has also made investors happy
– 10 years after founding, has achieved $1 billion in annual
sales
– Amazon.com acquired the company for $1.2 billion

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 Chapter Case 11: Zappo’s (2 of 2)

• Zappo’s has experienced rapid growth.

– 20 million unique visitors a month
• Is reorganizing to a holacracy
– To offer the best customer service possible
– Employees self-direct their work instead of reporting to a
manager who tells them what to do.
• This structure can be hard to implement.
– Zappo’s is the first large corporation to try it.

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 Appendix 1 The AFI Strategy Framework
The important inside circle is titled "Gaining and Sustaining a Competitive Advantage" that is at the very center of the image, with
five different circles on the outside of it. Arrows go back and forth from the center circle to each of the five outer circles. The five
outer circles are labeled: (1) Getting Started, (2) External and Internal Analysis, (3) Formulation: Business Strategy, (4)
Formulation, Corporate Strategy, and (5) Implementation.

Each of these outer five circles have a brief description beside them to explain what the circle means:

Under the first outer circle titled "Getting Started", it says: Part 1, Strategy Analysis, "What is Strategy (Chapter 1)" and "Strategic
Leadership: Managing the Strategy Process (Chapter 2)".

Under the second outer circle titled "External and Internal Analysis", it says: Part 1, Strategy Analysis, "External Analysis: Industry
Structure, Competitive Forces and Strategic Groups (Chapter 3)", "Internal Analysis: Resources, Capabilities and Core
Competencies (Chapter 4)", and "Competitive Advantage, Firm Performance, and Business Models (Chapter 5)".

Under the third outer circle titled "Formulation: Business Strategy", it says: Part 2, Strategy Formulation, "Business Strategy:
Differentiation, Cost Leadership and Integration (Chapter 6)" and "Business Strategy, Innovation and Entrepreneurship (Chapter
7)".

Under the fourth outer circle titled "Formulation: Corporate Strategy", it says: Part 2, Strategy Formulation, "Corporate Strategy:
Vertical Integration and Diversification (Chapter 8)", "Corporate Strategy: Strategic Alliances, Mergers and Acquisitions (Chapter
9)", and "Global Strategy: Competing Around the World (Chapter 10)".

Under the fifth outer circle titled "Implementation", it says: Part 3, Strategy Implementation, "Organizational Design: Structure,
Culture and Control (Chapter 11)", and "Corporate Governance and Business Ethics (Chapter 12)".

Return to slide

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 Appendix 2 Exhibit 11.2 Failure of Firms to Respond to
Shifts in the External or Internal Environments

This image shows a large oval, which contains four smaller ovals. Namely,
1. Mastery of, and fit with, the current environment.
2. Success, usually measured by financial measurements.
3. Structures, measures, and systems to accommodate and manage size.
4. A resulting organizational inertia that tends to minimize opportunities and
challenges created by shifts in the internal and external environment.
There are shorter internal arrows titled "External Shifts / PESTEL Factors" which
indicate pressures on the firm. A square on the inside of the model is titled "Internal
Shifts" such as accelerated growth, a change in the business model, entry into new
markets, a change in the top management team (TMT), or mergers and acquisitions.

Return to slide

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 Appendix 3 Exhibit 11.4 Types of Organizational Structure

This an important evolutionary pattern.

Small firm size, low organizational complexity = simple structure.
Medium firm size, medium organizational complexity =
functional structure.
Large firm size, high organizational complexity = multidivisional
structure or matrix structure.
As a firm diversifies into different product lines and geographies,
it generally implements a multidivisional or a matrix structure.

Return to slide

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Appendix 4 Exhibit 11.5 Typical Functional Structure

This image demonstrates that while work in a functional

structure tends to be specialized, it is centrally coordinated by
the CEO. All positions in this image report to the CEO. A
functional structure allows for an efficient top-down and
bottom-up communication chain between the CEO and the
functional departments, and thus relies on a relatively flat
structure.

Return to slide

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 Appendix 5 Exhibit 11.7 Typical
Multidivisional Structure
Corporations may use SBUs to organize around different
businesses and product lines or around different geographic
regions. Each SBU represents a self-contained business with its
own hierarchy and organizational structure. Above all of the
CEOs is a president who reports to the board of directors. Also
reporting to the president are the Corporate R&D team as well
as the corporate HQ staff.

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 Appendix 6 Exhibit 11.9 Typical Matrix Structure

The geographic divisions (North America, South America,

Europe, Middle East & Africa, and Asia) are charged with local
responsiveness and learning. At the same time, each SBU is
charged with driving down costs through economies of scale and
other efficiencies. A global matrix structure also allows the firm
to feed local learning back to different SBUs and thus diffuse it
throughout the organization.

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©McGraw-Hill Education.
 Appendix 7 Exhibit 11.11 The Elements of
Organizational Culture

Values, norms, and artifacts are shown as concentric circles. The

most important yet least visible element—values—is in the
center. As we move outward in the figure, from values to norms
to artifacts, culture becomes more observable. Understanding
what organizational culture is, and how it is created, maintained,
and changed, can help you be a more effective manager. A
unique culture that is strategically relevant can also be the basis
of a firm’s competitive advantage.

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