Strategy through Organizational Design

This resource presents the four types of organizational structures (simple, functional, multi-divisional, and matrix) and gives examples of companies that have used them. It then explores some of the newer ideas about organizational design and delves into the reasons to change for setting up control systems. Note the discussion on management fads.

Reasons for Changing an Organization's Structure

Creating an organizational structure is not a one time activity. Executives must revisit an organization's structure over time and make changes to it if certain danger signs arise. For example, a structure might need to be adjusted if decisions with the organization are being made too slowly or if the organization is performing poorly. Both these problems plagued Sears Holdings in 2008, leading executives to reorganize the company.

Sears's new structure organized the firm around five types of divisions: (1) operating businesses (such as clothing, appliances, and electronics), (2) support units (certain functional areas such as marketing and finance), (3) brands (which focus on nurturing the firm's various brands such as Lands' End, Joe Boxer, Craftsman, and Kenmore), (4) online, and (5) real estate. At the time, Sears's chairman Edward S. Lampert noted that "by creating smaller focused teams that are clearly responsible for their units, we [will] increase autonomy and accountability, create greater ownership and enable faster, better decisions (Retail Net)". Unfortunately, structural changes cannot cure all a company's ills. As of July 2011, Sears's stock was worth just over half what it had been worth five years earlier.