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.

Creating Organizational Control Systems

Output Control

Output control focuses on measurable results within an organization. Examples might include the number of hits a website receives per day, the number of microwave ovens an assembly line produces per week, or the number of vehicles a car salesman sells per month. In each of these cases, executives must decide what level of performance is acceptable, communicate expectations to the relevant employees, track whether performance meets expectations, and then make any needed changes.

In early 2011, Delta Air Lines was forced to face some facts as part of its use of output control. Data gathered by the federal government revealed that only 77.4 percent of Delta's flights had arrived on time during 2010. This performance led Delta to rank dead last among the major US airlines and fifteenth out of eighteen total carriers. In response, Delta took important corrective steps. The airline added to its ability to service airplanes and provided more customer service training for its employees. Because some delays are inevitable, Delta also announced plans to staff a Twitter account called Delta Assist around the clock to help passengers whose flights are delayed. These changes and others paid off. For the second quarter of 2011, Delta enjoyed a $198 million profit, despite having to absorb a $1 billion increase in its fuel costs due to rising prices.

Output control also plays a big part in the college experience. For example, test scores and grade point averages are good examples of output measures. If you perform badly on a test, you might take corrective action by studying harder or by studying in a group for the next test. At most colleges and universities, a student is put on academic probation when his grade point average drops below a certain level. If the student's performance does not improve, he may be removed from his major and even dismissed. On the positive side, output measures can trigger rewards too. A very high grade point average can lead to placement on the dean's list and graduating with honors.