Introduction
In the previous chapter you described the organization in terms of its basic structure. Today many organizations operate in multiple locations and use variants of the basic organizational structures presented in Chapter 4. Distri- buted organizational designs enable firms to coordinate work across national and other geographic boundaries and meet the knowledge needs of our increas- ingly service-oriented economy.
This segment of our step-by-step approach consists of two analyses. First, we will assess your organization’s approach to organizing across geographic boundaries. Second, we will assess the organization’s approach to organizing for knowledge exchange. The variants in structure described in this chapter are sometimes called “new organizational forms” because they represent new twists on classic ways of organizing (DeSanctis and Fulk, 1999; Heydebrand, 1989). The variants described here represent options for designing your firm to meet the demands of today’s global, information-intense organization.
When an organization is founded, it typically starts by doing business in one locale. That locale services a particular neighborhood, city, or even an entire country. As the executive managing a business centered in one locale, you become an expert in doing business in that environment. You know the people, the culture, and the general setting in which your firm operates. Your firm becomes highly knowledgeable about that one locale. This allows you to build efficiency and effectiveness based on local knowledge. In addition, doing business with partners, that is, managing relationships with suppliers, distributors, government regulators, and other entities, is relatively
straightforward when all are co-located. You share a common language, laws, customs, and ways of doing business.
As your business expands to include operations or sales activity to regions that are geographically distant from your home locale, you face significant organizational challenges. These relate to managing people and processes across distance and cultures. The challenges are important whether you are managing a large organization or a small work team. Should you organize around the talent (expertise) or function, regardless of locale, or should you organize based on geographic location? To what extent should you allow various locales to operate independently versus enforce standard ways of doing things across the firm? Should you own or directly manage operations in distant locales, or would it be better to form partnerships or alliances that permit local units to organize as they see fit? To what extent should you rely on information technology, versus travel and face-to-face meetings, to link people together?
As an example, consider the European appliance manufacturer Merloni Elettrodomestici, an Italian-owned company with headquarters in Paris. Ini- tially limited to regional operations in Italy, the company began exporting its products in 1972. The company soon had a sales force distributed across Europe and later acquired or built facilities in Germany, France, the UK, Spain, Portugal, Holland, and Belgium (Bower, 2001). The firm then faced the chal- lenge of how to organize a growing, distributed enterprise. Merloni first created country-based organizations, all coordinated through the Paris office; later the company consolidated by product line, creating several centers of excellence that coordinated all operations for a given product throughout Europe. By 1994 a matrix reporting structure was added to link research and development activities with brand-based activities. In more recent years the firm has created a “developing markets division,” with country-based organizations in Russia and China, while maintaining product-line organizations in Europe. Merloni’s experience illustrates the kinds of design choices that firms have to make as they expand their businesses around the world.
Similar design decisions must be made by managers of small work teams. Consider an energy engineering firm operating within a large multinational enterprise. The large company may operate in a divisional fashion, but any one division may have engineering teams with research expertise in Germany, design expertise in the US, and production expertise in Malaysia. How should the team organize? All work could be coordinated through one locale, such as the US facility, or, instead, team members in each of the three countries could do their work autonomously and simply link tasks together on an as-needed,
project-by-project basis. Team members could complete all task demands on their own, or they could hire external parties to work as contractors, passing routine or specialized work to the contractors and leaving core work tasks for the regular team members. The team could designate liaison representatives in each country to coordinate with team members in the other countries; or teams could set up a matrix system in which specialists from each locale regularly communicate with all parallel specialists in the other locales.
Every day you face these kinds of design decisions in your organization. As an executive, you decide how work is to be allocated and coordinated across place and space. When workers are in different time zones, speak different languages, have different holiday schedules, work habits, and skill sets, the work allocation and coordination challenges escalate. Worldwide distribution of work creates access to resources to accomplish the organization’s mission, and it can bring your company close to the customers and suppliers with whom you do business; but distribution of work also creates immense challenges in how to design work processes for the greatest efficiency and effectiveness.
Let us begin by assessing an organization’s approach to organizing across geographic boundaries. Next, we will assess the organization’s approach to organizing for knowledge exchange.