Coordinating Roles Coordinating roles or groups use persuasion and negotiation to help dovetail the efforts of different units. They are boundary-spanners with diplomatic status who are artful in dealing across specialized turfs. For example, a product manager in a consumer goods company, responsible for the performance of a laundry detergent or low-fat snack, spends much of the day pulling together functions essential to the product’s success such as R&D, manufactur- ing, marketing, and sales.
Matrix Structures Until the mid-twentieth century, most companies were functionally organized. Responding to strategic complexity during the late 1950s and early 1960s, many companies shed their functional structures in favor of divisional forms pioneered by DuPont and General Motors in the 1920s. Beginning in the mid-1960s, many organizations in unwieldy environments began to develop matrix structures, even though they are often cumbersome (Peters, 1979; Davis and Lawrence, 1978.) When organizations !gure out how to make matrix structures work, they solve many problems (Vantrappen and Wirtz, 2016). By the mid-1990s, Asea Brown Boveri (ABB), the Swiss-based electrical engineering giant, had grown to encompass some 1,300 separate companies and more than 200,000 employees worldwide. To hold this complex collection together, ABB developed a matrix structure crisscrossing approximately 100 countries with about 65 business sectors (Rappaport, 1992). Each subsidiary reported to both a country manager (Sweden, Germany, and so on) and a sector manager (power transformers, transportation, and the like).
The design carried the inevitable risk of confusion, tension, and con”ict between sector and country managers. ABB aimed for structural cohesion at the top with a small executive coordinating committee (11 individuals from seven countries in 2016), an elite cadre of some 500 global managers, and a policy of communicating in English, even though it was a second language for most employees. Variations on ABB’s structure—a matrix with business or product lines on one axis and countries or regions on another—are common in global corporations. Familiar brands like Starbucks and Whole Foods rely on matrix structures to support their successful international operations (Business Management, 2015).
Networks Networks have always been around, more so in some places than others. Cochran (2000) describes how both Western and Japanese !rms doing business in China in the nineteenth and twentieth centuries had to adapt their hierarchical structures to accommodate powerful
Getting Organized 59
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social networks deeply embedded in Chinese culture. One British !rm tried for years, with little success, to limit the control of “Number Ones” (powerful informal leaders who headed local networks based on kinship and village) over the hiring and wages of its workforce. The proliferation of information technology beginning in the 1980s led to an explosive growth of digital networks—everything from small local grids to the global Internet. These powerful new lateral communication devices often supplanted vertical strategies and spurred the development of network structures within and between organizations (Steward, 1994). Powell, Koput, and Smith-Doerr (1996) describe the mushrooming of “interorganizational networks” in fast-moving !elds like biotechnology, where knowledge is so complex and widely dispersed that no organization can go it alone. They give an example of research on Alzheimer’s disease that was carried out by thirty-four scientists from three corporations, a university, a government laboratory, and a private research institute.
Many large global corporations have evolved into interorganizational networks (Ghoshal and Bartlett, 1990; Gulati and Gargiulo, 1999). Horizontal linkages supplement and some- times supplant vertical coordination. Such a !rm is multicentric: initiatives and strategy emerge frommany places, taking shape through a variety of partnerships and joint ventures.
Designing a Structure That Works In designing a structure that works, managers have a set of options for dividing the work and coordinating multiple efforts. Structure needs to be designed with an eye toward strategy, the nature of the environment, the talents of the workforce, and the available resources (such as time, budget, and other contingencies). The options are summarized in Exhibit 3.1.
Vertical or Lateral? Vertical coordination is often ef!cient but not always effective and depends on employees’ willingness to follow directives from above. More decentralized and interactive lateral forms of coordination are often needed to keep top-down control from sti”ing initiative and creativity. Lateral coordination is often more effective but costlier than its vertical counter- parts. A meeting, for example, provides an opportunity for face-to-face dialogue and decision making but may squander time and energy. Personal and political agendas may undermine the meeting’s purpose.
Ad hoc groups such as task forces can foster creativity and integration around pressing problems but may divert attention from ongoing operating issues. The effectiveness of coordinators who span boundaries depends on their credibility and skills in handling others.
60 Reframing Organizations
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Exhibit 3.1. Basic Structural Options.
Division of labor: Options for differentiation
Customers or clients
Coordination: Options for integration
Rules and policies
Planning and control systems
Coordinators are also likely to schedule meetings that take still more time from actual work (Hannaway and Sproull, 1979). Matrix structures provide lateral linkage and integration but are notorious for creating con”ict and confusion. Multiple players and decision nodes make networks inherently dif!cult to manage. Organizations have to use both vertical and horizontal procedures for coordination. The optimal blend of the two depends on the unique challenges in a given situation. Vertical coordination is generally superior if an environment is stable, tasks are well understood and predictable, and uniformity is essential. Lateral communications work best for complex tasks performed in a turbulent environ- ment. Every organization must !nd a design that works for its circumstances, and inherent structural tradeoffs rarely yield easy answers or perfect solutions.