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artlett, 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.

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artlett, 1990; Gulati and Gargiulo, 1999). Horizontal linkages supplement and some- times supplant vertical coordination.
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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.

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Exhibit 3.1. Basic Structural Options.

Division of labor: Options for differentiation




Customers or clients

Place (geography)


Coordination: Options for integration

Vertical Authority

Rules and policies

Planning and control systems

Lateral Meetings

Task forces

Coordinating roles

Matrix structures


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.

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Consider the contrasting structures of McDonald’s and Harvard University (highly regarded organizations in two very different industries), and Amazon and Zappos (two successful Internet retailers with very different structures).

McDonald’s and Harvard: A Structural Odd Couple

McDonald’s, the company that made the Big Mac a household word, has been enormously successful. For 40 years after its founding in the 1950s, the company was an unstoppable growth engine that came to dominate the worldwide fast-food business. McDonald’s has a relatively small staff at its world headquarters near Chicago; the vast majority of its employees are salted across the world in more than 36,000 local outlets. But despite its size and geographic reach, McDonald’s is a highly centralized, tightly controlled organization. Most big decisions are made at headquarters.

Managers and employees of McDonald’s restaurants have limited discretion about how to do their jobs. Their work is controlled by technology; machines time the preparation of French fries and measure soft drinks. The parent company uses powerful systems to ensure that customers get what they expect and a Big Mac tastes about the same whether purchased in New York, Beijing, or Moscow. Cooks are not expected to develop creative new versions of the Big Mac or Quarter Pounder. Creative departures from standard product lines are neither encouraged nor tolerated on a day-to-day basis, though the company has adapted to growth and globalization with a mantra of “freedom within a framework,” increasing its receptivity to new ideas from the !eld. The Big Mac and Egg McMuf!n were both created by local franchisees, and burgers-on-wheels home delivery was pioneered in traf!c-choked cities like Cairo and Taipei (Arndt, 2007b).

All that structure might sound oppressive, but a major McDonald’s miscue in the 1990s resulted from trying to loosen up. Responding to pressure from some frustrated franchisees, McDonald’s in 1993 stopped sending out inspectors to grade restaurants on service, food, and ambience. When left to police themselves, some restaurants slipped badly. Customers noticed, and the company’s image sagged. Ten years later, a new CEO brought the inspectors back to correct lagging standards (David, 2003).

Year after year, Harvard University appears at or near the top of lists of the world’s best universities. Like McDonald’s, it has a small administrative group at the top, but in most other respects the two organizations diverge. Even though Harvard is more geographically concentrated than McDonald’s, it is signi!cantly more decentralized. Nearly all of Harvard’s activities occur within a few square miles of Boston and Cambridge, Massachusetts. Most employees are housed in the university’s several schools: Harvard College (the undergraduate school), the graduate faculty of arts and sciences, and various professional schools. Each school has its own dean and its own endowment and, in accordance with Harvard’s philosophy of “every tub on its own bottom,” largely controls its own destiny. Schools have !scal autonomy, and individual professors have enormous discretion. They have substantial control over what courses they teach, what research they do, and which university activities they pursue, if any. Faculty meetings are typically sparsely attended. If a dean or a department head wants a faculty member to chair a committee

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or offer a new course, the request is more often a humble entreaty than an authoritative command.

The contrast between McDonald’s and Harvard is particularly strong at the level of service delivery. Individual personality is not supposed to in”uence the quality of McDonald’s hamburgers, but Harvard courses are the unique creations of individual professors. Two schools might offer courses with the same title but different content and widely divergent teaching styles. Efforts to develop standardized core curricula founder on the autonomy of individual professors.

Structural Differences in the Same Industry

Harvard and McDonald’s operate in very different industries, but you will sometimes !nd very different structures among enterprises operating in a similar business environment. Take Amazon and Zappos.

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