Managing Organizational Structure Change
Smith & Falmouth (S&F), a mid-sized phone and mail order product company, has expanded into the online product market. S&F created S&;F Online as an independent business unit while it proves the strategic viability and value of online as a sales channel. S&F Online is made up of a small team that has been successful, and is now working to increase sales and diversify their online offerings to add health and beauty services. As S&F Online grows, it needs to determine the best organizational structure to support its business strategy and builds on its current organizational culture.
Current Organizational Structure
S&F Online is currently a small, nimble and relatively flat organization. The CEO created three functional departments to support the business – web development, logistics and marketing. This allows the heads of the three departments to work well together as a coordinated, cross-functional team with low formalization. This structure also allows the company to operate organically, with little bureaucracy because they are not far removed from the CEO. Being flexible allows for them to work through all the startup complexities and learnings quickly. Additionally, being departmentalized functionally allows S&F Online to maximize their functional skills. “The major advantage to this type of grouping is obtaining efficiencies from putting like specialists together. Functional departmentalization seeks to achieve economies of scale by placing people with common skills and orientations into common units” (Robbins & Judge, 2007, p.540). While S&F Online remains small and has limited product offerings, the current structure suits the needs of the company.
Current Organizational Culture
The current S&F Online culture is one that is high in innovation, outcome orientation and team orientation. The personnel are all young, talented and value hard work. Being highly capable supports the departments’ ability to make decisions and work cross-functionally, with little direction from the CEO. The risk with such a culture is that as it grows, it will resist bureaucracy that comes along with being a large company, and may cause more political tactics as leaders fight for influence. Restructuring Recommendation
As S&F Online prepares for large growth and expansion of services, the CEO needs to consider the best organizational structure to support these strategies. The recent addition of a COO may not have been the best choice for the CEO to make. Having another management layer makes vertical communication more complex and disengages the current teams’ level of influence in the organization (when they are used to being key drivers). As such, S&F Online needs to take into careful consideration whether becoming more bureaucratic is the best choice for an innovative, cross-functional team.
The functional departments are going to need to support health consulting and beauty services online in addition to product sales. As S&F Online grows its portfolio of products, the best choice is for the organization to move to a matrix structure. It can operate more efficiently by having the functions support across all the product lines, but have designated product owners in charge of the direction of each product area. Benefits. One benefit of the matrix organization is to maintain the effectiveness of having specialized staff while support multiple product lines.
It facilitates the efficient allocation of specialists. When individuals with highly specialized skills are lodged in one functional department or product group, their talents are monopolized. The matrix achieves the advantages of economies of scale by providing the organization with both the best resources and an effective way of ensuring their efficient deployment (Robbins & Judge, 2007, p.549). Another benefit is the inherent...