Handbook of Principles of Organizational Behavior - Soltanieh ...

416 L EX DONALDSON
units are acquired or divested by a corporation, or combined in a division or split into
separate divisions (Karim, 2006 ). Many of these changes are compatible with the logic of
building larger divisions to achieve economies of scale, or creating more tightly focused
divisions to attain innovation and sales growth (Karim and Mitchell, 2000 , 2004 ).
Furthermore, the strategy of an organization may be low - cost mass production for an
existing product (or service), while simultaneously pursuing the innovation of developing
and launching a new product (or service). Then the organization should adopt the “ ambidexterous
organization ” structure (O ’ Reilly and Tushman, 2004 ). The existing mass - produced
product should be run mechanistically to reap cost savings, while the new product
should be run organically to maximize innovation and minimize development time. To
facilitate these different substructures, they should be structurally separated, by making
each a division. Greeley Hard Copy (itself a subunit of Hewlett - Packard) did so by splitting
off its new, portable scanner product into a separate division from its existing fl at bed
scanner division (Tushman and Radov, 2000 ). Similarly, USA Today split off its new, online
news service into a separate division from the existing newspaper, in order to develop the
online news concept. Thus, the subprinciple that medium diversifi ed (i.e. related products
or services) companies should divisionalize to innovate, applies even if only one of the
divisions is innovatory.
Some medium diversification organizations may wish to avoid the extremes of maximizing
cost control or sales growth and instead may wish to compromise and have some
cost control while attaining some innovation and customer responsiveness so as to attain
moderate sales growth. They can retain both functional and product or service structures
with equal emphasis by adopting a matrix structure of the functional - product or functional ­
project or functional - service types. Functional managers coordinate the common issues
across the related products or services. A subordinate reports simultaneously to a functional
manager and also to the manager in charge of a product or service. For example,
the functional - project matrix of the Lockheed - Georgia Division of the Lockheed Aircraft
Corporation features a manager for each function (e.g. engineering) and also a manager
for each project, that is, airplane type, with subordinates reporting to both. The functional
managers seek to control costs by optimizing the use of resources in an integrated
way across projects, while the project managers facilitate interaction within their temporary
teams (drawn from the functions), to speed innovation and to interface with their client
(Corey and Star, 1971 ). In the contemporary era, a quite frequent type of organizational
redesign in large corporations is the formation of additional teams, such as for projects, to
create matrix structures or to make existing matrix structures more elaborate (Galbraith,
2001 ).
The subprinciple of compromise for medium diversifi cation is:
Medium diversified organizations should choose a functional - product matrix structure where both some cost
control and some sales growth is the goal.
While corporate head offices should be smaller and less interventionist where products
(or services) are unrelated, this does not mean that they should never intervene in the
divisions. On the contrary, corporate head offices can and should intervene in divisions
when divisional performance is unsatisfactory. This applies not only for corporations with
unrelated diversification but also for corporations with related diversifi cation or vertical