UNIT 2: COMPANY STRUCTURE

Exercise 1. Before you read dlscuss fhese questions:

think of?

company structure?

Exerclse 2. Read the text about the different ways in which companies are
organized and answer these questions:

What are they?

DOING THE BUSINESS

Ror'sln lngle hears how efficient management structures are vital for success

The need for a solid structure within all busrness entities is "absolutely
fundamental", according to Ms. Angela Tripoli, a lecturer in Business Administration at
University College Dublin. "Organizational structure concerns who reports to whom in
the company and how different elements are grouped together. A new company
cannot go forward without this and established companies must ensure their structure
reflects their target markets, goals and available technology".
Depending on their size and needs there are several organizational structures
companies can choose from. lncreasingly though, in the constantly evolving
business environment, "many firms are opting for a kind of hybrid of all of them".
The most recognizable set up is called the functional structure where a fairly
traditional chain of command (incorporating senior management, middle management
and junior management) is put in place. The main benefit of this system is clear lines
of communication from top to bottom but it is generally accepted that it can also be a
bureaucratic set up which does not favour speedy decision-making.
More and more companies are organizing themselves along product /rnes where
companies have separate divisions according to the product that is being worked on.
"ln this case the focus is always on the product and how it can be improved".
The importance for multinational companies of a good geographic structure,
said Ms. Tripoli, could be seen when one electrical products manufacturer
produced an innovative rice cooker which made perfect rice - according to
western standards. When they tried to sell it on the Asian market the product
flopped because there were no country managers informing them of the changes
that would need to be made in order to satisfy this more demanding market.
 The matrix structure first evolved during a project developed by NASA when
they needed fo pool togefher different skills from a variety of functional areas.
Essentially the matrix structure organizes a business into project teams, led by
project leaders, to carry out certain objectives. Training is vitally important here in
order to avoid conflict between the various members of the teams.
During the 1980s a wave of restructuring went through industry around the
globe. This process, known as delayering, saw a change in the traditional
hierarchical structures with layers of middle management being removed. This
development was, driven by new technology and by the need to reduce costs. The
overall result was organizations that were less bureaucratic.
The delayering process has run its course now. Among the trends that currently
influence how a company organizes itself is the move towards centralization and
outsourcing. Restructuring has evolved along with a more "cusfomercentric" approach
that can be seen to good effect in the banks. They now categorize their customers and
their complex needs into rou instead of a ct lines

Another development can be

seen in larger companies, which
are giving their employees more
freedom to innovate in order to maintain
a competitive edge.
Ms. Julia MacLauchlan,
Director of Microsoft's
European Product Development Centre
in Dublin, said the leading software
company had a very flat organizational
structure. "There would not be more
than around seven levels between the average software tester and Bill Gates", she said.
Microsoft is a good example of a company that is structured along product lines. ln
lreland, where 1,000 employees work on localization of the software for all
Microsoft's markets, the company is sp/if up into seven business units. Each unit
controls the localization of their specific products while working closely with the
designers in Microsoft's Seattle Headquarters.
It works, said Ms. Maclauchlan, because everyone who works in the unit is
"incredibly empowered".
"Without a huge bureaucratic infrastructure people can react a lot more quickly
to any challenges and work towards the company's objectives".

Exercise 3. Match these definitions with the four organizational structures

described in the text:

1. A cross-functional structure where people are organized into project teams.

2. A structure rather like the army, where each person has their place in a
fixed hierarchy.
3. A structure that enables a company to operate internationally, country by country.
4. A structure organized around different products.
Exercise 4. Match these nouns as they occur together in the text:

1. product a. teams
2. target b. objectives
3. borrowing c. lines
4. project d. units
5. delayering e. company
6. country f. process
7. business g. markets
8. software h. needs
9. company i. managers
Exerclse 5. Use an appropiate phrase from the text to complete each sentence

1. Banks need to be fully aware of their customers

2. Silicon Valley is full of .....
3. Many companies are now organized along , in which
each division is responsible for a group of products.
4. A matrix organization groups people into ..
5. Some companies are divided into different .. often
also called profit centres.
6. A multinational company will often have a number of in
charge of activities in different parts of the world.

Exercise 6. Match fhese terms with their definitions

1. business entities a. focusing on the customer rather than the product

2. set up b. new, original
3. innovative c. companies
4. flopped d. something that makes you better than other
companies
5. outsourcing e. did not succeed, failed
6, customercentric f. structure
7. competitive edge g. getting external companies to do work for your
company

Exercise 7. Complefe fhese senfences with an appropriate preposition

1. Organizational structure concerns who reports . ... ... whom.

2. Depending its size, there are several organizational
structures a company can choose from.
3. [iIany companies are organizing themselves ..... .... product lines.
4. ln the 1980s a wave of restructuring went ....... industry.
5. Delayering was driven ....... the need to reduce costs.
6. Microsoft in lreland is split ...... seven business units.
Exercr'se 8. Read the text below about different ways of organizing companies,
and then label the diagram, according to which of these they illustrate:

line structure matrix structure functional structure staff structure

:, [f ii

A B
tr c D

COMPANY STRUCTURE
ltlost organizations have a hierarchical or pyramidal structure, with one person
or a group of people at the top, and an increasing number of people below them at
each successive level. There is a clear line or chain of command running down
the pyramid. All the people in the organization know what decisions they are able
to make, who their superior (or boss) is (to whom they report), and who their
immediate subordinafes are (to whom they can give instructions).
Some people in an organization have colleagues who help them: for example,
there might be an Assistant to the lt/arketing lt/anager. This is known as a staff
position: its holder has no line authority, and is not integrated into the chain of
command, unlike, for example, the Assistant Marketing Manager, who is number
two in the marketing department.
Yet the activities of most companies are too complicated to be organized in a
single hierarchy. Shortly before the First World War, the French industrialist Henry
Fayol organized his coal-mining business according to the functions that it had to
carry out. He is generally credited with inventing functional organization. Today, most
large manufacturing organizations have a functional structure, including (among
others) production, finance, marketing, sales, and personnel or staff departments.
This means, for example, that the production and marketing departments cannot take
financial decisions without consulting the finance department.
Functional organization is efficient, but there are two standard criticisms. Firstly,
people are usually more concerned with the success of their department than that
of the company, so there are permanent battles between, for example, finance
and marketing, or marketing and production, which have incompatible goals.
Secondly, separating functions is unlikely to encourage innovation.
Yet for a large organization manufacturing a range of products, having a single
production department is generally inefficient. Consequently, most large companies
are decentralized, following the model of Alfred Sloan, who divided General Motors
into separate operating divisions in 1920. Each division had its own engineering,
production and sales departments, made a different category of car (but with some
overlap, to encourage internal competition), and was expected to make a profit.
Businesses that cannot be divided into autonomous divisions with their own markets
can simulate decentralization, setting up divisions that deal with each other using
internally determined transfer prices. Many banks, for example, have established
commercial, corporate, private banking, international and investment divisions.
 An inherent problem of hierarchies is that people at lower levels are unable to
make important decisions, but have to pass on responsibility to their boss. One
solution to this is matrix management, in which people report to more than one
superior. For example, a product manager with an idea might be able to deal directly
with managers responsible for a certain market segment and for a geographical
region, as well as the managers responsible for the traditional functions of finance,
sales and production. This is one way of keeping authority at lower levels, but it is not
necessarily a very efficient one. Thomas Peters and Robert Waterman, in their well-
known book /n Search of Excellence, insist on the necessity of pushing authority and
autonomy down the line, but they argue that one element - probably the product -
must have priority; four-dimensional matrices are far too complex.
A further possibility is to have wholly autonomous, temporary groups or teams that
are responsible for an entire project, and are split up as soon as it is successfully
completed. Teams are often not very good for decision-making, and they run the risk
of relational problems, unless they are small and have a lot of self-discipline. ln fact
they still require a definite leader, on whom their success probably depends.

' text, and why?

First summary:
Although most organizations are hierarchical, with a number of levels, and a line of
command running from the top to the bottom, hierarchies should be avoided because they
make decision-making slow and difficult. A solution to this problem is matrix management,
which allows people from the traditional functional departments of production, finance,
marketing, sales, etc. to work together in teams. Another solution is decentralization: the
separation of the organization into competing autonomous divisions.
Second summary:
Most business organizations have a hierarchy consisting of several levels and a clear
line of command. There may also be staff positions that are not integrated into the
hierarchy. The organization might also be divided into functional departments, such as
production, finance, marketing, sales and personnel. Larger organizations are often
further divided into autonomous divisions, each with its own functional sections. More
recent organizational systems include matrix management and teams, both of which
combine people from different functions and keep decision-making at lower levels.
Third summary:
Most businesses are organized as hierarchies, with a clear chain of command: a boss who
has subordinates, who in turn have their own subordinates, and so on. The hierarchy might be
internally divided into functional departments. A company offering a large number of products
or services might also be subdivided into autonomous divisions. Communication among
divisions can be improved by the introduction of matrix management or teams.

and production (or operations) departments. Classify the following

strategies according to which departments would probably favour them:

1. a factory working at full capacity

2. a large advertising budget
 3. a large sales force earning high commission
4. a standard product without optional features
5. a strong cash balance
6. a strong ma*et share for new products
7 . generous credit facilities for customers
8. high profit margins
9. large inventories to make sure that products are available
10.low research and development spending
1 1 . machines that give the possibility of making various different products
12.self-financing (using retained eamings rather than borrowing)

Exercise 9. Sentences 1 to I make up a short text about different ways in which

companies can be structured. Complete each sentence, by taking a middle part
from the second box and an end from the third box.

1. Most organizations have a hierarchical or pyramidal structure,

2. A clear line or chain of command runs down the hierarchy,
3. Some people in an organization have an assistant who helps them;
4. Yet the activities of most large organizations are too elaborate
5. Large companies manufacturing a wide range of products, e.g. General Motors,
6. Businesses that cannot be divided into autonomous divisions with their own markets
7. An inevitable problem with hierarchies is that people at lower levels
8. One solution to this problem is matrix management, in which people report to
more than one superior:
9. Another, more recent, idea is to have a network of flexible groups or teams,
a. are normally decentralized into separate operating divisions,
b. are unable to make important decisions, but are obliged to pass on
responsibitity to their boss,
c. can simulate decentralization, setting up divisions that use
d. instead of the traditional departments, which are often at war with each other;
e. so that all employees know who their superior or boss is, to whom they report,
f. e.g a brand manager with an idea can deal directly with
g. this is an example of a staff position: its holder has no line authority,
h. to be organized in a single hierarchy, and require functional organization,
i. with a sinqle person or a group of people at the top,
j. and an increasing number of people below them at each successive level.
k. and is not integrated into the chain of command.
l. and who their immediate subordinates are, to whom they can give instructions.
m. each with its own engineering, production and sales departments.
n. internally determined transfer prices when dealing with each other.
o. the appropriate managers in the finance, manufacturing and sales departments.
p. they are formed to carry out a project, after which they are dissolved and their
members reassigned.
q. unless responsibilities have been explicitly delegated.
r. usually with production or operations, finance, marketing and personnel departments.
Exercise 10. Complete the text using the conect farm of the following verbs

achieve allocate balance dealwith develop

employ estab/rsh follow require sef
The top managers of a company (1) have to objectives and then develop particular
strategies that will enable the company to (2)......... them. This will involve (3)......... the
company's human, capital and physical resources. Strategies can often be sub-divided
into tactics - the precise methods in which the resources attached to a strategy are (4)

The founders of a business usually establish a "mission statement" - a declaration about

what the business is and what it will be in the future. The business's central values and
objectives will (5) from this. But because the business environment is always
changing, companies will occasionally have to modify or change their objectives. lt is part
of top management's role to (6) ......... today's objectives and needs against those of the
future, and to take responsibility for innovation, without which any organization can only
expect a limited life. Top managers are also expected to set standards, and to (7)
human resources, especially future top managers.
They also have to manage a business's social responsibilities and its impact on the
environment. They have to (8) ..... .. . and maintain good relations with customers, major
suppliers, bankers, government agencies, and so on. The top management, of course, is
also on permanent stand-by to (9) major crises.
Between them, these tasks (10) ......... many different skills which are almost never found
in one person, so top management is work for a team. A team, of course, is not the same
as a committee: it needs a clear leader, in this case the chairman or managing director.

Complete the following collocations:

11.to set .........
12.to allocate
13. to ......... responsibility
14.1o standards
15. to and ......... good relations
16. to ......... a crisis

Exercise 11. Complete the text using the fallowing verbs

appointed attacked combined defined

con stituted reviewed su pervised su pported

Large British companies generally have a chairman of the board of directors who oversees
operations, and a managing director (MD) who is responsible for the dayto-day running of the
company. ln smaller companies, the roles of chairman and managing director are
usually (1).. .. Americans tend to use the term president ratherthan chairman, and
chief executive officer (CEO) instead of managing director. The CEO or MD is (2)........
by various executive officers or vice-presidents, each with clearly (3). authority and
responsibility (production, marketing, finance, personnel, and so on).
Top managers are (4) (and sometimes dismissed) by a company's board of directors.
They are (5) and advised and have their decisions and performance (6) ..
.... by the
board. The directors of private companies were traditionally major shareholders, but this
does not apply to large public companies with wide share ownership. Such companies
should have boards (7)......... of experienced people of integrity and with a record of
performance in a related business and a willingness to work to make the company
successful. ln reality, however, companies often appoint people with connections that will
impress the financial and political milieu. Yet a board that does not demand high
performance and remove inadequate executives will probably eventually find itself
(8) . .. and displaced by raiders.

Exercise 13. Many big firms have lots of different secfions and it can be helpfut to
know which part of the company does what. Look at the following company
departments. Which depaftmenl does which job?

Human Resources:
Production:
Marketinq:
Finance:

Sales, Financial Services, Quality, Training, Payroll, Production, Advertising,

Accounts,
Distribution, Maintenance, Marketing, Customer Service, Purchasing, Personnel,
Packaging

Exercise 14. What departmenf does which job? Match each job from the column
on the left to a company depaftment from the column an the right:

1. puts the product into boxes? A. Training

2. pays wages and salaries? B. Production
3. plans how to promote products? C. Marketing
4. has systems to prevent mistakes? D. Purchasing
5. looks after the equipment? E. Personnel
6. deals with complaints? F. Packaging
7. manufactures the products? G. Sales
8. sends invoices to customers? H. Accounts
9. buys equipment? l. Payroll
10. arranges credit facilities? J. Distribution
1 1. helps staff develop new skills? K. Customer Service
12. sends products to the customer? L, Financial Services
13. buys media space? M. Quality
14. recruits new staff? N. Advertising
15. sends representatives to visit O. Maintenance
customers?
 RE.ENGINEERING THE CORPORATION
"lt's not called redundancy these days ... lt's called downsizing"
lf you want to stay in step with the latest management trend, fire half your staff.
That's the advice of Michael Hammer and James Champy in their best-selling
book 'Re-engineering the Corporation'. For Business Process Re-engineering or
BPR is about smashing up the corporate hierarchies we're used to and rebuilding
them from scratch. And the result is that tens of thousands of managers are losing
their jobs in the name of re-inventing the corporation. ln fact, some say that, if
BPR really caught on, 25 million Americans would be made redundant tomorrow.
Of course, it's not called redundancy these days. lt's called downsizing. But it
means the same thing to an out-of-work executive.
Out with vertical hierarchy
According to Tom Peters, a management guru who's clearly more excited
about BPR than the 25 million looking at impending unemployment, what a lot of
large companies are learning is that they can do better with four layers of
management than with twelve. The vertical hierarchy is out. The new, streamlined
'horizontal network' is in. And gone are the days of the autocratic kings of industry
- the Lee laccocas and John Sculleys of this world - for now the customer is king.
From the bottom up
Basically, BPR is a mixture of Japanese lean, flexible, 'just in time' production
and American enthusiasm for re-structuring companies from the bottom up. What
it means is that, in order to remain competitive, we'll all have to forget the old
bureaucratic empires, divided by function into separate departments such as sales
and accounts. We'll be organizing ourselves instead around continuous business
processes aimed at getting the product to the customer.
Empowerment or madness?
ln fact, 're-engineers' say that by the year 2000 it'll be team-players and not leaders
that businesses will chiefly be looking for. And, when it comes to decision-making, middle
management may increasingly find itself bypassed altogether, as more and more
responsibility is passed down the line to cross-functional teams of junior managers
and shopfloor workers. For by then these will have become largely self-managing,
and the corporate pyramid will be turned completely upside down. BPR
enthusiasts call this 'empowerment'. Others call it madness.
Mini-companies the way ahead
But is it even that? Or is it just a sexy new name for an old idea? ln Sweden, where
the top 20 firms do 80% of their business abroad, companies like the manufacturing grant,
ABB, have already done something remarkably similar to re-engineering by breaking up
the firm into hundreds of mini-companies. IBM had the same idea when it decided to form
independent mini-companies of its own and 'Big Blue' set up thirteen little 'Baby Blues'.
But, whereas ABB has managed to halve the development time of its products, IBM has
not been able fo keep pace with its smaller, fitter competitors.
The customer comes first
For BPR does seem to work better in some countries than in others. ln the fast-
growing economies of East Asia and Latin America, for example, it's doing well.
But things don't look quite so good in the USA, and in Central Europe it's even
worse. Paternalistic German bosses, in particular, find it hard to delegate
responsibility lo subordinates and yet overpaid German workers cost their
companies 50% more than the average American costs theirs. Many French
executives, too, still find it difficult to accept that the customer comes first. And in
recession-battered Britain BPR is, more often than not, just an excuse to cut back
and get rid of unwanted staff. Perhaps they should be gefting rid of BPR instead.

What is your immediate reaction to the article? Tick the response nearest to your
own or sum up what you think in a single sentence:
1. I think it paints a rather negative picture.
2. I think it oversimplifies the issue.
3. I think it's a bit one-sided.
4. I think it makes some interesting points.
5. I think it argues its case extremely well.
6. I think .....
Without refening back to the article, how much can you remember about,
7. mass redundancies
8. the managerial ladder
L the customer
l0.teamwork
11 mini-companies
.

l2.cultural attitudes

Find the expressions in the ariicle which mean

1 3.the latest'fashion'

14.right from the beginning

15.became popular
1 6. unemployed executive

lT.management expert
l S.completely restructure at all levels
19.may be excluded
20.can't match the competition
21.to economize

Exercise 15. Complete the short dialogues below using the following phrasal
verbs:

get on to come up with come in for put up with back out of

get down to live up to put in for cut back on keep up with

1. Has the restructuring of the production department speeded things up at all?

Not really. l'm afraid it failed to ................ expectations.
2. How's the budget for this year looking?
I think we're going to have to ................ spending, l'm afraid.
3. We really need to consult our legal advisors on this one.
oK,r'il.......... them straightaway.
4. You know, in this industry it's
sometimes hard to ................ all the latest
developments.
But that's what l'm paying you for!
5. You know, l'm sorry we ever got into this project in Hong Kong.
Well, its too late to it now.
6. I hear you've a promotion.
Yes. After eight years in this place, I think it's about time they gave me my own
 department.
7. I think everyone's here who's supposed to be here.
OK, let's business.
8. Look, if our team can't find a solution to this problem, no
one can. OK, go away and see what you can

9. A lot of people were very unhappy about the way they handled the redundancies.
I know. They've ..... quite a lot of criticism over that.
10. lf you want to stay in this job, you'll have to ................ a fair amount of hassle,
l'm
afraid.
That's OK. l'm getting fairly used to it by now.

Exercise 16. Now, without referring back to the previous exercise, try to match
up the halves of the following word partnerships:

1. come up a. to business
2. cut back b. for a promotion
3. get on c. for criticism
4. keep up d. to expectations
5. back out e. with a lot of hassle
6. put in f. with a solution
7. qet down g. of an agreement
L come up h. to the account department
9. come in i. with the latest development
10. put up j on spending

Exercr'se 17. Read the whole text and then complete the orEanization chart:

1.
2..

3.

ri
I

T-
I
1.

I think we have a fairly typical organization for a manufacturing firm. We're divided
into Finance, Production, Marketing and Human Resources departments.
The Human Resources department is the simplest. lt consists of two sections. One is