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Big Business Organisational Structure - Does it Matter?

By m0rzo in Media
Sat Jan 05, 2002 at 08:05:55 PM EST
Tags: etc (all tags)
/etc

Do the old laws of business still apply? This article examines the relationship between organisational structure and brand success. Does it matter? Let's see...


The last 30 years or so have played host to the emergence of huge multi-national companies. Companies such as Coca-Cola, Nike, Microsoft, Nokia, Wal-Mart, and Budweiser, - the list is seemingly endless. Times change and the second half of the 20th Century was no exception to that rule when businesses realised one important thing. Branding, . Consumer goods companies, since the early 1970s, have begun to shift the focus from product to brand. From then on, product development was to come second fiddle to image and prestige. I will go into more detail regarding this important development further on.

There are two definite types of business structure in use today. There are the older, hierarchical structures and the modern, flatter, more democratic and egalitarian structures favoured, perhaps unwisely, by the service, sector. The ultimate test of effectiveness for a particular business structure would be to look at those companies which are the most successful in the world. This led to me checking out Interbrand, and it's annually produced "Top 100 Brand" list for more information.

Interbrand, according to them at least, is "the world's leading branding consultancy specialising in a unique range of brand-related services and activities." Founded in 1974, asides from offering consultation, it prints a globally recognised list of the 100 most eminent companies in the world. Think of it, if you will, as a kind of "Who's Who" of the business elite. Interbrand's Top 100, which when read out loud sounds a lot like a Top of the Pops countdown, makes compelling reading - all those companies you'd expect are well up there, with Coca-Colatopping the list followed unsurprisingly by Microsoft. Quite what they're best at isn't clear - screwing people or raking in plenty of cash; a bit of both one would suspect.

After doing a bit of research and already having prior knowledge of both companies, I decided to use list dominators Coca-Cola and Microsoft as two examples of structure in relation to competitiveness. According to Philippa Hankinson, Senior Lecturer at Roehampton University of Surrey, in her paper "'An empirical study which compares the organisational structures of companies managing the World's Top 100 brands with those managing Outsider brands" hierarchical structures are giving way to relatively flat structures in the post-modern business world. Far from being a beneficial evolution, however, the report casts doubt on the axiom that more rigid, hierarchical, top-down companies are less successful than flatter, more horizontally-integrated ones.

Hankinson, when referring to these "outsiders", is discussing those companies that despite being well-known, failed to get into this haut monde list of lists. Comparing the two groups, Hankinson discovered that both had a higher than expected proportion of relatively flat structures. This appears to be the current vogue and confirms her assertion that Hierarchical structures do seem to be in decline. According to her research, there was no real, clear, decisive correlation between business structure and brand success. This is an interesting disparity between consumer goods and consumer services companies. Interesting because amongst the Top 100 companies that were service-based, 80% of them were hierarchical as contrasted with 39% of the "outside" companies. This revelation of sorts, confirms misgivings had by many prominent economists that flatter organisational structuring can produce stronger brands. The evidence certainly suggests otherwise. It is, however, worth noting that 73% of the surveyed managers from Top 100 companies in the consumer goods sector had the right sort of structure for success, as opposed to only 43% from outsider companies. As previously stated, the relationship between structure and success concerning consumer goods companies was practically non-existent. Given that these two sets of companies would therefore have similar structures, it raises questions over whether it's simply managers' perceptions of how well the structure works, rather than anything inherently good about the structure itself.

Microsoft Corporation was founded in 1975 by William.H.Gates III and Paul Allen. An amateur interest in programming led to the birth of a company which, in the last 25 or so years, has rapidly elevated itself to be the dominant market leader and of course custodian of the prestigious second place position in Interbrand's Top 100. A pity it is then, that Microsoft Word fails to recognise Interbrand in its not-so-excellent spell-checker. Microsoft is a type of hierarchy, the very nature of its business necessitates it. In a rapidly altering market place it's essential that its staff members, who apparently are the worlds finest, can remain adept and learn new skills. Microsoft implements amongst its staff a structure of skills; a triangle divided into four levels. Starting at the top is universal, then global, local/unique and foundation skills at the bottom. These levels equate skill with competency and rightly so. It's with companies such as Microsoft and other computer based firms that a rigid command system is imperative in order to get things done. With all this supposed expertise then, it is in my opinion, unforgivable that Microsoft time and time again release to the public sub-standard software. The board of directors' role then becomes questionable - image appears to be everything. Microsoft spends a colossal amount of money on advertising, ensuring that the vast majority of home computers are running its operating systems. It is feasible then that Microsoft have, like countless other companies such as Nike, built up a brand that far, far surpasses the product. The small detail of structure is then glanced over; if you've got this mega-brand, you can release what you want to the general public, regardless of quality and sleep easy in the knowledge that they'll lap it up. Microsoft appear to have adopted the guise of feudalistic barons and we, the consumers, are their serfs - those that shun Windows in favour of Linux are true radicals.

Let-ups in labour laws have meant that companies like Microsoft, Nike, Gap, Intel and IBM can now have their goods manufactured by contractors, many of whom are based overseas. Here the shift from product to image is blatant. The truth is; organisational structure at Microsoft is relatively unimportant. Freeing the manufacturing and development to contractors leaves the big-wigs at Redmond free to concentrate on the real product - brand.

Why forsake brand for product? The answer to this question could explain the growing trend for "temp" workers across the big companies. Manufacturing overseas is cheap - manufacturing in the USA is expensive - simple. Many critics have observed that Microsoft is quickly on its way to becoming an "employee-less company" and they're not joking. Who cares about structure after all when you're hardly employing anyone? Bill Gates has amassed a fortune of over $55 billion whilst almost 80% of his workforce is classed as "temporary".

Nike is a perfect example of a company that's organisation matters little to competitiveness. Nike has, especially over the past few years, been criticised for it's involvement in sweat shops across Asia. Nike is one of these companies almost totally dependent on brand. It uses its vast wealth to make Nike synonymous with sport via intense advertising and sponsorship. So much money is spent, the fact that some little Chinese kid has been paid perhaps $2 a day to work a sewing machine in the most abysmal conditions, goes straight over the heads of consumers. Competitiveness can be attributed to much more plausible elements than organisational structure then - essentially the company who can make it's product the cheapest (regardless of any ethical factors) and can thrust it's adverts under the nose of the consumer at any possible opportunity, is the company that is more competitive, more effective and, it seems, more likely to get in the Interbrand Top 100 company list.

Coca-Cola has been doing the rounds ever since John Pemberton accidentally concocted a drink made from water, sugar syrup, caffeine and Cocaine in 1886. It's gone from generating just $50 in its first year of sales, to a massive yearly turn-over of over $19 billion. Like most companies of its age and stature, Coca-Cola until recently had a hierarchical structure. Whilst still being a hugely valuable and desired brand name, flat-under sales and threats from rivals forced the company to rethink its modus operandi. Douglas Daft Chairman and CEO of Coca-Cola realised that it had to rethink its structure and change accordingly with the times. Here is an instance of where brand wasn't enough - either that, or they weren't branding in the right way. Sure, they hadn't promised to get an advert on the moon like their rivals Pepsi, but they're certainly no stranger to the game of mass commercialism. Go to any third world country and you'll see billboard after billboard proclaiming the delights of Coke. Daft proposed "...flatter structures organised around work processes rather than functions, may be better positioned to understand customer needs."

Hankinson speculates as to whether companies like Coke with long histories have had more time to "bed down" their management structures and adapt to any changes that have been necessary over the years.

I believe that today, there are many, many more important and complicated variables that ensure a businesses' success than organisational structure. It can be argued that the Top 100 companies are in this elite little clique because they've managed to adapt themselves to various fashionable managerial vagaries and despite, rather than because of structures, they have been able to maintain their unique positions. That's my opinion at least and I think the evidence goes some way to substantiating that viewpoint.

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Poll
Does brand influence you?
o Yes, I'm a serf 32%
o No, I'm immune to their conspirational advances! 33%
o I don't wear clothes or eat 34%

Votes: 78
Results | Other Polls

Related Links
o Coca-Cola
o Nike
o Microsoft
o Nokia
o Wal-Mart
o Budweiser
o Branding
o service
o Interbrand
o "Top 100 Brand"
o "Who's Who"
o Top of the Pops
o Philippa Hankinson
o Roehampton University
o "'An empirical study which compares the organisational structures of companies managing the World's Top 100 brands with those managing Outsider brands"
o Microsoft Corporation
o Microsoft Word
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o Also by m0rzo


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Big Business Organisational Structure - Does it Matter? | 36 comments (22 topical, 14 editorial, 0 hidden)
About the poll. (4.00 / 1) (#6)
by demi on Sat Jan 05, 2002 at 01:09:13 PM EST

I don't know how this might figure into your polling strategy, but in general I do not trust certain brands to deliver consistent quality, and therefore I don't have much brand loyalty as a consumer. However, there are certain brands that I distrust and dislike, perhaps irrationally, such as Blockbuster. I won't ever rent or buy anything there as long as I have a say in the matter. Inasmuch as I can tell, anti-Blockbuster and anti-MS people, who are not brand-loyal in any way, are still influenced by brand identity.

It is embarassing to admit it but I am no better than someone who is loyal to Starbucks for great coffee when you come right down to it.



yeah, i agree. (4.00 / 1) (#7)
by m0rzo on Sat Jan 05, 2002 at 01:13:21 PM EST

The thing I really detest about these blockbuster/starbucks type places is how they saturate the market and swallow up all the small, local competition that has been in business so long.

These big companies carry the weight to bully suppliers into handing things over cheap - small companies obviously can't compete.
My last sig was just plain offensive.
[ Parent ]

You mean Wal-Mart? (none / 0) (#34)
by Stealthbadger on Tue Jan 08, 2002 at 05:08:57 AM EST

Or K-Mart, or Trak Auto, or Crown Books, or Dart Drug/Fantle's/Whatever

The only, and I mean the ONLY good thing about this type of corporate critter is that it is just as happy gnawing on another of its kind as it is absorbing the business of every "independent" it can.

Of course, in the process of trying to drive each other out of business they tend to stomp everyone else around them flat. (see Wal-Mart/K-Mart, a competition that now seems to be in its closing phases, or for even more entertaining reading, look at what McDonald's did to KFC/Arthur Treacher's/Subway, and almost did to Burger King (though the clown definitely won that one, too)


Searching for Truth, Justice, and the guy who boosted my wallet a few weeks back....
[ Parent ]

Not sure why you say that (3.00 / 1) (#33)
by slippytoad on Mon Jan 07, 2002 at 01:14:58 PM EST

It is embarassing to admit it but I am no better than someone who is loyal to Starbucks for great coffee when you come right down to it.

Someone who's insanely loyal to a brand despite any deficiencies in quality or value it might have is, well, not behaving rationally. On the other hand, someone (like me) who got continually overcharged and reamed by a company like Blockbuster (briefly, they appeared to be randomly selecting movies from the return bin to mark as 'late' and rack up a charge, and we caught them at it when we returned a group of three movies several times in a row and always had one marked late) has every rational reason to avoid them in the future, seeing as their business practices are questionable and/or their product quality excreable.
If I were the al Qaeda people right now I would be planning a lot of attacks in the next few days and weeks -- John "Bring 'em On" McCain
[ Parent ]

Sizzle and steak (3.40 / 5) (#10)
by tmoertel on Sat Jan 05, 2002 at 02:00:46 PM EST

Regarding:
Microsoft spends a colossal amount of money on advertising, ensuring that the vast majority of home computers are running its operating systems. It is feasible then that Microsoft have, like countless other companies such as Nike, built up a brand that far, far surpasses the product. The small detail of structure is then glanced over; if you've got this mega-brand, you can release what you want to the general public, regardless of quality and sleep easy in the knowledge that they'll lap it up.
It is any surprise that the brand surpasses the products? What motivation has Microsoft to produce better products? The company's market share is so close to 100% in key markets that there isn't a relatively large increase to be had. Diminishing returns.

Further, even in markets where the company stands to pick up significant share (e.g., server OSes), there is little reason to improve quality. Why? Because almost all of the potential customers are incapable of evaluating the quality of software products. They buy based on perception of quality, and it's more cost-effective to manipulate this perception via advertising, marketing, sponsoring "independent" reviews, etc., than it is to improve the actual quality of the products to the extent that the improvement is perceived by potential customers.

In short, if the customers see the sizzle more than the steak, why waste money on producing top-quality steak? Just create lots of sizzle instead.

--
My blog | LectroTest

[ Disagree? Reply. ]


Microsoft's mgmt structure also an advantage (4.00 / 5) (#13)
by calimehtar on Sat Jan 05, 2002 at 04:06:39 PM EST

Microsoft, in spite of ramant bugginess of products, manages to coordinate vast, complicated products and keep them simultaneously more cutting-edge and useful than most of their competition. For example, they have a huge, complicated, office suite with programs that interact with eachother in a relatively predictable way. No other company has anything close currently, though gnome and sun may have in a few years. Microsoft has had a 10-year headstart, granted, but that is partly due to a mgmt structure that is capable of reacting quickly to customer needs. The same can be said, to a greater or lesser extent, for COM components and Windows itself.

+++

The whole point of the Doomsday Machine is lost if you keep it a secret.


Hierarchical pyramid structures (4.66 / 3) (#14)
by I am Jack's username on Sat Jan 05, 2002 at 04:12:59 PM EST

...a textile company that wove fine English woollens. Its 200 employees worked in a machine-filled factory set in what might be called an exurban industrial park. The chief executive was definitely performance-orientated, starting with his own: he arrived early, left late, and made all the important decisions in between. The factory was sub-devided into specialized areas of production, each with its own boss. Each boss, in turn, had a group of foremen to watch the workers. Accountants and salespeople were on the mezzanine above the shop. Everything was strictly hierarchial and pyramidal... Except that this textile factory existed in 1633. And the moral of the story: our advances in technology have far outstripped our advances in mentality.-- Ricardo Semler, Maverick!, p 274

For those with access to the Arrow edition 1994, see the following pages for insightful ideas regarding hierarchical pyramid structures: 5, 87, 89, 107-108, 114, 132, 182-192, 274, 297, 305.
--
Inoshiro for president!
"War does not determine who is right - only who is left." - Bertrand Russell

brand influence (4.40 / 5) (#19)
by Delirium on Sat Jan 05, 2002 at 06:22:08 PM EST

Brand names having influence on spending habits can be good and bad. I can't count the number of people who generally scoff at the purchasers of Tommy Hilfiger (r) clothing and even buy generic cola instead of Coca-Cola (r), but then swear that they'll never buy anything but Micron (r) RAM.

You miss the point (4.66 / 6) (#21)
by spacefrog on Sat Jan 05, 2002 at 09:29:56 PM EST

You completely miss the point.

It's a question of WHY they are purchasing a particular brand over another.

Person A:
Buys nothing but Tommy Hillfiger because it's the "popular" thing to wear. From my perspective (hey, I'm just a nerd), this is idiotic.

Person B:
Buys nothing buy Micron RAM or Toyota cars because they have proven themselves to be reliable and consistant in the past. This makes perfect sense. Like it or not, we have nothing better on which to predict the future than the past.

From my perspective, these two people, other than purchasing something based upon brand name, have almost nothing in common.

Person A bought something based upon society pressure.

Person B bought something because they are looking to replicate the past true or perceived success success of themselves or others.

[ Parent ]
Not entirely dissimilar (5.00 / 4) (#22)
by mech9t8 on Sat Jan 05, 2002 at 10:11:05 PM EST

Person B buys the brand name because past history indicates that it'll be successful at its intended purpose (for instance, Micron = it'll be good at being computer memory).

Person A buys the brand name because past history indicates it'll be successful at its intended purpose (for instance, The Gap = looking decent).

What you're dismissing as "Societal Pressure" is really "Fitting in with Society". And that's important to most people. Maybe not Linux nerds and whatnot, but most people want to get laid or promoted or whatnot every now and then... ;)

Now, if you want, you can go research what people wear, examine the quality of clothes at various locations, and buy a successful outfit at K-Mart. Likewise, if you do the research, you could probably get decent memory at somewhere other than Micron.

Of course, there are idiots that'll think a Hilfiger shirt is worth more than an otherwise identical shirt simply because it has "Tommy" written on it, but I don't think that's the majority. Most people just buy stuff at the Gap because part experience has shown them that'll make them look decent, and no-name stuff from K-Mart will look crappy and wear out after a few weeks.

There's also an element of "trendiness" that pervades this kind of thing, and short-term trends are certainly far more pervasive in clothing than anything else. But merchants trying to associate their names with quality or trying to start and maintain trends is certainly nothing overwhelming new, revolutionary, or evil, as much as the No Logo people want to make it.

(And, unfortunately, people judging other people based on their appearance is going to be around for a least forseeable future. Of course, at some point in the future, we're going to decide to all wear the silver jumpsuit with the stripe down the side, but we're not at that point yet...)

Now, if the anti-brand-name people actually manage to convince a few dumbass teenagers that Nike shoes aren't worth $250 bucks, that's great - but most adults, at least, realise the true nature of brand names. The obsession certain groups have with yelling "Branding is evil!" is just a distraction from things people actually should be worried about.

--
IMHO
[ Parent ]
Labels and trademarks (4.50 / 6) (#24)
by dachshund on Sat Jan 05, 2002 at 10:33:37 PM EST

Of course, there are idiots that'll think a Hilfiger shirt is worth more than an otherwise identical shirt simply because it has "Tommy" written on it, but I don't think that's the majority.

I think you're vastly underestimating this market. As Neal Stephenson points out in "In the Beginning was the Command Line", it's very much in the interest of clothing manufacturers to encourage treating the brand as a fashion statement all by itself. Clothing designs are easy to imitate, but labels can be trademarked. This behavior, when fully cultivated, results in the clothes themselves become less important than the label-- oftentimes, nothing more than a T-shirt with the right text printed on it.

[ Parent ]

Not anymore (4.50 / 2) (#31)
by deaddrunk on Sun Jan 06, 2002 at 01:41:02 PM EST

I remember when labels meant quality as well as style, but that hasn't been the case for many years now. A Hilfiger T-shirt could very well be made in exactly the same factory as a K-Mart one and with just as little quality control. The strength of the brand is what ensures that people will buy it, irrespective of the actual quality of the goods.



[ Parent ]
T-shirts are a poor example (3.00 / 1) (#32)
by mech9t8 on Sun Jan 06, 2002 at 05:19:59 PM EST

Well, I'll agree that the segment of the population that actually goes out of their way to get a "Hilfiger" t-shirt are dumbasses. But I think that the people who actually care about getting brand-name t-shirts is a much smaller section of the population than those that go for brand name "real" clothes (pants, shirts, sweaters, etc).

And while there isn't much of an argument for getting Hilfiger or Gap t-shirts, I think my arguments for Gap "real" clothes still hold up. I tend to still get smaller-name stuff from my local department store, but it takes a lot more effort to pick out the decent stuff than to just go to the Gap and pay a bit more.

OTOH, while "fashion" name brands like Hilfiger t-shirts are usually crap, it's very difficult to find a quality t-shirt that doesn't have Nike or Addidas or Russel Athletic written all over it.

--
IMHO
[ Parent ]
What was the point of this article? (4.14 / 7) (#23)
by Jonas Cord on Sat Jan 05, 2002 at 10:26:26 PM EST

The author is trying to establish a correlation between corporate organizational structure and brand awareness. Why? I'll never know, as the author never fully explains.

Brand awareness, at its most, are indicative of the importance of marketing to the corporation, and how much they are willing to spend - which is not predetermined by having either a flat or heirarchical management structure.

Then again, any sort of reference to the specific details of the organizational structure of the example corporations is sorely lacking.

What is in abundance, is the author's apparent disdain for these corporations and their actions. The author might have picked a more business ethics oriented topic rather than presume to be able to make predictive assertations based on his poorly researched opinion.



Related MLP (4.33 / 3) (#25)
by plutronic on Sun Jan 06, 2002 at 12:22:47 AM EST

There is a very enlightening article at the economist (http://www.economist.com/su rveys/displayStory.cfm?story_id=770874) which ponders the fundamental changes in corporate structure, already begun, which will (possibly) accelerate in the near future.

-------sig----
DeCSS
Chevrolet Prizm vs. Toyota Corolla (4.66 / 6) (#26)
by demi on Sun Jan 06, 2002 at 01:53:22 AM EST

I'm old enough to remember the 1980's, when there was an incredible tumult in the US economy due to the popularity of Japanese-manufactured automobiles (along with Walkmans, Nintendos, etc.). A period of Japanophobia ensued (anyone remember the 1993 movie Rising Sun?), but eventually we got over it once our fortunes reversed themselves. However, consumer confidence in the domestic automotive industry has been very slow to recover.

Although there was a significant 'quality gap' between domestic and foreign car manufacturers in 1985, by 2001 that gap has become much smaller. Yet, there is still some perception that american manufactured (or designed) cars are inferior. I take much of the following information from an excellent article published in the McKinsey Quarterly (registration is necessary but free).

Take the Chevrolet Prizm (used to be sold under the Geo marque) for example. It is sold in Chevrolet car lots, but it is made in the same plant in Fremont, California, where the Toyota Corolla is manufactured. In fact, they are assembled side by side, with only minor cosmetic differences between them by the time they reach the dealers. In order to sell 52,000 Prizms in 2000, Chevrolet dealers offered $1,000 rebates and low long-term financing rates, whereas Toyota dealers sold 230,000 Corollas in 2000 without any incentives. The Toyota Corolla, 2 years after purchase, depreciates to $11,417 while the Prizm depreciates to $9,955. Both cars rate very high in Consumer Reports reliability ratings, and the Corolla tops the 2001 JD Power Initial Quality Study in its class, yet there is a striking disparity in consumer behavior towards the two models. Toyota is simply a stronger brand.

Moral of this story? First off, used Chevy Prizms are a great buy! ;) Secondly, Chevrolet, and possibly GM as a whole, does not have a strong brand identity in the compact car consumer segment, even when they field what is essentially an exact copy of one of the most successful autos ever made (although the Corolla is a slightly better investment WRT resale value). Even to pragmatic car buyers, the Prizm is not viewed as an equivalent to the Corolla, despite a significantly discounted price (about 10% less brand new and more than 20% less used). Lastly, protecting a strong brand name helped Toyota become the most successful automaker of the last 20 years (in addition to their commitment to quality). As a little epilogue here, 2002 will be the last year of the Chevy Prizm (although they will still make the Corolla).



this article is methodlolgically flawed (5.00 / 3) (#27)
by roffe on Sun Jan 06, 2002 at 05:15:57 AM EST

The ultimate test of effectiveness for a particular business structure would be to look at those companies which are the most successful in the world

No, because these companies are by definition statistical outliers and their success could be attributed to a lot of things besides organizational structure. Furthermore, organizational structure is tied to a lot of contingencies that would not be the same for organizations that operate in different markets, so even if it were sound to look at top performers, the list should be stratified to reflect the different markets that those companies operate in - if that's even possible, given that it's difficult to see whether two markets are "the same" or not.


--
Rolf Marvin Bøe Lindgren
roffe@extern.uio.no


What ? (4.50 / 2) (#28)
by Simon Kinahan on Sun Jan 06, 2002 at 10:17:14 AM EST

I don't see the connection between the stuff in the article about branding, and the stuff about organisational structure. Whether a firm is flat or hierarchical seems to have no prima facie relation to whether its brand is recognised, or - a much more relevant measure - its current or expected profits. The author never even defines what is flat and what is hierarchical, and betrays what seems to be a complete ignorance of the software industry when he claims that computer firms need to be hierarchical, and that Microsoft is a traditional hierarchy. For years everyone from Wired to the Economist has been touting the supposedly flat and egalitarian nature of such firms: you'd have thought that at least some effort might have been expended tackling those arguments.

However, I think organisational strucutures in broader sense *are* very important to success, but not in any very simplistic way, such as flat structures always bringing success. Rather the structure of an organisation needs to be tuned to the nature of its business.

Lets look at Coca-Cola: contrary to popular belief Coca-Cola does not make Coke, ship it round the country or move it around the world. Rather, it owns the formula for the syrup, and the trademark. In its home markets it advertises the stuff and makes the syrup, but other firms with much lower margins take on the grunt work of mixing it with carbonated water and getting it into cans and the cans into shops. In foreign markets, Coke itself simply licenses the formula and trademarks and rakes in royalties. Coke, therefore has the high-value, high-margin business and makes stupendous profits. Its satelite bottling and transport firms are utterly dependent on it, and bare nearly all the costs.

Just how Coke and its satelites operate within that structure is really unimportant, 90% of the time, although I would assume that flatter, project based management might bring about greater efficiency in manufacturing, and, of course, the core of Coke itself - the product development and marketing folks - will be non-hierarchical anyway.

Now Microsoft: MS has a core of very highly rewarded permanent staff in all functions, including development and testing. Those people have stock options. However, it also employs vast numbers of temporary staff, again in all functions. Why ? Well, temps are cheaper, and easier to get. They're also less committed to the success of the company itself, and will have less involvement in strategy.

The nature of software means that technical decisions can be critical to business success, but *most* technical decisions are not. You therefore need a core of people, knowledgable in the technology and briefed in the nature of the business who can spot those issues, communicate them to the executive staff and take care of implementing the decisions - those people need to be well paid and well informed. However, you do not want those people wasting their time grinding out animations for that ****ing paper-clip. Hence Microsoft's use of temps. Think of it like the Soviet use of political officers in their armed forces :)

Now, that structure is neither a traditional hierarchy, nor a perfectly flat structure (like the one I am lucky enough to work in myself). Its more of an oligarchy. Having worked for a firm that was structured similarly, although there is a hierarchy within the permanent staff, there is no command-and-control aspect to it. All of those people have some decision making ability, and while they are expected to share ideas and ask for adivice, its rare for anyone to tell someone else what to do. The senior executives' role is to formulate and communicate strategy, but its implementation, and indeed scope to challlenge it is spread about. The temporary staff are an entirely different matter, because they only have narrow technical skills in their field, and presumably like it like that.

Now Nike: Nike is much more like Coke. It designs products, markets them and owns the trademarks that identify its brand. The actual business of making trainers and getting them into stores is all contracted out - not in order to subjugate the strugging peoples of the developing world to the colonial opression of capital, but because you can't make the profits required to pay western workers by sewing stuff and moving it around. Like Coke, Nike takes the profits from the high-margin part of its business, and lets other people handle the rest. I'd bet my bottom dollar that Nike's own employees are highly paid, small in number, and have a very flat corporate structure. I don't imagine for a minute that goes for Malaysian sweat-shop workers, though.



Simon

If you disagree, post, don't moderate
The temp development model doesn't work (4.00 / 2) (#29)
by pslam on Sun Jan 06, 2002 at 12:36:37 PM EST

...However, it also employs vast numbers of temporary staff, again in all functions. Why ? Well, temps are cheaper, and easier to get. They're also less committed to the success of the company itself, and will have less involvement in strategy.

Development staff not committed to the success of the company leads to lackluster products written no further than the lowest spec, and full of bugs that nobody could care about fixing. Development staff not involved in discussions of strategy (products possibilities etc) leads to impractical products which are usually spec'd far below (or just completely off) what's actually possible with the technology.

The nature of software means that technical decisions can be critical to business success, but *most* technical decisions are not.

While most technical decisions are not directly critical to business success, the sum of every tiny technical decision is critical to a product's success. Without experience with the working code base, everyone's going to be making lots of very tiny bad decisions. Code quality suffers, and the end product is crap.

The thinking of those who hire temporary staff (or churn permanant staff regularly as is recently popular) is that they can take over from the previous employee with very little hassle. This all falls over because it takes months to figure out the technical decisions taken by your colleges. And what happens if all your colleges are also recently employed? Well, then nobody knows the code base except the "decision making" permenant staff. But of course, none of them actually made any decisions at this "non-business-critical" level.

The code *is* the product. Ignoring this level in the hierarchical structure of business is suicidal. But, as the author of this story suggests, the product is pointless when you can just brand your way to success.

[ Parent ]

Yep (none / 0) (#30)
by Simon Kinahan on Sun Jan 06, 2002 at 12:59:40 PM EST

I agree. I wasn't trying to advocate Microsoft's strategy: just explain it. You can see the effects - as you describe them - in Microsoft's products (and in Java, to a lesser extent). Where technical properties of a product were seen as important for business purposes, things are quite well constructed, at least in their overall architectural features. Where they are not, things are barely functional.

In my personal dream-company, the employer would take care of the professional development of all employees, and encourage everyone to participate in strategic decisions appropriate to their level of experience. I just wouldn't hire people who claimed their interests were *only* technical.

Simon

If you disagree, post, don't moderate
[ Parent ]
Point of useless information... (none / 0) (#35)
by vambo rool on Tue Jan 08, 2002 at 10:29:37 AM EST

...and mostly off topic

[Microsoft Word's] not-so-excellent spell-checker.
While it is a spell-checker used in Microsoft Word, they didn't write it. It's another example of embrase and extend. The spell checker was written by Inso Corporation and was licensed to Microsoft for several versions until some [expletive deleted] product manager at Inso sold the source code to Microsoft of a big fee (and commission). Since the licensing fees to Microsoft were something like 80% of Inso's business, the following quarters' revenue was, er, "down." This eventually led to the first of three stock collapses (each preceded by top executives selling out just before the collapse). The company was split in two, one half was sold to Lernout & Hauspie and died with the L&H. The other half bought a company in Rhode Island called Electronic Business Technologies International and changed their name to eBTI. They have has just filed for liquidation. Inso Corporation was originally a spin-off from Houghton Mifflin, the publishing (which created the word lists used in the spell-checker). All aspects of Inso Corporation are now dead.

Birth. Life. Death.



Child labor and low wages... (5.00 / 1) (#36)
by skyknight on Tue Jan 08, 2002 at 03:04:10 PM EST

aren't so bad if the alternative is death. It is a way overused idiom to cite the "little Chinese kid [that] has been paid perhaps $2 a day to work a sewing machine in the most abysmal conditions." Yes it is a sad thing to envision, but if the child is in fact going in to work under those conditions, imagine how terrible his life must have been without the job. Before it, he may have had more "free time", but probably didn't get any food or medicine.

Are companies like Nike exploiting the labor markets in foreign contries? Absolutely. Is it a bad thing for the workers in the sweat shops? Not compared to what their circumstances would be without the factories. We're talking about countries where the doctors don't get much more than $2 per day.

It all boils down to supply and demand. There are very few factories in foreign lands, so when Nike comes in and sets up shop, there are a very small number of jobs, and a HUGE number of people who want them. Hence Nike can pay very little. If there were lots of factories in these foreign lands then the companies would have to compete for labor and thus pay better wages. People like you protesting the construction of more factories is detrimental to the progress of these people. Yes, it would be nice if everyone could have all their needs provided for right now, but change does not happen instantly. You have to let the free market take hold and work with its invisible hand.

In case your rebuttal is to be "as soon as the workers wise up and ask for better wages, the factory closes up and moves to the country next door", I have this response... What if the country next door already had lots of factories? Well, then they couldn't pack up shop and move somewhere cheaper, they would be forced to pay better wages, or the workers might migrate away to the loss of the manufacturer. Free trade and capitalism don't instantly make the situation better, but they are the only mechanism for long term prosperity and stability. Cut the anti-globalism crap, and let the world evolve.

P.S. However, I do agree with you that almost all brands surpass their products. I just couldn't let you get away with your anti-globalizaton jab.



It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
Big Business Organisational Structure - Does it Matter? | 36 comments (22 topical, 14 editorial, 0 hidden)
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