Companies that adopt a defender business strategy are likely to choose the bureaucratic organizational structure . This pyramid-shaped structure consists of hierarchies with many levels of management. It uses a top-down or “command-and-control” approach to management in which managers provide considerable direction to and have considerable control over their subordinates. The classic example of a bureaucratic organization is the military, which has a long chain of command of intermediate officers between the generals (who initiate combat orders) and the troops (who do the fighting on the battlefield).

A bureaucratic organization is based on a functional division of labor. Employees are divided into divisions based on their function. Thus, production employees are grouped in one division, marketing employees in another, engineering employees in a third, and so on. Rigid boundaries separate the functional units from one another. At a bureaucratic auto parts company, for instance, automotive engineers would develop plans for a new part and then deliver its specifications to the production workers.

Rigid boundaries also separate workers from one another and from their managers because the bureaucratic structure relies on work specialization. Narrowly specified job descriptions clearly mark the boundaries of each employee’s work. Employees are encouraged to do only the work specified in their job description—no more and no less. They spend most of their time working individually at specialized tasks and usually advance only within one function. For example, employees who begin their career in sales can advance to higher and higher positions in sales or marketing, but cannot switch into production or finance.

The bureaucratic structure works best in a predictable and stable environment. It is highly centralized and depends on frontline workers performing repetitive tasks according to managers’ orders. In a dynamic environment, this structure is less efficient and sometimes disastrous.

A company that selects the prospector business strategy is likely to choose the flat organizational structure . A flat organization has only a few levels of managers and emphasizes a decentralized approach to management. Flat organizations encourage high employee involvement in business decisions. Nucor (a Charlotte, North Carolina, steel company) has a flat organizational structure. Although Nucor has over 20,000 employees, only a few levels separate the frontline steel workers from the president of the company. Headquarters staff consists of a mere 100 people in a modest cluster of offices.7

Flat organizations are likely to be divided into units or teams that represent different products, services, or customers. The purpose of this structure is to create independent small businesses that can respond rapidly to customers’ needs or changes in the business environment. For example, Johnson & Johnson, a manufacturer of health care products, is organized into more than 250 operating companies that are located in 60 countries. Each operating company behaves like a minibusiness that is responsible for generating profits for the overall company, and employees within each unit feel as if they are working for a small company. The flat organization structure has fostered an entrepreneurial culture that has enabled Johnson & Johnson to innovate.

The flat organizational structure reduces some of the boundaries that isolate employees from one another in bureaucratic organizations. Boundaries between workers at the same level are reduced because employees are likely to be working in teams. In contrast to workers at bureaucratic organizations, employees of a flat organization can cross functional boundaries as they pursue their careers (for instance, starting in sales, moving to finance, and then into production). In addition, job descriptions in flat organizations are more general and encourage employees to develop a broad range of skills (including management skills). Boundaries that separate employees from managers and supervisors also break down in flat organizations because employees are empowered to make more decisions.

Flat organizational structures can be useful for organizations that are implementing a management strategy that emphasizes customer satisfaction. Implementing a customer-focused strategy may require changing work processes so that customers can receive higher-quality products and better service. For example, an auto insurance company may change its claims adjustment process to speed up reimbursement to customers. Rather than using 25 employees who take 14 days to process a claim, the company may create a claims adjustment team that works closely with the customer to take care of all the paperwork within 3 days.

The flat structure works best in rapidly changing environments because it enables management to create an entrepreneurial culture that fosters employee participation.

A boundaryless organizational structure enables an organization to form relationships with customers, suppliers, and/or competitors, either to pool organizational resources for mutual benefit or to encourage cooperation in an uncertain environment. Such relationships often take the form of joint ventures, which let the companies share talented employees, intellectual property (such as a manufacturing process), marketing distribution channels (such as a direct sales force), or financial resources. Boundaryless organizational structures are most often used by companies that select the prospector business strategy and operate in a volatile environment.

Boundaryless organizations share many of the characteristics of flat organizations. They break down boundaries between the organization and its suppliers, customers, or competitors. They also strongly emphasize teams, which are likely to include employees representing different companies in the joint venture. For example, a quality expert from an automobile manufacturing company may work closely with employees at one of the company’s auto parts suppliers to train them in specific quality management processes.

Companies often use a boundaryless organizational structure when they (1) collaborate with customers or suppliers to provide better-quality products or services, (2) are entering foreign markets that have entry barriers to foreign competitors, or (3) need to manage the risk of developing an expensive new technology. The boundaryless organization is appropriate in these situations because it is open to change, it facilitates the formation of joint ventures with foreign companies, and it reduces the financial risk to any one organization. Here are some examples of boundaryless organizational structures:

• ▪ Pixar, the animation studio, partnered with Walt Disney Pictures to produce a number of highly successful animated feature films, including Toy Story, Monsters, Inc., Finding Nemo, and Cars. Finding Nemo generated $865 million in global box office revenue and received the Academy Award for Best Animated Feature Film. The partnership combined Pixar’s expertise in computer animation with Disney’s strength in marketing to reduce the risk of producing animated features.8

• ▪ Airbus Industries is a boundaryless organizational design that consists of a partnership of European firms from four countries (France, Germany, England, and Spain) that worked together to market and develop commercial jet aircraft to compete with Boeing and become a leading producer of passenger jets.

• ▪ Apple Inc. partners with Foxconn, a Taiwanese electronics firm, to manufacture Apple’s iPods, iMacs, and iPhones in China. Apple designs and markets the products, and its Asian partner builds and assembles them according to the design specifications and ships the finished products back to the United States.9 Apple Inc. also forms partnerships with numerous independent, self-employed software programmers who design new applications to use on Apple’s iPhones.