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Simple and complex structures - Management challenges for SBU-based structures

5 important questions on Simple and complex structures - Management challenges for SBU-based structures

What are the 5 management challenges for the SBU-based structure?

1 Selecting an appropriate market focus for SBU's

2 Achieving coordination between SBU's

3 Avoiding SBU silos

4 Parenting SBU's

5 Adapting SBUs to changed circumstances

Many managers believe that achieving coordination between autonomous SBU's is hard. But even SBU's that are designed to be largely self-contained quite often choose to collaborate (different SBU's share a common call center etc.). What's imporant in this collaboration?

The collaboration need not inhibit (verhinderen) their autonomy. SBU's work together on the basis of mutual self-interest. Senior managers need to insure that ther are no impediments (belemmeringen) that will prevent SBU's from voluntarily collaborating.

What are silos and why should they be avoid?

Silos: groups of managers so dedicated to their allocated focus that they become narrow-minded and uncooperative. Commited to short-term profits and fail to pay attention to wider performance measures.

What is the role of the parent in a SBU-based structure?

A hands-off role. The difficulty of adding value to separate SBUs has led to questioning about the rationale for many multi-business groups. Break-up strategies of the last decade imply that the parent does not add value.

How can SBU-based structures adapt to change?

The can modify the scope of their market focus, decide what value chain activities are carried out in- or outhouse. The degree of adaptability depends on managers willingsness to change.

The question on the page originate from the summary of the following study material:

Designing effective organizations : how to create structured networks | 9780787960643 | Michael Goold, et al

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