What is Organizational Structure for Corporate Entrepreneurship?

An organizational structure defines how activities such as task allocation, coordination, and supervision are directed toward the achievement of organizational aims. Also learn, Why is Intrapreneurship Better than Entrepreneurship? This article explains to Organizational Structure for Corporate Entrepreneurship. Organizations need to be efficient, flexible, innovative and caring to achieve sustainable competitive advantage. Organizational structure can also consider as the viewing glass or perspective through which individuals see their organization and its environment.

Learn, Entrepreneurial, What is Organizational Structure for Corporate Entrepreneurship?

Corporate entrepreneurship (also called intrapreneurship) is defined by Guth and Ginsburg as;

“The birth of new business within existing organizations, that is, internal innovation or venturing; and the transformation of organizations through the renewal of the key ideas on which they are built, that is, strategic renewal.”

The organizational structure affects organizational action in two ways:

1. It provides the foundation on which standard operating procedures and routines rest.
2. It determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions.

Organizational Structures for Corporate Entrepreneurship:

Burgelman proposes that the use of a particular organizational structure should determine by:

1. The strategic importance of the new business to the corporation. and.
2. The relatedness of the unit’s operations to those of the corporation.

The combination of these two factors results in nine organizational structures for corporate entrepreneurship.

1] Direct Integration:

A new business with a great deal of strategic importance and operational relatedness must be a part of the corporation’s mainstream. Product champion-people who are respected by others in the corporation and who know how to work the system need to manage these projects.

2] New Product Business Department:

A new business with a great deal of strategic importance and partial operational relatedness should be a separate department. Organize around an entrepreneurial project in the division where skills and capabilities can share.

3] Special Business Units:

A new business with a great deal of strategic importance and low operational relatedness should be a special new business unit with specific objectives and time horizons.

4] Micro New Ventures Department:

A new business with uncertain strategic importance and high operational relatedness should be a peripheral project. Which is likely to emerge in the operating divisions continuously. Each division thus has its new ventures department.

5] New Venture Division:

A new business with the uncertain strategic importance that is only partly related to present corporate operations belongs in a new venture division. It brings together projects that either exists in various parts of the corporation or can acquire externally, sizable new businesses are built.

6] Independent Business Units:

Uncertain strategic importance coupled with no relationship to present corporate activities can make external arrangements attractive. Also read, The Corporate Entrepreneurship Categories and Organizational Thinking.

7] Nurturing and Contracting:

When an entrepreneurial proposal might not be important strategically to the corporation but is strongly related to present operations. Top management might help the entrepreneurial unit to spin-off from the corporation. This allows a friendly competitor, instead of one of the corporation’s major rivals, to capture a small niche.

8] Contracting:

As the required capabilities and sills of the new business are less related to those of the corporation. The parent corporation may spin off the strategically unimportant unit yet keep some relationship through a contractual arrangement with the new firm. The connection s useful in case the new firm eventually develops something of value to the corporation.

9] Complete Spin-Off:

If both the strategic importance and the operational relatedness of the new business are negligible. The corporations are likely to completely sell off the business to another firm or the present employees in some form of ESOP (Employee Stock Ownership Plan). The corporation also could sell off the unit through a leveraged buy-out executives of the unit buy. Also, the unit from the parent company with money from a third source, to be repaid out of the unit’s anticipated earnings.

Entrepreneurial Organizational Structure:

The organizational structure of an entrepreneurial company often has two central requirements based on the nature and size of the business. Because they are innovators, these businesses must develop organizational structures. That promotes frequent interaction and communication among their marketing, sales and production departments. Because they are often smaller businesses that aren’t able to fully departmentalize because they have large sales of one product. They must maximize their management resources through multitasking.

1] Theory Originator:

The theory of an entrepreneurial organizational structure was developing by McGill University professor and management expert Henry Mintzberg. He proposed theories about five different types of organizational structures, including one well suited for operating an entrepreneurial organization. Others have since expanded on his theories, first proposed in the 1970s, as markets and technologies have evolved.

2] Flat vs Hierarchical Structure:

Smaller businesses with few employees that continue to evolve. Their product development and marketing often use a flat organizational structure rather than a hierarchical one. A traditional hierarchical organizational structure organizes a company based on departments. With each department having a leader and subordinates reporting to the department head.

These departments work independently, reporting to a president, chief executive officer or executive management team. A flat organizational structure consists of individuals or small groups that work collaboratively, all reporting to the owner or CEO. A flat structure can require managers to take on or participate in more than one task to maximize scarce human resources.

3] Planning Structure:

An entrepreneurial structure should facilitate cooperative planning rather than top-down strategic and marketing planning. Which features execution of plans assigned to different departments. Marketing activities include product development, pricing strategies, brand creation, and distribution channel selection that occur before any promotions take place.

For example, at a larger business with a hierarchical organizational structure. Also, the marketing department might develop the product and then tell the production department to determine how to make it. In an entrepreneurial organization, all team members are involving in product planning.

So, they can share their concerns or make suggestions about whether they can make the product. At large companies, marketing will know the capabilities of its production department. While at an entrepreneurial company, marketing will pitch an idea, asking production. Information technology, sales, and finance if they can bring the idea to market.

4] Communication Structure:

An entrepreneurial organization holds regular team meetings to discuss ideas before a decision is creating. While a more traditional organizational structure uses meetings of department heads to announce their progress and tell subordinates what has been deciding. An entrepreneurial company might create an intranet or a communication system based on the Cloud to exchange project status in real-time.

A Cloud-based system puts information on a secure Internet site that people can access with a password from anywhere. An intranet resides on a company’s servers. Using such a system, each team member will have his responsibilities but will update his progress on a master document that all other team members can access from their computers at any time of the day.

Reference:

1. Structures – //www.mbaknol.com/strategic-management/corporate-entrepreneurship/
2. Entrepreneurial – //yourbusiness.azcentral.com/entrepreneurial-organizational-structure-16071.html
3. Photo Credit URL – //conditionaldesign.org/workshops/3d-straw-structure/resources/09-img-5455-edit.jpg