Why Divisional Structure?

When organizations get large, they become slow, awkward, unmanageable, inflexible, and difficult to focus. They distance people from each other, and consume more energy than they release.

Division Defined

Division is a business unit having a clear set of customers and competitors. A division can be independently planned for within the organization and has profit and loss responsibility.

 Case in Point:  Hewlett-Packard

Hewlett-Packard set the pattern for a divisional structure of an innovative organization long ago. Divisions aggregated into units such as Test and Measurement Organization are the core dominant organizational entities of the company. When John Chambers, President and CEO of Cisco Systems looked around for large-scale organizational models that sustained innovation, customer intimacy and satisfaction, he found Hewlett-Packard to be the best.

Building an Innovation-friendly Organization

Leaders of successful, high-growth companies understand that innovation is what drives growth, and innovation is achieved by awesome people with a shared relentless growth attitude and shared passion for creative problem solving and for turning ideas into realities.

Companies that continuously innovate will create and re-invent new markets, products, services, and business models – which leads to more growth. Innovation is founded on your enterprise's ability to recognize market opportunities, your internal capabilities to respond innovatively, and your knowledge base... More

 Case in Point:  Quantum

Quantum launched Plus Development division to create an upside opportunity for people after the growth of the parent company has slowed. Using vehicles such as phantom stock it provided a feel and reward of a startup and helped Quantun retain key staffers who might have left the company and formed a startup of their own.

Problem to Address

Divisions can create internal competition that ruins cooperation, cross-pollination of ideas, and learning within your firm.

 Case in Point:  Cirrus Logic

To improve communication and cooperation between divisions, Cirrus Logic use cross-divisional councils as a platform for defining new technologies and developing business strategy.

 Case in Point:  Cisco Systems

When Cisco Systems divisionilized, they established councils that operate across business units to force cooperation on key innovations, customers and markets. These councils are composed primarily on marketing and sales people. Furthermore, the company continued to reward key executives on the company’s overall performance in order to prevent competition and promote cooperation between divisions.