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T205B TMA Case StudyGoogle’s Organizational Structure & Organizational CultureGoogle’s organizational structure and organizational culture are aligned to support thecompany’s competitive strength.Google’s success is linked to the effectiveness of its organizational structure and organizationalculture in supporting excellence in innovation. The company’s organizational structure is notconventional. Google’s organizational culture is also not typical because it emphasizes changeand direct social links within the firm. Theory suggests that a strong alignment between a firm’sorganizational structure and its organizational culture can lead to higher chances of success. Thisbenefit is manifested in the case of Google’s businesses that continue to expand and prosper.Thus, the company’s current dominant position is attributable to the synergistic benefits of itsorganizational structure and organizational culture.Google’s organizational structure supports the company’s organizational culture to maximizeeffectiveness of innovation.Google’s Organizational StructureGoogle has a cross-functional organizational structure, which is technically a matrixorganizational structure with a considerable degree of flatness. Thus, the company’sorganizational structure has three main characteristics:1.Function-based definition2.Product-based definition3.FlatnessGoogle uses function as basis for grouping employees. For example, the company has a SalesOperations team, an Engineering & Design Team, and a Product Management Team, amongothers. The firm also uses products as basis for grouping employees. For example, the companygroups employees for developing Nexus devices. The firm also groups employees for its Fiberbusiness. In addition, the firm’s organizational structure has considerable flatness. A flatorganizational structure means that Google’s employees, teams or groups can bypass middlemanagement and report directly to CEO Larry Page. Employees can also meet and shareinformation across teams.1
Google’s Organizational CultureGoogle’s organizational culture is not typical, partly because of the effects of the firm’sorganizational structure. In essence, structure and culture interact to influence the capabilities ofthe organization. Google’s organizational culture is:1.Open2.Innovative3.Smart with emphasis on excellence4.Hands-on5.Supports small-company-family rapportOpenness is achieved through the matrix organizational structure. Within Google’sorganizational culture context, employees feel free to give their ideas and opinions. Innovation isat the heart of Google. Every employee is conditioned to contribute innovative ideas. In thisorganizational culture, the firm also favors smart employees who strive for excellence. Inaddition, the companysupports employee involvement in projects and experiments. The overallambiance at the company’s offices is warm because the firm’s organizational culture maintains asmall-company-family feel, where people can easily talk and share ideas with each other,including CEO Larry Page. Thus, Google’s organizational culture supports excellence ininnovation through sharing of ideas and capability to rapidly respond to the market.Our cultureIt’s really the people that make Google the kind of company it is. We hire people who are smartand determined, and we favor ability over experience. Although Googlers share common goalsand visions for the company,we come from all walks of lifeand speak dozens of languages,reflecting the global audience that we serve. And when not at work, Googlers pursue interestsranging from cycling to beekeeping.We strive to maintain the open culture often associated with startups, in which everyone is ahands-on contributor and feels comfortable sharing ideas and opinions. In our weekly (“TGIF”)meetings—not to mention over email or in the cafe—Googlers ask questions directly to Larry,Sergey and other execs about any number of company issues. Our offices and cafes are designedto encourage interactions between Googlers within and across teams, and to spark conversationabout work as well as play.Google's Business Leadership and Organizational CultureGoogle Inc. has received a lot of attention and acclaim for its unusual organizational culture,which is designed to encourage both loyalty and creativity. Google has created many significantproducts through this emphasis on innovation, including the Google search engine, Google Mapsand the Google Chrome Web browser. The company is now much larger than it was when theorganizational culture first developed, forcing some changes to the original model.2
Leadership StructureGoogle's corporate structure is not particularly unusual other than the existence of a few uniqueleadership positions such as Chief Culture Officer and Chief Internet Evangelist. The company isoverseen by a board of directors, which passes instructions down through an executivemanagement group. This group oversees several departments such as Engineering, Products,Legal, Finance and Sales. Each of these departments is divided into smaller units. For instance,the Sales department has branches dedicated to the Americas, Asia Pacific, and Europe, theMiddle East and Africa. Despite the use of a standard corporate organizational structure, Googlehas developed a corporate culture based on giving employees substantial leeway to develop newideas without excessive oversight.The 70/20/10 RuleAll Google employees follow a rule called the 70/20/10 rule, under which they are expected todevote 70 percent of every work day to whichever projects are assigned by management, 20percent of each day to new projects or ideas related to their core projects, and 10 percent to anynew ideas they want to pursue regardless of what they might be. The company credits this rulewith being the driving force behind many of Google's new products and services, becauseprogrammers, salespeople and even executives are given enough space to be creative. When thecompany became too large to easily manage the flow of new ideas and projects, it instituted aschedule of meetings between employees and the company's founders and chief executives. Atthese meetings, employees can pitch new ideas and projects directly to the top executives.CriticismsAlthough the culture of creativity at Google has resulted in many new products, critics such asGene Munster from the Piper Jaffray Investment Bank charge that most of these products havenot produced substantial new revenue. Because advertising on search engine pages producesmuch of Google's revenues, many of its products are offered for free to encourage the use of theGoogle search engine. Google initially paid employees less than many other Silicon Valleyfirms, but used other perks to attract employees. For instance, Google employees receive freefood cooked by a company chef, are provided with bus rides to work and are allowed to travelthrough the building on scooters and bicycles. They also have access to company daycarefacilities, exercise gyms and other amenities. These perks are intended to help create a fun andcreative atmosphere. In addition, Google now offers stock plans and higher wages that havebrought its compensation package into the same range as other companies in the same industry.Google's MottoGoogle's unofficial motto is “Don't Be Evil,” and many of its policies and corporate decisions arebased on trying to live up to this motto. Although it may seem eccentric to pursue such anapproach in a business environment where profit is always the final concern, employees reportfeeling very differently about working at Google as opposed to other companies. According to aNew York Times article from 2005, Google employees interviewed said that they felt a sense ofbeing personally invested in the company's sense of mission and future success. A 2009 article in3
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