Group Assignment - 20158 ORGANIZATION
Issue: Change in Structural Design
In order to understand better the issues faced by the organization, we have contacted Angelo, who works at Google Headquarters in Dublin in the Sales and Marketing Division. His main responsibility is to assist the AdWords and YouTube Ad clients, and to increase sales of these services.
L. Page and S. Brin founded Google Inc. in 1998 after discovering an algorithm to rank web pages. The company’s mission is to ‘organize the world’s ...view middle of the document...
Each business within Alphabet has a CEO who reports to L. Page. S. Pichai, former Senior VP of Products, has become Google’s CEO. Other Google’s former executives are now part of Alphabet’s management [Figure 1].
As the founders promise in their announcement’s letter, Alphabet’s strategy will remain unconventional by having “smaller bets in areas that might seem very speculative or even strange” - compared to the core business, and will make the way the company operates “cleaner and more accountable”. Overall, the new structural design supports this strategy.
The two main strategic reasons behind Google’s restructuring are the necessity of shareholders for more clarity regarding the performance of the core business and the amount of money spent in each of them, and the need for more management scale in running independently businesses that are not closely related. The new design enables each business to enjoy higher autonomy, thus allowing for greater flexibility of the overall organization.
The main benefit of this structure is transparency. Indeed, Alphabet Inc. will report the performance in two segments, ‘Google’ and ‘Other businesses’, thus responding to those investors who demanded higher clarity regarding the provenience of the cash flows and the profitability of the former Google businesses. Although Google core businesses' performance can be clearly evaluated now, it is still unclear how the ‘Other businesses’ are performing, as they are grouped together in a single category.
The new modular approach facilitates each unit to deploy the appropriate strategy. For example, AdWords may need to follow a classic strategy, emphasising planning, scale economies, and business model optimization. On the contrary, ‘moonshots businesses’ such as Google X may need to be more visionary, thus stressing speed and meeting customers need.
Consistent with the company’s objective of leading in the field of technology and innovation, the new design facilitates the acquisition process by providing higher incentives for startups’ CEOs to join the holding as they could keep their CEO position (not becoming VPs as the rule before would have provided for), thus maintaining a high degree control over their businesses. They will nonetheless report to Page, who will determine their pay and will have an influence over the amount of resources they can receive.
According to Mintzberg framework, the new divisionalized form implies more decentralization, leaving higher discretion to the single businesses’ CEOs. However, the activities under the Google umbrella are now under two layers of top management [Figure 1] instead of one as it was before [Figure 2]. Although the structural design makes it clear how decision-making rights should be allocated, it is not straightforward to what extent the business ventures will be actually independent from L. Page and S. Brin in their strategy design, and how the resources of the holding company will be allocated. For some...