Organizational behavior

CASE: APPLE

After five years under Apple CEO Tim Cook’s leadership, Apple’s revenue has

tripled, it has doubled the number employees working for the company to over

115,000, and its cash reserves have grown to a record $246 billion. Cook says,

“Our reason for being is the same as it’s always been. To make the world’s best

products that really enrich people’s lives.” Apple’s functional structure has helped

that product development to be wildly successful through collaboration, beating

out a number of competitors like Sony whose multi-divisional structures keep them

from sharing information, expertise, and technology in the most effective way.

However, it causes problems for them as well. Apple desktop users are frustrated

with a lack of updates (over three years running) and iPhone/iPad users get

frustrated that Apple waits to provide major updates

to its software systems until it has a new product on the market. Apple

shareholders are upset that Apple isn’t making more money off of their services

(iTunes and other apps). These kinds of issues arise partly because nobody is “in

charge” of those products or services.

One of the reasons companies eschew functional (expertise) structures is that it

makes

it more difficult to hold managers accountable for things when they go wrong. In a

multi- divisional structure, if a product fails or a region or unit doesn’t make a

certain amount of profit—there is someone to point to. When an issue arises with

Windows or Office or Microsoft Cloud, Microsoft knows where to go and whom

to hold responsible because someone is in charge of those products. Apple’s

philosophy is different. Apple CEO Tim Cook said, “They’re not things where we

run separate [profits and losses] on, because we don’t do that—we don’t believe in

that. We manage the company at the top and just have one [profit and loss] and

don’t worry about the iCloud team making money and the Siri team making

money. We want to have a great customer experience, and we think measuring all

these things at that level would never achieve such a thing.”

As Apple becomes even larger though, their structure is going to be harder to

maintain. The fact is that they could be making updates much more frequently to a

wide range of products, upgrading software, and providing services that could

allow them to be much more profitable if they were to adopt a different structure.

They have also been blessed with great leadership given their very centralized

approach to decision making. The question is where do they go from here?