Smith & Falmouth Company: Organizational Structure


In every business organization, a form of control, coordination, and understanding exist where leaders and their workers have a clear view of company goals, aims, and how to achieve them. It was also observed that “organization structure refers to the division of labor as well as patterns of coordination, communication, workflow, and formal power that direct organization activities,” as McShane and Von Glinow (2003, p. 446) emphasized.

This paper shall try to identify and describe the formal organizational structure of the Smith & Falmouth (S & F) company, a teleshopping and mail order network that operates in the United States and Canada. This paper will also compare S & F’s structure with another organizational structure and analyze whether the informal culture at S&F is better than a formal structure.

In addition, this paper will assess the informal culture of the S & F’s company, determine its impacts on the formal structure, and discuss the role of power and politics within the organizational culture to demonstrate the power and politics within the S & F culture. In conclusion, it will recommend the most effective leadership style to Irene Seagrave, chief executive officer of the S & F.

S&F Structure

The formal structure of S & F is undertaken through informal communication in a formal hierarchy which includes sharing of information on the mutual task between the three managers and the chief executive officer. Hierarchy, which is always considered formal, makes the power of individuals formal and legal. This enables leaders to direct the workflow (McShane and Von Glinow, 2004). S & F is considered a flat structure with a wide span of control in terms of elements of organizational structure. While the structure was centralized, S & F operates in a decentralized manner in which the operations and the logistics managers coordinate with each other but do not report directly to the chief executive officer.

In terms of departmentalization, S & F divided the company into product and service structures. The chief executive officer has legitimate power over operational service and under him are the operations manager, marketing manager, and logistics manager for production purposes. However, S & F also operates on the matrix structure. A matrix structure is considered a situation where employees have two bosses (MsShane and Von Glinow, 2004). In the case of S&F, both the logistics team and the operational team employees need to report to two managers: the operations manager and the logistics manager.

The F & S’ formal operational structure was constructed with a matrix, centralized hierarchy, and flat structure concentrated on production. The organizational structure of S & F is seen as less coordinated management compared to a mechanistic structure used by other companies like McDonald’s. According to MsShane and VonGlinow (2004), a mechanistic structure has a narrow span of control but with a high degree of formalization and centralization. In the case where S & F applies this structure, the CEO can limit the decision-making power of the operations and logistics managers, and in turn, gives him more control over the entire operational process. In a capable management team, S&F may maximize gains. However, it has to have a smart and driven management capacity.

While the mechanistic structure has a tall hierarchic structure, it follows a vertical communication flow (MsShane & VonGlinow, 2004). This allows the company to divide the management power and specialize duties towards middle and operational management levels. It was noted, nevertheless, that mechanistic structure requires higher investment in management as compared to team-based or lateral structure that has lesser management investment.

The organizational structure of S & F has a lower degree of employee empowerment compared to the team-based (lateral) structure. According to McShane & Von Glinow (2004), the lateral structure was applied by the Criterion Group with fewer organizational levels making it a flat structure with horizontal communication. This organizational structure was seen to benefit organizational finance by enabling company savings for human workforce management. This structure creates an easy-to-direct work team that empowers the company’s employees.

Informal organizational structures influence the effectiveness of the formal structure. Formal cultures include rules, regulations, and company structures while informal cultures set the tone and atmosphere in the workplace (Cesafsky and Morton, 2005). To fit in an informal culture where an individual may be newly exposed to, one should be aware of the way other employees act and dress, whether casual or formal. The employee also takes note of who does the company serve or who comprises a team. Lack of knowledge and acceptance of the informal culture of the company makes an employee look lost and isolated from others. The differences in informal cultures among employees may create barriers in communications and work relations. This may lead to lower productivity or failure in the operational role of that individual and directly computes negative formal culture productivity goals.

As Jack Welch (2005) of General Electric noted, a leader needs to recognize not only him or herself within an organization. “It’s about building a team and recruiting and keeping the best players. It’s all about them. Energize them, challenge them, execute, and get the job done. Show more passion, care more, pick great talent. Weed out the losers,” Welch (2005, p. 1) emphasized. However, Welch was known to have applied the informal culture to empower his employees that led to the long-term success of General Electric. Welch focused on recruiting and training good leaders seen with passion, intelligence, energy, edge, execution, and engagement. He firmly believed that an employee who did not share company values had to go.

It was noted that various teams of S & F, especially the logistics and operations teams could refuse vertical communication from the chief of operations (COO). The COO attempted to win the acceptance of the teams informally by aligning himself with the project manager, James William Argyle, who had a good relationship with other managers and teams. But Argyle refuses to give up his power so that he became a sort of a “bridge” between. Other COO attempts are to upgrade the system and increase manpower to accomplish the company goals. But due to the informal setting, the existing team members became hostile towards the new member. Failure in adjusting to the informal culture such as establishing relationships among the staff members, the plan could be implemented only with a lot of challenges. Within the informal culture, and effective communication could lead to the success of the formal culture and the entire plan.


There is a lot of disadvantageous alignment in the structure and culture of S&F. The informal structure of S & F is challenged in leading unwilling employees towards the company’s goals. While informal communication in S & F goes horizontally, it may create confusion among employees as there is a need to establish authority to gain the following: is the order from the CEO, COO, or the logistics or operations manager? In the case where differing or varied orders or communications are released to the staff, which should be followed?

It is then necessary that S & F shift communication processes in a vertical direction before the horizontal direction. S&F will also benefit to effect major changes in the company, to establish a working organizational structure where one voice of authority may be overshadowed by a higher voice. In this process, where conflict between two same-level management team members or managers themselves could be easily resolved through formal communication: releasing of a memorandum that orders each to comply with the higher authority’s message or direction.

When it comes to power and politics within the S & F formal culture, there is a need to consolidate its operations to streamline with online operations, increase the reach of the online sales channel, and increase profits.


It is highly recommended to Irene Seagrave that the management of S&F should adopt a formal organizational structure where the chief executive officer oversees all managers. With this task is the responsibility to consolidate all teams as a single workforce to achieve the company’s goals, from production, office culture, to profitability.

The leadership and management must influence the work-environment culture to effect changes that lead to development and growth, where respect for individuals ranks higher than differences. In this process, it is also imperative to empower the employees because, through this process, the leadership and management will be able to gauge those which Welch emphasized: identify passion, establish more caring members, then, pick great talent.


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