Microsoft Organizational Structure In A Nutshell - FourWeekMBA (2024)

Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

Understanding Microsoft’s organizational structure

Microsoft has a product-type divisional organizational structure, with each division focusing on a specific line of goods and services. Furthermore, each has a separate research and development arm and dedicated sales and customer support staff.

Since current CEO Satya Nadella was appointed in 2015, the company has undergone several structural changes. Presently, Microsoft has two core engineering (product development) divisions:

1. Cloud and Artificial Intelligence Platforms.
2. Experiences and Devices.

Functional structure

Microsoft has a further seven functional divisions:

1. Business Development and Evangelism.
2. Finance.
3. Human Resources.
4. Legal and Corporate Affairs.
5. Engineering (operating systems, devices, studios, applications, services, and cloud and enterprise units).
6. Dynamics.
7. Advanced Strategy and Research.

Despite each division having some autonomy, divisional heads must still report directly to Nadella.

Geographic divisions

Microsoft also contains two geographic divisions: United States and International.

Other characteristics of Microsoft organizational structure

Span of control

Microsoft has a wide span of control (SOC). This means the company has a comparatively higher number of subordinates under a single manager.

Centralization

Unlike Apple – where decision-making is made by all levels of management – Microsoft remains predominantly centralized with decisions made by those with authority.

Instituted by Bill Gates, centralized decision-making standardizes work output and removes the potential for personal biases. This creates a unified company with universal standards of performance and progression.

Advantages and disadvantages of Microsoft’s corporate structure

Advantages

• Streamlined innovation. With a product-based divisional structure, employees work on projects that suit their skills and expertise. Supportive leadership with access to the CEO gives product specialists the freedom and resources to innovate. This ties in nicely with Microsoft’s core strategy of creating a family of integrated devices and services.
• Minimization of internal conflict. With little overlap in the scope of each division’s activities, there is little chance for conflict over resources or skills.
• Flexibility and responsiveness. Each division operates as a pseudo-entity, equipped with the functions and resources necessary to accomplish its mission. As a whole, this makes the divisional structure of Microsoft more adaptative. Divisions can be added, removed, or merged as required and do not impact other units.

Disadvantages

• Incompatibility. The divisional structure has led to a scenario where Microsoft’s own products were incompatible with each other. This occurred when the business software division was unable to integrate Microsoft SharePoint with Windows Live.
• Minimal consideration for international markets. Microsoft has a sole geographic division for the rest of the world sans the United States. It could be argued that a single geographic division fails to capture the nuanced differences of regional markets.

Key takeaways:

• Microsoft has a product-based divisional organizational structure. The company has sought to streamline product development over the years, with current CEO Satya Nadella creating just two product divisions. These are Cloud and Artificial Intelligence Platforms and Experiences and Devices.
• Microsoft has a further seven functional divisions, with each divisional head reporting directly to Nadella.
• Microsoft’s divisional structure helps it streamline innovation and support a core strategy of integrated products and services. Divisions also help the company operate as a collection of flexible and adaptive entities with separate missions and access to resources.

Key Highlights of Microsoft’s Organizational Structure:

• Product-Type Divisional Structure: Microsoft employs a divisional organizational structure based on products and services. Each division focuses on specific goods and services, with its own R&D, sales, and customer support teams.
• Engineering Divisions: Under CEO Satya Nadella’s leadership, Microsoft has two core engineering divisions: Cloud and Artificial Intelligence Platforms, and Experiences and Devices.
• Functional Divisions: Microsoft also has seven functional divisions:
  • Business Development and Evangelism.
  • Finance.
  • Human Resources.
  • Legal and Corporate Affairs.
  • Engineering (operating systems, devices, applications, etc.).
  • Dynamics.
  • Advanced Strategy and Research.
• Geographic Divisions: The company has two geographic divisions: United States and International.
• Span of Control: Microsoft employs a wide span of control, meaning a higher number of subordinates report to a single manager.
• Centralization: Decision-making at Microsoft is predominantly centralized, allowing for standardized work output and a unified company approach.
• Advantages:
  • Streamlined Innovation: Divisional structure allows specialists to focus on projects that match their expertise.
  • Minimized Internal Conflict: Limited overlap between division activities reduces conflicts over resources.
  • Flexibility and Responsiveness: Each division operates as a semi-independent entity, enhancing adaptability.
• Disadvantages:
  • Incompatibility Issues: Divisional structure led to cases of Microsoft products being incompatible with each other.
  • Limited Consideration for International Markets: Single geographic division might not fully address regional market differences.
• Key Takeaways:
  • Microsoft’s structure includes product divisions, functional divisions, and geographic divisions.
  • Nadella’s leadership streamlined the company’s structure to enhance innovation and adaptability.
  • The divisional structure supports Microsoft’s strategy of integrated products and services.
  • However, incompatibility issues and limited regional market considerations have been drawbacks.

Read Next: Microsoft Business Model, Who Owns Microsoft?, Microsoft Organizational Structure, Microsoft SWOT Analysis, Microsoft Mission Statement, Microsoft Acquisitions, Microsoft Subsidiaries, Bill Gates Companies.

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