Case Study-KBR

KBR is organized into six business units. This means there are numerous job roles in areas such as engineering, construction, operations, logistics and project management. The different roles can be organized within the structure of KBR to enable it to achieve its mission, which is to safely deliver any project, any time, in any environment for the benefit of our customers, shareholders, employees and the communities they serve. There are three means to organize a corporate and business unit structure for KBR: through functional structure, product division structure and matrix structure.

Functional structure is a design that groups people together on the basis of their common expertise and experience or because they use the same resources. As Chapter 4 discusses, the assignment of one person to a role is the start of specialization and horizontal differentiation. As this process continues, the result is a functional structure, a design that groups people into separate functions or departments because they share common skills and expertise because they make use of the same resources.

Functional structure is the bedrock or foundation of horizontal differentiation. An organization groups different tasks into separate functions to increase the effectiveness with which it achieves its principal goal: providing customers with high-quality products at competitive prices. As functions specialize, employees’ skills and abilities improve and the core competences that give an organization a competitive advantage emerge. Different functions are formed as an organization responds to increasingly complex task requirements.

Figure 1 shows a functional structure for KBR. As shown in Figure 1 below, there are 8 major functions in KBR: Finance, Research & Development, Sales & Marketing, Engineering, Construction, Operations, Logistics and Project management. By focusing on the best way to divide into functions the total task facing the organization (the creation of valuable products for customers) and recruiting experienced functional managers from other organizations to run them, KBR created core competences that allowed its products to compete effectively with other engineering, construction and services companies.

Figure 1 Functional Structure A product division structure is characterized by the splitting of the manufacturing function into several different product lines or divisions; a centralized set of support functions then services the needs of all these product divisions. Figure 2 shows a product division structure for KBR. Figure 2 shows that in a product division structure, support functions such as engineering, construction, operation, logistics and project management are centralized at the top of the organization. Each product division uses the services of the central support functions and does not have its own support functions.

Creating separate support functions for each product division would be expensive, and the cost could be justified only if the needs of the different divisions were so diverse and dissimilar that different functional specialists were required for each type of product. Each support function is divided into product-oriented teams of functional specialists who focus on the needs of one particular product division. Figure 2 shows the grouping of the five functions into six teams, each of which focuses on a separate product division.

The six business units for KBR are as follows: Upstream offers engineering, construction, purchasing and related services for energy projects; Downstream serves business clients in the petrochemical, refining and coal gasification markets; KBR Services provides construction and maintenance services; KBR Technology protects the technological property rights of the business; KBR Ventures offers financial investment and management services for companies owning assets of KBR projects; Government and Infrastructure offers construction, engineering, programme management and services contracting for public and private sector businesses all over the world.

This arrangement allows each team to specialize and become expert in managing the needs of its own product group. However, because all of the teams belong to the same centralized function, they can share knowledge and information. Such sharing of skills and resources increases a function’s ability to create value across product divisions.

Figure 2 Product Division Structure A matrix structure is an organizational design that groups people and resources in two ways simultaneously: by function and by product. Figure 3 shows a matrix structure for KBR. In the context of organizational design, a matrix is a rectangular grid that shows a vertical flow of functional responsibility and a horizontal flow of product responsibility. In Figure 3, the lines pointing down represent the grouping of tasks by function, and the lines pointing from left to right represent the grouping of tasks by product. An organization with a matrix structure is differentiated into whatever functions the organization needs to achieve its goals.

The members of the team are called two-boss employees because they report to two superiors: the product team manager and the functional manager. The defining feature of a matrix structure is the fact that team members have two superiors. In the matrix structure, team membership is not fixed. Team members move from team to team, to where their skills are most needed. In theory, the matrix structure should be more flexible, in which lines of authority and coordination are more stable.

Figure 3 Matrix Structure