Unilever Organizational Structure: Formal vs. Informal

Introduction to Unilever's Organizational Structure

Unilever has a formal structure that represents the manner in which the organization is established by its stakeholders and the personnel responsible for its management. Under this formal structure, the organization is able to meet its objectives. The company's individual organizational structure is a formal composition of responsibilities, tasks, and reporting relationships that allows the organization to control, coordinate, and motivate employees so that a common goal can be realized (Ron, 2002).

Unilever operates with a hybrid form of formal organization. The company operates with two product segments, three divisional regions, and five functional segments. This organizational structure was developed and implemented to foster communication and to take advantage of the resources available to the company. Typically, this kind of organization is structured on a top-down basis. Once the executive body is satisfied with the system, it flows down through the levels of management. In some cases the organizational structure may not be clearly visible; however, judging by the actions and the specified reporting protocol, the structure is functional and intact.

This type of formal organization enables the company to take advantage of existing environmental conditions at any given time.

The company also has informal structures within its systems of working and management. Unilever's management culture has historically encouraged the use of informal organization, as is the case in most other businesses. The company's informal structure is also crucial and effective — more by accident than by design. It is essentially a by-product of an intensive program of attachments, training, and job rotation. All of these activities create a formidable network within the organization that helps facilitate the transfer of skills and experience from one individual to another. It is the informal exchange of information among individuals that most facilitates the transfer of skills (Ron, 2002). This informal exchange has added value to the competitiveness of experts in the organization. The free flow of information encourages a sense of competition in the head office, where experts improve their knowledge and skills while competing alongside junior employees.

The transfer of skills between product groups raises a number of issues, the most crucial of which often involves technology. For instance, fat science can be applied across multiple sectors, including skin cream, frying fat, soap making, bakery materials, margarine, oleo-chemicals, ice cream, and many other company products.

Informal Organization and Knowledge Transfer

The increasing degree of scientific specialization necessary to improve the company's products requires major expenditure on research and development. The economies of scale in research and development are a key reason for the existence of large companies. The responsibility for making use of the existing science base as widely as possible is shared between the product groups and the research director. However, while the company has made considerable progress over the past decade in integrating science throughout the organization, there is still some way to go. A significant challenge is that predicting consumer behavior over longer time horizons becomes notoriously difficult once corporate management seeks to move beyond the general trends commonly cited in popular publications.

Informal organization also enhances the sharing of activities, which is a potent basis for corporate strategy, as sharing tends to enhance competitive advantage by lowering costs or raising differentiation. In an informal organization, the sharing of activities can be achieved through a central service or a system of sharing between operating units.

Generally, informal organization creates favorable working conditions in which all employees can work in teams and share ideas. It enables the formation of a good network in which all stakeholders feel comfortable with one another.

Teams within organizations are formed specifically based on the role or task for which they are intended. They are assembled with the aim of accomplishing a given objective that is crucial to the development of the organization. For instance, when the company wants to develop a new marketing strategy, it involves the relevant personnel from related departments. The functional duty of each team is crucial in determining how groups are formed. Teams also emerge from the interaction of personnel — individuals who share similar beliefs, values, character traits, and ideas come together to ensure that the team's intentions are achieved. A collective responsibility or desire is the primary driver of team formation.

The management of teams is a critical responsibility. To ensure that the objectives for which teams were formed are achieved, management must ensure that teams are functioning well and efficiently. Integration within groups should be encouraged and managed adequately. In an organization with multiple teams, the organization should be divided into various segments based on role or function. This enables the company to enhance the effectiveness and efficiency of its functional teams. For instance, in a manufacturing company, product development departments might be staffed exclusively by manufacturing engineers, making management of such a functional group much easier and more effective.

Team Formation and Management

Functional teams tend to be successful in large companies such as Unilever, which produce high volumes of output at relatively low costs. Such large companies can afford lower production costs due to economies of scale.

Teamwork in the workplace is a success factor that depends on the interdependence of each individual member. This is crucial in ensuring that overall organizational performance goals are met or exceeded. One defining characteristic of a team is that it functions as an integral unit within an organization, working toward shared organizational goals rather than as an aggregate of individuals pursuing independent objectives. Currently, team management within the company remains a necessary factor in achieving organizational goals. It involves managing employees across various locations and moving beyond face-to-face interaction as the sole means of building relationships.

In managing teams, the management builds strong relationships among members and between employees and the executive. This is best defined by establishing team understanding, trust, communication, and an appreciation of difference and diversity (Ron, 2002). The leaders of each team need to know how to obtain the best performance and productivity from every member.

Establishing a relationship with remote workers is not overly difficult. Team management solutions provide managers with a sound understanding of the core characteristics of each employee, regardless of their location.

Identifying each team member's strengths and weaknesses helps in the management of teams, since managers can distribute and balance responsibility based on personality and skill set. Such an analysis of team dynamics provides the resources and information necessary for managing, developing, and enhancing all types of teams.

By understanding the unique characteristics of each employee, management can provide appropriate recommendations on how to manage that employee effectively based on fit — fit with the job, the manager, the team, and the organization as a whole.