For the organizational structure, how is the company currently structuring its operations? What type of structural model best describes what they do: functional, divisional, matrix, virtual, etc.? Is the working for them? Show an organizational chart.
Organizational Structure, Design and Effectiveness
According to Daft, organizational structure has three basic components which are identifying and allocating groups of individuals into departments, designating formal relationships and includes designing a system for an effective communication, coordination, and integration among all the business activities of an organization.[footnoteRef:1] Thus, not only having a strategic plan with set of objectives but also having an effective for implementing necessary plans is equally essential for any organization. Daft has explained various types such as functional, divisional, and geographical structures which are used by many elite companies across the world. Merck operating in more than 250 world locations, has organized its commercial activities using matrix structure for effective domestic and international operations as it needs both vertical and horizontal coordination for overall organizational efficacy. [1: Daft, R.L., & Armstrong, A. (2015). Organization theory and design (3rd ed.). Toronto, ON: Nelson Education.]
Before the acquisition of Schering-Plough in 2009, Merck used to commercially operate in two divisions: Pharmaceutical products, and Vaccines and Infectious diseases.[footnoteRef:2] With the successful acquisition post 2010, Merck began operating in three major divisions until fiscal 2014: Pharmaceutical, Animal Health and Alliances segments of which only pharmaceutical segment is reportable. Merck’s pharmaceutical segment also until October 1, 2014 was inclusive of consumer business unit that developed, manufactured, and marketed over-the-counter, foot care and sun care products.[footnoteRef:3] Having such vast variety of drugs in its basket along with international operations, Merck had always been keen on restructuring in line with their portfolio matching market requirements. After divesting their consumer business on October 1, 2014, Merck’s operations are principally managed on a products basis and are comprised of four operating segments: the Pharmaceutical, Animal Health, Alliances, and Healthcare Services segments since fiscal 2015.[footnoteRef:4] As previously mentioned, Merck is prospective about spinning off their women’s healthcare products, biologics and trusted legacy brands by first half of 2021 into a new company called as Organon & Co[footnoteRef:5] also shows their commitment towards being a purely focused science based organization. Their latest restructuring happened in fiscal 2015 showing that since then their operations are effective and supporting their organizational strategy according to their 2016 annual filings.[footnoteRef:6] It unleashes their focus on extensive research and turning into a pure science-based firm reinstating its global position. All the manufacturing of various business segments is headed by a single top manager, along with the teams spread across all the continents exhibiting the coordination and balance between functional and product matrix. [2: Merck & Co. (n.d.). Merck 2019 . Retrieved from: https://s21.q4cdn.com/488056881/files/doc_financials/2019/q4/2019-Form-10-K-Final.pdf] [3: Merck & Co. (n.d.). Merck 2014 Annual Review. Retrieved from: http://s21.q4cdn.com/488056881/files/doc_financials/2014/q4/MERCK_2014_Form_10_K_FINAL_022715.pdf] [4: Merck & Co. (n.d.). Merck 2015 Annual Review. Retrieved from: https://s21.q4cdn.com/488056881/files/doc_financials/2015/annual/MRK_2015_Form_10-K_FINAL_r879.pdf ] [5: Merck & Co. (n.d.). Merck 2019 Annual Review. Retrieved from: https://s21.q4cdn.com/488056881/files/doc_financials/2019/q4/2019-Form-10-K-Final.pdf] [6: Merck & Co. (n.d.) Merck 2016 Annual Review. Retrieved from: https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_MRK_2016.pdf]
Merck over years has been successful in having effective corporate governance in place by implying and value creation as their main values for organizational growth. Hierarchically, it has two basic layers: board of directors and senior executive team after which information flow and sharing is horizontal, vertical, and cross-functional enabling an integrated and connected ecosystem among all the employees. Kenneth C. Frazier, who has been serving as the chairman of the board and as the CEO since December 2011, substantially increased Merck’s spending on R&D over years.[footnoteRef:7] Board members form an integral part of strategic decision-making overseeing all the commercial activities while creating value for their shareholders. There are four committees reporting to the board ensuring proper functioning of the internal processes and reporting designed by the executive team: audit, governance, compensation and benefits, and research committees.[footnoteRef:8] Each of these four committees are led by a leader who ensures their team’s alignment with the by-laws designed and conduct polices. Audit committee checks Merck’s operations through the SEC regulations ensuring the correctness and reliability of their reporting which otherwise is a liable offence. Governance committee discharges duty of evaluating executives and employees’ ability of aligning with laid out company policies while discharging one’s own duty towards company growth. Compensation and benefits committee is solely responsible for allocating performance with incentives and providing extra benefits to the executives depending on the past year’s achievement and forward-looking initiatives. Lastly, research committee ensures transparency avoiding complacency and expedited discovery without safety only for making money. [7: Merck & Co. (n.d.). Company Leadership. Retrieved from: https://www.merck.com/company-overview/leadership/executive-team/] [8: Merck & Co. (n.d.). Company Leadership. Retrieved from: https://www.merck.com/company-overview/leadership/board-of-directors/]
Figure 1: Matrix structure of Merck & Co[footnoteRef:9] [9: Merck & Co. (n.d.). Company Overview. Retrieved from: https://www.merck.com/company-overview/]
Hierarchy, code of conduct, corporate governance, and internal control are the major attributes of an organizational structure directing decision-making and internal processes by evaluating the effectiveness of the organization. While board of directors’ main purpose lies in creating a value for shareholders through business activities, Merck is known for having a wide range and experienced executive team of 11 members who are known to be one of the most effective industry leaders in the pharma sector. Merck’s restructuring policies have been always in line with their strategic initiatives resulting in positive outcomes boosting their global presence. Since fiscal 2016, having such widespread portfolio of products, their matrix structure contributed in their effective functioning over years.[footnoteRef:10] Merck seems to have consistently restructured its operating divisions timely, which made them to spread out under correct and support from both executive team and the board. Therefore, with its robust product portfolio and integrated matrix structure, Merck is efficient in executing its strategic plan boosting its overall performance and increasing market share operating in a complex and extremely regulated industry. [10: Merck & Co. (n.d.) Merck 2016 Annual Review. Retrieved from: https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_MRK_2016.pdf]
CEO &Board ChairmanPresident, Merck Manufacturing Division& EVPPresident, Merck Research Laboratories& EVPPresident, Merck Animal Health Division& EVPChief CommercialOfficer& EVPChief FinancialOfficer & EVPChief PatientOfficer & EVPChief HROfficer & EVPChief MarketingOfficer & EVPChief Info& DigitalOfficer&EVPEVP & General Counsel