One Roaster, Three Businesses: Planning at Three Levels and Choosing Between a Functional, Divisional and Hybrid Structure for a Growing Specialty Coffee Company
[Student Name]
University of Phoenix
MGT/521: Management
Week 2 Assignment
[Instructor Name]
[Date]
The company, employees and figures are a composite written for a model paper.
A composite specialty coffee company began 14 years ago as a single café with a small roaster in the back. Today it roasts about 900,000 pounds of coffee a year and earns about $18 million in revenue from three businesses: wholesale sales to restaurants, offices and grocery stores, about $9 million; seven company-owned cafés, about $6.5 million; and an online subscription service, about $2.5 million and growing fastest. It employs about 140 people. Its structure has hardly changed since the second café: a founder and chief executive, with heads of roasting and production, sales, café operations, marketing and finance reporting directly to her. The company had become three businesses with three sets of customers, still organized as though it were one café with a roaster in the back. This paper sets plans for the next three years and recommends a structure to carry them out.
Symptoms of a Structure Under Strain
The problems are visible in daily operations. Roasting capacity is scheduled first for large wholesale orders, so cafés often wait for single-origin coffees and online subscribers receive shipments late; subscription cancellations rose to 6% a month last year. The sales head, whose team is paid on wholesale revenue, has little reason to help the online business, which marketing manages. Decisions about which business gets scarce roasting time go to the founder, who spends much of each week arbitrating between department heads. No one below the founder is responsible for the results of any one business.
Planning at Three Levels
Plans exist at three levels that must fit together (Robbins & Coulter, 2021). The company's strategic plan, set by the founder and board, has three goals for the next three years: grow online subscriptions to $6 million, grow wholesale to $11 million with better margins by focusing on specialty grocers and add three cafés. Tactical plans translate those goals into annual targets for each business, such as reducing subscription cancellations to 3% a month and adding 40 specialty grocery accounts. Operational plans set the weekly roasting schedule, café staffing and fulfillment routines that deliver the tactical targets.
Under the current structure, there is no level at which tactical plans for each business are owned. Every department contributes to all three businesses, and no one is accountable for any one of them.
Understanding the Options
Mintzberg (1980) described organizations as configurations that fit their environments. Young, small firms often use a simple structure centered on the founder; as they grow and standardize, they shift toward more formal structures, and firms serving distinct markets often adopt a divisionalized form with semiautonomous units. The coffee company is still run as a simple structure layered on functional departments, a form it has outgrown.
Galbraith (2014) argues that structure is one of several design elements, along with processes, rewards and people practices, that must fit the strategy. Changing boxes on an organization chart without changing how decisions are made and how people are rewarded will not change behavior.
Three Structural Options
Option 1: Improved functional structure
Keep the functional departments but add a weekly planning meeting to allocate roasting capacity and set shared goals. This is simple and preserves roasting expertise and efficiency, but it leaves no one accountable for each business and keeps conflicts flowing to the founder.
Option 2: Full divisional structure
Create three divisions, wholesale, cafés and online, each with its own roasting, marketing and finance staff. Each division head would own results. But roasting is capital-intensive and benefits from scale; splitting it into three small operations would raise costs and reduce quality consistency, and the company is too small to duplicate finance and HR.
Option 3: Hybrid structure
Create three business units, each led by a general manager responsible for revenue, customer experience and profit, while keeping roasting and supply chain, finance and HR as shared services that serve all three.
Criteria and Comparison
The options were compared on four criteria drawn from the strategic plan: accountability for each business's results, efficient use of roasting capacity, responsiveness to each business's customers and cost.
The functional option scores well on efficiency and cost but poorly on accountability and responsiveness. The divisional option scores well on accountability and responsiveness but poorly on efficiency and cost. The hybrid option scores well on accountability and responsiveness while preserving the efficiency of shared roasting, at a moderate cost: three general manager roles, two of which can be filled by promoting the current sales and café operations heads.
Recommendation: The Hybrid Structure
The company should adopt the hybrid structure. The wholesale general manager leads sales and account management for restaurants, offices and grocers. The café general manager leads the seven cafés and new openings. The online general manager leads the subscription business, including its marketing and customer service. Roasting and supply chain, finance and HR report to a chief operating officer, a new role, who manages shared services and capacity.
Following Galbraith's argument, the structure needs matching processes and rewards. The most important process is a monthly sales and operations planning meeting in which the three general managers and the head of roasting agree on demand forecasts and allocate roasting capacity for the next quarter, with the chief operating officer deciding unresolved conflicts rather than the founder. Each general manager's bonus should depend partly on their own unit's results and partly on company profit, so they share an interest in using the roaster well.
Implementation
The change should be phased over six months: appoint the general managers and the chief operating officer first, then launch the planning meeting, then move marketing and customer service staff into the units. The founder's role shifts to strategy, brand and the board.
Risks of the New Design
The hybrid carries its own risks. General managers may compete for roasting capacity even more forcefully once their bonuses depend on it, which is why the planning meeting and the chief operating officer's authority to settle disputes matter. Shared services can become slow and bureaucratic if they answer to no one's customers; the roasting team should therefore have service targets, such as on-time completion of each unit's weekly roast plan, reviewed at the planning meeting. And the founder must resist the habit of settling disputes herself, or the new structure will exist only on paper. The company should review the design after one year against the tactical targets in the plan, including subscription cancellations, grocery accounts added and on-time café deliveries.
Conclusion
The coffee company has grown into three businesses but remains organized as one, leaving tactical plans without owners and routing every conflict to the founder. A hybrid structure, with three business units accountable for their own results and shared roasting and support services, supported by a monthly planning process and aligned rewards, would give each business an owner while protecting the efficiency of the roaster. Planning and structure must fit, and this design lets the strategic plan be carried out.
References
Galbraith, J. R. (2014). Designing organizations: Strategy, structure, and process at the business unit and enterprise levels (3rd ed.). Jossey-Bass.
Mintzberg, H. (1980). Structure in 5's: A synthesis of the research on organization design. Management Science, 26(3), 322-341. https://doi.org/10.1287/mnsc.26.3.322
Robbins, S. P., & Coulter, M. (2021). Management (15th ed.). Pearson.
How this MGT 521 Week 2 example is structured
The MGT/521 shelf page describes Week 2 as covering planning and structure, with learning teams forming in many sections. The paper treats the two topics as linked: plans set what the company must accomplish, and structure determines whether it can. It diagnoses the current structure's failures with evidence, weighs alternatives against stated criteria and ends with a design specific enough to draw as an organization chart. Students search this week as MGT 521 Week 2, MGT521 Wk 2 or MGT/521 Wk 2; all three are the same assignment.
MGT/521 Week 2 questions, answered
What does MGT/521 Week 2 usually ask for?
The MGT/521 shelf describes Week 2 as covering planning and organizational structure. Many sections ask students to analyze an organization's planning and structure, compare structural options and recommend a design that supports its goals.
What is the difference between functional and divisional structures?
A functional structure groups people by specialty, such as production, sales and finance, which builds expertise and efficiency. A divisional structure groups people by product, market or region, each with its own functions, which improves responsiveness to each market but can duplicate resources.
What is a hybrid structure?
A design that combines divisional units for markets or products with shared functional units for activities that benefit from scale or expertise. Hybrids aim to capture responsiveness and efficiency together but require strong coordination between the units.
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