Apple University Dean and Vice President Joel Podolny:
When Jobs arrived back at Apple, it had a conventional structure for a company of its size and scope. It was divided into business units, each with its own P&L responsibilities. General managers ran the Macintosh products group, the information appliances division, and the server products division, among others. As is often the case with decentralized business units, managers were inclined to fight with one another, over transfer prices in particular. Believing that conventional management had stifled innovation, Jobs, in his first year returning as CEO, laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization.
The adoption of a functional structure may have been unsurprising for a company of Apple’s size at the time. What is surprising—in fact, remarkable—is that Apple retains it today, even though the company is nearly 40 times as large in terms of revenue and far more complex than it was in 1998. Senior vice presidents are in charge of functions, not products. As was the case with Jobs before him, CEO Tim Cook occupies the only position on the organizational chart where the design, engineering, operations, marketing, and retail of any of Apple’s main products meet. In effect, besides the CEO, the company operates with no conventional general managers: people who control an entire process from product development through sales and are judged according to a P&L statement.