When Steve Jobs returned to Apple in 1997, the company was a mess. It was basically a collection of mini-companies all fighting for resources, each with its own P&L statement. Most big tech firms today still look like that. They have a "General Manager" for the cloud division, another for hardware, and another for services. But Jobs hated that. He fired the general managers, laid off thousands of people, and shifted the entire company to a functional structure.
This move is what defines organizational design of apple to this day. It’s weird. It’s rare. Honestly, it shouldn't work for a company that makes over $300 billion a year. Most CEOs would lose their minds trying to manage a behemoth without delegating profit-and-loss responsibility to divisional heads. Yet, Tim Cook has kept this engine running.
The Secret Sauce of Functional Expertise
Apple is organized by function, not by product. Think about that for a second. There isn't an "iPhone Division" or a "Mac Division" with its own dedicated marketing, finance, and engineering teams. Instead, there is one Software Engineering department, one Hardware Engineering department, and one Marketing department.
If you're the Senior VP of Hardware Engineering, you’re responsible for the hardware of every single product—from the Apple Watch Ultra to the Mac Studio.
This creates a massive amount of pressure. Why? Because the people at the top have to be experts. In a typical multidivisional (M-form) company, a manager's primary skill is "management." They look at spreadsheets and move resources around. At Apple, the leaders are expected to have deep technical expertise in their specific function. It’s the "experts leading experts" model.
Basically, the organizational design of apple is built on the belief that those with the most expertise should have the decision-making power. You won't find a generalist running the camera team. You’ll find someone who has spent twenty years obsessed with lenses and sensors.
Collaboration vs. Competition
In most big corporations, different product teams compete with each other for the CEO’s attention and the company's budget. It’s like a corporate version of Game of Thrones. Because Apple doesn't have these silos, the hardware team doesn't "sell" their services to the software team. They just work together on a product.
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Of course, this creates a different kind of friction. Since no one person (other than the CEO or COO) owns the entire product lifecycle, everyone has to collaborate. It’s intense. It requires a level of "discretionary leadership" where people have to influence others without having direct authority over them.
Why the Organizational Design of Apple Defies Industry Norms
Most business schools teach that as a company grows, it must decentralize. If you get too big, the "C-suite" becomes a bottleneck. Decisions take too long. Innovation dies.
Apple just ignores this.
They’ve managed to scale by keeping the decision-making power concentrated in a few functional silos. This allows for what they call "simultaneous excellence." When the silicon team develops the M3 chip, they aren't just thinking about the MacBook Air. They're thinking about how that chip architecture scales across the entire ecosystem. That’s why an iPad Pro feels as fast as a laptop. It’s the same DNA because it came from the same team.
Harvard Business Review researchers, specifically Joel Podolny and Morten Hansen, have noted that this structure relies on three specific leadership traits:
- Deep expertise that allows leaders to "get into the weeds" of a problem.
- Immersion in the details so they can make quick, informed decisions.
- A willingness to collaboratively debate during the collective decision-making process.
It sounds exhausting. It is. But it’s also why an iPhone doesn't feel like it was designed by a committee of people who never met each other.
The "No P&L" Rule and Why It Matters
Here is the kicker: none of the functional heads at Apple have their own Profit and Loss (P&L) statement. Only the CFO has a P&L that matters.
In a normal company, if you're the head of the "Home Audio" division and your sales are down, you cut your R&D budget to make your numbers look better. You make decisions based on short-term financial targets. At Apple, the head of engineering doesn't have to worry about the quarterly earnings of a specific product line. They just have to build the best possible hardware.
This removes the incentive to "nickel and dime" the product. It allows the company to invest heavily in technologies—like the transition to Apple Silicon—that might not show a return for half a decade. Most public companies can't do that because their divisional managers are too busy protecting their own bonuses.
The Cost of Excellence
Is there a downside? Absolutely.
The organizational design of apple puts a ridiculous amount of stress on the CEO. Tim Cook has to act as the ultimate arbiter between these massive functional silos. If Software and Hardware are at an impasse, it goes up the chain. Fast.
It also makes it harder to enter entirely new categories. When Apple started working on the Vision Pro, they couldn't just "spin up" a headset division. They had to weave the project through the existing functional departments. This is likely why Apple products take so long to hit the market. They don't just launch a "v1" and fix it later; they wait until the entire functional machine can produce something that fits the ecosystem perfectly.
Navigating the Apple Ecosystem Structure
If you’re looking at how this impacts you, the consumer, it’s all about the "walled garden." That seamless handoff from your Mac to your iPhone isn't an accident. It's a direct result of the organizational structure.
Since the same software team handles the OS for all devices, they build features that work across the board. There's no "Mac OS team" fighting with the "iOS team" for dominance. They are one and the same.
- Iterative Design: Because they focus on a few products, they can refine the same design for years.
- Resource Allocation: They can move 500 engineers to a single problem (like a battery fire or a security flaw) instantly because they aren't tied to a specific product P&L.
- Unified Vision: The marketing team sees the whole picture, ensuring the brand voice is identical whether you're buying a $20 cloth or a $5,000 desktop.
Strategic Takeaways for Business Leaders
You probably shouldn't copy Apple's structure exactly unless you have a workforce of world-class experts and a leader who can handle the cognitive load. However, the organizational design of apple offers lessons for any business trying to stay innovative while scaling.
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First, stop over-managing and start leading with expertise. If your managers don't understand the work their team is doing, they can't make good decisions. They’re just relaying information.
Second, consider where your silos are hurting the customer experience. If your website feels different than your mobile app, it’s probably because those two teams don't report to a single functional head.
Finally, look at your incentives. Are you rewarding managers for hitting short-term divisional goals at the expense of the company’s long-term health? Apple’s "one P&L" approach is a radical solution to the common problem of corporate infighting.
Apple’s success isn't just about "good design" or "cool marketing." It’s about a rigid, demanding, and highly unconventional way of organizing people. It’s a structure built for a company that wants to act like a startup even when it's the size of a small country's economy.
How to Apply These Principles
- Audit your leadership's technical depth. Ensure that your decision-makers are actually experts in what they oversee, rather than just "people managers."
- Identify friction points between divisions. If "Product A" and "Product B" feel like they come from two different companies, you have an organizational design problem.
- Simplify your P&L structure. Even if you can't have one single P&L, try to align incentives so that managers are rewarded for company-wide success, not just their own silo.
- Focus on the "Hand-off." In a functional design, the most critical moments happen when the "baton" is passed between teams. Optimize those communication channels.
The organizational design of apple remains a masterpiece of corporate engineering. It is the reason they can maintain such a high level of detail across a vast product line. While it’s not for everyone, it proves that "the way it's always been done" isn't the only way to build a trillion-dollar company.