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ORGANIZATIONAL STRUCTURE.
Term Paper ID:29860
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Essay Subject:
Discusses various types of structures.... More...
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10 Pages / 2250 Words
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Paper Abstract:
Discusses various types of structures. How companies can determine which structure is appropriate. Vertical organization as a hierarchical division of labor. Horizontal organization and greater employee autonomy. Functional specialization. Divisional Departmentation. Matrix Departmentation. Hybrid form of structure. Advantages and disadvantages of different structures.
Paper Introduction:
INTRODUCTION
The structure of any particular company can determine the level of success that the company enjoys in the market. There are various types of structures, including vertical, horizontal and matrix, which can be used to organize a company, but no singularly correct structure for every company. In fact, most companies should regularly review their organizational structure to determine if they are organized in the most efficient manner possible for their current and anticipated business environment. Company X has not undertaken such a review in many years, and faces the challenge of implementing significant change throughout the organization in order to achieve the best possible structure for today's business environment. While implementing organizational change is not a simple process, ensuring that employees are working withi
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This patterncan help cut costs in organizations with diverse operations that operate inmany territories, produce a vast array of products and services, or whichserve a few major customers. Company Xhas not undertaken such a review in many years, and faces the challenge ofimplementing significant change throughout the organization in order toachieve the best possible structure for today's business environment.While implementing organizational change is not a simple process, ensuringthat employees are working within a structure that offers flexibility andthe greatest ability to meet the needs of the organization is an importantsuccess factor. 885-916.Johnson, P. The Influence of organizational structure. (1996, July-August). Values and organizational structure. R. (1996, December). Functional departments are one side and project efforts on the other.Workers and supervisors in the middle of the matrix have two supervisors:the functional supervisor and the project supervisor. J. 37-41.Wahad, M. Unity of command is alsoimportant in that each individual within the organization receivesdirection and priorities from one and only one other individual. Thisstructure has particular appeal for Company X with its multinationalorientation. Advances in technology also enhance the effectiveness ofhorizontal organizations since information can be made available toindividuals through the use of IT systems. Individuals may also lookup the organizational hierarchy for direction and reinforcement rather thanfocusing attention on products, services or clients. Unity of command is considered necessary toavoid confusion, to assign accountability to specific persons and toprovide clear channels of communication up and down the organization.Companies that have highly vertical structures rely heavily on unity ofcommand to provide clear guidelines to workers and managers as to who isultimately responsible for any particular decision. When this occurs, it is called"unity of command." The number of individuals a manager can directlysupervise effectively is limited; this number is called the "span ofcontrol." There is no absolute minimum or maximum span of control thatleads to an optimum level of efficiency, but vertical specialization tendsto limit the span of control of managers at each level in the organization. Determining the APPROPRIATE Organizational Structure As companies expand, they may find that a hybrid form of structure isused. Top managers and seniorexecutives plan the overall strategy of the organization and determine itslong-term future. A simple vertical structure is shown below: [pic] Horizontal specialization refers to the process of grouping similarpeople and resources together. Types of Structure Before structural change can take place, an organization must have agood understanding of the structure already in place, and the structurewhich is ideal for the organization. For example, Procterand Gamble has successfully promoted competition among product groups(Ristelhueber, 1996). C., & Williamson, P. Sales andmarketing might be organized along regional territories in order to respondto the different needs of the market in different parts of the country,although the company as a whole is characterized by a functional structure(Markides & Williamson, 1996). R., Thibault, L., Slack, T. 53-56.Tata, J., Prasad, S., & thorn, R. (1996, February). Thisenables the organization to run smoothly since there are few schedulingconflicts. The resultof this is that top management may spend an excessive amount of time andeffort dealing with cross-functional problems. Functional departmentation may reinforce the narrow training ofindividuals and lead to boring and routine jobs. Instead of many levels of management on anorganizational chart and many vertical lines, horizontal organizations arecharacterized by few levels of management. Divisional Departmentation Divisional departmentation groups individuals and resources byproducts, services, clients, territories and legal entities. They may have acquired companies or developed new legalentities to limit their liability in new risky ventures. Traveling through transitions. S., & Halperin, R. As a result, employeeturnover may be high as employees seek other challenges in otherorganizations. 185-2 4.Weiss, W. A horizontal organization isone which is more open to change than a vertical organization; this is dueto the greater autonomy that employees generally have in a horizontalorganization, and less tendency among individuals to seek to preserve thestatus quo. Lower level managers supervise the actionsof subordinates to ensure implementation of the strategies authorized bytop management, and compliance with the related policies established bymiddle management (Greco, 1998). In an organization with a high level of unity of command, poweris generally associated with "higher" positions on organizational charts(Malone, Morton & Halperin, 1996). (1998, Nov-Dec). In addition, employees caneasily understand the role of each unit, even though each employee may notknow what each individual in every unit actually does (Watad, 1999). Middle managers guide the daily operations of the organization,help to formulate policy and translate top management decisions into morespecific guidelines for action. The number of managers almostdoubles, in some cases. Journal of Managerial Issues (11), pp. Without a strong unity of command,managers can shift responsibility to other departments and other managers,with the result that accountability is lost. (1996, July). This phased move toward greaterhorizontal structure can enhance the ability of Company X to meet its long-term corporate objectives while also enhancing its effectiveness over theshort-term (Hinings, Thibault, Slack & Kikulis, 1996). Because of this, any attempt to changethe organizational structure must include and focus on the participation ofthe individuals who currently wield power within the existing structure. This patternis often used to meet diverse external threats and opportunities. It provides a dual emphasis between functionaland divisional concerns, however, with the result that conflict can beresolved at the working level where the balance between technical, cost,customer and organizational concerns can be rectified. & Kikulis, L. W., Morton, M. (2 1, Summer). Precise integration and control is needed acrossmany sophisticated functional specialties and corporations. The Science and art of managing. (1999, Summer). Organizations that rely on a few major customers may organize theiremployees and resources by client. Types of Horizontal Specialization There are three major types of horizontal specialization: function,division and matrix. Divisional specialization provides adaptability and flexibility inmeeting the demands of important external groups. Vertical specialization is ahierarchical division of labor that distributes formal authority andestablishes where and how critical decisions are made (Markides &Williamson, 1996). The distribution of formal authority can most easily be seen indescriptions of typical managerial duties. To the extent thatthis departmentation yields separate business units, top management cancompare the performance of one group with another. Matrix Departmentation Matrix departmentation evolved from very complex projects whereneither functional nor divisional forms were working. Large,geographically dispersed organizations which have national andinternational markets often use this departmentation by territory strategyas the basis for their organizations. Designing for the 21st century. Electronic Business Today, pp. Many government agencies also have a legal form of organization,primarily because of the legislation that authorizes their activities. Communication across technical areas can be difficult andconflict between units may arise. R. In some organizations, eachdepartment has a technical specialty, such as marketing, finance,production and personnel. This helps minimize the role ofsupervisor-as-information-gatekeeper that is often found in verticalorganizations. To the extent that customer needsare unique, departmentation by client can also cut costs, reduce confusionand increase synergy. 4-19.Malone, T. M. 44 - 468.Trahant, B., & Burke, W. The solutionwas to integrate both the functional and divisional forms simultaneously. Over time,organizations that rely on functional specialization may experience anemphasis on quality from a technical standpoint rather than a productstandpoint, a high level of resistance to change, and difficulty incoordinating the actions of different functional areas (Tata, Prasad &Thorn, 1999). Individuals within adepartment can easily build on one another's knowledge, training andexperience. Here, the idea is to focus attention onthe needs of the individual customer. There are various types ofstructures, including vertical, horizontal and matrix, which can be used toorganize a company, but no singularly correct structure for every company.In fact, most companies should regularly review their organizationalstructure to determine if they are organized in the most efficient mannerpossible for their current and anticipated business environment. For some large organizations, themaze of subsidiaries, joint ventures and holding agreements are highlycomplex. Whatmatrix management demonstrates is that companies do not have to abide by aneither-or scenario when developing their organizational structure.Companies can examine their operating environment and develop anorganizational structure that meets the demands of that environment.Because of the vastly diverse cultures in which Company X operates,implementation of a matrix structure could prove difficult for employeesacross the organization as a whole. Thecompany can use its corporate identity to take responsibility for actionsthat were taken by individuals. (1999, March). Such a structure is typical of older companies such asCompany X. They are also the company's final judges for internaldisputes, and serve to certify promotions, reorganizations and similardecisions. Only then can a plan be developed toput the new structure into place. This is the most popular form of organizationamong large, multinational companies (Trahant & Burke, 1996). F., & Leenders, M. Journal of Business Strategy (19), n.p.Hinings, C. This departmentation by client was commonly used bycompanies that did business with both the military and also producedcommercial applications, such as aerospace companies. There are disadvantages associated with functional specialization,however, which form the reason for other types of horizontal organizations. Over time, organizations that use divisional specialization will findthat they are able to be flexible enough to respond to external threats andopportunities, but they may also experience a lag in the technical qualityof products and services when compared to functionally structuredcompetitors. Public Personnel Management (28), pp. For example, a company may still remain organized along functionallines, with production, marketing and finance forming the main functions,but within those functions, divisional structures may be used. 11-15. This research examines the various types of organizationalstructure and how companies can determine which structure is appropriatefor Company X. Lines of communication across theorganization can become very complex. The functional form of specialization is commonin American business and is used often toward the bottom of the hierarchy.A simple horizontal structure is shown below: [pic] Functional Specialization Functional specialization can yield very clear task assignments thatare consistent with an individual's training. Matrixdepartmentation is found throughout the aerospace industry where projectsare technically complex and involve hundreds of subcontractors locatedthroughout the world. The keydisadvantage of the matrix method is the loss of unity of command.Individuals are often not sure what their jobs are, who they report to forspecific activities and how various managers are to administer the effort.It can be a very expensive method since it relies on individual managers tocoordinate efforts deep within the firm. (1996, April). Strategy & Leadership, pp. This structure is also highly expensive and difficult to explain toemployees. The savings in time, effort andtravel can be substantial when compared to functional departmentation, andeach territory can adjust to regional differences in the market. It also allows forspotting external changes as they are emerging. Functional departmentation is accomplished throughgrouping by skill, knowledge and action. H. 6-1 .Markides, C. The major advantage of the matrix method of departmentation is that itcombines the strengths of both functional and divisional departmentation.It also helps to provide a blending of technical and market emphasis inorganizations operating in highly complex environments. While employees can easily understand the structure that goeswith either functional or divisional organization, the structure associatedwith matrix departmentation is more complex and can lead to greaterambiguity, resulting in higher levels of confusion and some short-termdrops in productivity (Hinings, Thibault, Slack & Kikulis, 1996). Journal of Supply Chain Management (37), pp. The Supply organizational structure dilemma. The greater the level of verticalization, the narrower the span ofcontrol; conversely, the more horizontal the structure of the organizationis, the broader the span of control (Johnson & Leenders, 2 1). Supervision (6 ), pp. Facing similar problems and having similar training facilitatecommunication and technical problem solving. ReferencesGreco, J. Some companies choose divisional specialization because of theirhistories. When unity of commandis lacking, no single individual is responsible for any one action. 34 -367.Ristelhueber, R. Organizing for the 21st century. In organizations wheresatisfying the demands of outsiders is particularly important, thedivisional structure may provide the desired capabilities. The major disadvantage to this type of organization is thelack of coordination across divisions, particularly where divisions mustwork closely or sell to each other (Weiss, 1999). W. Introduction The structure of any particular company can determine the level ofsuccess that the company enjoys in the market. Organizationsexpanding internationally may also departmentalize by legal entity to meethost country ownership requirements. Corporate diversification and organizational structure. Complex communication channels canlead to too much information being forwarded to top management. As companies examine therole that each individual plays within the organization, there is a growingtendency to eliminate middle managers and to expand companies to horizontalstructures that reduce overhead and which can offer individual employeesgreater autonomy in performing their jobs. Chain of command refers to the hierarchical connections that areformed among executives, managers, supervisors and line employees.Individuals are expected to follow the decisions of their supervisors inthe areas of responsibility as outlined in the organizational chart.Traditional management theory suggests that each individual is to have oneboss, and each unit is to have one leader. Training & Development, pp. Integrated managerial training. Human Relations, pp. When determining the level of verticalization that a company shouldhave, it is important to consider the effect of the decision on thecompany's unity of command. Divisional specializationprovides for the integration of specialized personnel deep within thehierarchy, and also can focus and react to the success or failure ofparticular products, services, clients and territories. (1999, Winter). Academy of Management Journal, pp. Limiting a company to a highly vertical organizational structure meansthat there is likely to be increased conflict as competition for resourcesintensifies, and that the company is less able to respond to changes in themarketplace and elsewhere in its environment. Change from the roots up.
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