PRODUCT VERSUS FUNCTIONAL FORMS-1

One of the issues in determining the form of an organization relates to the question of whether to group activities primarily by product or by function. Should all specialists in a given function be grouped under a common boss even if they deal in different products or should the various functional specialists working on a single product be grouped together under the same boss?

 

As with the problem of centralization versus decentralization, here too most managers find it difficult to say which choice will be the best one. We can understand this with example of gift shop. In gift shop there are birthday gifts, childrens gifts, get well gifts, holiday gifts. Each gift is having it’s own category but all fall under one heading gift.

 

Lawrence and Lorsch studies from a behavior point of view the criteria used in the past to make the choice to see whether a pattern emerges to provide meaningful clues to resolve the dilemma. Reviewing the literature they found that managers seem to make the choice based on three criteria:

 

1.      Maximum use of special technical knowledge.

2.      Most efficient utilization of machinery and equipment.

3.      The degree and nature of control and coordination required.

 

The major problem with each of these criterion concerns the trade-off involved in these decisions which may lead to unanticipated results and reduced effectiveness.

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