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Understanding Organizational Design

We are talking organization design in our blogs. Organizations are social units with specific purposes. The basic elements of organizations have remained the same over the years. Several disciplines provide the knowledge and the means to understand organizations. However, it is appropriate to look at organizations integrally in multi-disciplinary perspective. Three viewpoints have emerged, over the years in successive stages, each seeking to provide a window on the others. They are the classical approach, three streams stand out: bureaucracy, administrative theory and principles of scientific management. It is important to note that with the passage of time, the viewpoints have been changed or modified, but not replaced as such. Each major contribution brought new knowledge, awareness, tools and techniques to understand the organizations better.

Thus, today we are richer than ever before tin terms of our knowledge about approaches to understand organizations. We take example of portable car DVD players. Today there are so many companies who are manufacturing car DVD players like philips pet1002 , samsung DVD-L100 , JVC kd-avx33.  One person can have all knowledge of such products at one desk.  All the same, more knowledge meant reckoning with more complex variables to comprehend the complexities of human organizations. There is, as yet, no general, unified, universal theory as such. Organizations being diverse and complex in more senses than one, it is difficult, if not meaningless to be too general or too specific about them.

 

Organization structures based on classical bureaucratic principles are hierarchical. But modern organization theories attempted to modify them in the light of experience, changes in technology and knowledge about human behaviour. The centralized structures gave way to some sort of decentralization and thus transformed, partially at least, vertical (tall) organizations into horizontal (flat) ones, reflecting a shift in emphasis from command to consensus based self control. The relative conditions of instability and uncertainty transformed the classical mechanistic forms of management systems into organic ones.

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MATRIX ORGANIZATION-2

 

This is the output or transaction side of the matrix. Depending on how many people holding a specialist orientation, either resource or output, the organization needs, these groupings can develop several echelons in response to the practical limits of the span of control of any line manager. At the foot of the matrix is the two-boss manager. This manager is responsible for the performance of a defined package of work. The manager is given agreed-upon financial resources and performance targets by superiors on the output side, and negotiated human and equipment resources from the resource manager. The two streams, taken together, constitute the work package. The manager is responsible for managing these resources to meet performance targets. To perform, the manager must handle high volumes of information, weigh alternatives, make commitments on behalf of the organization as a whole, and be prepared to be judge by the results. A manager of blinds company who are selling vertical blinds and roman shades online, need to use all information related to online business as well as the real customers. This form of organization induces the manager to think and behave like a general manager.

 

Even in a fully developed matrix organization, only a relatively small proportion of the total number of people in the organization will be directly in the matrix.

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MATRIX ORGANIZATION-1

The change to a matrix cannot be accomplished by issuing a new organization chart People are brought up, by and large, to think in terms of “one person, one boss” and such habits of mind are not easily changed. People must learn to work comfortably and effectively in a different way of managing and organizing.

 

Ideally, the matrix form organization induces (1) the focusing of undivided human effort on two (or more) essential organizational tasks simultaneously, (2) the processing of a great deal of information and the commitment of organization to a balanced reasoned response, and (3) the rapid redeployment of human resources to various projects, products, services, clients, or markets. 

Diamond-shaped organization rather than the conventional pyramid. The top of the diamond represents the same top management symbolized by the top of the pyramid. The two arms of the diamond symbolize the dual chain of command. In the typical case the left arm would array the functional specialist groups or what could be thought of as the resource or input side of the organization. The right arm arrays the various products, projects, markets, clients, services or areas the organization is set up to provide.

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MATRIX ORGANIZATION

Matrix organization structure originated with the United states Aero Space Programme of the 1960s and the Aero space agency’s extraordinary and conflicting needs for system (for innovation) and order (for regulation and control). A matrix organization employs a multiple command system that includes not only a multiple command structure, but also related support mechanisms and associated organization culture and behaviour pattern. A matrix organization is not desirable unless (i) the organization must cope with two or more critical sectors (functions, products, services, areas); manufacturing of blinds and selling of roller shades, woven wood shades and paperless office management makes it complicated.

 

(ii) Organizational tasks are uncertain, complex and highly interdependent; industries like term life insurance, hotel and motels.

 

The structure involves the dual chains of command. The system must also operate along two dimensions simultaneously: planning, controlling, appraising and rewarding, etc., along both functional and product lines at the same time. Moreover, every organization has a culture of its own and, for the matrix to succeed the ethos or spirit of the organization must be consonant with the new form. Finally, people’s behaviour, especially those with two bosses and those who share subordinates, must reflect and understanding and an ability to work within such overlapping boundaries.

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Product versus Functional Forms-5

If functional structure is adopted, projects may fall behind; if product/project organization is chosen technology and specialization may not develop optimally. Therefore, the need for a compromise between the two becomes imperative.

 

The possible compromises between product and functional bases include, in ascending order of structural complexity:

 

  1. The use of cross-functional teams to facilitate integration. These teams provide some opportunity for communication and conflict resolution and also a degree of common identification with product goals that characterizes the product organization. At the same time, they retain the differentiation provided by the functional organization.
  2. The appointment of full-time integrators of coordinators around a product. These product managers or project managers encourage the functional specialists to become committed to product goals and help resolve conflicts between them. The specialists will retain their primary identification with their functions.
  3. The “matrix” or grid organization, which combines the product and functional forms by overlaying one on the other. Some managers wear functional hats and are involved in the day-to-day, more routine activities. Naturally, they identify with functional goals and are more involved in the problem-solving activity required to cope with long-range issues and to achieve cross-functional coordination.

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Product versus Functional Forms-4

The discussion in the preceding section and an overview of literature on function vs product choice, permits us to observe that both forms of organization design have their own set advantages and disadvantages. The functional structure facilitates the acquisition of specialized inputs. In permits pooling of resources and sharing them across products or projects.

 

The organization can hire, utilize and retain specialists. However the problem lies in coordinating the varying nature and amount of skills required at different times. The product or project organization, on the other hand, facilitates coordination among specialists; but may result in duplicating costs and reduction in the degree of specialization. For example, a blinds manufacturing company who manufacture roller shades and woven wood shades, need to adopt product forms not functional. It depend on the type of business company is doing. A term life insurance company can go with functional while a motels industry need to select product. Thus, if functional structure is adopted, projects may fall behind; if product/project organization is chosen technology and specialization may not develop optimally. Therefore, the need for a compromise between the two becomes imperative.

 

The possible compromises between product and functional bases include, in ascending order of structural complexity:

 

  1. The use of cross-functional teams to facilitate integration. These teams provide some opportunity for communication and conflict resolution and also a degree of common identification with product goals that characterizes the product organization. At the same time, they retain the differentiation provided by the functional organization.

We will discuss on two other structural complexity in next post.

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Product Versus Functional Forms-3

Today we continue our talk on Product Versus Functional. Walker and Lorsch studies two plants which were closely matched in several ways. They were making the same product; their markets, technology, and even raw materials were identical. The parent companies were also similar; both were large national corporations that developed, manufactured, and marketed many consumer products. In each case divisional and corporate headquarters were located more than 100 miles from the facilities studied. The plants were separated from other structures at the same site, where other company products were made.

 

Both plants had very similar management styles. They stressed their desire to roster employee’s initiative and autonomy and placed great reliance on selection of well-qualified department heads. They also identified explicitly the same two objectives. The first was to formulate, package, and ship the products in minimum time at specified levels of quality and at minimum costs-that is, within existing capabilities. The second was to improve the capabilities of the plant.

 

In each plant there were identical functional specialists involved with the manufacturing units and packing unit, as well as quality control, planning and scheduling, warehousing, industrial engineering, and plant engineering.

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