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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Product Versus Functional Forms-2

Lawrence and Lorsch highlighted important factors about specialization and coordination. According to them classical theorists saw specialization in terms of grouping of similar activities, skills or equipment. But this concept overlooks social and psychological consequences.

 

There is an important relationship between a units’s or individual’s assigned activities and the unit members’ patterns of thought and behavior. Functional specialists tend to develop patterns of behavior and thought that are in tune with the demands of their jobs and training. As such these specialists (e.g. industrial engineers and production supervisors) have different ideas and orientation about what is important in getting the job done. For example a cheap medical insurance quotes and term life insurance quotes both are different things. A health care insurance is related to medical insurance only while term life insurance is for life. This is referred to as ‘differentiation’ which means differences in thought patterns and behavior that develop among different specialists in relation to their respective tasks. Differentiation is necessary for functional specialists to perform their jobs effectively. 

 

Differentiation is closely related to achievement of coordination which may also be referred to as ‘integration’. Therefore, alternatively both differentiation and integration coexist. This is possible through effective communication channels. The appropriate mix of differentiation and integration in an organization is considered to be dependent on the nature of external factors such as markets, technology facing an organization as well as the goals of the organization. Since organizational pattern affects individual members, management and show concern to the kind of stress and cross functional conflicts that a certain pattern may produce. 

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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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MECHANISTIC AND ORGANIC SYSTEMS

Burns and Stalker propose two contrasting forms of management systems to suit different conditions. These are called as mechanistic organic forms. A mechanistic management system is considered appropriate to stable conditions while the organic form is suitable to changing conditions.

 

It is observed that organic systems are not hierarchical in the same way as mechanistic systems and they remain stratified based on expertise. Also, people’s commitment to the cause of the organization is supposed to be more in organic than mechanistic systems. In an organic form the hierarchic command gives way to consensus based commitment. The two forms of systems represent two ends of a continuum than being dichotomous. The relation of one form to the other is elastic and an organization may oscilate from one en (mechanistic) to the other end (organic) as the transition occurs in its conditions from relative stability to relative change.

We have considered different types of organization structures which have evolved over time. In response to complex, changing requirements. The continuum of structures range from centralization to decentralization, vertical to horizontal, mechanistic to organic and product to function. The predominant mode is decentralization with centralized control and a certain type of matrix in complex organizations. Each form has its own set of advantages and disadvantages. Compromises are possible in the context of organization’s environment, technology, culture and aspects of human behavior.

 

blinds, roller shades, woven wood shades

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VERTICAL AND HORIZONTAL STRUCTURE

The classical bureaucratic model of organization though pervasive, has been considered inappropriate to the changing requirements of modern times. A bureaucratic organization was considered to be too inflexible and hierarchical to adapt to the changes occurring in organizations and technology.

 

Parkinson’s laws and Peter Principle highlight the negative aspects of bureaucratic organizations. Whatever be the criticism against bureaucracies, it is realized that to some extent they have become essential. Therefore, writers and organizations began to explore ways to modify the bureaucratic organization structures. In essence these new structures reflect modifications to the classical principles of delegation of authority and standard of control.

 

Delegation extends the scope of the principle to the point of an abiding organization-wide philosophy of management. A tall organization structure means a series of narrow spans of control, and a flat one incorporates wide spans and limited layers of control at horizontal levels. Both the structures have their advantages and disadvantages. They should be viewed on relevant concepts and not as ideal absolutes.

 

A tall structure calls for control and close supervision over the subordinates. But close supervision may not necessarily produce better control. Similarly in a flat organization with wide spans, it may not be possible to keep close control over subordinates but it provides for decentralization, individual initiative and self-control. Tall structures are less favorably viewed it is held that self-control is better than imposed control. The choice in this regard however rests ultimately on management assumptions about individuals and groups in organizations.

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