Posts Tagged Formal Organization

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-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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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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Centralization and Decentralization-2

Centralization is the process by which the activities of an organization, particularly those regarding decision-making, become concentrated within a particular location and/or group. In political science, this refers to the concentration of a government’s power – both geographically and politically, into a centralized government.

 

Decentralization is the process of dispersing decision-making governance closer to the people or citizen. It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy, sociology and economics. Decentralization is also possible in the dispersal of population and employment. Law, science and technological advancements lead to highly decentralized human endeavors. 

 

Alfred P. Slogan played and instrumental role in developing a model of central control of decentralized operations for General motors based on the following twin premises:

 

  1. The responsibility attached to the chief executive of each operation shall in no way be limited. Each such organization headed by its chief executive shall be complete in every necessary function and enabled to exercise its full initiative and logical development (Decentralization of operations)
  2. Certain central organization functions are absolutely essential to the logical development and proper coordination of the Corporation’s activities: Centralized staff services to advise the line on specialized phases of the work, and central measurement of results to check the exercise of delegated responsibility.

blinds, roller shades, woven wood shades

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Centralization and Decentralization-1

Today we are going to discuss on Centralization and decentralization as part of Organizations. Centralization refers to consolidating decision making in one coordinating head. Decentralization refers to delegation of decision making to subordinate units. Both centralization and decentralization are intended to improve organizational effectiveness. Theories are of little avail in suggesting which is the proper thing to do in a given situation. At one point Ford Motor Company suffered because of centralization and General Motors because of decentralization.

 

If one were discerning enough, it is possible to identify two basic types of centralization and decentralization.

  1. Geographic/territorial concentration (centralization) or dispersal (decentralization) of operation. If all operations are under one roof or in one geographic region, Geographic regions could refer to a city (eg. Bombay), State (Maharashtra), country (India) or continent (Asia).
  2. Functional concentration or decentralization. As an example, personnel functions in an organization could be concentrated in one separate department or handled in various functional departments.

However, from a practical point of view, merely by looming at charts it is difficult to determine to what extent authority is concentrated or dispersed. There is need therefore to analytically study how the chain of command operates in an organization.

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FORMAL-INFORMATION ORGANISATION-2

In last post we talked about formal information in organization. Today we continue our talk on that. Informal organization has both functional and dysfunctional aspects while in formal organization the functional aspects such as conflicting objectives, restriction of output, inertia and resistance to change have received wide attention. With the result, there is often a misconception about the counter-productive role of informal organization. Changes within organization are not easy to be accepted by the employee. Like if we change window blinds in our house from horizontal to vertical blinds with roman shades than that’s also not easy to be accepted. Formal communication helps to implement changes easily and smoothly in organization.

 

Informal communication channels like grapevine and rumor are the most potent forces in any organization. Since these move fast and concern recent happenings affecting people at work in terms of what they know, managements should deal with and use them rather than ignore or curb informal communication channels. In reality, informal organization can reinforce and facilitate the functional aspects of formal organization in the following ways:

 

  1. It is very useful channel for communication in the organization, if properly used. It can become an effective supplement to the formal system of communication.
  2. It blends with the formal system and facilitates smoother, speedier and effective flow of work.
  3. It provides satisfaction and stability to work groups.
  4. It reduces the adverse impacts of the rigidity of formal organization.

roman shades, vertical blinds, window blinds

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