Modifications to basic model
There are four modifications to the basic model of
organization as under:
-
Functional
-
Product/Market/Service
- Project
- Matrix
The functional organization is most suitable where the
organization business can be split into clear divisions of activity and all of
them are equally important. For
example, the business organization can be functionally organized into four to
five functions such as marketing, manufacturing, finance, personnel, and
marketing, manufacturing, finance, personnel, and materials.
The strength of the people and the hierarchy in each of the
functional organizations would vary depending upon the size and the number of
activities. Decision making in any functional organization is at the level of
the functional head with accountability to the chief of the organization. The
implications of the decisions are largely on the functions themselves. A
decision affecting other functions of the business, however, is referred to the
top management. The information flow is from the top to the bottom and in the
reverse order. The information flow
across the functions is not expected. Accumulation of information is at the
chief executive's level and is shared by the others.
The functional organization is most suited where each
function is a specialty and calls for an expertise in the field; and where
coordination is of a very low order and can be handled easily through the
management process. The organization
works efficiently when the business is stable and expected to grow in a steady
manner. When the business becomes
competitive and develops threats to its growth, the functional structure
undergoes a change. The development of people is on the specialized functions
and hence they are not equipped to handle other functions if required. The people in a functional organization
develop a narrow outlook restricted to their own functions and responsibilities.
The corporate culture is difficult to imbibe in a functional line.
The government departments and agencies are organized on the functional
principle.
When the organization grows large in turnover and strength,
and when the decision-making relates to, either the product or the market or the
service, the organization structure is built around one of these factors. In this structure, the total
responsibility rests with the product/market/service head. He is expected to
take all the decisions regarding finance, material, etc.
The people in the organization report to the product head.
The decision making in this structure is faster and to some
extent centralized. The
inter-functional conflicts are avoided resulting in speedy business progress. In this structure, people work more for
product goals than the corporate goals. The contribution to profit by product
can be easily measured as profit is earned by product business unit. In this structure, the manpower
requirements are higher and the people develop specializations in the specific
technology and management.
A project organization is a special case of product
organization where the common services like finance, purchase, etc. are
organized at the functional level.
But the project resources are allocated to the project manager. Since the
business responsibility rests with the project manager, necessary authority is
given to him with the requisite resources. This type of organization structure
helps in making quick decisions for project control in terms of costs, resource
and time. In a project organization
some of the functions are of corporate responsibility and some of them are the
project manager's responsibility.
In a project business, the activity is one at a time and has
implications on the subsequent activities in the project. Therefore, any problem or conflict
relating to the activity needs to be resolved immediately. This calls for quick
decisions. This is possible by organizing all the functional resources under one
command of the project manager.
In all the three organization structures discussed so far,
the communication protocol is vertical in the hierarchy. The information flow is
within the hierarchy. The lateral communication between the functions is not
permitted. In a matrix organization
a vertical as well as a lateral communication and information flow is allowed.
The matrix organization integrates functional responsibility with product
responsibility. It is combination of the functional
and the product organization structure.
A product manager is responsible for the total performance of the product and he
will have the production manager, the marketing manager, the accounts manager as
his counterparts in the manufacturing, marketing and accounting functions
respectively. These functional managers report to the functional head vertically
and the product manager laterally.
The matrix organization structure is used in big companies
having diverse business activities. The business units, known as strategic
business units, are organized with a unit head at the top. The structure enjoys
the advantages of a functional as well as of a product organization. It should be noted that the organization
structure is a dynamic model. It is
effective for the purpose it is set to fulfill under certain conditions. The
moment the business conditions change, the structure should undergo a suitable
change. The structural changes do not limit themselves from one type to other
but many other qualitative changes are also desirable.
There has to be a change in the people in terms of strengths,
skills and abilities. A functional head in the functional organization may be
not be suitable to shoulder the responsibility of the Product Manager in a
product organization structure, because of inherent limitations of narrow
specialized experience as a functional head.
With the standardization and formalization drive in the
organization, the span of control can be enlarged than before. With the delegation of authority, backed
by the rules and policies, the junior level personnel become more knowledgeable,
experienced and capable of shouldering higher responsibility. This would affect the levels in
hierarchy.
