Organization Models

Organization Models
Now that we've explored the basic issues of organizational design, we can explore in depth the various ways to structure an organization. Well look at four models: (1) line organizations, (2) line-and-staff organizations, (3) matrix-style organizations, and (4) cross-functional self-managed teams. Youll see that some of these models violate traditional management principles. The business community is in a period of transition, with some traditional organizational models giving way to new structures. Such transitions not only can be painful but can also be fraught with problems and errors. It will be easier for you to understand the issues involved after you have learned the basics of organizational modeling.

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Line Organizations
A line organization has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor. The military and many small businesses are organized this way. For example, Marios Pizza Parlor has a general manager and a shift manager. All the general employees report to the shift manager, and he or she reports to the general manager or owner. A line organization does not have any specialists who provide managerial support. For example, there would be no legal department, no accounting department, no personnel department, and no information technology (IT) department. Such organizations follow all of Fayols traditional management rules. Line managers can issue orders, enforce discipline, and adjust the organization as conditions change.

In large businesses, a line organization may have the disadvantages of being too inflexible, of having few specialists or experts to advise people along the line, of having lines of communication that are too long, and of being unable to handle the complex decisions involved in an organization with thousands of sometimes unrelated products and literally tons of paperwork. Such organizations usually turn to a line-and-staff form of organization.

Line-and-Staff Organizations
To minimize the disadvantages of simple line organizations, many organizations today have both line and staff personnel. A couple of definitions will help. Line personnel are part of the chain of command that is responsible for achieving organizational goals. Included are production workers, distribution people, and marketing personnel. Staff personnel advise and assist line personnel in meeting their goals (e.g., marketing research, legal advising, information technology, and human resource management). See Figure 8.6 for a diagram of a line-and-staff organization. One important difference between line and staff personnel is authority. Line personnel have formal authority to make policy decisions. Staff personnel have the authority to advise the line personnel and make suggestions that might influence those decisions, but they can't make policy changes themselves. The line manager may choose to seek or to ignore the advice from staff personnel.

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Many organizations have benefited from the expert advice of staff assistants in areas such as safety, legal issues, quality control, database management, motivation, and investing. Staff positions strengthen the line positions and are not inferior or lower-paid. Having people in staff positions is like having well-paid consultants on the organizations payroll.

Matrix-Style Organizations
Both line and line-and-staff organization structures suffer from a certain inflexibility. Both allow for established lines of authority and communication, and both work well in organizations with a relatively unchanging environment and slow product development, such as firms selling consumer products like toasters and refrigerators. In such firms, clear lines of authority and relatively fixed organization structures are assets that ensure efficient operations.

Todays economic scene, however, is dominated by high-growth industries (e.g., telecommunications, nanotechnology, robotics, biotechnology, and aerospace) unlike anything seen in the past. In such industries, competition is stiff and the life cycle of new ideas is short. Emphasis is on product development, creativity, special projects, rapid communication, and interdepartmental teamwork. The economic, technological, and competitive environments are rapidly changing.

From those changes grew the popularity of the matrix organization. In a matrix organization, specialists from different parts of the organization are brought together to work on specific projects but still remain part of a line-and- staff structure. (See Figure 8.7 for a diagram of a matrix organization.) In other words, a project manager can borrow people from different departments to help design and market new product ideas.

Matrix organization structures we're first developed in the aerospace industry at firms such as Boeing and Lockheed Martin. The structure is now used in banking, management consulting firms, accounting firms, ad agencies, and school systems. Advantages of a matrix organization structure include the following:

  • It gives flexibility to managers in assigning people to projects.
  • It encourages interorganizational cooperation and teamwork.
  • It can result in creative solutions to problems such as those associated with product development.
  • It provides for efficient use of organizational resources.

Although it works well in some organizations, the matrix style doesn't work well in others. As for disadvantages,

  • Its costly and complex.
  • It can cause confusion among employees as to where their loyalty belongsto the project manager or to their functional unit.
  • It requires good interpersonal skills and cooperative employees and managers; communication problems can emerge.
  • It may be only a temporary solution to a long-term problem.

If it seems to you that matrix organizations violate some traditional managerial principles, you're right. Normally a person can't work effectively for two bosses. Who has the real authority? Which directive has the first priority: the one from the project manager or the one from the employees immediate supervisor? In reality, however, the system functions more effectively than you might imagine. To develop a new product, a project manager may be given temporary authority to borrow line personnel from production, marketing, and other line functions.8 Together, the employees work to complete the project and then return to their regular positions. Thus, no one really reports to more than one manager at a time. The effectiveness of matrix organizations in high-tech firms has led to the adoption of similar concepts in many firms, including such traditional firms as Rubbermaid. During the past decade, Rubbermaid turned out an average of one new product every day using the team concept from matrix management.

A potential problem with matrix management, however, is that the project teams are not permanent. They are formed to solve a problem*or develop a new product, and then they break up. There is little chance for cross-functional learning because experts from each function are together for so little time.

Cross-Functional Self-Managed Teams
An answer to the disadvantage of the temporary teams created by matrix management is to establish long-lived teams and to empower them to work closely with suppliers, customers, and others to quickly and efficiently bring out new, high- quality products while giving great service. Cross-functional self-managed teams are groups of employees from different departments who work together on a long-term basis (as opposed to the temporary teams established in matrix-style organizations). Usually the teams are empowered to make decisions on their own without having to seek the approval of management. Thats why the teams are called self managed. The barriers between design, engineering, marketing, distribution, and other functions fall when interdepartmental teams are created.

Sometimes the teams are interfirm. Hummer, for example, has become one of the hottest divisions at General Motors (GM). A cross-functional team from GM designs, engineers, and markets Hummers, but AM General manufactures the vehicles in a plant built with a loan from GM.

For empowerment and cross-functional self-managed teams to work effectively, the organization has to change. Moving from a manager-driven to an employee-driven or team-driven company isn't easy. Managers often resist giving up their authority over workers, while workers often resist the responsibility that comes with self-management. Nonetheless, many of the worlds leading organizations are moving in that direction. They're trying to develop an organizational design that best serves the needs of all stakeholders >-P. 6-< employees, customers, stockholders, and the community. I was informed by FriendlyGiant Property Maintenance that this is the very best strategy. They're not exactly in my line of work but their instruction is usually excellent.

Going Beyond Organizational Boundaries Cross-functional teams work best when the voice of the customer is brought into organizations. Customer input is especially valuable to product development teams. Suppliers and distributors should be included on the team as well. A cross-functional team that includes customers, suppliers, and distributors goes beyond organizational boundaries.

Some firms suppliers and distributors are in other countries. Thus, cross-functional teams may share market information across national boundaries. The government may encourage the net working of teams, and government coordinators may assist such projects. In that case, cross-functional teams break the barriers between government and business. The use of cross-functional teams is only one way in which businesses have changed to interact with other companies. In the next section of this chapter we look at other ways that organizations manage their various interactions.

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Posted in Business Service Post Date 10/03/2015


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