Chartered Institute of Marketing

Professional Diploma in Marketing

UNIT 3 – Managing Marketing

Hand Out - 1

Importance of Organizational Structures

By

Tharanga Gunasekera
MBA (UK), MCIM (UK), Dip M(UK), Dip M (SL), Chartered Marketer
Organizational Structure

Why Structure ?

Organizations can be regarded as people management systems. They range

from simple hierarchies along traditional lines to complex networks dependent on
computer systems and telecommunications. Human resource managers can
encourage organizations to adopt strategies (for their structures) which foster
both cost-effectiveness and employee commitment. Organizational structures
can be classified into a number of types, including functional, divisional, matrix
and networks.

Functional structures

Early organizational design divided enterprises into relatively simple parts,

splitting them into defined activities such as production, marketing or personnel.
functional organizations have the advantage of being simple to understand with
clear lines of command, specified tasks and responsibilities. Staff can specialize
in a particular business area such as production or marketing and follow well-
defined career paths. This is equally true of human resource specialists who can
develop expertise in specific areas such as employee relations or reward
management.

There are also major disadvantages to functional structures. People managers

have to tread carefully because this form of organization is prone to
interdepartmental conflict, often degenerating into 'them and us' tribal warfare.
Coherence and good communication are particularly hard to achieve between
virtually independent functions.

Divisional organizations

Split into self-contained units, able to react to environmental changes as quickly

as small companies, they are also described as multidivisional or 'M-form'
organizations. Divisions encourage team spirit and identification with a product or
region. Managers can develop broad skills as they have control of all basic
functions. Each division is likely to have a devolved human resource function. But
there is a risk of duplicating activities between head office and divisional human
resource departments and of conflict between staff in successful and
unsuccessful divisions. The divisional function may play a coordinating role,
reconciling decisions taken at the corporate and business unit levels. This results
in a complex picture of people management.
Matrix organizations

Matrix forms of management can be regarded (arguably) as an early form of

'network' structure. They focus on project teams, bringing skilled individuals
together from different parts of the organization. Individuals were made
responsible both to their line manager and the project manager involved. Before
the advent of network technology, many matrix organizations were dogged by
duplication and confusion: the 'matrix muddle'.

New Forms of Organization

New structures

The new people management relationships proposed by management writers

such as Tom Peters are different from the formal, 'top-down' command structures
seen in traditional organizations. Modern technology allows us to develop
organizations which are differentiated - allowing local flexibility and autonomy -
but highly integrated at the same time.

Networks

Networks and networking have a number of distinct meanings in HRM. In this

context the terms are employed in an analagous fashion to their use in
computing. It is not necessary and probably not a good idea for organizations to
perform all their functions in-house. Businesses can concentrate on their
individual strengths and work as alliances or business partners to provide a
service or manufacture a product.

Virtual organizations

These are organizations which do not necessarily have any physical presence or
permanence. E-commerce companies such as amazon.com are good examples:
they have a 'reality' only on the worldwide web. They can be formed and re-
formed to meet the needs of new projects. From a HR perspective, virtual teams
may be composed of specialists working from home, 'telecottages' or small
companies. They work together for the purposes of the project. Selecting,
managing and assessing the performance of virtual team members is a whole
new ball game.

According to Price (2000): "Teams dissolve on completion, to reappear in new

combinations for other tasks. Departments, divisions and offices disappear
leaving an amorphous mass of people connected electronically and meeting -
perhaps through video-conferencing - only if and when required. Traditional
hierarchical structures have no role in this kind of organizational structure.
"Truly virtual organizations create new problems for human resource
management. A networked company does not require a personnel function but
its core management must be adept in managing people at a distance, some of
whom may not be 'employees' as such. They are true 'human resource
managers' (Thomson and Mabey, 1994: 5). How does performance management
or HR development take place in such circumstances ? How are they 'managed'
on a day-to-day basis? Who resolves conflict and disagreement? These
questions are especially relevant in the case of teleworkers

"Bradt (1998) cites the case of a manager working for the Bank of Montreal in
Toronto, Canada. She and her husband decided to return to Dorset, England on
his retirement. She was reluctant to leave her job and the bank did not want to
lose a good manager. The Bank arranged for her to manage her group in
Toronto by means of teleconferencing, e-mail and voicemail. The experiment
was apparently successful, despite a 5-hour time difference. According to Bradt
(after a visit to her home): 'The image of a little office in the very archetype of
English thatched cottage tied to a group of people in a glass building in Toronto
is a striking one.'

"Avery points out, however, that in practice most virtual organizations are only
partly virtual. Most companies of this kind have 'real world' elements which still
use offices and have face-to-face meetings. After all, human contact is invaluable
for engendering good relationships and sparking off creative ideas.

"In fact, there may be a continuum of virtuality. Bradt (1998) divides virtual
organizations into four types:

1. The alliance organization, in which functions previously carried out within the
boundaries of one organization are conducted by linked partners which
concentrate on their 'core competencies' (best strengths).

2. Displaced organizations where individual members are distributed

geographically and connected by information technology, but appear to outsiders
to be a single unified organisation. One of the most common forms has
customer-facing units or corporate headquarters in one country and back office
or support activities in another. For example, software companies have made
use of the considerable (and comparatively cheap) talents of Indian programmers
and data input staff. Clerical support for investment and insurance companies
can be placed in less expensive locations than the cities of London, New York or
Tokyo. Businesses can choose to centralize global or regional back offices or call
centres or decentralize them to staff working at home or in rural locations.

"Internationally, a virtual shift system may operate when teams around the globe
deal with the same project at different times, each group leaving progress reports
for the next as they conclude their working day. Virtual shifts operate in
circumstances such as global investment or vehicle design.
3. The invisible organization has no physical structure as such. Bradt cites Direct
Line Insurance as a typical example. There are no visible high street branches,
simply a network of call-centres and back offices. Business is conducted by
telephone.

4. The truly virtual, such as the online Amazon.com bookstore. This is a

combination of the first three types. Customers come to the company via Internet
Service Providers (ISP)s, often from links on the web pages of 'affiliates' who
promote particular books and are paid by commission. Orders are processed
centrally but relatively few books are held in stock - mostly they are despatched
from publishers' warehouses. Delivery is handled by independent agents such as
UPS or Parcel Force."

Specific structures for the Marketing function:

a) Product / Market Structure – Ex : B2C Vs B2B markets

b) Brand Structure – Ex: Unilever
c) Territory Structure – Ex : Sales oriented firms
d) Matrix Structure – Product & sales teams - Ex IBM
e) International & Multinational structures – Ex Coke , HSBC

References:

Bradt, R. (1998) Virtual Organizations: A Simple Taxonomy, Infothink..

Price, A.J. (2000) Principles of Human Resource Management: An Action-

Learning Approach, Blackwell, Oxford.

Thomson, R. and Mabey, C. (1994) Developing Human Resources, Butterworth-

Heinemann.

http://www.hrmguide.co.uk