HC1031 Managing People and Organization

Lecture 6: Part C

Fundamentals of organizing
 What you will learn in Part C

1. Explain why organizations need coordination across

departments and hierarchical levels, and describe mechanisms
for achieving coordination
2. Describe how organization structure can be designed to fit
environmental uncertainty
3. Define production technology and explain how it influences organization
structure
4. Explain matrix ( 2 & 3), team, functional, divisional, regional, cross
functional, etc. structures
5. Examine how contingency factors influence organization structure

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 Matrix approach is…

1. An organisation structure that utilises functional and divisional chains of

command simultaneously in the same part of the organisation
2. Is an attempt to improve horizontal coordination and information sharing
3. Popular with global organisations

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 Dual-authority structure in a matrix

Note that a
manager will report
to his/her product
expert (plastic,
glass or insulation
products).

And also to a profit

center manager in
charge of a region
(Germany, Latin
America, etc.)

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 Advantages

Advantages include:

1. more efficient use of resources than in single hierarchy

organizations
2. flexibility and adaptability to changing environment
3. development of both general and specialist management skills
4. interdisciplinary cooperation, so expertise is available to all divisions
5. enlarged tasks for employees.

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 Disadvantages

Disadvantages include:

1. frustration and confusion from dual chain of command high conflict

between two sides of matrix
2. many meetings and more discussion than action human
relations training needed

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 Hybrid Structure

1. Many organizations have found that their strategy and operations

evolve to the point where no single ‘pure’ structural type best fits
their needs.

2. Organizations come in an amazing number of different shapes and sizes,

with different goals, strategies, technologies, cultures, products and
services, and markets that they serve.

3. Therefore, it is no surprise that organizations' structures also are of

many varieties, and these can usually be considered as hybrids of the
‘pure’ forms of functional structure, divisional structure and others.

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 Cross functional team

Fosters flexibility and quicker responses in a competitive global environment

Cross functional team:

1. Consists of employees from various functional departments who are
responsible for resolving mutual problems
2. Frequently used in change projects including new product or service
innovation

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 How can we work effectively?

Organizations are trying to find ways to: delegate authority

1. push responsibility to lower levels in the

organization
2. create participative teams that gain the commitment of
workers

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 Permanent teams

Some organizations have created permanent teams, groups of employees

who are brought together in a way similar to a formal department

Each team brings together employees from all functional departments,

and the emphasis is on horizontal communication and information sharing
because representatives from all functions are coordinating their work and
skills to complete a specific organizational task

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 Authority

Authority is pushed down to lower levels, and front-line employees are

often given the freedom to make decisions and take action on their own.
Team members may share or rotate team leadership

With a team-based structure, the entire organization is made up of

horizontal teams that coordinate their work and work directly with
customers to accomplish the organization's goals

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 Advantages and disadvantages of team structure

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 Organising for horizontal coordination

Growing trend toward emphasis on horizontal coordination:

Need for coordination & collaboration

Focus on re-engineering:

Radical redesign of business processes (workflows) to achieve

dramatic improvements in costs, quality, service and speed e.g. SAP

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 The need for coordination

1. Coordination refers to the quality of collaboration across

organizational departments

2. Coordination is required regardless of whether the organization has a

functional, divisional or team structure

3. Employees identify with their immediate department and may not want to
collaborate with other units for the good of the organization as a whole

4. Some of the key mechanisms for achieving coordination include re-

engineering, task forces, project managers and horizontal teams

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 Evolution of organisation structure

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 Task force

A task force is a temporary team or committee designed to solve a short-

term problem involving several departments. Task force members represent
their departments and share information that enables coordination

In addition to creating task forces, organizations also set up teams. A team

is a group of participants from several departments who meet regularly to
solve ongoing problems of common interest

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 Factors shaping structure

1. Structure follows strategy

2. Structure reflects the environment
3. Structure fits the technology

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 Porter – 2 business level strategies

Porter proposed two competitive or business-level strategies that

organizations can adopt:

1. Cost leadership. The organization strives for internal efficiency.

Strategic goals include cost leadership, efficiency and stability.

2. Differentiation. The organization tries to develop innovative products

unique to the market. Strategic goals include differentiation, innovation
and flexibility.

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 Structures - summary
1. ‘functional structure’. The most appropriate structure for achieving internal
efficiency goals, the functional structure uses task specialization and chain of
command to gain efficient use of scarce resources

2. ‘matrix structure’. This structure uses two chains of command: a functional

hierarchy to promote efficiency and a product hierarchy to promote innovation
and coordination

3. ‘divisional structure’. This structure promotes differentiation so each division

can focus on specific products and customers

4. ‘team structure’. This structure is appropriate when the primary goal is

innovation and flexibility because it enables organizations to differentiate and
respond quickly to the demands of a shifting environment. Holmes Institute
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 Contingency factors that influence organization structure

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 Organising for sustainable development

Develop a sustainability strategy

Requires leadership from the center and top of the organization, widespread
implementation and decision making involving:

1. Strong stakeholder engagement

2. Values that include social and environmental policies and
investments
3. Employee education and training
4. Long-term organization culture

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 Summary: What have you learned?

1. We examined why organizations need coordination

across departments and hierarchical levels, and
described mechanisms for achieving coordination
2. Described how organizational structure can be designed to fit
environmental uncertainty
3. Defined production technology and explained how it influences
organizational structure
4. Explained matrix ( 2 & 3), team, functional, divisional, regional,
cross functional, etc. structures
5. Examined how contingency factors influence organizational
structure

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