Modern organization structures

Global Matrix Structure (Stage-4)

• When a multinational is trying to integrate its operations

across on more than one dimension like product as well as
geography, or customers or technology; it resorts to matrix
structure. As shown in the figure 6.6, both product division
and area division share joint responsibility. This means both
executives jointly decide allocation of resources and other
important matters but the matrix manager is held responsible
for results.
• In this structure, there are pressures from horizontal matrix
managers for equal allocation of resources however the
vertical managers are supposed to balance this by taking into
account relative importance of products or projects based on
organizational priorities and other long-term considerations.
This structure reflects the process of decision-making and
results in higher quality of decisions. It also results in better
customer focus or on final results or response to local needs.
• However there are several shortcomings associated with the
matrix. First, as the design complexity increases, coordinating
the personnel and getting everyone to work towards common
goals often becomes difficult. Second, some employees
experience dual authority, which is frustrating and confusing.
• Matrix managers need excellent interpersonal and conflict-
resolution skills. The matrix also forces managers to spend a
great deal of time in meetings. If managers do not adapt to
the information and power sharing required by the matrix,
the system will not work.
• Managers must collaborate with each other rather than rely
on vertical authority in decision-making. Proliferation of
communication channels create information logjams. And
barriers of distance, culture and language make it virtually
impossible for managers to resolve conflicts and to clarify the
confusion.
Bernevic, the former CEO of ABB discussing the matrix, said

• ABB is an organization with three internal contradictions. We

want to be global and local, big and small, radically
decentralized with centralized reporting and control. If we
resolve those contradictions, we create real organization
advantage. This is where the matrix comes in. The matrix is
the framework through which we organize our activities. It
allows us to optimise our business globally and maximize our
performance in every country in which we operate. Some
people resist it. They say that the matrix is too rigid, too
simplistic. But what choice do you have? To say you don’t like
matrix is like saying you don’t like factories or you don’t like
breathing. It is a fact of life. If you deny the formal matrix, you
wind up with an informal one- and that much harder to recon
with. As we learn to master the matrix, we get a truly
multidomestic organization.
The Matrix Structure

Chief Exec utive

Officer

Productio n Marketing Finance Human Reso urce

n

V.P. Global products V.P.International

Europe Americas Asia Pacific

Product
A

Product
B

Product
C
 NETWORKED- STRUCTURE
• certain large and mature internationalised firms as a network, in situations
where:
• Subsidiaries have developed into significant centres for investments,
activities and influence and can not be regarded at the periphery;
• Interaction between headquarters and each subsidiary is likely to be
dyadic, taking place between various actors at many different
organizational levels and covering different exchanges, the outcome of
which is important for effective global performance; and
• Such multinationals are loosely coupled political systems rather than
tightly bonded homogenous, hierarchically bonded systems. This runs
counter to the traditional structure where linkages are described formally
via the organization’s structure and standardized procedures, they operate
informally through interpersonal contact , socialization. And shared vision
and goals
• One subsidiary may act as a nodal unit linking a cluster of satellite
organizations. Thus, one centre can assume responsibility for other units
in its country or region.
• The management of multi-cantered networked organization is complex.
 KIERATSU

• Still another type of newly emerging organizational arrangement is the Kieretsu, which is a
large, often vertically integrated, group of companies that cooperate and work closely
with each other. A good example is the Mitsubishi Group, shown in figure 16.8. This
keiretsu consist of 28 core members who are bound together by cross-ownership, long-
term business dealings, interlocking directorates, and social ties (many of the senior
executives are college or class mates or family members and relatives).
• In this keiretsu, there are three flagship firms in the group: Mitsubishi Corporation, which
is a trading company; Mitsubishi Bank, which finances the keiretsu’s operations; and
Mitsubishi Heavy Industries, which is a leading worldwide manufacturer. In addition to the
firms, as shown, there are hundreds of other Mitsubishi-related companies that
contribute to the power of the keiretsu.
• This form of organization has been cited by some international analyst’s as the reason,
why Japanese multinationals are so successful. For example, although keiretsu companies
in Japan account for less than 1/10th of 1percent of all Japanese firm’s, they account for
78 percent of the value of all shares on the Tokyo Stock Exchange, 68 percent of all
Japanese investments made in the U.S. high-tech firms.
• Quite obviously, these keiratsus are very powerful.
Figure 9.7 THE NETWORKED ORGANISATIO
 HORIZONTAL STRUCTURE/TEAM BASED STRUCTURE
• This structure organizes employees and activities along core processes.
Organizations typically shift towards horizontal structure during a
procedure known as “Ree-ingineering” or BPR.
• It means redesign of a vertical organization along its horizontal workflows
and processes.
• A process refers to an organized group of related tasks and activities that
work together to transform inputs into outputs that create value for
customers. Ree-ingineering changes the way managers think about how
the work is done. Rather than focusing on narrow jobs structured into
functional departments, they focus on core processes that cut horizontally
across the organizations and involve teams of employees working together
to serve customers.
• For example, processes include, customer order procurement, order
fulfillment, new product development and customer service.
• When a company is reeingineered into a horizontal structure,
all the people throughout the organization who work on a
particular process have easy access to one another so that
they can have easy access to one another so that they can
communicate and coordinate their efforts.
• The horizontal structure virtually removes vertical hierarchy
and old departmental boundaries. This has resulted into
profound changes at the workplace.
• Technological progress emphasizes computer-and internet
based integration and coordination.
• Customers want faster and better service, and employees
want opportunities to use their minds., learn new skills and
assume greater responsibility, organisations mired in vertical
mindset have hard time meeting these challenges. s
Henry Mintzberg
 Any one of these parts can dominate an organization, and which part is in control a given
structural configuration is likely to be used.

• If control lies with the operating core, decisions are centralized, this
creates the configuration “Professional Bureaucracy”.
• When the strategic core is dominant, control is centralized and the
organization is a “Simple Structure”
• If middle management is in control, with autonomous units-”Divisional
Structure” is created.
• Where analysts in techno-structure are dominant control will be
through ‘standardization’ and the structure is “ machine Bureaucracy”
• Where support facilities rule and control is by mutual adjustment it is “
Adhocracy”
• Where culture is dominant- it is “Missionary” structure.

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 The ‘match’ with the structure and strategy emerges over time rather that it is designed.
Mintzberg’s six organizational configurations are:

1-The simple structure-few of the activities are formalized, minimal use of

planning and has a small management hierarchy dominated by CEO-
often an owner-and loose division of work. It is the vision and
personality of CEO that drives the org. Highly effective in small
entrepreneurial organizations where flexibility to changing
circumastances is critical to success.
2- The Machine Bureaucracy- found in mature organizations where rate of
change is low. It is characterized by large techno-structure (staff
functions) which works for increasing efficiency. Appropriate for cost-
leadership strategy is crucial for success.

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3-The professional bureaucracy- is bureaucratic without the
centralization found in machine bureaucracy. Professional work is
complex, but it is standardized through ensuring that professionals
operating in the core have the same core knowledge and
competences. An emphasis on training and peer group interaction and
learning is important to sustaining this standardization. These
specialists constitute the operating core. Ex. Public accounting firms,
hospitals, IT companies, consulting firms and design firms.
4-The Divisionalised structure- to take care of diversity of products and
markets. Real issues are center-division relationships and efficiency is
achieved through builtin functional structure.

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5- the adhocracy-where competitive strategy is through
innovation and change. The configuration is highly organic relying on
direct interaction between workers in the operating core and a
management style which assists and promotes this ‘mutual
adjustment’ ex movie companies, 3-M or Algore type companies.
6-Missionary organizations are dominated by cultural issues which are
clear, focused, inspiring and distinctive. These ideals dominate the
organizations purpose and its modus operandi. Many voluntary
organizations operate in this way. They attract like-minded individuals
who share the missionary vision, and as such rely less on structures
and systems to drive the organization along.
Few organizations neatly fit into these stereotypes. But resemble one of
them.

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 The relative size and importance of these building blocks will very with the circumstances
as well as methods of coordinating activities. Which are:

• Mutual adjustments—through informal contacts between people in

the operating core. Common in small, simple organizations as well as in
highly complex ones like R&D.
• Direct Supervision through the hierarchy with direction from apex,
through middle line to the operating core.
• Standardization of work processes through systems which specify how
work should be undertaken. It is usually the job of analysts in the
techno-structure.
• Standardization of output through product specification and service-
level agreements between departments to specify and clarify the the
level of service is expected.

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• Standardization of skills-including knowledge and
competences and also standards of performance
expected from units, SBUs and subsidiaries.
• Standardization of Norms, where employees share the
same core beliefs. This is particulrly powerful in many
voluntary organizations.
• The choice of configuration to support an organization’s
strategies can best be thought of matching its
configuration through its design parameters like
building blocks, coordinating devices and integrating
devices.

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 INTEGRATING MECHANISMS-
• Hierarchy or Authority- A ranking of employees integrates by
specifying who reports to whom.
• Direct control- managers meet face to face to coordinate activities.
• Committees and meetings.
• Liaison Roles –A specific manager is given responsibility for
coordinating with managers from other subunits on behalf of his
subunit.
• Task force- managers meet in temporary committees to coordinate
activities
• Teams – where every member is responsible for each other and work
together to achieve goals and control their resources and coordinate
their activities.
• Integrating department-A new department is created to coordinate
various functions and divisions.

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 In most organizations people with similar and related roles are grouped
into a subunits.
• A function is a subunit composed of a group of people working
together who posses similar skills, or use the same kind of
knowledge, tools or techniques to perform their job.
• A division is a subunit that consists of a collection of a function or
departments that share responsibility for producing a particular
good, component or service.
• Support functions, which facilitate an organization’s control of its
relations with its environment and its stake holder.
• Maintenance Function- which enables an organization to keep its
departments in operation.

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 Changing Configurations- it is also possible that different part may work in different
configurations in times of change.-giving hybrid types

From To Reason example

simple Machine growth Manufacturing

Bureaucracy companies

Machine Divisionalised Growth and Many companies

bureaucracy Diversity

Professional adhocracy Changing Many service

Bureaucracy environment organization

missionary Professional Growth Not-to –profit

bureaucracy organizations
Professional Network Dynamic Professional service
Bureaucracy organizations environments organizations.

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 Summary of the six configurations

Characterist Simple Machine Professio Divisional adhocrac missionar

ic structu bureaucr nal structure y y
re acy bureaucr
acy
specialization low High, High High High little
functional social functional social specialisa
tion
formalization low high low High Low norms
within
divisions
centralizatio high high low limited low high
n

environment Simple Simple Complex Simple Complex Simple

/ and and and and and
dynami stable stable stable dynamic stable
c
Structural organic Mechanist Mechanist Mechanist organic organic
classification ic ic
Prof. S.c.Gupta- ic of
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 Each design challenge has implications for how an organization as a whole
behave and perform. Which dimension is emphasized more?

Mechanistic structures result Organic structure results

when an organization makes when an organization makes
these choices. these choices
Individual specialization- Joint specialization-
employees work separately employees work together and
and specialize in one clearly coordinate their actions to
defined task find the best way of
performing a task
Simple Integrating Complex mechanisms-
Mechanisms-hierarchy of taskforce, teams,
authority; clearly defined job organization culture are the
descriptions. Or department major integrating
for integration mechanisms
Centralization- Decentralization
Standardization Mutual adjustment Low
formalization.
High formalization
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Different organizations face different type of environment and thus different level
of uncertainty.

• As early as 1961, Burns and Stalker had suggested that,

through a judicious design of organisation structure firms
could greatly increase their ability to secure their
position within their environment. Their research is an
empirical study of electronic firms in Scotland, suggesting
that mechanistic structure is more suitable in stable and
simple environment where uncertainty is low. And where
the environment is complex and dynamic an organic
structure is most effective.

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Management-Noida
• Formalization is strong. Given the importance of vertical command structure,
the organisation is very ‘status’ concerned. Promotions are slow and related to
performance and seniority.
• Organic structure is the opposite end of mechanistic structures. They promote
flexibility, so people initiate change and can adapt quickly to changing
conditions. They are decentralised and ‘roles’ are loosely defined and people
continuously develop new skills in new activities. Many tasks are performed
jointly. Employees from different functions work together to solve problems as
a result high level of integration is needed so that employees can share
information and overcome problems. The integration of functions is achieved
through complex mechanisms like task forces and teams. Coordination is
achieved through mutual adjustments. In an organic structure informal norms
and values develop that emphasize personal competence, expertise and the
ability to act in innovative ways. Status is conferred by the ability to provide
creative leadership, not by any formal position in the hierarchy. Sony
Corporation has become the successful giant by maintaining an organic
structure within highly complex and dynamic environment.

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• Mechanistic Structures are designed to induce people to behave in
predictable, accountable ways. Decision making authority is
centralized, subordinates are closely supervised and information flows
mainly in a vertical direction down a clearly defined hierarchy. In this
structure the tasks associated with a role are also clearly defined. Each
person is individually specialized and knows exactly what he or she is
responsible for, and behaviour inappropriate to the role is discouraged
or prohibited. At the functional level, each function is separate and
communication and cooperation among functions are responsibility of
some one at top management level. Hierarchy is the principal
integrating mechanism. Tasks and roles are coordinated through
standardisation. Formalization is strong. Given the importance of
vertical command structure, the organisation is very ‘status’
concerned. Promotions are slow and related to performance and
seniority.

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 Most effective structure is one that adjusts to its requirement of environment

Machnistic structures result ORGANIC structure results

when these choics are made
Individual specialisation ,
Employees work separately and
specialise in one clearly defined
task
Simple integrating mechanisms
hierarchy of authority is clearly
defined and is the major integrating
mechanism.
Centralisation, authority to control
tasks is kept at the top of the
organisation. Most communication
is vertical
Standardisation, Extensive use is
made of rules, and SOPs to
coordinate tasks, and work process
is predictable.
Influence is by authority
Communication is vertical
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when these choices are made
Joint specialisation, employees
work together and coordinate their
actions to find the best way of
performing a task.
Complex integrating mechanisms,
task forces, and teams are the
major integrating mechanisms.
Decentralisation, authority to
control tasks is delegated to people
at all levels in the organisation.
Most communication is lateral.
Mutual Adjustment, extensive use
is made of face to face contact to
coordinate tasks, and work process
is relatively unpredictable.
Influence by expertise and
experience
Communication id lateral.
26
Lawrence and Lorsch- what constituted an organization’s internal environment?

• Differentiation- apart from horizontal differentiation, it means that the

managers in different departments hold how much different attitudes
and behave differently in terms of their goal perspective, time frame
the interpersonal perspective. That the managers do not agree on
common plan of action. Hence degree of differentiation becomes a
measure of complexity indicating rapid change in environment.
• Integration is the quality of collaboration that exists between
interdependent departments required to achieve unity of efforts. Basic
reason for differentiaion into departments was to deal more effectively
with subunits of environments.

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• They postulated that the more turbulent, complex, and diverse is the
external environment of an organization is more it will be
differentiated. The more it is differentiated more elaborate ‘integrating
devices are needed to cope with its environment.
• He postulated that plastic firms would be most differentiated followed
by food and container firms in that order. He divided each firm in
theses industries into high, moderate and low performers. He found
that high performing firms had a structure that best fit their
environmental demands.
• In diverse environments subunits were more differentiated than the
homogeneous environments. Plastic was more differentiated than food
followed by container. Manufacturing was less differentiated than
R&D.

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 How to synthesize environmental variability into a framework to understand the level of
uncertainty that an organization is facing?

• The capacity (Abundant –Scarce)- refers to the degree to which it can support
growth. Rich and growing environments generate excess resources to enable it
meet situations of scarcity. It also enables the organization to make some
mistakes. While scarce capacity does not. Mobile firms today are facing
abundant environment and textile ones scarce.
• Volatility (Dynamic-Stable)- the degree of instability in an organization is
captured in the volatility dimension. Where there is high degree of
unpredictable change the environment is dynamic.
• Complexity- the degree of heterogeneity and concentration among
environmental elements. Simple environments are homogeneous and
concentrated and with fewer elements to bring change.

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 What does Lawerence and Lorsch mean?

• First there are multiple specific environments with different degrees of

uncertainty.
• Second successful organization’s subunits meet the demands of their
sub-environments.
• Since differentiation and integration represent opposing forces, the key
is to match the two appropriately, creating differentiation between
departments to deal with specific problems and tasks facing the
organization and getting people to integrate and work as a cohesive
team towards the organization’s goals.
• Successful organization’s have solved this delemma by providing both
differentiation and integration by matching their internal subunits to
the demands of their subunits.

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 Simple+ stable= Low Complex+ stable=
uncertainty low/moderate uncertainty
Examples soft drinks Examples universities
container/transporters Insurance companies
Food processors Chemical companies
Appliance manufacturers
Simple + unstable= high/moderste
Uncertainty Complex+ unstable= high
Examples: E-commerce Uncertainty
Fashion clothing Example computer firms
Music industry Aero space firms, airlines
Toy manufacturers telecommunication

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Organizations that operate in environments characterized by dynamic, complex and scarce
face the greatest degree of uncertainty.

• In such organizations there is little for error, high degree of

unpredictability and many variables need to be monitored. Such
environments require more of organic structure.
• The Population-Ecology view- argues that the environment selects
certain types of organizations to survive and others to perish based on
their structural characteristics and the characteristics of their
environment. It argues that oganizational forms must either fit their
organizational niches or fail. The environments selects ‘in’ some
organizations and selects ‘out’ others.

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 The assumptions of population ecology theory.
• First it focuses on groups or population and not individual organizations like,
retail grocery business or large retailers.
• Second, organization effectiveness is simply defined only in terms of ‘survival’
and nothing else. Only survivors are considered as effective.
• Third, environment totally determines structure unlike the dictum that
strategy decides structure or in shorter time management has little impact on
organization survival or effectiveness or structure. Success therefore is a
matter of chance. Successful organizations happen to be at right time and right
place. For example if interest rates rise (environment) property sellers would
be wiped out.
• Fourth, The carrying capacity of environment is limited that it can support only
limited number of hospitals a community size can support or firms. finally,
• Fifth, there is a three stage process that explains how organizations operating
in similar niches, end up having a common structural dimensions.

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 variation selection retention

• The change process recognizes ‘variations’ within and between

organizations, the selection of those variations that are best suited to
their environments, and a retention mechanism that sustains and
reproduces those variations that are positively selected. Following this
concept we should expect to find common organizational practices and
structural characteristics within common populations. Over the very
long run, even the positively selected variations are likely to be
selected out when environments change. Example morning paper
format succeeds and not noon oe evening paper.

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The environment-Structure relationship. Every organization depends to some degree on its
environment but the degree of dependence varies.

• The environment’s effect on an organization is a function of its

vulnerability, which in turn is a function of dependence. Ex unionised
firms are more vulnerable and their effectiveness depends upon
maintaining good IR
• The evidence demonstrates that dynamic environment has more effect
on structure than a stable environment. Dynamic environment will
push it to organic structure even if size is large or technology suggests
a mechinistic structure. However a static environment will not overide
a the influence of size and technology.
• Environment and complexity are directly related, similarly a complex
environment require number of departments and specialists

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 Environment and formalization- stable environment should push towards high
formalization. Because it does not require an immediate response.

• If successful, a dynamic environment is likely to lead to

low formalization of boundary activities while
maintaining relatively high formalization with other
functions.
• The more complex the environment, the more
decentralized is structure. Disparities in environment are
responded to through decentralization but selectively
depending upon which subunit is facing it.
• The extreme hostility in the environment drives it
temporarily to centralized structure.

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 Managing environment through external or internal strategies

Internal strategies External strategies

Domain choice Advertising
Recruitment Contracting
Environment scanning Co-opting
Buffering Coalescing
Smoothing lobbying
Rationing
Geographic dispersion
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• IT is important for executives to understand the nature of
technology being used or proposed to be introduced in the near
future and which organisational structure is best ‘fit’ with it. This
is because technology subsystem and human subsystem are
interdependent and interlinked. One influences the other
significantly.
• Technology is defined as the combination of skills, knowledge,
abilities, materials, machines, computers, tools and equipments,
processes, manuals etc. that people use to convert or change raw
materials into valuable goods and services. Inside an
organisation, technology exists at three levels: Individual,
Functional or departmental and Organisational.

09/08/2021 Senior professor S.C.Gupta 38

 Environment-political/
economic/technology/international-
boundary legal-social-cultural
organization
Non-core technology

transformation
HR Finance marketing
R &D
Core work Core
Raw processes like technology
Products
material foundry,
or service
inputs machining, milling,
output
material handling

Feedback loop

09/08/2021 Senior professor S.C.Gupta 39

• Technology transfer covers: developing and marketing of technology, selection
of technology, mechanism and process, economic, political and legal aspects,
government policies; monitoring of effectiveness of transfer via design
capability, manufacturing processes and productivity and quality, etc.
• Technological developments influence not only the firm but entire industry and
societies. New products make the existing ones become obsolete. Entirely new
industries are created and existing ones are destroyed like the typewriters.
• Technology influences employee skills, nature of employee tasks, organization
structure, employee job satisfaction and attitude towards work and cost of
production or profits. Management has to choose which particular technology is
best for improving efficiency and achieving organization goals. Innovation might
involve, new products, processes or working methods or the use of specialized
know-how.
• Multinationals spend huge amount on research and development to remain as
technological leaders in their industries. It is one of their main strengths in
negotiations with the governments for gaining concessions and permissions.

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 Horizontal
structure

Vertical structure

Adaptive
Rigid empowerment
Routine tasks culture
culture

Formal Competitive Shared Collaborative

tasks strategy information strategy

Simple technology Complex technology

Stable environment Turbulent environment
Efficient performance
09/08/2021 Senior professor S.C.Gupta
Learning organization
41
 How technology can be measured, or classified or understood?

• By examining characteristics and flow of raw materials into

organization
• By variability of work activities and complexities involved.
• Degree to which the production process is automated or mechanized
• The extent to which one task depends on another in the work flow
• By the number of new product or service outputs.
• We can also look into type and sizes of organizations for studying
technology.
• There are three important paradigms cited most frequently in studying
technology- each has taken a very different perspective in studying
Technology.

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• At the individual level, technology is the personal skills, knowledge and
competences that individual workers possess. At the functional or
departmental level, the procedure and techniques that groups work out to
perform their work creates competences that constitute technology and the
way an organisation converts inputs into outputs is often used to characterise
technology at the organisation level.
• Some kinds of technology are more complex and difficult to control than
others. The ones that can be programmed or made predictable are highly
complex than those that are not so programmable and depend upon people
are having low complexity.
• Manufacturing Firms -Joan Woodward(100 firms) had identified 10 levels of
technical complexity which she associated with three types of production
technology: (1) small-batch or unit (2) large-batch or mass production (3)
Continuous or process technology, she treated them in increasing order of
technological complexity.

09/08/2021 Senior professor S.C.Gupta 43

• She studied several structural characteristics like span of
control, levels, styles, reward system with respect to technical
complexity present.
• She found that there was 1-distinct relationship between
these technology classification and their structure and 2- the
effectiveness of the organization is based on the ‘fit’ between
technology and structure.
• The degree of vertical differentiation increased with technical
complexity.
• The administrative component varied directly with type of
technology; that is as technology complexity increased, so did
the proportion of administrative and support staff personnel.
However relationship is not linear.

09/08/2021 Senior professor S.C.Gupta 44

 1. Production of single pieces to customer orders.
2. Production of technically complex units one by one low
Batch
3. Fabrication of large equipment in stages
4. Production of pieces in small batches
5. Production in large batches subsequently assembled
6. Production in large batches assembly line type
7. Mass production
Mass8. Continuous Process combined with large batch Technical
production for sale Complexity
9. Continuous production of chemicals in batches
10. Continuous flow production of liquids, gases or solid
shapes
Continous

High

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 Technical Ccomplexity- Ccomplexity
complexity-low Medium high
Structural Small batch/unit Mass Continuous
Characteristic production Process
Level of hierarchy 3 4 6
Span of Control of CEO 4 7 10
Span of control of first 23 48 15
line supervisor
Ratio of managers to 1:23 1:16 1:8
non managers
Organizational form flat with narrow Tall with wide Very tall with
span of control span of control narrow span of
Centralization Low High control
Low

Type of structure Organic Machanistic organic

Cost of operation High Medium Low
communication Verbal - high Verbal- low Verbal- High
written- low written- high Written low
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 • The Direct to indirect labor ratio decreases with technical
complexity because more indirect workers are required to
support and maintain complex machinary.
• Unit and continuous process technology requires highly
skilled workers and higher verbal communication to run the
machines.
• Mass production is standardized so few exceptions occur
hence little verbal communication is needed and workers
are less skilled.
• Unit and Continuous process require Organic Structure and
mass technology – Mechanistic.

09/08/2021 Senior professor S.C.Gupta 47