Organizations are working in the Open system. Relatively static environments and others face dynamic environment. As the environmental complexity increases, the organization structure is less formalized and less centralized. Structural design is an important tool that managers employ to eliminate or minimize the impact of environmental uncertaininity.

20 industrial firms in the U.K, to find out the specific links between environment and organization . These 20 firms were operating in both ,stable and dynamic

environments. The general findings states that successful firms in stable environments were MECHANISTIC in

structure ,whereas successful firms in dynamic environment tended to be

more ORGANIC or FLEXIBLE structures.

Regardless of the type of structure Regardless of the type of structure currently in place, as environments currently in place, as environments become more dynamic, threatening become more dynamic, threatening and complex, organizations find that and complex, organizations find that competitive survival forces them to competitive survival forces them to become more entrepreneurial. This, become more entrepreneurial. This, in turn, means they must find ways in turn, means they must find ways to move the company towards more to move the company towards more organic structures.organic structures.

• Operating Styles – must be uniform and Operating Styles – must be uniform and restrictedrestricted

• Reluctant adaptation – with insistence Reluctant adaptation – with insistence on holding fast to tried-and-true on holding fast to tried-and-true management principles despite changes management principles despite changes in business conditionsin business conditions

• Tight control – through sophisticated Tight control – through sophisticated control systemscontrol systems

More benign or controllable More benign or controllable external environmentexternal environment

Conservative management style is Conservative management style is more appropriatemore appropriate

Mechanistic/bureaucratic Mechanistic/bureaucratic structure is effectivestructure is effective

• Operating styles – allowed to Operating styles – allowed to vary freelyvary freely

• Free adaptation – by the organization Free adaptation – by the organization to changing circumstancesto changing circumstances

• Loose, informal control – with Loose, informal control – with emphasis on norm of cooperationemphasis on norm of cooperation

More hostile external environmentMore hostile external environment

Management style must be more Management style must be more entrepreneurialentrepreneurial

Organic structure is needed to Organic structure is needed to facilitate entrepreneurshipfacilitate entrepreneurship

Mechanistic Structures Organic Structures

1. Operate in dynamic environments ,characterized, by faster rates of changes and greater uncertainty.

2. A more realistic divisional type of division of work,where tasks are not clearly defined in advance but are adjusted and redefined through employee interaction.

3. Less hierarchy of authority and control.

4. Decentralized5. Lateral communication.

1. Operate in stable environment, characterized by slow technological and market changes.

2. A functional division of work where tasks are broken down into specialized ,separate tasks.

3. Strict hierarchy of authority and controls .Many rules and procedures.

4. Most decisions are made at the top

5. Communication is vertical

Formal Vs Informal Organization Formal Organization : It is deliberately designed. It refers to the structure of well-Defined jobs , each bearing

a definite authority, responsibility . The structure is built on 4 Pillars.( Division of labor, scalar process,

structure and span of control) Is designed by the Top Management. Concentrates on the performance of the job. Coordination among members is maintained through

processes and procedures.

Refer to the natural grouping of people on the basis of some similarity in an organization. Some sort of pattern of relationship is developed. It is a natural outcome at the workplace. Membership is voluntary. Behavior Is coordinated by group norms .

Departmentation is a means of dividing a large and complex organization into smaller

,flexible administrative units.

A form of departmentalization in which individuals engaged in one functional activity (Marketing, Finance, HRM) , are grouped into one unit

E xec . V .P .F in an ce & A d m in .

S en ior V . P .S to res

S en io r V .P .L og is t ic s

S en ior V .P .H u m an R esou rce

Clark JohnsonC E O

Advantages:Clarity SpecializationCoordination In-depth skill development

Disadvantages :Effort FocusSub Unit ConflictsMonotony

Departmentation by product is adopted in the case of a multi product enterprise. The organization is divided into divisions which bring together those who are involved with a certain type of product.

Manager(Automobiles)

Manager(Refrigerators)

Manager(Spare Parts)

Manager(Computer Accessories)

Vice President(Production)

President

The resources of one particular unit are deployed on the product.All the activities for a single product or purpose are brought under one manager.It becomes easy to fix accountability .Whenever necessary , the autonomous units can be lopped off with minimal effect on the entire organization.

Duplication of Resources.Competition crops up within the organization Autonomy of divisional manager is exercised within limits.

Geographic Departmentation ,facilitates adaptation to territorial differences. Large companies that distribute products on a massive scale nationally, often cannot

coordinate all regions from the headquarters.

Each region of the country has distinct needs, tastes and facilities that demand coordination.

Decisions regarding pricing and marketing may be left to the territorial managers who are close to customers and

know their needs better.

President

Vice President (Marketing)

Manager East Zone

Manager West Zone

ManagerSouth Zone

ManagerNorth Zone

Strengths: 1. Assess the needs of Local Customers closely and serve

them well.2. It is easy to pin point responsibility on Zonal Centers.3. Expertise in a particular area.4. Results in saving labor & Transportation costs.

Weaknesses:1. Geographical distance gives rise to the problems of

communication ,coordination and control especially between the head office and the branches.

2. Duplication of physical facilities may increase the costs of operations.

The most recent approach , where a variety of industries , vertically integrated ,hierarchical organizations are giving way to loosely interconnected groups of companies with permeable boundaries.

Outsourcing which means farming out certain activities has become a significant trend. In addition ,partnerships, alliances ,and other complex collaborative forms are now a leading approach to achieving strategic goals.

The virtual network structure means that the firm subcontracts most of its major functions to separate companies and coordinates their activities from a small headquarters organization.

How it Works :

The organization can be viewed as a central hub surrounded by a network of outside specialists. Rather than being housed under one roof ,services are outsourced to separate organizations that are connected electronically to the central office.

Company core(HUB)

Accounts receivable provided by a company in the US

Design provided by a company in Canada

Manufacturing being provided by a company in Asia.

Distribution being provided by a company in Europe

STRIDA

How do two people run an entire company that sells thousands of high-tech folding bicycles all over the world?

Steedman Bass and Bill Bennet do it with a virtual network approach that outsources design ,manufacturing ,customer service, logistics ,accounting ,and just about everything else to other organizations.Bass, an avid cyclist ,got into the bicycle business when he and his partner Bennnet bought the struggling British company strida,which was having trouble making enough quality bicycles to meet even minimum orders. The partners soon realized why strida was struggling . The design for the folding bicycle was a clever engineering idea, but it was a manufacturing nightmare .Bass and Bennet immediately turned over production engineering and new product development to an American Bicycle designer, still with the intensions of building bikes at the Birmingham factory. However, a large order from Italy sent them looking for other options. Eventually ,they transferred all manufacturing to Ming Cycle company of Taiwan ,which builds the bikes with parts sourced from parts manufacturers in Taiwan and China.Finally, the last piece of the puzzle was to contract with the company in Birmingham that would take over everything else-from marketing to distribution. Bass and Bennet concentrate their energies on managing the partnerships that make the network function smoothly.

With a network structure like this ,it is difficult to answer the question ,” Where is the

organization?”. In traditional terms .The different organizational parts may be spread all over the world. They are drawn together contractually and coordinated electronically ,creating new

form of organization. Much like building blocks,parts of the network can be added or

taken way to meet changing need.

Some positions in an Organization are primary to the company’s mission, whereas others are secondary – in the form of support or indirect contribution.

Line Functions are those that are related directly with the attainment of the Organizational Objectives . E.g. Producing or selling a product or service.

A line Manager has a clear line authority. That exists between superior and his subordinates.

The direct relationship between a superior and his subordinates is created through the enforcement of line relationships .

It includes the right of the manager to issue instructions to his immediate subordinates, to supervise and coordinate the tasks assigned to them.

Line Functions

Production Manager in a Manufacturing enterprise.

Production Manager

Foreman A Foreman B Foreman C

Workers Workers Workers

Staff positions serve the organization by indirectly supporting line functions. Staff personnel use their technical expertise to assist line personnel .

e.g. Legal adviser is an example of staff manager

Refers to a pattern in which staff specialists advice line managers to perform their duties .

Line managers requires the services of specialists which he himself cannot provide.

The staff positions or departments are purely advisory in nature. Indirectly support the line functions.

They have the right to recommend , but no authority to enforce their preference on the departments.

General ManagerSecretary Public Relation

Officer

Manager-finance Manager-Personnel

Manager- Production

Production - Engineer

Foreman

Workers

Manager- Marketing

Sales Officer

Sales Supervisor

Salesmen

e.g The Production Manager in a manufacturing enterprise has line authority to make decisions on the types volumes of materials needed for production operations.

Whereas the Purchase Department acts as a staff function by advising the Production Manager on whom to contact regarding the same.

1. Poor Human Relations2. Overlapping authority and responsibility

Line View

1. Dilution and Usurpation of Authority 2. Ivory Tower Theoreticians3. Steals Credit

Staff View

1. Line does not make proper use of staff2. Line resists new ideas3. Line does not give staff enough authority

A) Clarity in relationships.B) Acceptance of staff adviceC) An informed staffD) Completed staff work ( A careful study of the problem, listing of possible

alternatives and clear recommendations)

A Permanent organization designed to achieve specific results by using teams of specialists from different functional areas in the organization is a matrix organization.

Maintaining a balance between Technical Expertise and Customer Requirement.

Breaks the application of the concept Unity Of Command

1. Conflicting Environmental pressures

Maintaining Technical Excellence and also to meet unique customer requirement.

2. High Information Processing

Are found in organizations which demand responses to rapid change in markets and technology which face uncertainties that generate high information processing requirements.

3. The need for better resource use

Matrix form provides an excellent opportunity for extra performers and possessors of rare skill to contribute to more than one project or to more than one functional department.

The matrix organization is an attempt to combine the advantages of the pure functional structure and the product organizational structure. This form is identically suited for companies, such as construction, that are “project-driven”. The figure below shows a typical Matrix organization.

a matrix organization, each project manager reports directly to the vice president and the general manager. Since each project represents a potential profit centre, the power and authority used by the project manager come directly from the general manager.

A matrix organization eliminates this duplication of skills and responsibilities by identifying functions or common components that are shared by multiple divisions, projects, or products. An

organizational chart that allocates skills or resources across the sectors or divisional components as needed portrays the cross-

functional nature of this organizational design. It creates a multi-functional team approach rather than a group of somewhat

redundant functional skill sets.

Allow more efficient allocation of specialized skills across the entire business. By taking advantage of the shared services and skills and not having to develop and manage those skills themselves, the divisional or product line organizations can better focus on their core business objectives. This last point was one of the original driving forces behind the development and popularization of matrix organizations. Today, matrix organizations are used to describe more than just the product-based organization shown in these examples. For example, many IT project managers use smaller matrix-style structures for project and team organizations to track skills, tasks, and resources across multiple projects to ensure skills and resources are used properly

FEATURES

1. It is a hybrid structure.2. In the matrix structure, project managers are assigned a variety of

projects-rather than a single one. 3. The matrix breaks the Unity of command concept.

USAGE

1. INDUSTRIAL PRODUCTS2. BANKING PRODUCTS3. ADVERTISING4. HOSPITALS

PRESIDENT Cost Centers

Board Chairman

Business.No 2

Business.No 1

Business No 3

Business No. 4

Future

Other Services

Mktg Mgr Mfg Mgr T&D Mgr Eval Control

Business Board

Functional Professionalis

m

General Manager

Managers of Shoe Manufacture’s Plant

Manufacturing

Design

Marketing Outerwear Product

Manager

Footwear Product Manager

Procurement PackagingQuality

Two Boss Manager

Functions (R

esources) Products (Outputs) Matrix Bosses

Fabrication

Top Leadership