Chapter 7

ORGANIZING

ORGANIZATION STRUCTURE

DEFINES HOW TASKS ARE FORMALLY DIVIDED , GROUPED, AND COORDINATED

WHEN DESIGNING AN ORGANIZATION STRUCTUREA MANAGER WILL HAVE TO ADDRESS SOME QUESTIONS

ORGANIZATION STRUCTURE
WORK SPECIALIZATION

TO WHAT EXTENT ARE TASKS SUBDIVIDED INTO SEPARATE JOBS DEPARTMENTALIZATION ON WHAT BASIS WILL JOBS BE GROUPED TOGETHER CHAIN OF COMMAND TO WHOM DO INDIVIDUALS AND GROUPS REPORT HOW MANY INDIVIDUALS CAN A MANAGER EFFICIENTLY & EFFECTIVELY MANAGE
CENTRALIZATION DECENTRALIZATION SPAN OF CONTROL

WHERE DOES THE DECISION MAKING AUTHORITY LIE TO WHAT DEGREE WILL THERE BE RULES/ REGULATIONS TO DIRECT EMPLOYEES AND MANAGERS FORMALIZATION

ORGANIZATION STRUCTURE

WORK SPECIALIZATION

ALSO CALLED DIVISION OF LABOR

TO WHAT EXTENT TASKS ARE SUB DIVIDED INTO SEPARATE JOBS

THE FOCUS IS ON EFFICIENCY AND SPECIALIZATION OF SKILLS

TRAINING PEOPLE TO DO REPETITIVE TASKS

DEVELOPED IN THE MANUFACTURING SECTOR IN THE 1940S

WORKED WELL FOR 20 YEARSPRODUCTIVITY WAS HIGH

BY

THE

1960SHUMAN

FACTORS

SUCH

AS

BOREDOM,

FATIGUESTARTED

RESULTING IN LOW PRODUCTIVITY

ORGANIZATION STRUCTURE

WORK SPECIALIZATION

HIGH

HUMAN DISECONOMIES (FATIGUEBORING JOB)

PRODUCTIVITY

ECONOMIES OF SPECIALIZATION

LOW

WORK SPECIALIZATION

HIGH

ORGANIZATION STRUCTURE

DEPARTMENTALIZATION

THE BASIS ON WHICH THE JOBS ARE GROUPED TOGETHER

GROUPING

IS

BASED

ON

THE

FUNCTIONS

(PRODUCTION,

ACCOUNTING,

PURCHASING, PERSONNEL)

GROUPING ALSO BASED ON PRODUCT (PEPSI BEVERAGES)

COLA, FINGER FOOD, NATURAL

GROUPING BASED ON TERRITORY (NORTH, SOUTH, EAST, WEST EG. BSNL, MOST OF THE TELECOM PROVIDERS AND ISPs)

BASED ON THE CUSTOMERS YOU ARE CATERING TO (BANKING: RETAIL AND CORPORATE DIVISIONS)

ORGANIZATION STRUCTURE

CHAIN OF COMMAND

UNBROKEN

LINE

OF

AUTHORITY

RUNNING

ACROSS

THE

ORGANIZATIONDEFINING THE REPORTING STRUCTURE

HAS AUTHORITY & UNITY OF COMMAND

AUTHORITY: RIGHTS GIVEN TO A MANAGERIAL POSITION

UNITY OF COMMAND : PERSON SHOULD HAVE ONLY ONE SUPERIOR TO WHOM HE IS RESPONSIBLE

ORGANIZATION STRUCTURE

SPAN OF CONTROL

HOW MANY EMPLOYEEES CAN A MANAGER HANDLE EFFECTIVELY AND EFFICIENTLY

NARROW SPAN OF CONTROLGIVES BETTER CONTROL FOR THE MANAGER OVER THE EMPLOYEES

HOWEVERTHEY ADD LEVELS OF MANAGEMENT AND ARE THEREFORE EXPENSIVE

ORGANIZATION STRUCTURE

CENTRALIZATION/ DECENTRALIZATION

CENTRALIZATION

IS

THE

DEGREE

TO

WHICH

DECISION

MAKING

IS

CONCENTRATED AT A SINGLE POINT

DECENTRALIZED

ORGANIZATIONS

FASTER

DECISION

MAKING;

MORE

PEOPLE PROVIDE INPUTS FOR DECISION MAKING

MAKES THE ORGANIZATION MORE FLEXIBLE

ORGANIZATION STRUCTURE

FORMALIZATION

DEGREE TO WHICH JOBS IN THE ORGANIZATION ARE STANDARDIZED

MORE THE DEGREE OF FORMALIZATIONTHE LESSER AUTONOMY WILL YOU HAVE ON THE JOB

RULES ARE EXPLICITLY MENTIONED

ORGANIZATION STRUCTURE

THERE CAN BE DIFFERENT TYPES OF ORGANIZATION STRUCTURES

ORGANIZATION STRUCTURE

Structure of the organization determines how the resources would be expended and also the degree of autonomy given to the project manager

3 different kinds of organization structures which lie across the continuum

Functional

Weak Matrix

Balanced Matrix

Strong Matrix

Projectized

Matrix Organization

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Functional Organization/ Bureaucratic Organization

Staff members are grouped by specialty/ functional departments such as HRM, Manufacturing, and Marketing etc

Each functional department undertakes projects (tasks) within the realm of the functional department

Some of the staff members in each department are assigned to the project/ tasks

Staff assigned from various departments

Functional Organization

Project Coordination

CEO

HRM

PRODUCTION

MARKETING

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Strengths of the Functional Organization

Individual experts from one functional department can be assigned to multiple projects The functional heads can be grouped to share knowledge Each of the functional departments act as Knowledge banks as they develop expertise in a niche area Eg. The finance department develops expertise in the area of project cost budgeting; the marketing department develops expertise in activities leading to project launch; However, this knowledge may not be shared between these two departments during the course of the project

The functional departments offer a well defined career path to the employees

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Weaknesses of the Functional Organization

There is little focus on meeting the customers requirements The functional department is not oriented towards the Project, failing to see the projects objectives

Cross functional communication is slow and difficult The functional departments may be risk averse, failing to take the risks The functional departments are extremely rigid in their structure and hence offer little flexibility to accommodate the projects requirements

There is no accountability for project failures and the functional departments end up blaming each other

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Product Organization

Form of functional organization Best suited for organizations with a large product line All the activities, expertise, and resources to produce one product are grouped under a single head

A manager for a particular product is in charge for all the activities The job is better coordinated and higher level of performance is achieved There is accountability for each product division The disadvantage in this organization structure is that the managers may place the interests of the division over the organization

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Product Organization
General Manager

Manager Food Products

Manager Pharmaceutical Products

Manager Cosmetics

Manager Health Products

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Projectized Organization

Most of Organizations resources are involved in the project work

Project Managers have absolute autonomy and authority

Projectized organizations have organizational units called departments

These departments report to the project manager and/or provide services to the project

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Projectized Organization

The project manager controls the project budget The Project manager and the project administrative staff are assigned full time to the project

However, the project manager and the staff may work on more than one project simultaneously

Every project is treated as separate entity and all the functional departments (design, engineering etc) support the project managers

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Pure Project Organization Project Manager

Design

Engineering

Procurement

Production

Staff assigned from various departments Project Coordination

Projectized Organization (PMI PMBOK, 2003)

CEO

PROJECT MANAGER -Project 1

PROJECT MANAGER -Project 2

PROJECT MANAGER -Project 3

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

STAFF

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Strengths of Projectized Organization

Project manager has complete authority over the project (tasks, people, and resources) All project staff directly report to the Project manager The Project manager has direct access to the organizations senior management This organization structure supports faster decision making The team members develop a strong sense of identity with the project and hence are more committed to the projects objectives

Offers flexibility in determining costs, schedule, and performance trade-offs by the project managers

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Weaknesses of Projectized Organization

There may be duplication of resources across different projects Project Manager may hoard resources including people for his/her project; thus project resources may remain idle if acquired before the start of the project

The team members become highly specialized in their field, so much so that they may fail to update their knowledge

Become strongly affiliated to their own project and the team; alienate the other employees in the organization

Requires constant supervision of the senior management

PROJECTS IN ORGANIZATIONS Matrix Organization

Blend of Functional and Projectized Organizations 3 kinds of Matrix organizations are observed:

Weak Matrix Organization (similar to Functional Organization) Balanced Matrix Organization Strong Matrix Organization (similar to Projectized

Organization)

PROJECTS IN ORGANIZATIONS
Matrix Organization
Weak Matrix Organization

The Project Manager has limited authority in these types of organizations The organization commits only limited resources to the project The functional manager is responsible for controlling the project budget The project manager and the project administrative staff are only assigned part time to the project

The strengths and the weaknesses for this organization structure are similar to functional organization

Staff assigned from various departments

Weak Matrix Organization (PMI PMBOK, 2003)

CEO

FUNCTIONAL MANAGER 1

FUNCTIONAL MANAGER 2

FUNCTIONAL MANAGER 3

STAFF STAFF STAFF STAFF

STAFF

STAFF

STAFF

STAFF Project Coordination

PROJECTS IN ORGANIZATIONS
Matrix Organization
Balanced Matrix Organization

The project manager has only limited or moderate authority The organization moderately commits resources to the project The project budget may be controlled by both the project manager and the functional manager

While the project manager is assigned full time to the project, the project administrative staff are assigned part time

Staff assigned from various departments

Balanced Matrix Organization

(PMI PMBOK, 2003)

CEO

FUNCTIONAL MANAGER 1

FUNCTIONAL MANAGER 2

FUNCTIONAL MANAGER 3

STAFF STAFF STAFF STAFF

STAFF

PROJECT MANAGER

STAFF

STAFF Project Coordination

PROJECTS IN ORGANIZATIONS
Strengths of Balanced Matrix Organization

The project manager has considerable authority over the projects resources Administrative consistency is achieved when managing the project There is adequate customer focus The use of resources is considerably efficient The project staff have a higher sense of job security as compared to the projectized organization

PROJECTS IN ORGANIZATIONS
Weaknesses of Balanced Matrix Organization

It is a delicate balance of power when it comes to decision making between the functional manager and the project manager. This may lead to conflicts

The employees have 2 Bosses- The functional manager and the project manager. This leads to confusion

Conflicts may also arise when it comes to sharing of resources between the projects

PROJECTS IN CONTEMPORARY ORGANIZATIONS

Matrix Organization
Strong Matrix Organization

The project manager has moderate to a high degree of authority

The organization commits adequate to high degree of resources to the project

The Project manager is responsible for controlling the project budget

The project manager and the project administrative staff are assigned full time to the project

The strengths and the weaknesses of the Strong Matrix Organization structure are similar to the Projectized Organization Structure

Staff assigned from various departments

Strong Matrix Organization

CEO

FUNCTIONAL MANAGER 1

FUNCTIONAL MANAGER 2

MANAGER OF PROJECT MANAGER/ PROGRAM MANAGER

STAFF STAFF STAFF STAFF

STAFF

STAFF

STAFF

PROJECT MANAGER

VIRTUAL ORGANIZATION/ NETWORK/ MODULAR ORGANIZATION

collection of autonomous firms/ units behaving as a single entity

Some of these entities can be wholly owned, or independent firms

Large organizations develop their units as Profit Centers (INTERNAL NETWORK)

A central organization that outsource its work to other organizations (suppliers) Or have several partnerships such as JVs, long term contract (STABLE NETWORK)

VIRTUAL ORGANIZATION/ NETWORK/ MODULAR ORGANIZATION

typically characterized by:

People being drawn into the team based on their expertise

Use ICT extensively to communicate

Client centered organizations

Offers flexibility of operations

Management control, reward management, learning is a major drawback

VIRTUAL ORGANIZATION/ NETWORK/ MODULAR ORGANIZATION

THINK ABOUT A COMPUTER MANUFACTURER THAT MAKES COMPUTERS BASED ON CERTAIN KIND OF MEMORY CHIPS THEY BUY THE CHIPS FROM TIMETOTIME FROM DIFFERENT SUPPLIERS THE COMPANY CAN NOT PREDICT THE DEMAND FOR ITS PRODUCTS THE QUALITY OF THE CHIPS OBTAINED FROM DIFFERENT SUPPLIERS WILL BE DIFFERENT SOMETIMES THE COMPANY MAY HAVE TO OVERBUY THE CHIPS TO INSULATE ITSELF AGAINST THE PRICE FLUCTUTIONS TYPICALLY IN THESE CONDITIONS WHEN THE FREQUENCY OF TRANSACTIONS IS HIGHTHE MARKET IS VOLATILETHE PROCESSES ARE BROUGHT IN-HOUSE NETWORK ORGANIZATION MAY NOT BE FEASIBLE

VIRTUAL ORGANIZATION/ NETWORK/ MODULAR ORGANIZATION

ON THE OTHER HAND THINK ABOUT A SERVICE PROVIDER WHO DEVELOPS SOFTWARE FOR BANKS THE BANK WILL NOT DEVELOP THE SOFTWARE FREQUENTLY SOFTWARE DEVELOPMENT IS NOT THE CORE AREA OF ITS COMPETENCY AS IT IS A ONE TIME PROJECTTHE QUESTION OF PRICE FLUCTUATIONS OR MAINTENANCE OF INVENTORY OVER A PERIOD OF TIMEDOES NOT ARISE UNDER THESE CONDITIONSNETWORKED ORGANIZATIONS ARE MORE APT!