change management in power distribtion

83

Emerging Developments

84

Change Management

in Power Distribution

Managing change is probably the single most important issue for those who

are entrusted with the responsibility to manage organisations. In the past few

years, we have witnessed rapid technological changes and increased global

competition caused by liberalisation and deregulation. These developments

have placed greater demands on organisations, which now have to be even

more flexible, responsive and efficient. Organisations, big and small, the world

over face the inevitable prospect of change, which takes many forms and

involves simultaneously managing resources, processes and emotions. For

these reasons, managing change in the contemporary world is a complicated

and challenging task. There are several management theories, models and

tools but intense competition forces organisations to find ever new ways of

grappling with the rapid rate of change. Restructuring is one of the successful

ways of meeting such demands imposed by rapid change. The current

restructuring models all over the world are manifesting in the form of mergers

and acquisitions.

Organisations are economic and social entities in which a number of persons

perform multifarious tasks in order to attain common goals. Organisations also

act as effective instruments and help individuals in accomplishing their

personal objectives which cannot be achieved by the individual alone. In this

unit, you will learn about emerging trends in the organisations and changes in

their structures.

In the emerging world order, four key organisational trends are visible:

Globalisation, diversity, flatness and networking.

• Globalisation

Manifested in

� Increasingly globalised sales, manufacturing, research, management.

� Movement from direct exports to having sales offices in different

countries spread across the globe.

� Increasingly globalised labour market.

Due to

� Reduced cost and improved quality of international transportation and

communication.

� Search for unsaturated markets.

� Exploit regional cost and expertise differences.

8.1 INTRODUCTION

8.2 TWENTY-FIRST CENTURY ORGANISATIONAL TRENDS

85


• Diversity

Manifested in

� Workforce getting more heterogeneous in gender, race, culture,

language, etc.

Due to

� Differentiated customer needs – fulfilling them is a source of

competitive advantage.

� Increasing access of workplace to diverse populations.

� Increased pace of change in technology and markets.

� Diversity in organisations is a source of both innovation and

conflict/communication problem. Managers in such organisations need

to cope with different styles of interaction, presentation, dress, physical

appearance, etc.

• Flatness

Manifested in

� Fewer levels of management.

� Empowerment of workers for making decisions.

� Fewer differences in responsibility (not in pay) across levels.

Due to

� Need for quick decision making.

� Development in information technology.

� Globalisation which forces intensified competition and increases the

need to cut costs.

• Networking

Manifested in

� Direct communication across unit and firm boundaries, ignoring chain of command.

� Cross-unit team structures.

� Outsourcing and downsizing.

� Strategic alliances with competitors, customers and collaborators all at

the same time.

� Close coordination among firms (e.g., JIT systems) and information

sharing (open computer systems).

� Across the board contact with customers, not just official boundary

spanners.

� Customisation.

� Decentralisation.

86

Change Management

in Power Distribution Due to

� New information technologies, especially, groupware, client-server,

distributed computing.

� Fast changing customer needs and competitor offerings.

� More complicated products require better integration of manufacturing,

design, and marketing functions.

All these trends imply a strong need to design and redesign the organisations

again from time to time to increase their efficiency and effectiveness.

Therefore, you need to understand the organisational designs and structures.

8.2.1 Organisational Design

Organisational design deals with structural aspects of an organisation. It aims

at analyzing roles and relationships of various categories of staff so that

collective effort can be explicitly organised to achieve organisational goals.

The design process leads to development of an organisational structure

consisting of units and positions. The relationships involving exercise of

authority and exchange of information between these units and positions are

depicted in Fig. 8.1.

Fig. 8.1: Organisational Design - The dashed arrows mean, “creates the need

for”, while the solid arrows mean “causes” or “enables”.

87


Thus, organisational design is the process of systematic and logical grouping

of activities, delegation of authority and responsibility and establishing working

relationships that will enable both the company and employee to realize their

mutual objectives.

8.2.2 Organisational Structure

Organisational structure defines how tasks are formally divided, grouped and

coordinated. Managers need to address the following six key elements when

they design their organisation’s structure:

• work specialisation;

• departmentalisation;

• chain of command;

• span of control;

• centralisation and decentralisation; and

• formalisation.

Their descriptions are presented in Table 8.1.

Study Fig. 8.1 and answer the following questions:

a) What factors create the need for globalisation, flexibility, flat organisations and networking? List them in the form of a table.

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

………………………………………………………………………………… …………………………………………………………………………………

b) Which factors cause or enable globalisation, flexibility, flat organisations and networking? List them.

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

SAQ 1: Current organisational trends

88

Change Management

in Power Distribution Table 8.1: Key Elements in the Design of Organisational Structure

Elements Description

Work Specialisation Specifies degree to which tasks in the organisation are

sub-divided into separate jobs. It is also called the

division of labour.

Departmentalisation The basis on which jobs are grouped together.

Chain of Command

Refers to the unbroken line of authority that extends

from the top of the organisation to the lowest echelon

and clarifies who reports to whom.

Span of Control

Defines the number of subordinates a manager can

efficiently and effectively direct.

Centralisation and

Decentralisation

Centralisation refers to the degree to which decision

making is concentrated at a single point in the

organisation. Decentralisation is the degree to which

decision discretion is pushed down to lower level

employees.

Formalisation Specifies the degree to which jobs within the

organisation are standardised.

In this section we acquaint you with the different types of organisational

structures in vogue today.

8.3.1 Spaghetti Organisation

It is a form of boundary-less organisation, which seeks to eliminate the chain

of command having limitless span of control and replaces departments with

empowered teams. In such an organisation, vertical and horizontal boundaries

within the company are eliminated and external barriers between the company

Describe the structure of your organisation. What changes, if any, are

required in it to address the six elements described in this section?

……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ………………………………………………………………………………………

SAQ 2: Organisational structure

8.3 TYPES OF ORGANISATIONAL STRUCTURES

89


and its customers/suppliers are broken down. By removing vertical

boundaries, the management flattens the hierarchy. Status and rank are

minimized. In this way, the organisation looks more like a silo than a pyramid.

The boundaries can be eliminated by creating cross-hierarchical teams,

participative decision-making practices and the use of 360-degree

performance appraisals. Horizontal boundaries can be reduced by replacing

the functional departments with cross-functional teams and by organizing

activities around processes. These boundaries can also be cut through job

rotation of people into different functional areas. This turns specialist into

generalists.

The external barriers can be removed with the help of globalisation, strategic

alliances, customer-organisation linkages and telecommuting.

The one common technological thread that makes the boundary-less

organisation possible is a networked computer, which allows people to

communicate across intra- organisational and inter-organisational boundaries.

In Table 8.2, we present the advantages and disadvantages of this type of

structure.

Table 8.2: Advantages and Disadvantages of Spaghetti Organisation

Advantages

1. In the absence of vertical or horizontal boundaries,

communication is faster in the organisation, which

facilitates quick decision making.

2. This kind of organisational structure promotes

participative decision making which motivates the

employee and develops their analytical and creative

abilities.

3. Job rotation leads to the development of an

employee in all the functional areas.

4. The reach of the organisation spreads, as there are

no external boundaries.

Disadvantages

1. In the absence of vertical and horizontal boundaries

the relationship between superior and subordinates

is not clearly established.

2. The authority and responsibilities are not clearly

delegated as a result of which there may be

confusion regarding “Who is responsible for What”

in the organisation.

90

Change Management

in Power Distribution 8.3.2 Amoeba-shaped Organisation

It is another form of boundary-less organisation, which is structured like an

amoeba with a central nucleus and a flexible operating structure enabling it to

move into different types of projects and markets while operating as cross-

functional teams.

An amoeba structured company could spin off into smaller independent

companies. For example, ENTACT Inc. environmental services company

based in Texas, U.S. divides like an amoeba to form new companies. When it

has about 40 employees, it spins off into another business with the first

company retaining a 90 percent stake hold in the new business, while the

employees of the spin off unit retain 10 per cent. In this manner, ENTACT Inc.

has been able to attract new companies. Since it operates without much of a

structure and has no middle level management, there is a lot of latitude and

freedom in its operations and it can be divided into new operative units with

ease. Table 8.3 presents the advantages and disadvantages of the amoeba

shaped organisation.

Table 8.3: Advantages and Disadvantages of Amoeba Shaped Organisation

Advantages

1. Flexibility in operations.

2. Freedom to take decisions in the organisation,

which motivates the employees.

Disadvantages

1. Absence of middle level management affects the

flow of communication from first line employees to

the top management.

2. Increase in the number of operating units may drive

the organisation into confusion if there is lack of

cooperation and coordination.

8.3.3 Vertical/Tall Organisations

Vertical/tall organisation (Fig. 8.2) refers to increase in the length of the

organisational chain of command. The hierarchical chain of command

represents the company’s authority-accountability relationship between

superiors and subordinates. Authority and responsibility flows from the top to

the bottom through all the levels of hierarchy. Accountability flows from the

lowest level to the highest level.

91


Table 8.4: Advantages and Disadvantages of Vertical/Tall Organisation

Advantages

1. Effective analysis of factors and efficient decision

making are possible as a number of officials at

different levels supervise and check the activities.

2. Communication of the company’s mission goals

and objectives to all employees is better.

3. Coordination of functional areas is enhanced and

ensures that each area is working closely with

other functions.

Disadvantages

1. Too many hierarchical levels may waste time in

communication, which may, in turn, lead to delays

in decision making.

2. There is too much centralisation.

3. Tight operational control delays the decision

making process.

Fig. 8.2: Hierarchical Levels in Vertical/Tall Organisations

8.3.4 Horizontal/Flat Organisation

The horizontal organisation is a more appropriate model for the knowledge

age. Companies are increasingly finding this structure more effective as it

promotes more decentralized, downsized, team-oriented organisations with

empowered workers. Horizontal structure emphasizes the need to start with

an understanding of an organisation’s core competencies.

In the U.S.A. some well known corporate giants such as AT&T, Du Pont,

General Electric, and Motorola are moving towards “the horizontal corporation”

in which traditional internal departmental divisions and well defined layers of

authority are blurred or destroyed to allow an organisation to respond more

quickly and effectively to market changes.

92

Change Management

in Power Distribution Box 8.1: Fundamental Principles for Creating Horizontal Organisation

All core processes lead to one end objective: Creating and delivering

something of value to the customer.

Table 8.5: Advantages and Disadvantages of Horizontal/Flat /Tall Organisation

Advantages

1. Quick decision making as there are fewer levels of

hierarchy.

2. Low administration costs, freedom and autonomy to

the managers to operate.

3. This structure motivates the managers to accept

responsibility and commit themselves towards

organisational objects.

Disadvantages

1. Absence of control, effective coordination and

proper reporting to superiors because of

decentralisation.

DESIGNING THE ORGANISATION

1) Organise cross-functional processes.

2) Install process owners.

3) Form teams, not individuals, as the cornerstone of organisational

design and performance.

4) Integrate with customers and suppliers.

5) Decrease hierarchy by eliminating non-value-added work and by giving

team members the authority to make decisions.

INSTITUTIONALISATION OF CHANGE

6) Build a corporate culture of openness, cooperation and collaboration, a

culture that focuses on continuous performance improvement and

values employee’s empowerment, responsibility, and well-being.

7) Empower people by giving them the tools, skills, motivation and

authority they need to discharge their responsibilities.

8) Use information technology to help people reach performance

objectives and deliver the value proposition to the customer.

9) Measure for end of process performance objectives as well as

customer satisfaction, employee satisfaction, and financial

contribution.

10) Redesign functional departments or areas to work as partners in

process performance with core process groups.

11) Emphasize multiple competencies and train people to handle issues

and work productively in cross functional areas.

12) Promote multi-skilling, the ability to think creatively and respond

flexibly to challenges that arise in the work that teams do.

93


8.3.5 Inverted Pyramid

The traditional business is styled in the form of a pyramid with the chief

executive officer at the top, senior executives underneath, and so on. There

are many layers in the management structure, which reflects who reports to

whom. In the inverted management pyramid (Fig. 8.3), customers have the

most important role in driving the business. It also gives the front line

employees a similar ability as they are closest to the customers. Since the

customers are considered primary, it also helps to improve the business. The

flow of communication from the customers and within the enterprise improves

vastly. Once the inverted pyramid idea is accepted, the role of management

needs to undergo a change: From a commanding role, it should become a

supporting one.

Fig. 8.3: Inverted Pyramid

Table 8.6: Advantages and Disadvantages of Inverted Pyramid Structure

Advantages

1. In this structure the customers are given the first preference.

This way it becomes very easy to understand their preferences

and plan the strategies of the organisation accordingly.

2. Front line employees are given more responsibility and

authority in the organisation than the top management

because they are closest to the customers.

3. Decentralization of authority and responsibility place a very

important role in prompt and timely decisions.

4. The inverted pyramid structure motivates the employees as

they are placed in a better position than the top management.

Disadvantages

1. This structure may be dangerous because the role of top

management is shifted to supporting one from that of

commanding one which ultimately leads to the direction less-

organisation.

2. In this structure there is absence of clear authority and

responsibility levels as a result of which people become

confused and business veers out of control.

3. Frontline supervisor cannot make strategies regarding

organisations even though they have proper understanding of

the customers because they are not equipped to do so.

94

Change Management

in Power Distribution 8.3.6 Orchestra

A firm styled as an orchestra could be an efficient management structure. You

may know that an orchestra has a conductor and a team in which every

member plays a different instrument and at different times to operate a

musical score (Fig. 8.4).

Fig. 8.4: Musical Orchestra

The conductor ensures that each player performs in synchrony with the

others.

Table 8.7: Advantages and Disadvantages of Orchestra Structure

Advantages

1. There is a lot of cooperation and coordination

between the employees and the management.

2. The objectives are clearly defined.

3. The flow of information in the organisation is

perfect because it is more of information based

management rather than the bureaucratic

command control.

Disadvantages

1. A perfect synchrony cannot be expected from the

top management and the employees always

because there may be some hindrances in

communication flow as there is no middle level

management.

2. The authority-responsibility aspects are not

clearly defined.

3. The control of whole organisation by the top

management alone without the help of middle

level management may not give good results.

95


8.3.7 Cluster Organisation

An organisation may be restructured around certain clusters that are inter-

locked or networked representing a cluster organisation. Each cluster consists

of a group of people drawn from different functional and staff areas working

together on a semi-permanent basis to accomplish certain preset goals. A

cluster handles its administrative functions, develops the required expertise,

relates to customers, and is accountable for its actions. Each individual within

the cluster has responsibility for his/her particular area of activity and also of

the performance of the cluster as a whole.

Individual clusters in an organisation may differ in size consisting usually of 30

to 50 members to provide for a broad range of functional and staff expertise.

Within itself a cluster may have smaller teams of 5 or more individuals to

facilitate its work.

A typical cluster organisation would have a number of interlocked circles with

the CEO at the centre and the senior and middle level management in

adjacent circles (Fig. 8.5), while others are grouped around in a number of

independent clusters (each cluster with a specific mission or purpose.)

Fig. 8.5: Cluster Organisation

96

Change Management

in Power Distribution Table 8.8: Advantages and Disadvantages of Cluster Organisation

Advantages

1. Well defined responsibilities.

2. This structure empowers the employee by

fostering individual and team work.

Disadvantages

1. Employees in this structure work on a semi-

permanent basis. The state of being not

employed on a permanent basis by the

organisation may depress the employees and

dampen their initiative.

2. A cluster, which manages all the activities

associated with accomplishing their corporate

goals may lose speciality.

3. There is lack of formal hierarchical structure,

which may lead to lack of direction in the

organisation.

8.3.8 Virtual Organisation

A firm is said to be having a virtual organisational structure when it contracts

out almost all functions. The only function retained by the organisation is the

name and the coordination among the parties. A virtual organisation might not

have even have a permanent office. This is especially common in the fashion

industry where you can have clothing labels that are just that. Say the label is

“XXX”. The label has a clear identity in the public eye, but when you try to

track down the XXX Taylor Company, you find there are no XXX designers, no

XXX manufacturers. There are just 3 people in an office subcontracting out all

functions.

Thus, a virtual organisation is a network of firms held together by the product

of the day. It is an open-ended system of ideas, activities and firms.

Table 8.9: Advantages and Disadvantages of Virtual Organisation

Advantages

1. These structures enable business with less

capital, less human resources and other inputs.

2. These structures provide flexibility of operation.

3. These structures develop ancillary industries.

Disadvantages

1. Companies do not have strong foundations or

strengths in their operations.

2. Organisations have to heavily depend on outside

support.

3. Failure in the network results in failure of the

organisation.

97


8.3.9 Matrix Organisation

Matrix organisation structure (Fig. 8.6) processes a dual chain of command.

Both functional and project managers exercise authority over organisational

activities in a matrix structure. The strength of the matrix lies in the ability to

facilitate coordination when the organisation has a multiplicity of complex and

inter dependent activities. The direct and frequent contacts between different

specialities in a matrix make for better communication and greater flexibility.

Information permeates the organisation and more quickly reaches those

people who need to take account of it.

Fig. 8.6: A Matrix Organisation

Matrix also facilitates efficient allocation of specialists. When individuals with

highly specialised skills are lodged in one functional department or product

group, their talents are monopolized and under-utilised. The matrix achieves

the advantages of economies of scale by providing the organisation with the

best resources and an effective way of ensuring their efficient development.

Managing Director

General Manager

Manager Human

Resource

Manager Finance

Manager Production

Manager Marketing

Manager R&D

Project A Manager

HR Specialists

Finance Specialists

Production Specialists

Marketing Specialists

R&D Specialists

Project B Manager

HR Specialists

Finance Specialists

Production Specialists

Marketing Specialists

R&D Specialists

98

Change Management

in Power Distribution Table 8.10: Advantages and Disadvantages of a Matrix Organisation

Advantages

1. This structure has considerable flexibility. The

personnel can be transferred form one project to the

other depending upon the need of the project.

2. The lower level functional employees are highly

motivated and satisfied with their job, as they are

involved in decision making.

3. Promotes making trade off decisions on the basis of

what is the best for the organisation as a whole.

4. Encourages cooperation, consensus building, conflict

resolution and coordination of related activities.

5. Makes efficient use of functional expertise.

Disadvantages

1. It is very complex to manage.

2. The authority is so much shared that it can result in

misappropriated amounts of time being spent on

communications.

3. This structure violates unity of command.

4. Requires too much time for meetings and

collaboration.

5. It is hard to move quickly and decisively without

getting clearance from many other people.

8.3.10 Functional Organisation Structure

In this structure (Fig. 8.7) each functional department consists of those jobs in

which employees perform similar jobs at different levels. The commonly used

functions are: marketing, finance and accounting, human resources,

manufacturing, research and development, and engineering.

Fig. 8.7: Functional Organisation Structure

99


Table 8.11: Advantages and Disadvantages of a Functional Organisation

Structure

Advantages

1. In-depth specialisation and focussed

concentration on performing functional tasks can

enhance operating efficiency and development of

core competencies.

2. This structure promotes maximum utilisation of

up-to-date technical skills and enables the firm to

capitalise on specialisation and efficiency.

3. This structure promotes common values and

goals among employees of the department,

facilitating cooperation and collaboration with the

functional department.

4. Enhances operating efficiency where tasks are

routine and repetitive.

Disadvantages

1. The department members will see the activities

from the view point of the department rather than

the total organisation. This results in the absence

of inter-departmental coordination and

cooperation.

2. The narrow specialisation kills the initiative of

entrepreneurs and the zeal of innovativeness and

creativeness.

3. This kind of structure promotes over

specialization and narrow management

viewpoints.

4. This kind of structure is effective only in stable

environment.

5. This also results in absence of accountability.

8.3.11 Product Organisation Structure

Companies producing more than one product, structure their organisations

based on product structures (Fig. 8.8). Activities are divided on the basis of

individual products, product line, services and are grouped into departments in

100

Change Management

in Power Distribution product organisation structure. All important functions, viz. marketing,

production, finance and human resources are located within each department.

Table 8.12: Advantages and Disadvantages of a Product Organisation Structure

Advantages

1. This organisation structure is appropriate for

those firms which produce multiple products.

2. Coordination among functional areas like product

design, production, marketing is effective as all

functions are in the same department.

3. Responsibility and accountability for market

share, sales, profit/loss can be clearly fixed.

Disadvantages

1. Each department will have production, marketing,

human resource, finance managers, secretarial

and supporting staff, computers and testing

equipment. As such specialised personal and

equipment cannot be procured.

2. Inter departmental conflicts arise regarding

sharing of common resources, allocation of

common and overhead expenses etc.

Fig. 8.8: Product Organisation Structure

Which of the organisational structures described in this section are suitable for the electricity industry? Justify your answer.

……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ………………………………………………………………………………………

SAQ 3: Types of organisational structure

101


Every merger or acquisition goes through a learning process of its own. If

managed properly, mergers and acquisitions (M&A) can help the organisation

take a path of growth and prosperity. In this section, we describe mergers and

acquisitions, in brief.

Mergers and acquisitions reached new heights in the 1990s that eclipses the

peaks set in the 1980s. This period witnessed the development of the most

unusual merger wave in the US economic history. Large scale mega mergers

became common place. Hostile deals captured media headlines on a regular

basis. This wave collapsed in 1980s and many of the highly leveraged deals of

that period became fashionable in the early 1980s. However, just when it

appeared that the frantic pace of mergers had clearly ended, the trend got

reversed and a new period of M&A began in 1993. These periods are

characterised by cyclic activity, that is, high levels of merger followed by a

period of relatively few mergers.

Mergers are often categorised as horizontal, vertical and conglomerate

mergers.

A horizontal merger occurs when two competitors combine. The Hewlett

Packard and Compaq merger is an example of horizontal merger. If a

horizontal merger causes the combined firm to experience an increase in

market power that will have anti competitive effects, the merger may be

opposed on anti trust grounds. In recent years, however, governments all over

the world have been liberal in allowing many horizontal mergers to take place

unopposed.

A vertical merger is a combination of companies that have a buyer-seller

relationship. Merck, the world’s largest drug company acquired Medco, the

largest marketer of discount prescription medicines in the U.S. This is an

example of vertical merger. This transaction enabled Merck to be not only the

largest pharmaceutical company but also the largest integrated producer and

distributor of pharmaceuticals. This transaction too was not opposed by anti

trust regulators even though the combination clearly resulted in a more

powerful firm. Recent acquisition of Corus by the Indian corporate Tata is also

an example of this type.

A conglomerate merger occurs when the companies are not competitors and

do not have a buyer-seller relationship. For instance, Phillip Morris, a tobacco

company acquired general foods and these companies were in very different

lines of business.

• Organisations are economic and social entities in which a number of

persons perform multifarious tasks in order to attain common goals. Four

8.5 SUMMARY

8.4 MERGERS AND ACQUISITIONS

102

Change Management

in Power Distribution key organisational trends are visible currently: Globalisation, diversity,

flatness, networking.

• Organisational structure defines how job tasks are formally divided,

grouped and coordinated. Managers need to address six key elements

when they design their organisation structure: work specialisation,

departmentalisation, chain of command, span of control,

centralisation and decentralisation, and formalisation.

• There are different types of organisational structures:

− Spaghetti Organisation is a form of boundary less organisation.

− Amoeba-shaped organisation is another form of boundary less

organisation which is structured like an amoeba with a central nucleus

and a flexible operating structure enabling it to move into different

types of projects and markets while operating as cross-functional

teams.

− Vertical/tall organisations refer to increase in the length of the

organisation chain of command. The hierarchical chain of command

represents the company’s authority-accountability relationship between

superiors and subordinates. Authority and responsibility flow from the

top to the bottom through all the levels of hierarchy. Accountability

flows from the lowest level to the highest level.

− Horizontal/flat organisations are a more appropriate model for the

knowledge age. These promote more decentralized, downsized, team-

oriented organisations with empowered workers. Flatness, or the

absence of an organisational hierarchy, does not mean the elimination

of individual roles or responsibilities. It does mean the end of people

with more over-riding authority over other people’s work.

− Inverted pyramid structure has the chief executive officer at the top,

senior executives underneath, and so on. There are many layers in

the management structure, which reflects who reports to whom.

− A firm styled as an orchestra could be an efficient management

structure, in which the CEO/top management and the

employees/managers operate with the same objective. It is an

organisation of specialists of different kinds directing themselves and

doing different kinds of work (the roles and responsibilities of each is

clear in relation to his/her own task and that of others).

− Cluster organisation is an organisation structured around certain

clusters that are inter-locked or networked representing a cluster

organisation. Each cluster consists of a group of people drawn from

different functional and staff areas working together on a semi

permanent basis to accomplish certain preset goals. A cluster handles

its administrative functions, develops the required expertise, relates to

customers, and is accountable for its actions. Each individual within the

103


cluster has responsibility for his/her particular area of activity and also

of the performance of the cluster as a whole.

− Virtual organisation is the kind of structure in which a firm contracts

out almost all functions. The only function retained by the organisation

is the name and the coordination among the parties. A virtual

organisation might not have even have a permanent office.

− Matrix organisation structure processes a dual chain of command.

Both functional and project managers exercise authority over

organisational activities in a matrix structure.

− Functional organisation structure has functional departments

consisting of those jobs in which employees perform similar jobs at

different levels. The commonly used functions are: marketing, finance

and accounting, human resources, manufacturing, research and

development, and engineering.

− Product organisation structure has activities being divided on the

basis of individual products, product line, services. These are grouped

into departments and all important functions viz. marketing, production,

finance and human resources are contained within each department.

• Mergers and acquisitions are quite common in businesses and are often

categorised as horizontal, vertical and conglomerate mergers. A

horizontal merger occurs when two competitors combine. A vertical

merger is a combination of companies that have a buyer-seller

relationship. A conglomerate merger occurs when the companies are not

competitors and do not have a buyer- seller relationship.

1. Explain the reasons why organisations design and redesign in order to be

efficient and effective.

2. Discuss different types of organisational structures. Which type fits the

best in your context?

3. Suppose your organisation requires restructuring. Which type of structure

would you choose and why? Give reasons.

4. Explain the concept of mergers and acquisitions.

8.6 TERMINAL QUESTIONS

change management in power distribtion

Documents