MAKING STRATEGY WORK: OVERCOMING THE OBSTACLES TO EFFECTIVE EXECUTIONby Lawrence Hrebiniak

Lawrence Hrebiniak is a professor in the Strategy Group, Department of Management, The Wharton School, University of Pennsylvania. His latest work on execution is Making Strategy Work (Wharton School Publishing, 2005).

Formulating strategy is a difficult task. Making strategy work—executing or implementing it throughout the organization—is even more difficult. This author, who has written several books on strategy and implementation,

briefly describes what managers must do to overcome the impediments and achieve strategic success.

Some obstacles to effective execution

The road to effective strategy execution is full of potholes and dangers. What are some of them?

Planning and execution are interdependent. Strategy formulation and implementation are separate, distinguishable parts of the strategic management process. Logically, implementation follows formulation; one cannot implement something until that something exists. But formulation and implementation are also interdependent, part of an overall process of planning-executing-adapting. This interdependence suggests that overlap between planners and “doers” improves the probability of execution success. Not involving those responsible for execution in the planning process threatens knowledge transfer, commitment to sought-after outcomes, and the entire implementation process.

Execution takes time. The successful implementation of strategy takes more time than its formulation. This can challenge managers’ attention to execution details. The longer time frame can also detract from managers’ attention to strategic goals. Controls must be set to provide feedback and keep management abreast of external “shocks” and changes. The process of execution must be dynamic and adaptive, responding to unanticipated events. This imperative challenges managers responsible for execution.

Execution involves many people. Strategy implementation always involves more people than strategy formulation. This presents problems. Communication down the organization or across different functions becomes a challenge. Making sure that processes throughout the organization support strategy execution efforts can be problematical in a large organization. Linking strategic objectives with the day-to-day objectives at different organizational levels and locations becomes a challenging task. The larger the number of people involved, the greater the challenge to execute strategy effectively.

Effective execution involves managers across all hierarchical levels. Another problem is that some top-level managers believe strategy implementation is “below them,” something best left to lower-level employees. This view holds that one group of managers does innovative, challenging work (planning), and then “hands off the ball” to lower-levels for execution. If things go awry, the problem is placed squarely at the feet of the “doers,” who somehow couldn’t implement a perfectly sound and viable plan.

This view is wrong. It blames the wrong people for execution mishaps. The truth is that implementation demands ownership at all levels of management. From C-level managers on down, people must commit to and own the processes and actions central to effective execution. The execution tasks, jobs, and responsibilities vary across levels, but they all are interdependent and important. Execution is a key responsibility of all managers, not something that “others” do or worry about.

Managing change is difficult. Execution often involves change—in structure, incentives, controls, people, objectives, responsibilities. As we know, change can be threatening. The importance of managing change well is clearly important for effective strategy implementation. The inability to manage change and reduce resistance to new implementation decisions or actions can spell disaster for execution efforts.

Other execution-related problems. My research uncovered other problems that challenge strategy implementation. They include responsibility and accountability for execution activities and decisions that are not clear; poor knowledge sharing among key functions or divisions; dysfunctional incentives; inadequate

coordination; poor or vague strategy; and not having guidelines or a model to shape execution activities and decisions. Space limitations prevent a complete discussion of how to overcome all obstacles to strategy execution. Let’s focus, then, on some of the decisions or actions that are critical to making strategy work.

Making strategy work

Table 1 summarizes what I see as important issues in making strategy work. Let’s consider some of them.

Table 1: Critical Issues in Making Strategy Work

Having an Implementation Model to Guide Execution Thoughts and Actions Remembering that Sound Strategy Comes First Structure is Important to Successful Implementation Care Must be Taken to Translate Strategic Objectives into Short-term Operating Metrics Clear Responsibility and Accountability are a Must for Effective Execution Reward the Right Things—Use Incentives to Support Execution Processes and Outcomes Ensure the Development of Appropriate Capabilities and Managerial Skills to Make Strategy Work Focus on Managing Change

Use a logical approach to execution. Managers need and benefit from a logical model to guide execution decisions and actions. Without guidelines, execution becomes a labyrinth. Without guidance, individuals do the things they think are important, often resulting in uncoordinated, divergent, even conflicting decisions and actions. Without the benefit of a logical approach, execution suffers or fails because managers don’t know what steps to take and when to take them. Having a model or roadmap positively effects execution success; not having one leads to execution failure and frustration.

Figure 1 shows the model of strategy execution derived from my research (see Hrebiniak, 2005). The model suggests or notes some of the key execution-related decisions and actions mentioned in Table 1. The remainder of this paper will focus on these.

Figure 1: Implementing Strategy: Key Decisions and Actions

Good strategy comes first. Effective execution is impossible if strategies are flawed. Figure 1 begins with corporate strategy, which is concerned with the entire organization and focuses on areas such as portfolio management, diversification, and resource allocations across the businesses or operating units that make up the total enterprise. Business strategy is also shown in Figure 1. At the business level, strategy focuses on products, services, and how to compete in a given industry or market segment. What must be stressed additionally is that business strategy is important to the implementation of corporate strategy. Business strategy and corporate strategy are interdependent—each effects and is effected by the other. Consider for a moment the well-known portfolio approaches to corporate strategy. “Cash cows” generate cash. Corporate “milks” them and uses their cash to feed and grow other business units, including the “stars” with high potential. Corporate needs the “cash cows” to grow parts of its portfolio, consistent with its strategy. But what if “cows” fail to produce sufficient cash nourishment? Clearly, a corporate investment strategy would be harmed if “cash cows” didn’t play their part.

The point is that business strategy is essential to the successful execution of corporate strategy. Poor strategic performance at the business level detracts from corporate’s ability to achieve its strategic aims, while good performance helps make corporate strategy work. Inadequate attention to the role of businesses in the corporate portfolio and the performance metrics for which businesses are held accountable can dull or negate the execution process at the very start.

The impact of structure. Figure 1 shows that the choice of structure is vital to the implementation of corporate strategy. To see this relationship, consider the age-old structural issue of centralization-decentralization. Over time, a corporation creates or acquires the businesses that make up the organization. Some corporate acquisitions become relatively independent, decentralized units competing in different industries. Yet there usually are activities or functions that cut across businesses and allow for centralization, reduced duplication of resources, and the scale economies so often sought by corporate management. Different businesses must be sufficiently independent to respond quickly to competitors’ actions and customer needs. Yet they can’t be so independent as to create an unnecessary duplication of resources and destroy all chances for synergies or scale economies across businesses. The corporation, then, must create the right balance of centralization and decentralization to achieve its strategic goals.

Structure is also important at the business level. Cost-leadership strategies, for example, often rely on functional structures to achieve not only expertise and critical capabilities, but also the scale and scope economies that result from the standardization, repetition, and volume associated with the functional design. Like their corporate counterparts, business leaders must also worry about the balance between centralization and decentralization and the costs and benefits associated with each. Structure again supports strategy implementation.

Need for integration. The integration components noted in Figure 1 refer to the methods used to achieve coordination across the units comprising organizational structure. In a previous example, corporations employed centralized functions that allowed for scale economies and low costs of duplication across business units. To achieve these benefits, the work of the centralized units must be shared by decentralized businesses. The coordination or integration of functional expertise and knowledge laterally, across units relying on that expertise, is absolutely essential to the efficiency or market-related goals of the organization.

The same is true within businesses where different functions must be coordinated to serve customers or gain advantage in a particular market or industry segment. People in different functions often see the world differently: R&D, marketing, and manufacturing, for example, usually have different goals, performance metrics, and time frames for decision making. Coordinating these diverse units to achieve common goals can be difficult. Still, this coordination is needed and various methods are available—e.g. teams, integrating roles, matrix structures—to share knowledge and improve communication across the diverse functions. So, too, in geographically dispersed companies, where achieving global coordination to serve business needs while simultaneously accounting for country or regional differences is necessary for the execution of a global strategy. Integration mechanisms and structures (e.g. a coordinated global matrix) are again important.

Integrating strategy and short-term objectives. Figure 1 shows that business strategy must be translated into short-term operating objectives or metrics in order to execute the strategy. To achieve strategic objectives, an organization must develop short-term measurable objectives that relate logically to strategy and how the organization plans to compete. Key issues, elements, and needs of strategy must be translated into objectives, action plans, and “scorecards” and this translation is an integral and vital part of the execution process. Performance appraisal and measurement of strategic progress simply cannot function without the existence of these critical metrics or measurable performance criteria.

Clarifying responsibilities and accountability. Managers cannot create coordination mechanisms or integrate strategic and short-term operating objectives if job responsibilities and accountability are unclear. Clarifying responsibility and accountability is vital to making strategy work.

The problem is that job-related responsibilities are not always clear, and even authority is not always unambiguous. Responsibility and accountability are often blurred when people from different divisions, functions, or hierarchical levels come together to solve a problem. Matrix-like structures in global settings marked by lateral, hierarchical, and country influences often suffer from a cloudy picture of responsibility, accountability, and authority.

To execute strategy, responsibility and accountability must be clear. Use of a responsibility matrix or similar tool can help to define key execution tasks or activities and the people responsible for them. Without this clarification of roles and responsibilities for critical tasks, decisions, and outcomes, making strategy work is difficult, at best.

Developing effective incentives and controls. The picture of strategy execution is not yet complete because the creation of strategy, objectives, structure, accountabilities, and coordinating mechanisms is not sufficient to ensure that individuals will embrace the goals of the organization. Some method of obtaining individual and organizational goal congruence is required. Execution will suffer if people are rewarded for doing the wrong things. Execution will fail when no one has skin in the game. Feedback on performance is also needed so the organization can evaluate whether the right things are indeed being accomplished in the strategy execution process.

What is required for successful strategy implementation is the careful development of incentives and controls, the last component of the model in Figure 1. On one hand, incentives motivate or guide performance and support the key aspects of the strategy-execution model. Controls, in turn, provide timely and valid feedback about organizational performance so that change and adaptation become a routine part

of the implementation effort. Controls allow for the revision of execution-related factors if desired goals are not being met.

Managing change. Making the necessary changes in the process of execution and overcoming resistance to them is the last step on the road to strategic success. This step requires unerring attention to detail, a focus on objectives, measurement of performance, and a strong commitment to the execution task at hand. Managing change is difficult, but successful execution depends on it.

These, then, are some of the important considerations or issues in successful strategy execution. The process of execution is challenging, but focusing on the issues identified above and following a logical model or set of guidelines definitely will help.

One of the most challenging tasks of a business may be organizing the people who perform its work. A business may begin with one person doing all the necessary tasks. As the business becomes successful and grows, however, there is generally more work, and more people are needed to perform various tasks. Through this division of work, individuals can become specialists at a specific job. Because there are several people—often in different locations—working toward a common objective, "there must be a plan showing how the work will be organized. The plan for the systematic arrangement of work is the organization structure. Organization structure is comprised of functions, relationships, responsibilities, authorities, and communications of individuals within each department" (Sexton, 1970, p. 23). The typical depiction of structure is the organizational chart. The formalized organizational chart has been around since 1854, when Daniel McCallum became general superintendent of the New York and Erie Railroad—one of the world's longest railroads. According to McCallum, since the railroad was one of the longest, the operating costs per mile should be less than those of shorter railroad lines. However, this was not the case. To remedy management inefficiencies, McCallum designed the first organizational chart in order to create a sense of structure. The organizational chart has been described as looking like a tree, with the roots representing the president and the board of directors, while the branches symbolize the various departments and the leaves depict the staff workers. The result of the organizational chart was a clear line of authority showing where subordinates were accountable to their immediate supervisors (Chandler, 1988, p. 156).

Traditional Structures

Traditional organizational structures focus on the functions, or departments, within an organization, closely following the organization's customs and bureaucratic procedures. These structures have clearly defined lines of authority for all levels of management. Two traditional structures are line and line-and-staff.

Line Structure

The line structure is defined by its clear chain of command, with final approval on decisions affecting the operations of the company still coming from the top down (Figure 1). Because the line structure is most often used in small organizations—such as small accounting offices and law firms, hair salons, and "mom-and-pop" stores—the president or CEO can easily provide information and direction to subordinates, thus allowing decisions to be made quickly (Boone and Kurtz, 1993, p. 259).

Line structures by nature are fairly informal and involve few departments, making the organizations highly decentralized. Employees are generally on a first-name basis with the president, who is often available throughout the day to answer questions and/or to respond to situations as they arise. It is common to see the president or CEO working alongside the subordinates. Because the president is often responsible for wearing many "hats" and being responsible for many activities, she or he cannot be an expert in all areas (Figure 1).

Line-And-Staff Structure

While the line structure would not be appropriate for larger companies, the line-and-staff structure is applicable because it helps to identify a set of guidelines for the people directly involved in completing the organization's work. This type of structure combines the flow of information from the line structure with the staff departments that service, advise, and support them (Boone and Kurtz, 1993, p. 259).

Line departments are involved in making decisions regarding the operation of the organization, while staff areas provide specialized support. The line-and-staff organizational structure "is necessary to provide specialized, functional assistance to all managers, to ensure adequate checks and balances, and to maintain accountability for end results" (Allen, 1970, p. 63).

An example of a line department might be the production department because it is directly responsible for producing the product. A staff department, on the other hand, has employees who advise and assist—making sure the product gets advertised or that the customer service representative's computer is working (Boone and Kurtz, 1993, p. 259).

Based on the company's general organization, line-and-staff structures generally have a centralized chain of command. The line-and-staff managers have direct authority over their subordinates, but staff managers have no authority over line managers and their subordinates. Because there are more layers and presumably more guidelines to follow in this type of organization, the decision-making process is slower than in a line organization. The line-and-staff organizational structure is generally more formal in nature and has many departments (Figure 2).

Matrix Structure

A variation of the line-and-staff organizational structure is the matrix structure. In today's workplace, employees are hired into a functional department (a department that performs a specific type of work, such as marketing, finance, accounting, and human resources) but may find themselves working on projects managed by members of another department. Organizations arranged according to project are referred to as matrix organizations. Matrix organizations combine both vertical authority relationships (where employees report to their functional manager) and horizontal, or diagonal, work relationships (where employees report to their project supervisor for the length of the project). "Workers are accountable to two supervisors—one functional manger in the department where the employee regularly works and one special project manager who uses the employee's services for a varying period of time" (Keeling and Kallaus, 1996,p. 43).

Since employees report to two separate managers, this type of organizational structure is difficult to manage—especially because of conflicting roles and shared authority. Employees' time is often split between departments and they can become easily frustrated if each manager requires extra efforts to complete projects on similar time-lines.

Because the matrix structure is often used in organizations using the line-and-staff setup, its also fairly centralized. However, the chain of command is different in that an employee can report to one or more managers, but one manager typically has more authority over the employee than the other manager(s). Within the project or team unit, decision making can occur faster than in a line-and-staff structure, but probably not as quickly as in a line structure. Typically, the matrix structure is more informal than line-and-staff structures but not as informal as line structures (Figure 3).

Centralization

Organizations with a centralized structure have several layers of management that control the company by maintaining a high level of authority, which is the power to make decisions concerning business activities. With a centralized structure, line-and-staff employees have limited authority to carry something out without prior approval. This organizational structure tends to focus on top-down management, whereby executives at the top communicate by telling middle managers, who then tell first-level managers, who then tell the staff what to do and how to do it. Since this organizational structure tends to be fairly bureaucratic, employees have little freedom. Centralized organizations are known for decreased span of control—a limited number of employees report to a manager, who then reports to the next management level, and so on up the ladder to the CEO (Figure 4).

Decentralization

Because individual creativity can be stifled and management costs can be greater in a centralized organization, many organizations continue to downsize into a more decentralized structure. Decentralization seeks to eliminate the unnecessary levels of management and to place authority in the hands of first-line managers and staff— thus increasing the span of control, with more employees reporting to one manager. Because more employees are reporting to a single manager than before, the managers are forced to delegate more work and to hold the employees more accountable. Downsizing has also helped to change the flow of communication, so that top management hears staff concerns and complaints in a more direct manner and management has a more hands-on approach. The hands-on approach involves less bureaucracy, which means there is a faster response to situations that demand immediate attention. This structure also takes advantage of bottom-up communication, with staff issues being addressed in a timely manner.

The restructuring generally takes place at the mid-management level. Because some middle managers have lost their jobs, been laid off, or simply taken advantage of early retirement and severance packages, their positions have been phased out, thus helping to reduce unnecessary costly salaries and increasing employee span of control. Many middle managers who stayed in their current "positions" found that their jobs have changed to being coaches, or team leaders, who allow their employees greater freedom in completing their work responsibilities (Csoka, 1995, p. 3).

The chain of command is the protocol used for communication within organizations. It provides a clear picture of who reports to whom. Quick decisions can be made in decentralized organizations because approval usually has to come only from the manager one level higher than the person making the decision. The chain of command involves line-and-staff employees, where the staff's job is completing the actual work and the line functions to oversee the staff (Figure 5).

Departmentalization

Organizations can be divided into various departments, or units, with individuals who specialize in a given area, such as marketing, finance, sales, and so forth. Having each unit perform specialized jobs is known as departmentalization. Departmentalization is done according to five major categories (Figure 6): (1) product, which requires each department to be responsible for the product being manufactured; (2) geographic, which divides the organization based on the location of stores and offices; (3) customer, which separates departments by customer type—for example, textbook companies that cater to both grade schools and community colleges; (4) functional, which breaks departments into specialty areas; and (5) process, which creates departments responsible for various steps in the production process (Boone and Kurtz, 1993).

Bibliography

Boone, Louis E., and Kurtz, David L. (1993). Contemporary Business, 7th ed. Fort Worth, TX: Dryden Press.

Chandler, Alfred D., Jr. (1988). "Origins of the Organization Chart," Harvard Business Review 88:2, (March/April):p. 156.

Csoka, Louis. (1995). "Redefining the Middle Manager," HR Executive Review, 2(2): 3-5.

Keeling, B. Lewis, and Kallaus, Norman F. (1996). Administrative Office Management, 11th ed., Cincinnati, OH: South-Western Educational Publishing.

Litterer, Joseph A. (1980). Organizations: Structure and Behavior. New York: Wiley.

Sexton, William P. (1970). "Organization Structure." In William P. Sexton, ed. Organization Theories. Columbus, OH: Charles E. Merrill.

[Article by: CHRISTINE JAHN]

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Wikipedia:

Organizational structureTop

Home > Library > Miscellaneous > Wikipedia

It has been suggested that Organizational hierarchy be merged into this article or section. (Discuss)

An organizational structure is a mainly hierarchical concept of subordination of entities that collaborate and contribute to serve one common aim.

Organizations are a variant of clustered entities. An organization can be structured in many different ways and styles, depending on their objectives and ambience.[clarification needed] The structure of an organization will determine the modes in which it operates and performs.

Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Individuals in an organizational structure are normally hired under time-limited work contracts or work orders, or under permanent employment contracts or program orders.

Contents [hide]

1 Operational organizations and informal organizations 2 Success factors 3 History

o 3.1 Organizational structure types 3.1.1 Pre-bureaucratic structures 3.1.2 Bureaucratic structures 3.1.3 Post-bureaucratic 3.1.4 Functional structure 3.1.5 Divisional structure 3.1.6 Matrix structure

o 3.2 Organizational circle: moving back to flat o 3.3 Team o 3.4 Network

3.4.1 Virtual 4 See also 5 References

Operational organizations and informal organizationsSee also: Informal organization and Formal organization

The set organizational structure may not coincide with facts, evolving in operational action. Such divergence decreases performance, when growing. E.g. a wrong organizational structure may hamper cooperation and thus hinder the completion of orders in due time and within limits of resources and budgets. Organizational structures shall be adaptive to process requirements, aiming to optimize the ratio of effort and input to output.

An effective organizational structure shall facilitate working relationships between various entities in the organization and may improve the working efficiency within the organizational units. Organization shall retain a set order and control to enable monitoring the processes. Organization shall support command for coping with a mix of orders and a change of conditions while performing work. Organization shall allow for application of individual skills to enable high flexibility and apply creativity. When a business expands, the chain of command will lengthen and the spans of control will widen. When an organization comes to age, the flexibility will decrease and the creativity will fatigue. Therefore organizational structures shall be altered from time to time to enable recovery. If such alteration is prevented internally, the final escape is to turn down the organization to prepare for a re-launch in an entirely new set up.

Success factors

Common success criteria for organizational structures are:

Decentralized reporting Flat hierarchy High transient speed High transparency Low residual mass Permanent monitoring Rapid response Shared reliability Matrix hierarchy

HistorySee also: Hierarchical organization and Flat organization

Organizational structures developed from the ancient times of hunters and collectors in tribal organizations through highly royal and clerical power structures to industrial structures and today's post-industrial structures.

Organizational structure types

Pre-bureaucratic structures

Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is most common in smaller organizations and is best used to solve simple tasks. The structure is totally centralized. The strategic leader makes all key decisions and most communication is done by one on one conversations. It is particularly useful for new (entrepreneurial) business as it enables the founder to control growth and development.

They are usually based on traditional domination or charismatic domination in the sense of Max Weber's tripartite classification of authority.

Bureaucratic structures

Bureaucratic structures have a certain degree of standardization. They are better suited for more complex or larger scale organizations. They usually adopt a tall structure. Then tension between bureaucratic structures and non-bureaucratic is echoed in Burns and Stalker[1] distinction between mechanistic and organic structures. It is not the entire thing about bureaucratic structure. It is very much complex and useful for hierarchical structures organization, mostly in tall organizations.

Post-bureaucratic

The term of post bureaucratic is used in two senses in the organizational literature: one generic and one much more specific [2]. In the generic sense the term post bureaucratic is often used to describe a range of ideas developed since the 1980s that specifically contrast themselves with Weber's ideal type bureaucracy. This may include total quality management, culture management and matrix management, amongst others. None of these however has left behind the core tenets of Bureaucracy. Hierarchies still exist, authority is still Weber's rational, legal type, and the organization is still rule bound. Heckscher, arguing along these lines, describes them as cleaned up bureaucracies [3], rather than a fundamental shift away from bureaucracy. Gideon Kunda, in his classic study of culture management at 'Tech' argued that 'the essence of bureaucratic control - the formalisation, codification and enforcement of rules and regulations - does not change in principle.....it shifts focus from organizational structure to the organization's culture'.

Another smaller group of theorists have developed the theory of the Post-Bureaucratic Organization.[3], provide a detailed discussion which attempts to describe an organization that is fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the post-bureaucratic organization, in which decisions are based on dialogue and consensus rather than authority and command, the organization is a network rather than a hierarchy, open at the boundaries (in direct contrast to culture management); there is an emphasis on meta-decision making rules rather than decision making rules. This sort of horizontal decision making by consensus model is often used in housing cooperatives, other cooperatives and when running a non-profit or community organization. It is used in order to encourage participation and help to empower people who normally experience oppression in groups.

Still other theorists are developing a resurgence of interest in complexity theory and organizations, and have focused on how simple structures can be used to engender organizational adaptations. For instance, Miner et al. (2000) studied how simple structures could be used to generate improvisational outcomes in product development. Their study makes links to simple structures and improviseal learning. Other scholars such as Jan Rivkin and Sigglekow[4], and Nelson Repenning [5] revive an older interest in how structure and strategy relate in dynamic environments.

Functional structure

Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with software engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible.

As a whole, a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable. Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost [6]. For instance, a small business could start making the components it requires for production of its products instead of procuring it from an external organization.But not only beneficial for organization but also for employees faiths.

Divisional structure

Also called a "product structure", the divisional structure groups each organizational function into a divisions. Each division within a divisional structure contains all the necessary resources and functions within it. Divisions can be categorized from different points of view. There can be made a distinction on geographical basis (a US division and an EU division) or on product/service basis (different products for different customers: households or companies). Another example, an automobile company with a divisional structure might have one division for SUVs, another division for subcompact cars, and another division for sedans. Each division would have its own sales, engineering and marketing departments.

Matrix structure

The matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms. An example would be a company that produces two products, "product a" and "product b". Using the matrix structure, this company would organize functions within the company as follows: "product a" sales department, "product a" customer service department, "product a" accounting, "product b" sales department, "product b" customer service department, "product b" accounting department. Matrix structure is amongst the purest of organizational structures, a simple lattice emulating order and regularity demonstrated in nature.

Weak/Functional Matrix: A project manager with only limited authority is assigned to oversee the cross- functional aspects of the project. The functional managers maintain control over their resources and project areas.

Balanced/Functional Matrix: A project manager is assigned to oversee the project. Power is shared equally between the project manager and the functional managers. It brings the best aspects of functional and projectized organizations. However, this is the most difficult system to maintain as the sharing power is delicate proposition.

Strong/Project Matrix: A project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources as needed.

Among these matrixes, there is no best format; implementation success always depends on organization's purpose and function.

Organizational circle: moving back to flat

The flat structure is common in enterprenerial start-ups, university spin offs or small companies in general. As the company grows, however, it becomes more complex and hierarchical, which leads to an expanded structure, with more levels and departments.

Often, it would result in bureaucracy, the most prevalent structure in the past. It is still, however, relevant in former Soviet Republics and China, as well as in most governmental organizations all over the world. Shell Group used to represent the typical bureaucracy: top-heavy and hierarchical. It

featured multiple levels of command and duplicate service companies existing in different regions. All this made Shell apprehensive to market changes [7], leading to its incapacity to grow and develop further. The failure of this structure became the main reason for the company restructuring into a matrix.

Starbucks is one of the numerous large organizations that successfully developed the matrix structure supporting their focused strategy. Its design combines functional and product based divisions, with employees reporting to two heads [8]. Creating a team spirit, the company empowers employees to make their own decisions and train them to develop both hard and soft skills. That makes Starbucks one of the best at customer service.

Some experts also mention the multinational design [9], common in global companies, such as Procter & Gamble, Toyota and Unilever. This structure can be seen as a complex form of the matrix, as it maintains coordination among products, functions and geographic areas.

In general, over the last decade, it has become increasingly clear that through the forces of globalization, competition and more demanding customers, the structure of many companies has become flatter, less hierarchical, more fluid and even virtual.[10]

Team

One of the newest organizational structures developed in the 20th century is team. In small businesses, the team structure can define the entire organization [9]. Teams can be both horizontal and vertical.[11] While an organization is constituted as a set of people who synergize individual competencies to achieve newer dimensions, the quality of organizational structure revolves around the competencies of teams in totality.[12] For example, every one of the Whole Foods Market stores, the largest natural-foods grocer in the US developing a focused strategy, is an autonomous profit centre composed of an average of 10 self-managed teams, while team leaders in each store and each region are also a team. Larger bureaucratic organizations can benefit from the flexibility of teams as well. Xerox, Motorola, and DaimlerChrysler are all among the companies that actively use teams to perform tasks.

Network

Another modern structure is network. While business giants risk becoming too clumsy to proact (such as), act and react efficiently [13], the new network organizations contract out any business function, that can be done better or more cheaply. In essence, managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means. H&M is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which are based in low-cost Asian countries. Not owning any factories, H&M can be more flexible than many other retailers in lowering its costs, which aligns with its low-cost strategy[14]. The potential management opportunities offered by recent advances in complex networks theory have been demonstrated [15] including applications to product design and development [16], and innovation problem in markets and industries [17].

Virtual

A special form of boundaryless organization is virtual. It works in a network of external alliances, using the Internet. This means while the core of the organization can be small but still the company can operate globally be a market leader in its niche. According to Anderson, because of the unlimited shelf space of the Web, the cost of reaching niche goods is falling dramatically. Although none sell in huge numbers, there are so many niche products that collectively they make a significant profit, and that is what made highly innovative Amazon.com so successful [18].

See also

Corporation Cross-functional team Group development Leadership Management Management consulting Organization development Organizational culture Organizational structure of the Central Intelligence Agency Parent company Team building Value network

References

1. ^ Burns, T. and G. Stalker. (1961) The Management of Innovation. London: Tavistock. 2. ^ Grey C., Garsten C., 2001, Trust, Control and Post-Bureaucracy, Sage Publishing) 3. ^ a b Heckscher C. (Editor), Donnellon A. (Editor), 1994, The Post-Bureaucratic Organization: New

Perspectives on Organizational Change, Sage Publications 4. ^ Nicolaj Sigglekow and Jan W. Rivkin, October 2003, Speed, Search and the Failure of Simple

Contingency, No. 04-019 5. ^ Repenning, N. (2002). A Simulation-Based Approach to Understanding the Dynamics of

Innovation Implementation. Organization Science, 13, 2: 109-127. 6. ^ Raymond E. Miles, Charles C. Snow, Causes of Failure in Network Organizations, California

Management Review, Summer 1992 7. ^ Grant, R.M. (2008). History of the Royal Dutch/Shell Group. Available at:

http://www.blackwellpublishing.com/grant/docs/07Shell.pdf (accessed 20/10/08) 8. ^ (Starbucks.com (2008). Starbucks Coffee International. Available at:

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Inc., p. 551-557. 10. ^ Gratton, L. (2004). The Democratic Enterprise, Financial Times Prentice Hall, pp. xii-xiv. 11. ^ Thareja P(2008), "Total Quality Organization Thru’ People,(Part 16), Each one is

Capable",FOUNDRY, Vol. XX, No. 4, July/Aug 2008 12. ^ (Thareja P(2007). A Total Quality Organisation thru'People Each One is Capable. Available at:

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18. ^ Anderson, C. (2007). The Long Tail. Random House Business Books, pp. 23, 53.

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)

Business Units

Nuon produces, sells and trades in energy. We therefore have not only technical departments but also commercial, financial, administrative and other departments.

Over 7000 people work in a wide variety of jobs in the following business units:

Power, Heat & Services Business Development & Projects Energy Trade & Wholesale Exploration & Production Marketing & Sales:

o Marketing & Sales Netherlands o Nuon Germany o Nuon Belgium o Customer Care Center o Value Added Services

Power Heat & Services

Nuon Power Heat & Services is responsible for generating and supplying energy (including heating and cooling) and for the management and acquisition of industrial parks. A considerable challenge, because we aspire to ‘best-in-class’ solutions and are continually on the lookout for opportunities to expand our substantial customer base still further. Our ambition: to capitalise on our growth potential through a perfect balance of profitability and sustainability.

Business Development & Projects

Nuon Business Development & Projects (BD&P) carries out the entire complex electricity and gas projects such as state-of-the-art power plants and wind farms. The high stakes involved make this an extremely challenging task: the construction of a new power plant, for example, could run to two billion euro. Moreover, we operate in a very dynamic sphere of activities, because legislation and regulations are constantly changing and there are a lot of stakeholders to convince.

Energy Trade & Wholesale

Energy Trade & Wholesale is responsible for procuring and selling electricity and gas and associated fuels. To ensure that the dynamic of the current energy market is properly monitored, ETW takes advantage of the opportunities to conclude short and long-term contracts. The external market risks that this involves are minimised by estimating them on a daily basis.

Exploration & Production

The business unit Exploration & Production invests in international gas fields – no easy task, bearing in mind that we operate in an extremely dynamic market. The department is growing rapidly, has short reporting lines and offers a lot of scope for initiative. Our staff identify chances and risks, initiate partnerships and are at the basis of a future-oriented, gas-related investment strategy.

Marketing & Sales

Since the liberalisation of the energy market Marketing & Sales has become a very important part of Nuon. Now that everyone is free to choose an energy supplier, competition between the energy companies has increased, both inside and outside the Netherlands. So we have to keep on finding ways of standing out from the crowd.

The Marketing & Sales business unit comprises the following units:

Marketing & Sales Netherlands Nuon Germany Nuon Belgium Customer Care Center Value Added Services

Marketing & Sales Netherlands

From branding to direct/indirect sales, from developing promising sales channels to coordinating group-wide sales processes and from coordinating the positioning of new propositions to cross-selling and upselling: Marketing & Sales Netherlands operates within a broad and challenging area of expertise. Our specialists analyse market preferences, initiate advertising campaigns and ensure that existing customers are happy to remain customers. By giving recommendations that provide a genuine benefit we maximise the customer experience.

Nuon Germany

Nuon is active not only in the Netherlands but also in Germany and Belgium. Nuon Germany supplies electricity, gas and energy-related services to consumers and businesses in Germany. This division also manages and operates energy-intensive industrial parks and public lighting in German cities such as Berlin.

Nuon Germany

Nuon Belgium

Nuon Belgium supplies electricity, gas and other energy-related products and services to consumers and businesses in Belgium. The division supplies both ordinary and green power. According to the independent supplier classification of Greenpeace Nuon’s green power is the greenest energy product in Flanders.

Nuon Belgium

Customer Care Center

The Nuon Customer Care Center (CCC) has a clear ambition: to help millions of customers to realise long-lasting energy savings. Our energy consultants – enthusiastic professionals with a passion for

customer contact – do everything they can to bind customers to the organisation by giving valuable advice and answering questions courteously and efficiently. We offer an inspiring work environment, encourage the development of staff and are an innovative trendsetter in the energy sector.

Value Added Services

Our ambition to enable customers to optimise their energy management is put into practice by the Value Added Services (VAS) market group by positioning products and services that make life just that bit safer or more comfortable. Innovative products in the fields of heating, insulation and security are put onto the market on the basis of a sophisticated marketing mix. The marketing specialists of VAS focus on acquiring, cross-selling and upselling an innovative product portfolio, varying from solar panels to smart savings products and energy labels and financing those products

Overcoming Barriers That Destroy Teams10/31/2005

Organizations increasingly turn to teams to get work done, but institutional barriers can quickly corral collaboration. Harvard Management Update reports on the merits of presenting your team with an irresistible challenge.

by Lauren Keller Johnson

It's not easy, pulling a group of diverse individuals together to work as a team. Barriers abound, in the form of fierce territoriality, incentive systems that reward individual rather than collective achievement, and mistrust spawned by an acquisition, merger, or major internal restructuring. Yet at a time when companies are increasingly relying on cross-functional teams at every level to generate innovative ideas, it's more crucial than ever to tap the fresh thinking that teams can provide.

How to overcome barriers to teamwork and unite an unlikely group of collaborators? Present them with an irresistible challenge, advise management consultants Patrick McKenna and David Maister in First Among Equals: How to Manage a Group of Professionals (Free Press, 2002).

Team challenges can take numerous forms—including a high-profile project, a process-improvement crusade, an enemy to be vanquished, or a chance to become the "winning underdogs." A crisis and pressure to complete a daunting task in a tight time frame (launching a new IT system, initiating a brand campaign) represent additional types of challenges. "A burning platform or aggressive deadline leaves team members no time to stall, hide, or point fingers," says Allan Steinmetz, CEO and founder of Inward Strategic Consulting, an internal branding firm in Newton, Massachusetts.

Regardless of the many forms team challenges can take, they share a purpose: fulfilling the deep need that most people have to be part of something larger than themselves. "People value this feeling more than anything else," maintains Judith Glaser, author of Creating We: Change I-Thinking to We-Thinking and Build a Healthy, Thriving Organization (Platinum Press, 2005).

But defining a challenge, and then inspiring your team to meet it, takes real savvy. "Managers must first be genuinely interested in helping people excel," says Maister. "They also have to understand that shifting from individual work to teamwork isn't an intellectual process, it's an emotional one. You have to seduce people step by step into collaborating as a team."

Effective managers use the following tactics:

1. Share as much information as you canShare with your team as much information as possible about why their effort is so important to the

company. "People want to be in the know," says John Coleman, CEO and founding partner of The VIA Group LLC, a marketing services firm in Portland, Maine. "I make our people feel like insiders by telling them about our company's challenges."

Glaser encourages her clients to "open up your company's closets. Put the brutal facts on the table—whether it's 'We slipped this quarter' or some other difficult news. You'll make people want to protect your company." Sharing information in this manner can spur teams to rally together and establish a shared vision for what they need to accomplish.

Katie Buckley, a senior organizational development consultant at Malvern, Pennsylvania-based Siemens Medical Solutions U.S.A., united business-unit leaders by challenging them to develop a graphic depiction of the company's competitive strategy as part of a nine-month development program in 2004. The team's effort resulted in a diagram that lays out the cause-and-effect links required for the company to leave rivals scrambling.

"We've grown through acquisitions," she says. "The challenge is in the integration—we strive to form complete solutions for customers."

After seeing the company's strategy in graphic form, "business leaders now realize they have to balance allegiance to their units and to the company, balance our future needs with today's needs, and put their 'enterprise' hat on," Buckley says. "They clearly see not only where we want to go as a company but also how we'll get there."

2. Provide the right amount of guidanceInvite team members to share ideas for surmounting challenges. Glaser advises clients to "help people articulate the unique contributions they can offer. Ask them: 'What are your ideas? What innovation can you bring to this effort?'" But balance this participation by providing guidelines for generating ideas and making decisions.

Brian Zanghi, president and CEO of Nashua, New Hampshire-based Pragmatech Software, took this approach with his executive team soon after he joined the company. His goal was to promote more cross-functional collaboration, and it proved a delicate task. Half the members of his executive team were new themselves, and the organization had a hierarchical culture.

"We had few cross-functional initiatives, and decisions escalated to a single point," he says. When Zanghi challenged his team to work across functions, several "old guard" members became uncomfortable. "Some of them wondered what their role was now and didn't know how to collaborate with their peers," he says.

To overcome these barriers, Zanghi asked team members to draw on their own expertise to generate ideas for cross-functional initiatives. "I don't micromanage; that kills creativity and collaboration," he says.

But he did provide some necessary structure to their brainstorming by testing ideas with such questions as "How will this idea get customers to use our products faster than before?"

3. "Stretch" your people beyond their current skillsDraw people into a challenge by offering them the chance to use skills they don't normally exercise in their day-to-day work. By "stretching" beyond their skill set, people gain experience thinking in fresh ways—a key ingredient in effective team collaboration. They can also become a great source of innovative ideas.

Stacy DeWalt, vice president of marketing for management services and enterprise accounts at Stamford, Connecticut-based Pitney Bowes, recently used this approach with her team. She brought twenty-five people together who had deep expertise in different areas—advertising, public relations, and the Web—to brainstorm ideas for how to change the perceptions of the firm's target audience and to elevate the importance of its products and services to the "C" level audience.

DeWalt then assigned people with different expertise to subgroups and challenged them to generate ideas outside their normal sphere of responsibility. Mass communication specialists, for instance, were charged with developing suggestions for direct-response marketing programs.

4. Make it fun, actionable, and visibleTo put team collaboration into overdrive, inject fun into your team's challenge. DeWalt, for instance, designed her team's brainstorming session to mimic the TV series The Apprentice, in which Donald Trump presents aspiring businesspeople with a challenge and then "fires" mediocre performers.

"Our CMO played Trump," DeWalt says. "He told the group we were out to 'fire' our competitors."

But DeWalt made it clear that there was more to the exercise than just fun. "We told the team that the company would fund their best ideas, so people knew their brainstorming was actionable." Participants also discovered their work would be visible. After the session, the groups gathered the easels on which they'd recorded their ideas and carried them to the boardroom on the sixth floor. "All the VPs and the CMO were there," says DeWalt. "People realized they had the executive team's endorsement."

DeWalt's reward? Four of the team's best ideas have found their way into corporate or business-unit marketing plans. Moreover, participants have begun collaborating more to seize advantage of one another's perspectives.

One young woman enamored by "makeover" series on TV suggested a "mailroom makeover." Intrigued by her pop-culture perspective, some of her brainstorming partners have invited her into other programs to get more of her ideas.

A postsession survey revealed additional important results: "People said they felt empowered," DeWalt says. "They responded, 'You're investing in us and giving us visibility. We want to step up and help. You're challenging us but making it feel safe to be creative.'"

5. Help people "feel" the challengeDesign exercises that let your team experience their challenge viscerally. Consider the tactics used by executives in General Motors' Saturn division when they recently challenged retailer teams to generate new ideas for fulfilling Saturn's purpose: to "surprise and delight" customers.

"We wanted them to experience surprising and delighting at a gut level," says Chris Bower, manager of Saturn's retail strategy and customer experience. So the company designed a core-values training course in which each retail team built a bicycle to learn how best to work together. Next the teams had to design a "delivery experience" meant to surprise and delight a new owner of their bike.

After the teams developed their strategies, facilitators brought children from the local community into the room and presented them as the new bike owners. Neither the youngsters nor the Saturn teams knew of the plan ahead of time. "The teams not only surprised and delighted the kids," says Bower, but they experienced those feelings themselves.

Team members thus gained a visceral understanding of what they were trying to achieve. The "surprise and delight" they themselves experienced during the exercise proved a powerful motivator

to solving the challenge they had been presented by Saturn's leaders.

Reprinted with permission from "Give Them a Challenge They Can't Resist," Harvard Management Update, Vol. 10, No. 9, September 2005.

See the latest issue of Harvard Management Update.

Lauren Keller Johnson is a Massachusetts-based writer. She can be reached at MUOpinion@hbsp.harvard.edu.

Hip-Pocket Tips for Building Team Effectiveness

by Lauren Keller Johnson

1. Share information. When people really understand the challenges the company faces, they are more likely to rally to help solve them.

2. Balance freedom and guidance. Effective leaders give their teams the freedom to solve problems while providing just enough guidance to keep them on track.

3. Give people room to stretch. When smart people are freed from the confines of their everyday responsibilities, some very creative ideas will surface.

4. Have some fun. This doesn't come naturally to some executives, but it can be well worth the effort. Teams require a sense of camaraderie to function at their best. A few laughs can go a long way toward building it.

5. Make the challenge visceral. When you and your team can see or feel an issue from outside the normal scope, it takes on a whole new meaning

6. Organizational analysis and planning focuses on cultivating and maintaining an efficient

workforce through the design and structure of an organization, as well as the relationships

and behavior of individuals within organizations. Specifically, organizational analysis is

concerned with developing models and theories that accurately capture the functioning and

development of organizations and that account for the ways in which organizations respond

to and bring about changes. Organizational planning, on the other hand, involves designing

an organization's structure and dividing up the responsibilities of an organization. The goals

of organizational analysis and planning typically have been to determine the best way to view

and organize a company in order to manage it successfully and to bring about greater

efficiency.

7. MODELS OF ORGANIZATIONAL ANALYSIS

8. One of the basic techniques of organizational analysis is modeling—developing models of

organizations that delineate the way they function and evolve in order to identify the best way

of managing each one. Modeling enables managers to determine the crucial variables in

particular circumstances so they can experiment with different combinations of variables to

achieve their desired results. For example, managers can determine the best combination of

technology and organizational structure for their company by using organizational models.

9. Organizational models typically focus on behavior, structure, or technology. In consideration

of these variables, four general models of organizational analysis exist: the rational (also

called the classical model), the natural system (also called the participative model), the

sociotechnical, and the cognitive model.

10. RATIONAL MODEL.

11. A pioneer of the rational model of organization was Frederick Taylor, who was influential

near the start of the twentieth century. Taylor's background in engineering prompted his

organizational analysis on efficiency. In Taylor's view, there was one best way—the most

efficient way—to perform a task. Scientific management sprang from his work, with resultant

time and motion studies in which tasks were timed and employee motions were gauged for

efficiency. The best way to perform a task, in Taylor's view, was the way that accomplished

the task in the least amount of time. He extended this view from employees to management,

suggesting that nearly all organizational tasks could become more efficient if scientific

principles were applied.

12. This was at the dawn of the introduction of the automobile to America. Although many

Western European nations began manufacturing automobiles before the early 1900s,

production efficiencies still had a long way to go. Applying scientific management principles

helped Ford Motor Company develop the first American, mass-produced automobile.

Frederick Taylor, then, was correct. Scientific management did work, but it was not without

problems. The main problem was that it ignored the boredom that repetitive tasks created for

workers. Workers became simply replaceable parts in the organizational machine.

13. In addition, the rational model of organization presupposes that decisions about an

organization's structure are reached because of the rational assessment of an organization's

needs, goals, and external influences. And like Taylor's scientific management, this is true in

some situations, but is not comprehensive enough to tell the whole story of how needs, goals

and external influences affect organizational analysis and planning.

14. The rational model assumes that deviations from rationality result from errors in judgment

and calculation as well as from ignorance. This model treats organizations as mechanical

groups because it conceives of the organization as having structure of different parts, and all

of these parts can be modified and manipulated in order to improve the efficiency of the

entire organization. Furthermore, individual parts of the organization are viewed as

modifiable through deliberate effort. Finally, this model sees the long-term development of

the organization as modifiable and controllable through planned modification in order to

accomplish definite goals.

15. The rational model is still pervasive among managers and corresponds to the pyramidal

organizational structure, in which top managers are at the apex and employees are at the

bottom. Managers possess the authority in this model, defining and assigning tasks to the

employees, who are charged with completing the tasks. They must begin by giving employees

clear and detailed instructions. After that, managers must evaluate employee performance

and distribute rewards and punishments based on the way employees performed their tasks.

16. Managers assume that worker motivation is directly correlated with economic rewards and

punishments meted out by the managers. Motivation, from a rational perspective, simply

involves increasing pay or threatening workers with various punishments. Hence, according

to this model, managers rely on pay and related forms of compensation to motivate workers

to complete their tasks efficiently in order to achieve company goals.

17. The problem with this assumption is that there are many motivators other than money, there

can be many ways to perform a given task, and there are many organizational goals that are

not rational. The rational model is thus a starting point for thinking about organizational

analysis, but certainly not encompassing enough to provide a complete picture.

18. NATURAL SYSTEM MODEL.

19. In contrast to the rational model, the natural system model views organizations holistically,

that is, as systems. The natural system model sees an organization as not only striving to

accomplish its own goals, but also other important goals. An organizational structure is

regarded as an institution in its own right that has needs of its own. Hence, according to this

model, an organization seeks to maintain a balance of its various needs and goals, which may

restrict the way it pursues other goals.

20. Unlike the rational model of organization, the natural system model sees the modification of

an organization as unplanned and adaptive reactions to unstable conditions that threaten the

balance of the organization as an entire system. The way an organization responds to

problems is characterized as a defense mechanism and as being influenced by the common

values ensconced in the members of the organization. This model concentrates on threats to

an organization's equilibrium, that is, on events and activities with the potential of disrupting

an organization's balance.

21. When deviations from organizational plans and goals occur, they are seen not as the product

of error or ignorance, but as the result of limitations brought about by an organization's

social structure. This model generally is based on the concept of organizations as organisms

in which all the parts are interconnected and interdependent. Consequently, changes in one

part of an organization are thought to have an impact on other parts of the organization, and

so planned modification of the organization is difficult.

22. In practical terms, the natural system model strives to balance the needs of all the members

of the organization as well as other stakeholders, such as customers, shareholders, and

suppliers. This model holds that organizations function best when members belong to at least

one effective work group (department, committee, or staff group), thereby contributing to the

goals of organizations. Members who belong to more than one work group help link the

different units of the organization together and facilitate communication and the exchange of

information throughout the organization.

23. The natural system model views change as affecting the entire organization, not just

individuals or individual units. Consequently, managers cannot change just one small part of

an organization; rather, they must change the whole organization. As a result, planning for

change must be comprehensive and systematic. Theoretically, the natural system model helps

prevent conflicts in that changes take place only with the involvement of each member of the

organization. Therefore, commitment to change is greatly increased and conflict over change

is limited.

24. SOCIOTECHNICAL MODEL

25. Because of the limitations of the previous models of organization, theorists have developed

other models to capture the essence and functioning of modern organizations. The

sociotechnical model does not rely on the mechanical and biological analogies of the rational

and natural system models. Instead, the sociotechnical model views organizations as having a

greater ability to modify their form and structure. Nevertheless, like the natural system

model, the sociotechnical model sees organizations as evolving. An organization changes

when the expectations of its members change as a result of their collaboration with other

members and the exchange of information.

26. This model views organizations as systems that interact with their environments. Through the

course of this interaction, organizational behavior is affected by human, social, technological,

and organizational inputs. These inputs are all interdependent, thus a change in one causes a

change in the others. The basic tenets of the sociotechnical model include the belief that

behavior in organizations can have a number of causes, that organizations are systems, and

that informal social systems are different from formal social systems.

27. An organization's main task is accomplished through the process of inputs being converted

into outputs. The organization is designed around these tasks. Similarly each unit of the

organization is designed around its specific subtask. The sociotechnical model assumes that

an organization's effectiveness is determined by its design to perform its main task.

Organizations have differentiated, yet integrated, units based on three primary factors:

technology (including techniques, skills, and materials), geographic location, and time (work

shifts). According to this model, if an organization is effectively designed around its main task

and if its units are differentiated and integrated effectively, then the number of conflicts will

be reduced.

28. COGNITIVE MODEL

29. The cognitive model of organization consists of three primary components: cognition, the

decision-making or problem-solving process, and an organizational setting. Cognition refers

to the information-processing units of an organization and its organizational units. The

decision-making or problem-solving component is a series of steps, operations, and

procedures that an organizational unit uses to make decisions or solve problems. The

organizational setting component is the arrangement of the organization, that is, the way

tasks are distributed and the way processes are coordinated.

30. Although the rational model of organization focuses on clarifying and assigning tasks, it does

not address the other aspects of organizations. In particular, it provides little in terms of the

ways organizations solve problems once tasks are clarified and assigned. The cognitive model

moves beyond this level of organizational analysis by focusing on the processes through

which organizations assign specific activities and times for the activities to be performed.

31. The cognitive model focuses on the decisionmaking process of an organization. An

organization makes decisions in accordance with its objectives and based on available

information. Since this model views individuals as having the capacity to do only a few things

at a time, the organization functions as the combination of these limited capacities and

facilitates the overall completion of a number of complex tasks, which are broken down into a

series of subtasks so that individuals can perform them. These subtasks are the areas of

specialization within an organization. Specialization, in turn, brings about the flow of specific

information to and from specialized units.

32. This model provides several key insights into the workings of organizations. It conceives of an

organization as a process that develops from the interaction of human cognition,

organizational structure, and the types of decisions that need to be made. Because of these

characteristics, the cognitive model focuses on the development and adaptation of

organizations in different circumstances. Furthermore, this model accounts for the way in

which specialization affects organizational behavior and coordination.

33. In conclusion, because each different organization model has its advantages and

disadvantages, managers must decide which one (or ones) best captures the workings of their

company by evaluating the assumptions and key processes of each, as well as by determining

which one can solve the kinds of problems they need to solve.

34. TYPES OF ORGANIZATIONAL

PLANNING STRUCTURES

35. Organizational planning involves designing an organization's structure to maximize efficiency.

This includes dividing a company up into different units, departments, and teams. Prior to this

division, managers must consider a company's goals and business obstacles as well as

alternative company structures. Business goals may include, for example, increasing the flow

of information, promoting teamwork, and reducing redundancy. Next, managers must

consider the different organizational structures and select the one that holds the greatest

potential for eliminating problems with the current corporate structure or for bringing about

the desired structural environment. The selection may be made by taking different

organizational models into consideration, as well.

36. Managers and executives generally divide an organization into different units based on one of

the following six criteria:

37. FUNCTION.

38. A manufacturing firm typically includes functional units such as engineering, production,

finance, sales, and personnel. These different functions are controlled by managers who head

each function. In this organizational structure, each function primarily focuses on its core

tasks (e.g., production or finance).

39. PRODUCT.

40. Large, diversified companies may find it advantageous to divide their tasks based on product

groups, such as foodstuffs, farm chemicals, and pharmaceuticals. This organizational

structure has the benefit of enabling each business unit to produce desired results. However,

it can lead to high administrative costs and redundancy.

41. CUSTOMERS.

42. Companies may be divided into different units based on target customers. For example, a

book publisher may be organized by retail bookstores, mail-order book stores, online book

stores, and school system tier, such as elementary, middle school, high school, and higher

education.

43. GEOGRAPHIC LOCATION.

44. Many sales and service companies use geographic location as the basis for creating

departments within the organization. This organizational structure calls for members of each

group to concentrate on particular locations for which they are responsible.

45. PROCESS.

46. Some companies are organized by process. Process organization is common in manufacturing

and clerical companies. For example, natural gas companies have different units for

exploration, production, and distribution. This type of organizational structure enables each

unit to have its own specialists.

47. MATRIX.

48. Matrix organizational structures include not only general functional units like production,

sales, and finance, but also product or geographic units. Company executives frequently

oversee the product units directly. The product units, in turn, collaborate with and coordinate

the functional units. By adopting the matrix arrangement, companies attempt to reap the

benefits of the functional and the product or geographic structures, while bypassing the

inefficient and redundant aspects of the product structure. A company with a matrix

organizational structure has functional units such as development, production, and sales

matched in a matrix by product or geographic location.

49. Company executives and managers must strive to select the organizational structure that best

suits their fields of business, that offers the optimal amount of control, specialization, and

cooperation, and that facilitates key business activities while also taking into consideration

concerns for efficiency and effectiveness.

50. SEE ALSO: Organizational Chart ; Organizational Development ; Organizational Structure

51.

Read more: Organizational Analysis and Planning - organization, system, advantages, school,

model, type, company, disadvantages, business, system, Models of organizational analysis,

Sociotechnical model, Cognitive model

http://www.referenceforbusiness.com/management/Ob-Or/Organizational-Analysis-and-

Planning.html#ixzz0vOY5DLdE

ORGANIZATION STRUCTURESKey to SUCCESSFUL Businesses

How Well Organized is Your Organization?

An apt analogy for the organization structures of many family businesses is that they are akin to an old country house that was built one room at time.

As the family grew, so did the house. At the time, little thought was given to how functional or how efficient the floor plan was - what drove the design of that old country house was expediency - not a thoughtful design process. So as the house grew in size, it became ever more inefficient.

"With family-owned businesses, the awful truth is that many are very poorly organized. So many family businesses never achieve the true potential of their business because their organization simply "evolved" as the business grew," according to top family business advisor Don Schwerzler.

"An effective organization is the product of thoughtful consideration - the implementation of an organizational strategy."

Schwerzler has been studying and advising family businesses for more than 40 years and he is the founder of the Family Business Institute.

What are some of the symptoms that the organization structures of your family business are not effective?

Is your family business in need of change - does it need to be re-energized? Does it have trouble taking advantage of new business opportunities? Has it grown reliant on its founder's way of managing the business and remains

unprepared for new leadership and new ideas? Have most improvement programs ended up wasting time, money, and

management's credibility? The tricks and methodologies that used to work don't. Managers and employees fail to understand the strategic direction of the business -

and their role in pursuing it. Processing an order is seldom routine because there is a lack of coordination

between different departments Employee productivity is poor. Employee motivation is poor. Employees have poor attitudes - after all, it's just a job. Performance standards and expectations are seldom achieved. Few people strive to improve the organization. Most just don't care. Being at work is never fun - always stressful. Some departments operate like political fiefdoms. Customers are complaining about service and quality. Competition is taking more and more business from you. Managers do not plan - they just move from one crisis to another. Change in your family business moves glacially.

It doesn't have to be that way!

If you have concerns about the organization structures of your family business, contact us. We can help!

Very often the first step in getting the business better organized involves getting the family better organized. That is our business!

We would like to present five of the traditional organization structures. Each has some specific advantages and each has some disadvantages. But regardless of what organization structures you use, remember, to work well, they must be well organized.

To select the best organization structures, first consider your firm's strategic intent, then adapt the organization structure that best supports that intent.

Of course, it rarely happens that a family business adopts any one of these organization structures exactly. The reality is that form changes and adapts over time as strategies change and reporting needs change. Growth in the structure can happen vertically [adding additional reporting levels in the organization] or horizontally [adding new functional or divisional responsibilities].

Organizations with relatively few reporting levels are known as flat organization structures and usually have decentralized control, while those with many levels are known as tall organization structures and usually have more centralized control.

Five Formal Organization Structures

Functional Organization

Description

small size,  single-product line undifferentiated market scale or expertise within the function long product development and life cycles common standards hybrids in large organizations may follow structure by division or business unit

Strategic Advantages

Centralized control of strategic results Very well suited for structuring a single business Structure is linked tightly to strategy by designating key activities as functional

departments Promotes in-depth functional expertise Well suited to developing functional skills and functional based competencies Conducive to exploiting learning/experience curve effects associated with functional

specialization Enhances operating efficiency where tasks are routine and repetitive

Strategic Disadvantages

Excessive fragmentation of strategy-critical processes Can lead to inter-functional rivalry and conflict, rather than team-play Multi-layered management bureaucracies and centralized decision-making slow

response time Hinders development of managers with cross-functional experience because the ladder

of advancement is up the ranks within the same functional area Forces  profit responsibility to the top Functional specialists often attach more importance to what's best for the functional area

than to what's best for the whole business - can lead to functional empire-building Functional myopia often inhibits creative entrepreneurship, adapting to change, and

attempts to create cross-functional core competencies

Geographical Structures

Description

low value-to-transport cost ratio service delivery on-site closeness to customer for delivery or support perception of the organization as local geographical market segments needed

Strategic Advantages

Allows tailoring of strategy to needs of each geographical market Delegates profit/loss responsibility to lowest strategic level Improves  functional coordination within target market Takes advantage of economies of local operations Area units make an excellent training ground for higher-level general managers

Strategic Disadvantages

Poses a problem of how much geographic uniformity headquarters should impose versus how much geographic diversity should be allowed

Greater difficulty in maintaining consistent company image/reputation from area to area when area mangers exercise strategic freedom

Adds another layer of management to run geographic units Can result in duplication of staff services at headquarters and district levels, creating

cost disadvantages

Decentralized Line of Business  [Product or Service]

Description

product focused multiple products for separate customers short product development and life cycle minimum efficient scale in functions or outsourcing

Strategic Advantages

Offers a logical and workablemeans of decentralizing responsibility and delegating authority in diversifiedorganizations

Puts responsibility for business strategy in closer proximity to each business' unique environment

Allows each business unit toorganize around its own value chain system, key activities, and functional requirements

Frees CEO to handle corporate strategy issues Puts clear profit/loss accountability on shoulders of business-unit managers

Strategic Disadvantages

May lead to costly duplication of staff functions at corporate and business-unit levels, thus raising administrative overhead costs

Poses a problem of what decisions to centralize and what decisions to decentralize [business  mangers need enough authority to get the  job done, but not so much that corporate management loses control of key business-level decisions].

Business/division  autonomy  works against achieving coordination of related activities in different business units, thus blocking to some extent the capture of strategic-fit benefits

Corporate management becomes heavily dependent on business unit managers Corporate managers can lost touch with business-unit situations, end up surprised when

problems arise, and not know much about how to fix such problems

Strategic Business Unit Structure

Description

important market segments product or service unique to segment buyer strength customer knowledge advantage rapid customer service and product cycles minimum efficient scales in functions or outsourcing

Strategic Advantages

Provides a strategically relevant way to organize the business-unit portfolio of a broadly diversified company

Facilitates the coordination of related activities with a SBU, thus helping to capture the benefits of strategic fits in the SBU

Promotes more cohesiveness among the new initiatives of separate but related  businesses

Allows strategic planning to be done at the most relevant level within the total enterprise Makes the task of strategic review by top executives  more objective and more effective Helps allocate corporate resources to areas with greatest growth opportunities

Strategic Disadvantages

It is easy for the definition and grouping of businesses into SBUs to be so arbitrary that the SBU serves no other purpose than administrative convenience. If the criteria for defining SBUs are rationalizations and have little to do with the nitty-gritty of strategy coordination, then the groupings lose real strategic significance

The SBUs can still be myopic in charting their future direction Adds another layer to top management The roles and authority of the CEO, the group vice president, and the business-unit

manager have to be carefully worked out or the group vice president gets trapped in the middle with ill-defined authority

Unless the SBU head is strong willed, very little strategy coordination is likely to occur across businessunits in the SBU

Performance recognition gets blurred, credit for successful business units tends to go to  corporate CEO, then to business unit head, last to group vice president

Matrix Structure

Description

alternative to the functional structure potential for new processes and radical change to processes reduced working capital need for reducing process cycle times

Strategic Advantages

Gives formal attention to each dimension of strategic priority Creates checks and balances among competing viewpoints Facilitates capture of functionally based strategic  fits in diversified companies Promotes making trade-off decisions based  on "what's best for the organization as a

whole". Encourages cooperation, consensus-building,conflict resolution and coordination of

related activities

Strategic Disadvantages

Very complex to manage Hard to maintain "balance" between the two lines of authority So much shared authority can result in transactions logjam and disproportionate

amounts of time being spent on communications It is hard to  move quickly and decisively without getting clearance from many other

people Promotes  an organizational bureaucracy and hamstrings creative entrepreneurship

An organization structure is the way inwhich the tasks and subtasks required to implement a strategy are arranged. The diagrammatical representation of structure could be an organization chart but a chart shows only the 'skeleton'. The 'flesh and blood' that brings to life an organization is the several mechanisms that support the structure. All these cannot be depicted on a chart. But a strategist has to grapple with the complexities of creating the structure, making it work, redesigning when required, and implementing changes that will keep the structure relevant to the needs of the strategies that have to be implemented. Successful strategy formulation does not guarantee successful strategy implementation. Varies among different types & sizes of organizations Organization Structure

Organizational structure & the controls that are a part of it affect firm's performance. When the firm's strategy is not matched with the most appropriate structure & controls, performance declines. Specifies the firm's formal reporting relationships, procedures, controls & authority, and decision-making process. Influences how managers work & the decisions resulting from that work. Specifies the work to be done & how to do it given the firm's strategy or strategies. Provides the stability a firm needs to successfully implement its strategies & maintain it's competitive advantages.

Structural Stability: Provides the capacity the firm requires to consistently and Predictably manage its daily work routines. Structural Flexibility: Provides the opportunity to explore competitive possibilities & allocate resources to activities that will shape the competitive advantages of the firm that it will need to be successful in the future.

Structure & Strategy o Structure dictates how objectives & policies will be established. o Structure dictates how resources will be allocated. Matching Structure w/ Strategy Changes in strategy = Changes in structure Basic Forms of Structure

Mainly categorized in five types: 1. Entrepreneurial Structure 2. Functional Structure 3. Divisional Structure 4. Strategic Business Unit Structure (SBU) 5. Matrix Structure

1. Entrepreneurial Structure

The most elementary form of structure and is appropriate for an organization that is owned and managed by one person. A small-scale industrial unit, a small proprietary concern, or a mini-service outlet may exhibit the characteristics of organizations, which are based on an entrepreneurial structure.

Advantages of Entrepreneurial Structure o Quick decision-making, as power is centralized. o Timely response to environmental changes

Disadvantages of Entrepreneurial Structure o Excessive reliance on the owner-manager and so proves to be demanding for the owner-manager o May divert the attention of owner-manager to day-to-day operational matters and ignore strategic decision o Increasingly inadequate for future requirements if volume of business expands

2. Functional Structure

As the volume of business expands, the entrepreneurial structure outlives its usefulness. The need arises for specialized skills and delegation of authority to managers who can look after different functional areas. The functional structure seeks to distribute decision-making and operational authority along functional lines. Most widely used as simple and least expensive.

Advantages of functional structure

o Efficient distribution of work through specialization.

o Delegation of day-to-day operational functions

o Providing time for the top management to focus on strategic decisions

Disadvantages of functional structure

o Creates difficulty in coordination among different functional areas

o Creates specialists, which results in narrow specialization, often at the cost of the overall benefit of the organization

o Leads to functional, and line and staff conflicts

o Minimizes career development opportunities

o Poor delegation of authority, inadequate planning for products and markets

3. Divisional Structure

The structural needs of expansion and growth are satisfied by the functional structure but only up to a limit. There comes a time in the life of organizations when growth and increasing complexity in term of geographic expansion, market segmentation and diversification make the functional structure in adequate. Second most common type of structure can be organized by:

- Geographic area

- Product or service

- Customer

- Process

o Advantages

- Clear accountability

- Higher employee morale

- Creates career development opportunities for managers

- Allows local control of situations

- Leads to a competitive climate within an organization

- Allows new businesses and products to be added easily

o Disadvantages

- Can be costly to set up

- Each division requires functional specialists

- Duplication of staff services, facilities, and personnel

- Managers must be well qualified

- Requires an elaborate, headquarters-driven control system

- Competition between divisions may become so intense that it is dysfunctional

4. The Strategic Business Unit (SBU)

Any part of a business organization, which is treated separately for strategic management purposes. When organizations face difficulty in managing divisional operations due to an increasing diversity, size, and number of divisions, it becomes difficult for the top management to exercise strategic control. Here, the concept of an SBU is helpful in creating an SBU-organizational structure. In multidivisional organizations, an SBU structure can greatly facilitate strategy-implementation efforts.

Advantages of Strategic Business Unit (SBU)

º Establishes coordination between divisions having common strategic interests.

º Facilitates strategic management and control of large, diverse organizations.

º Fixes accountability at the level of distinct business units.

Disadvantages of Strategic Business Unit (SBU)

º There are too many different SBUs to handle effectively in a large, diverse organisation.

º Difficulty in assigning responsibility and defining autonomy for SBU heads.

º Addition of another layer of management between corporate and divisional management.

5. The Matrix Structure

Most complex of all designs - requires both vertical and horizontal flows of authority and communication. In large organization, there is often a need to work on major products or project each of which is strategically significant.

Advantages of The Matrix Structure

- Project objectives are clear

- Many channels of communication

- Workers can see visible results of their work

- Shutting down a project can be accomplished relatively easily

- Facilitates the use of specialized personnel, equipment, and facilities

Disadvantages of The Matrix Structure

- Can result in higher overhead

- Dual lines of budget authority

- Dual sources of reward and punishment

- Shared authority

- Dual reporting channels

- Need for an extensive and effective communication system

º All the structure has their own advantages and disadvantages.

º It is task of strategists to choose the type of structure that would suite their strategies best.

º We usually conceive of organization structure as a chart consisting of boxes in which the names of position or designations of personnel (and sometimes the name of the person occupying the position) are written in a hierarchical order along with the depiction of the relationship that exists between various positions. To a strategist, an organization structure is not only a chart but much more.

Rural Labor Enquiry, A Report on wages & earnings of Rural Labor Household, 38th round National sample survey, Labor bureau, Ministry of Labor, Government of India, Shimla Chandigarh

H. L Kumar, Labor Laws, Universal Law Publishing Co. Pvt. Ltd., G.T. Karnal Road, Delhi-110033

K. Aswathappa, Business Environment, Himalaya Publishing House "Ramdoot" Dr. Bhalerao Marg, Girgaon, Bombay-400004

C.R. Kothari, Research Methodology, New Age International (P) Ltd. Publishers, Ansari Road, Daryaganj, New Delhi-110002

Dr. M.M.Varma & R.K. Agrawal, Mercantile and Industrial Law, King Book Publishers, 1684, Nai Sarak Delhi-110006

S. C. Shrivastava, Industrial Relations and Labor Laws, Vikas Publishing House, 576, Masjid Road Jangpura, New Delhi-110014

Mamoria, C.B. (1999): 'Personnel Management' Himalaya Publication, New Delhi. Kothari, C.R. (2000): 'Research Methodology' Vishwa Prakashan, New Delhi. Aswathapa K. (1997) Human Resource and Personnel Management, Tata McGraw Hill, New Delhi. V. S. P. Rao (2005) Human Resource Management, Excel Books , New Delhi Bhatia: Compensation management.

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MLA Style Citation: Iqbal, Naila "Effective Organization Structure Acts As Life Blood of Business." Effective Organization Structure Acts As Life Blood of Business. 23 Jun. 2008 EzineArticles.com. 1 Aug. 2010 <http://ezinearticles.com/?Effective-Organization--

Structure-Acts-As-Life-Blood-of-Business&id=1269812>.

APA Style Citation: Iqbal, N. (2008, June 23). Effective Organization Structure Acts As Life Blood of Business. Retrieved August 1, 2010, from http://ezinearticles.com/?Effective-Organization--

Structure-Acts-As-Life-Blood-of-Business&id=1269812

Chicago Style Citation: Iqbal, Naila "Effective Organization Structure Acts As Life Blood of Business." Effective Organization Structure Acts As Life Blood of Business EzineArticles.com. http://ezinearticles.com/?Effective-Organization-Structure-Acts--

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