The figure shows the organizational structure of the Daimler Benz AG until 1987.

The Daimler Benz AG was structured centralistically, which guaranteed a consistent

business policy and an efficient usage of resources (Fiedler 2007). The strict

structuring of management functions, business divisions and departments and the

resulting high division of labour turned out to be disadvantageous. The results were

considerable coordination efforts, especially when complex operations that included

several departments or divisions, were concerned. Therefore, the flexibility

demanded by the market – a consequence of increasing diversification and

expanding foreign trade – led to further development of structural organization.

Disadvanteges:

• centralistic management structure; Inflexibility

• Overhead caused by too many management levels

• project organization only in line-organization

• No regional differentiation

• Not process-oriented

Theory of administration (H. Fayol)

Fayol being one of the founders of Management theory emphasizes, contrary to the technocratic approach, the role of the manager and identifies certain functions of a manager. Fayol recognized the common aspects of management independent of a specific organization and deduced the necessity of a management theory.

According to Fayol there are five primary functions of management: (1) planning, (2) organizing, (3) commanding, (4) coordinating, and (5) controlling.

Scientific Management (F.W. Taylor):

Scientific management, also called Taylorism is a method in management theory that determines changes to improve labor productivity. The idea was first coined by Frederick Winslow Taylor. Taylor believed that decisions based upon tradition and rules of thumb should be replaced by precise procedures developed after careful study of an individual at work.

The four main principles of Scientific Management are:

1) division of work and controlling between workers and administrators

2) work should be based on precise instructions given by management (one-best-way-principle).

3) the first principle can only be achieved by a high division of labor since only small work processes can be analyzed and described in detail

4) wage incentives for increased output

Socio-technical Systems Approach

A socio-technical System, in sense of the work system known from the first lecture, consists of two subsystems: technical subsystem (machines of a production line), social subsystem (e.g. workers operating the technical subsystem). These subsystems cannot be divided since there are numerous interrelations.

Organizational Learning

The adaptation of organizations to their changing surroundings meets numerous barriers. These „learning deficits“ of organizations occur at different levels of an organization. On one hand they result from individual deficits on the level of organizational members (e.g. insufficient vision or insufficient acknowledgement of own weaknesses). On the other hand they result from deficits of the organization which determines the actions of its members. To overcome these barriers the development of a learning organization is required.

The term organization is used in a configurative, functional and an institutional

sense (Schreyögg 1999). According to the configurative view, a company has an

organization. According to the functional view, a company is organized. And

according to the institutional view, a company is an organization (Gomez,

Zimmermann 1999).

Organization in the configurative sense is the long term structuring and regulation of

work processes (Kosiol 1976). The functional and configurative views on

organization are closely related and can be summarized as instrumental

organization. Both approaches follow the aim of rationalizing work processes

through organizational rules (Schreyögg 1999). While the functional view

emphasizes on the management function of organizing and short term disposition,

the configurative view focuses on long term organizational structures.

Organizing in a functional sense is considered as a function of management and is

one of several leadership tasks which are supposed to ensure the achievement of a

company‘s goals (Schreyögg 2003). In classical management theory the term

organization is often used in a functional sense. According to Henry Fayol‘s

management approach, organizing is, along with administration, planning,

commanding, coordinating and controlling one of the central management tasks.

The institutional approach regards the complete socio-technical system. This

approach includes an instrumental view on the organization but also considers

informal aspects of the organization.

The figure shows the divisions of a manufacturing company.

Starting with the purchase of raw materials, components etc. on the relevant

procurement markets the value adding process is shown as a process chain.

The sales division represents the interface to the company‘s surrounding on the

output side, in this case the sales markets.

Arranged around the central value-adding processes the supporting areas of the

companies are shown.

The increasing globalization and consequent global competition supports value-

added networks. The macro level describes the organization of an entire enterprise

and/ or plant. Furthermore such a company can be part of an inter-organizational

network. This is summarized by the term operational organization or network-

organization (7th level). The enterprise level (6th level) includes legally separate

companies, possibly running in multiple locations in Germany, Europe and the

world. Each of these plants (5th level) incorporate organizational structures, which

are clearly defined (4th level) as work team (3th level), work place (2nd level), and job/

function (1st level).

On the departmental and group level (meso-level) work organization take place in a

broader sense, i.e. the actions of individual coworkers are coordinated.

On the micro-level a narrower definition of work organization exists since partial

actions of an individual are coordinated here for the completion of the work task.

Example:

The VIA-Network (Network of innovative automotive suppliers) is a cooperation

between companies that mainly supply metal structures for the automotive industry

and in some cases jointly produce and offer their products (7th level). Each network

partner is a legally independent company (6th level) with partly several plants in

Germany and Europe (Plant level). Each plant has its own organizational structure

on the level of divisions, work teams, work places and the respective tasks.

Industrial organization describes permanent regulations for an operational macro

structure. The task areas of the operatives are hereby defined in order to ensure

optimal task completion. Industrial organization show four factors:

• Goal orientation: the organization serves as an instrument for the attainment of

its immanent goals,

• Coordination: the organization consists of elements whose relations it

regulates,

• Continuity: the organization of a business consists for a certain period of time,

• Division of labor: exists between the organizational elements (organizational

units) that serve for goal achievement.

Various factors have direct and indirect influences on industrial organization:

Factors influencing production

• Type of products or services

• Quantity of items to be produced, including arising fluctuations in output

• Variety including arising fluctuations

• Product, production and other technologies

Factors influencing business management

• Business goals

• Goals of organizational representation of interests

Factors influencing economics

• Legal obligations and normative guidelines

• Wage agreements

• Conditions of the labor market

Human influencing factors

• Attitudes and expectations of humans with regards to work

Organizational structure, as an aspect of industrial organization, describes the

structuring of a business into a system of labor-divided organizational units.

This structure also displays the relationships of these organizational units to each

other. Position hierarchy, responsibility for tasks, as well as the authority to give

instructions and make decisions are hereby organized and arranged according to

the criteria function (e.g. purchasing, production, sales) or object (customers,

regional sales departments, materials, etc.).

The position is the smallest indivisible unit in the organization and contains tasks

that a single person can carry out on his own. Several work places are combined

into departments that must contain at least one management and one executive

position.

„In the monolithic line organization each position and each organizational unit have

one superior line office each. The employees receive orders and tasks only from

their direct superior. Apart from the specification of work tasks regulations

concerning forms of cooperation, collaboration as well as flows of information and

orders must be defined.“

(Luczak 1998)

„In the heterarchical line organization each employee has a different superior for

each area of his/ her work who is specialized in this area. This leads to multiple

assignments of each employee. The authority of each superior must be clearly

defined. Each superior must keep to the limits of his/ her authority to avoid

ambiguous responsibilities and conflicts.“

(Luczak 1998)

„The staff-line-organization is an expansion of the monolithic and heterarchical line

organization. Staffs are appointed to the line offices to support these by preparing

decisions (e.g. by collecting or processing information). Staffs do not have any

authority of decision or direction concerning positions of the line organization.

However, they can be part of a hierarchical staff-organization themselves (Schanz

1994). The static structure of the monolithic or the heterarchical line organization

can achieve a higher flexibility by implementing staffs. Since the staffs provide

professional support the line offices are relieved. Thus, additional capacity is

available at these positions and can be used for other tasks (e.g. strategic

planning)“ (Luczak 1998).

In many businesses there is currently a transition from function oriented to object

oriented industrial organization. Objects can thereby be products (e.g. metal

products, plastic products), services (e.g. A: corporate credits; B: personal loans; C:

mortgages), customer segments (A-customer: Turnover 10 million; B-customer: 5-9

million; C-customer: <5 million), geographic regions (A: north distribution; B: middle

distribution; C: south distribution), etc. The reason for this is the increasing pressure

of competition that no longer permits too large interface losses as a disadvantage.

The matrix organization is a special form of the heterarchical line organization. It

combines two principles of allocation of organizational units (function and object).

Typically a functionally oriented basic structure is overlapped by a further structure

which is arranged according to objects (e.g. products or projects). In the schematic

illustration this leads to a matrix. The result is a heterarchical line organization since

the units receive instructions from both, the functional managers and the object

managers.

Concerning the division of authority the following principle applies: The heads of the

functional departments are responsible for the tasks of their specialized

departments while the object managers are responsible for the horizontal integration

and the achievement of overall goals across all functions as a continuous process.

If the second level is structured according to more than two dimensions the resulting

organization is called tensor organization (Schreyögg 1998).

Process Organization means that a company is structured according to business

processes. This means that all activities are connected by a continuous flow of

goods/ services. Two different types of processes, direct value creating core

processes and indirect supporting processes, are distinguished.

The processes are assigned to a process coordinator who is responsible for the

process results and coordinates results within and across processes. The main

advantages of this type of organization result from the concentration on value

creating activities and the cross-functional character. Disadvantages may result

from the loss of efficiency of labor division due to ack of concentration on functions.

Product-oriented organizations structure their organizational units into product-

related sections. All activities belonging to the same product group are handled as

independent business area.

Accordingly, market-oriented organizations structure their units according to market

segments.

The allocation of authority to the divisions in object oriented organizations can be

carried out according to different basic principles.

A Cost-Center management has no influence on type, volume and price of the

required output. There are certain requirements which must be fulfilled with the least

possible expenditure.

Revenue-Centers are evaluated according to the achieved revenue and therefore

are responsible for the optimization of their volume of sales. Usually revenue-

centers are sales departments that do not have any influence on production costs.

In a Profit-Center the management of the division is responsible for costs and

revenue. Since there are certain requirements due to the company’s strategy, the

scope of decision mainly refers to the production volume and the sales prices.

In an Investment-Center the scope of decision is expanded to the capital

expenditure. In this case the division management can make decisions concerning

investments.

Differentiation between forms of project organization:

The illustration schematically shows the extent of directive and decisional authority

of the project manager in the different forms of project organization. In the pure

project organization, where a certain informal influence by the neighbor areas

exists, as well as in the project management in the line, the authority is clearly

divided.

In the influence project organization the project manager only has coordinating

influence on the units of the line.

In the order project organization there is a certain “balance of power“ due to the

clear cut customer-supplier-relationship.

Only in the weak and the strong matrix project organization there is a broad area of

conflict, either with focus on the line or the project.

(Burghardt 2002)

Influence Project Organization

In the influence project organization there is no actual project manager. Instead

there is a project coordinator with hardly any authority who can only act as a

coordinator. He mainly fulfills an information function for the line authorities. The

decisions are made in the line, meaning that the coordinator can not be made

responsible for success or failure of a project.

(Burghardt 2002)

Advantages

• Separate departments can be lead to systematic cooperation

• Only slight change of existing organization is necessary

Disadvantages

• Project Coordinator has hardly any authority

• No personified responsibility

• High effort for coordination

Matrix Project Organization

In matrix project organization the project manager carries the sole responsibility for

the project but does not have the complete authority over the project employees.

The matrix project organization has a two-dimensional structure of authority and

thus takes a position halfway between project and line as far as the division of

authority is concerned.

The project employees come from different organizational units and are temporarily

integrated in a project team. They are subjected to the professional authority of the

project manager. The disciplinary authority however lies with the line authorities.

(Burghardt 2002)

Advantages

• Quick integration of interdisciplinary groups

• No problems of posting employees at project start or project end

• Support of synergy effects

Disadvantages

• Project staff are subordinate to two managers

• High danger of conflict between project and line

Order Project Organization

This form of organization is matrix oriented. However, there are no double-

subordinations of project members. Project manager and project employees are not

integrated into the line organization but form an organizational unit on their own

called “project management“. The project management carries the complete

responsibility for the project. It is a customer of the development and manufacturing

areas as well as supplier for the sales department.

(Burghardt 2002)

Advantages

• Clear division of authority between project and line

• Easy integration of sub contractor (company internal or external)

• High flexibility in multi projects

Disadvantages

• Necessity of a separate organizational unit

• Competitiveness between departments

• Danger of exaggerated bureaucracy in project management

Pure Project Organization:

In the pure project organization the project staff is integrated in a project team with

one project manager as a subordinate. The project manager has the complete

directive and decisional authority and carries the sole responsibility for the project.

Only for the recruiting of personnel for the project and the re-posting of personnel at

project end the project manager must rely on the line authorities.

(Burghardt 2002)

Advantages

• The project manager has professional and disciplinary authority during the

project

• Short distances of communication and efficient overhead

• Optimal project goal orientation

Disadvantages

• Danger of establishment of the project group after the project

• Problems of posting employees after project end

• Danger of parallel developments in project and line organization

The large number of possible values in terms of project organization require an

individual selection of the most appropriate form for the enterprise concerned. In this

respect, business organization as well as corporate strategy are of great

importance.

Having selected the form of organization, strengths should be used and potential of

conflicts should be prevented. This for example can be realized by setting up rules

for the utilization of short resources.

An organization chart (also organigram) illustrates the summarization of positions to departments and the institutionalization of tasks. The individual positions are differentiated systematically through job descriptions and in a written form within the depicted organizational units.

A job description is a description of the goals, tasks, authority and relations to organizational units of a position in a written form, independent from a specific person.

The range of control specifies the number of employees directly subordinate to a

management position. It indicates the number of employees that hierarchically

belongs to a certain person or organizational unit.

The process organization regulates the spatial and temporal collaboration of

employees, equipment and work objects as well as the input of the work system in

order to carry out work tasks according to the organizational target system. Process

organization is generic and therefore present in every organization.

For example in industrial manufacturing the object oriented classification is carried

out according to:

• Location of processing

• Specification of resources/ tools

• Structures of production processes

• Temporal linking

• Technical linking

A detailed description of the classification criteria in relation with the dimensions of

task analysis is to be found in lecture unit 3.

Lecture unit 4 includes different methods of modeling and optimization of process

organization.

The four illustrated fundamental flow-charts of process modeling are independent

from the level of abstraction the description is based on. It results that both the

business processes at the macro-level of companies or company-networks and the

work processes at the micro-level of individual work stations can be modeled. This

aspect will be covered in detail in unit 4.

These four fundamental flow principles can therefore be described as „procedural

atoms“ of structural organization. They may be used to synthesize process

organization of any complexibility in a company.

Example of task/job oriented principle of manufacturing design: Job Shop/Workshop

Production

• Arrangement of machines according to processing functions,

• Therefore high flexibility concerning heterogeneous scope of orders

• Flexible re-integration of faulty work objects in case of quality problems

• Disadvantageous material flow, backflow of objects to previous work stations

• Possible irregular utilization of capacity and long waiting times depending on

the types and scope of orders

Example of Object Oriented Work Floor Layout: Serial Production (without imposed

cycle times)

A workpiece is transferred from one processing station to another for complete

processing. In this case the processing stations are based on the characteristic that

they work on the same or similar objects. According to the flow principle, only

identical work process sequences are permitted. Ongoing work progress takes

place without time constraint; the work flow is not timed.

Example of Object Principle: Serial production (un-timed)

The term transfer line is used if the individual processing stations are linked to a

total system. Assembly line work, however, is used to refer to a linking of individual

processing stations through automatic handling devices. In both cases the work

pieces are sent for processing completion from one processing station to another.

These work stations share the characteristic of dealing with similar or identical

objects. Just as in the case of serial production, only identical work process

operation sequences are permitted (flow principle); however, work progress is

timed.

With the concept of „One-Piece-Flow“ the work objects are directly transferred from

one work station to the next without being bundled. Thus, it is possible to eliminate

waiting times of work objects before the work stations. The aim is a material flow

consisting of single work objects. In the ideal case the batch size of 1 is achieved.

One-Piece-Flow supports the Pull-Principle and Just-In-Time-Production. It enables

minimum lead-times and maximum flexibility.

The concept is based on the principle that a work object travels over several work

stations that are arranged according to a U-shaped layout.

The work process that has to be carried out is structured into work contents, which

are to be executed by two workers at separated labour stations.

In the left working system one worker is running all the stations. The workers W1

and W2 will carry out all work contents sequentially and time-displaced. If any

stations execute the work process automatically assuming that only the insertion,

the removal and the starting of the process has to be done by an employee, the

process-time tv per station has to be separeted into personnel-time tp per station

and maschine-time tm. In the right work system one worker is only running a subset

of all work stations belonging to the system. After finishing, worker W1 hands over

the objects produced at stations 1 to 3 at woker W2 and takes them back at station

6. This is also made clear by the simplified gantt-chart.