Organizational Structures
3.0 INTRODUCTION
technology, and a requirement for better control of resources for multiproduct firms. More than thirty years ago, Wallace identified four major factors that caused the onset of the organizational revolution1:
● The technology revolution (complexity and variety of products, new materials and processes, and the effects of massive research)
● Competition and the profit squeeze (saturated markets, inflation of wage and material costs, and production efficiency)
● The high cost of marketing
● The unpredictability of consumer demands (due to high income, wide range of choices available, and shifting tastes)
Much has been written about how to identify and interpret those signs that indicate that a new organi- zational form may be necessary. According to Grinnell and Apple, there are five general indications that the traditional structure may not be adequate for managing projects2:
● Management is satisfied with its technical skills, but projects are not meeting time, cost, and other project requirements.
● There is a high commitment to getting project work done, but great fluctuations in how well per- formance specifications are met.
● Highly talented specialists involved in the project feel exploited and misused.
● Particular technical groups or individuals constantly blame each other for failure to meet specifi- cations or delivery dates.
● Projects are on time and to specifications, but groups and individuals aren’t satisfied with the achievement.
Unfortunately, many companies do not realize the necessity for organizational change until it is too late. Management looks externally (i.e., to the environment) rather than internally for solutions to problems.
A typical example would be that new product costs are rising while the product life cycle may be decreas- ing. Should emphasis be placed on lowering costs or developing new products?
If we assume that an organizational system is composed of both human and nonhuman resources, then we must analyze the sociotechnical subsystem whenever organizational changes are being considered. The social system is represented by the organization’s personnel and their group behavior. The technical sys- tem includes the technology, materials, and machines necessary to perform the required tasks.
Behavioralists contend that there is no one best structure to meet the challenges of tomorrow’s orga- nizations. The structure used, however, must be one that optimizes company performance by achieving a balance between the social and the technical requirements. According to Sadler3:
Since the relative influence of these (sociotechnical) factors change from situation to situation, there can be no such thing as an ideal structure making for effectiveness in organizations of all kinds, or even appropriate to a single type of organization at different stages in its development.
88 ORGANIZATIONAL STRUCTURES
1. W. L. Wallace, “The Winchester-Western Division Concept of Product Planning” (New Haven: Olin Mathieson Corporation, January 1963), pp. 2–3.
2. S. K. Grinnell and H. P. Apple, “When Two Bosses Are Better Than One,”Machine Design,January 1975, pp. 84–87.
3. Philip Sadler, “Designing an Organizational Structure,”Management International Review,Vol. 11, No. 6, 1971, pp. 19–33.
There are often real and important conflicts between the type of organizational structure called for if the tasks are to be achieved with minimum cost, and the structure that will be required if human beings are to have their needs satisfied. Considerable management judgment is called for when decisions are made as to the allocation of work activities to individuals and groups. High standardization of performance, high manpower utilization and other economic advantages associated with a high level of specialization and routinization of work have to be balanced against the possible effects of extreme specialization in lowering employee attitudes and motivation.
Organizations can be defined as groups of people who must coordinate their activities in order to meet organizational objectives. The coordination function requires strong communications and a clear under- standing of the relationships and interdependencies among people. Organizational structures are dictated by such factors as technology and its rate of change, complexity, resource availability, products and/or ser- vices, competition, and decision-making requirements. The reader must keep in mind that there is no such thing as a good or bad organizational structure; there are only appropriate or inappropriate ones.
Even the simplest type of organizational change can induce major conflicts. The creation of a new posi- tion, the need for better planning, the lengthening or shortening of the span of control, the need for additional technology (knowledge), and centralization or decentralization can result in major changes in the sociotechni- cal subsystem. Argyris has defined five conditions that form the basis for organizational change requirements4:
These requirements . . . depend upon (1) continuous and open access between individuals and groups, (2) free, reliable communication, where (3) independence is the foundation for individual and departmental cohesiveness and (4) trust, risk-taking and helping each other is prevalent so that (5) conflict is identified and managed in such a way that the destructive win-lose stances with their accompanying polarization of views are minimized. . . . Unfortunately these conditions are difficult to create. . . . There is a tendency toward con- formity, mistrust and lack of risk-taking among the peers that results in focusing upon individual survival, re- quiring the seeking out of the scarce rewards, identifying one’s self with a successful venture (be a hero) and being careful to avoid being blamed for or identified with a failure, thereby becoming a “bum.” All these adaptive behaviors tend to induce low interpersonal competence and can lead the organization, over the long- run, to become rigid, sticky, and less innovative, resulting in less than effective decisions with even less in- ternal commitment to the decision on the part of those involved.
Organizational restructuring is a compromise between the traditional (classical) and the behavioral schools of thought; management must consider the needs of individuals as well as the needs of the com- pany. Is the organization structured to manage people or to manage work?
There is a wide variety of organizational forms for restructuring management. The exact method de- pends on the people in the organization, the company’s product lines, and management’s philosophy. A poorly restructured organization can sever communication channels that may have taken months or years to cultivate; cause a restructuring of the informal organization, thus creating new power, status, and polit- ical positions; and eliminate job satisfaction and motivational factors to such a degree that complete dis- content results.
Sadler defines three tasks that must be considered because of the varied nature of organizations: control, integration, and external relationships.5If the company’s position is very sensitive to the environment, then management may be most concerned with the control task. For an organization with multiple products, each requiring a high degree of engineering and technology, the integration task can become primary. Finally, for
Introduction 89
4. Chris Argyris, “Today’s Problems with Tomorrow’s Organizations,”The Journal of Management Studies,February 1967, pp.
31–55.
5. See note 3.
situations with strong labor unions and repetitive tasks, external relations can predominate, especially in strong technological and scientific environments where strict government regulations must be adhered to.
In the sections that follow, a variety of organizational forms will be presented. Obviously, it is an im- possible task to describe all possible organizational structures. Each form describes how the project man- agement organization evolved from the classical theories of management. Advantages and disadvantages are listed for technology and social systems. Sadler has prepared a six-question checklist that explores a company’s tasks, social climate, and relationship to the environment.6
● To what extent does the task of organization call for close control if it is to be performed effi- ciently?
● What are the needs and attitudes of the people performing the tasks? What are the likely effects of control mechanisms on their motivation and performance?
● What are the natural social groupings with which people identify themselves? To what extent are satisfying social relationships important in relation to motivation and performance?
● What aspect of the organization’s activities needs to be closely integrated if the overall task is to be achieved?
● What organizational measures can be developed that will provide an appropriate measure of con- trol and integration of work activities, while at the same time meeting the needs of people and pro- viding adequate motivation?
● What environmental changes are likely to affect the future trend of company operations? What or- ganizational measures can be taken to insure that the enterprise responds to these effectively?
The answers to these questions are not easy. For the most part, they are a matter of the judgment exercised by organizational and behavioral managers.