Contemporary Organizational Designs

Department of Business Management

Introduction Organization Organization is two or more people who work together to achieve organizational goals goals and object objectiv ives es effici efficient ently ly and effect effective ively. ly. Also Also it can ident identif ify y as NonNonrandom arrangement of components of components or parts interconnected in a manner as to consti constitut tute e a system iden identi tifi fiab able le as a unit. unit. In an orga organi niza zati tion on,, they they us use e organ organiz izati ationa onall struct structure ures s for their their works works.. We can identi identify fy there there are three three trad tradit itio iona nall

orga organi niza zati tion onal al

desi design gn

such su ch

as

simp simple le,,

func functi tion onal al,,

divi divisi sion onal al..

Organizations face more strength and weakness in these structures. Nowadays they try to ignore that weakness and develop these organizational designs as Team structure, Matrix structure, Project structure, Boundaryless structure and Learning structure. Using those contemporary organizational designs organizations gain there are many many advant advantage ages. s. Emplo Employee yees s are more more invol involved ved and empow empowere ered, d, Reduce Reduce barriers among functional areas, fluid and flexible design that can respond to environmental changes, faster decision making, highly flexible and responsive, draws on talent wherever it’s found, organization can cope with environmental chan change ges s and and empl employ oyee ees s feel feel free free to make make deci decisi sion ons s are are adva advant ntag ages es.. So, So, contemporary organizational designs are better than traditional organizational structures to the organizations. organizations.

Sabaragamuwa University of Sri Lanka

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Would

you

like

to

know

about

Organizational

Structures

&

Furthermore? “Org “Organ aniz izat atio iona nall stru struct ctur ure e is the the form formal al fram framew ewor ork k by whic which h job job task tasks s are are divided, grouped, and coordinated”. When managers develop or change and organization’s structure, they are engaged in organizational design, a process that involves decisions about six key elements: Stephen P.Robbins & Mary Coulter 

Work Specialization



Departmentalization



Chain of Command



Span of Control



Centralization Centralization and Decentralization Decentralization



Formalization

In makin making g organi organizat zatio ional nal desig design n decisi decisions ons,, manag managers ers have have some some commo common n structural designs from which to choose. Most commonly we consider about two organ organiz izati ationa onall design designs. s. They They are: are: Tradi Traditio tional nal organ organiza izatio tional nal struct structure ure,, and Contemporary Contemporary organizational organizational structure.

When we consider the traditional organizational design, especially there are three major types of structures. They are can be listed out: •

Simple structure

•

Functional structure

•

Divisional structure

Disadvantages •

Lack of flexibility flexibility to changing mission needs/rapidly changing world

•

Internal

and

external

communicati ation

barriers

(ideas

are

not

communicated) •

Slow/Poor in responding to customer requirements requirements Sabaragamuwa University of Sri Lanka

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Department of Business Management •

Failure to get things done

•

Customers/Vendors Customers/Vendors have a hard time dealing with the organization (multiple/unknown (multiple/unknown contacts)

Due to above reasons they need to move in creative ways to structure and organize works and to make their organizations more responsive to the needs of customers, employees and other organizational constituents.

In this century, century, there are more more favorable concepts concepts that have being generated, generated, especially due to global village concept most of organizations have to revise their their organ organiz izati ationa onall struct structur ures es in order order to achiev achieve e their their overal overalll object objective ives s thro throug ugh h maki making ng empl employ oyee ees’ s’ job job sati satisf sfac acti tion on.. Ther Theref efor ore e the the cont contem empo pora rary ry structure is used by organizations. organizations.

Contemporary organizational designs The The flex flexib ible le stru struct ctur ural al meth method ods s that that job job task tasks s are are divi divide ded, d, grou groupe ped, d, and and coordinated for response to dynamic environmental factors.

To To

face ace

high highlly

dyn dynami amic

and and

com complex plex

envi envirronm onment ent

the the

con contem temporar orary y

orga organi niza zati tion onal al stru struct ctur ure e is very very impo import rtan ant. t. In resp respon onse se to mark market et plac place e demands for being lean, flexible and innovative current organization s use these contemporary structures.

•

Team structure

•

Matrix structure

•

Project structure

•

Boundary less organizations organizations

•

•

Network organizations

•

Modular organizations organizations

•

Virtual organizations

Learning organizations organizations Sabaragamuwa University of Sri Lanka

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Team Based Structure In the team base structure, the entire organization is made up of work groups or team teams s that that perf perfor orm m the the orga organi niza zati tion on’s ’s work work.. In the the team team base base stru struct ctur ure, e, employ employee’ ee’s s empowe empowerm rment ent is crucia cruciall becaus because e there there is no line line of manag manageri erial al authority from top to bottom. Rather, employee teams are free to design work in the way think is best. However, the teams are also held responsible for all work activity and performance results in their respective areas.

In large large organ organiza izatio tions, ns, the team team struct structure ure compl compleme ement nt what what is typica typicall lly y a func functi tion onal al or divi divisi sion onal al stru struct ctur ure. e. This This allo allows ws the the orga organi niza zati tion ons s to have have efficiency of a bureaucracy while providing the flexibility that team provide to improve productivity productivity at the operational level.

Examples for team structure o

In marketing field sales force is use this team based structure. Also forces use this team structure.

o

Tea Team m base based d stru struct ctur ure e us usua uall lly y prac practi tice ce in unbr unbran ande ded d prod produc ucts ts,, like like furniture, electric equipments, and cosmetics.

Advantages Easy Integration Since it is the most popularly used form of team organization .

it is easy to integrate. This is so, because every developer is experienced with such a structure and understands their role within it. Better Management, More Control

the the

same ame

buil uilding, ng,

.

Since the entire team is physically within

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communication communication is by far the best method in all situations. The physicality of this team structure typically means it is easier to find and solve issues together. It is also easier to spawn a team spirit, particularly in crunch periods, which can spark increased motivation. motivation. Greater productivity, in a team based structure there are various skills and

ability persons give their contribution produce a great output.

Disadvantages Significant Significant Overheads Of course hiring a full team and owning or renting office .

space with all that goes with it (i.e. electricity, computers) a studio is going to run high overheads. In fact, overheads can amount to a quarter of the budget on some productions, which is an incredibly high ratio of cost. Arising conflicts , team based structure lead to opinion conflicts among team

members.

MATRIX STRUCTURE The The matr matrix ix stru struct ctur ure e

of cont contem empo pora rary ry orga organi niza zati tion onal al stru struct ctur ures es assi assign gns s

spec sp ecia iali list st from from diff differ eren entt func functi tion onal al depa depart rtme ment nts s to work work on one one or more more projects.


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In matrix matrix structu structure re one employe employee e should should repor reportt to two manag managers ers..

So the

employee faces conflict when they address their superiors. To whom should I report firstly, and to whom should I obey or directly responsible. Their functional functional depa depart rtme ment nts s mana manage gerr and and thei theirr prod produc uctt or proj projec ectt mana manage gerr who who sh shar are e authority. The project managers have authority over the functional members who who are are part part of thei theirr proj projec ectt team team in area area rela relati tive ve to the the proj projec ect’ t’s s goal goals. s. However decisions such as promotions, salary recommendations and annual reviews remain the functional manager’s responsibilities. To work effectively, project project and functiona functionall managers managers have to communic communicate ate regularl regularly, y, coordina coordinate te work demands on employees and resolve conflicts together.

On the the othe otherr hand hand the the two two mana manage gers rs infl influe uenc nce e to the the empl employ oyee ee so the the employee should want to their works in correct way. By using matrix structure can establ establish ish high high contro controll and greate greaterr superv supervisi ision on throug throughou houtt the projec projectt period. It may helps to increase project performance and effectiveness.

In matrix structure we can easily get high performance because there is skilled, abil abilit ity y

full full and and

expe experi rien ence ced d

empl employ oyee ees s

com come

from from diff differ eren entt

func functi tion onal al

departments.

This structure is most effective to achieve overall organizational goals. It leads to increase job satisfaction, experience and knowledge of the employees.

Project Structure Sabaragamuwa University of Sri Lanka

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An organizational structure in which employees continuously work on projects is a project structure. In a project structure has no formal departments to which employee return at the completion of a project. Instead employees take their specific skills, abilities and experience to other work project.

In addition, all work activities in project structures are performed by teams of empl employ oyee ees s who who beco becom me part part of a proj projec ectt team team beca becau use they they have have the the appropriate work skills and abilities.

Project structure tends to be fluid and flexible organizational designs. There is no departmentalization or rigid organizational hierarchy to slow down decision making or taking actions.

Ex-: Information Systems build by using project structure, Constructions

Project structure reduces job boredom, because they work different projects, and less work specialization. Although the matrix structure work well and continued to be effective structure design choice for many organizations are using more advance types project structure, in which employees continuously work on projects. Unlike the matrix structure, a project structure has no formal departments to which employees return at the completion of a project. Instead, employee take there specific skill skills, s, abili abilitie ties s and experi experienc ences es to other other work work proje projects cts.. In addit addition ion,, all work work Sabaragamuwa University of Sri Lanka

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acti activi viti ties es in proj projec ectt stru struct ctur ures es are are perf perfor orme med d by team teams s of empl employ oyee ee who who become part of a project team because they have the appropriate work skills and abilities.

In this types of structures managers serve as facilitators, mentors and coaches. They They “serv “serve e the projec projectt teams teams by elimi eliminat natin ing g or mini minimi mizin zing g organi organizat zation ional al obstacles and by ensuring that team has the resources they need to effectively and efficiently complete their work.

Boundaryless Organizations In a boundaryless organization, the boundaries that divide employees such as hierarchy, job function, and geography as well as those that distance companies from suppliers and customers are broken down. A boundaryless organization seeks to remove vertical, horizontal, and external barriers so that employees, mana manage gers rs,, cust custom omer ers, s, and and su supp ppli lier ers s can can work work toge togeth ther er,, sh shar are e idea ideas, s, and and identify the best ideas for the organization. What are the boundaries? Vertical - Boundaries between layers within an organization organization

Classic Example: Military organization organization Problem: Someone in a lower layer has a useful idea; "Chain of command" mentality Horizontal - Boundaries which exist between organization organization functional units.

Each unit has a singular function. Problem: Each unit maximize maximize their own goals but not the overall goal of the organization External - Barriers between the organization organization and the outside world (customers,

suppliers, other government entities, special interest groups, communities). communities). Customers are the most capable of identifying major problems in the organization and are interested in solutions.


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Problem: Lose sight of the customer needs and supplier requirements Geographic - Barriers among organization units located in different countries

Instead of being organized around functions with many hierarchical levels, the boundaryl boundaryless ess organizat organization ion is made up of self-man self-managin aging g and cross-fun cross-functio ctional nal teams that are organized around core business processes that are critical for satisfying customers such as new-product development or materials handling.

The traditional vertical hierarchy is flattened and replaced by layers of teams making the organization look more horizontal than vertical. Some believe that the boundaryless organization is the perfect organizational structure for the 21st century.

How to remove vertical, horizontal, external boundaries?

By removing vertical boundaries through such structural approaches as cross hierarchical teams and participative decision making, the hierarchy is flattened. Managers can remove horizontal boundaries by using cross functional teams and and orga organi nizi zing ng work work acti activi viti ties es arou around nd work work proc proces esse ses s inst instea ead d of arro arroun und d functional departments. An extenal boundaries can be minimized or eliminated by us usin ing g stra strate tegi gic c alli allian ance ces s with with su supp ppli lier ers, s, or valu value e chai chain n mana manage geme ment nt customer organization linkages,

Types of boundary less Organizations: 

Network Organizations Organizations

organization , vario In a network organization, various us functi functions ons are coordi coordinat nated ed as much much by market mechanisms as by managers and formal lines of authority. Emphasis is placed on who can do what most effectively and economically rather than on fixed ties dictated by an organizational chart. All of the assets necessary to produce a finished product or service are present in the network as a whole, not held in-house by one firm. Sabaragamuwa University of Sri Lanka

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Department of Business Management 

Virtual Organizations

The most interesting networks are dynamic or virtual organizations. In a virtual organization an alliance of independent companies share skills, costs, and access to one another’s markets. It consists of a network of continually evolving independent companies. Each partner in a virtual organization contributes only in its area of core competencies. The key advantage of network and virtual organizations organizations is their flexibility and adaptability.



The Modular Organization Organization

A modular organization is an organization that performs a few core functions and outsources noncore activities to specialists and suppliers. Services that are often often outsou outsource rced d includ include e the manuf manufact acture ure of parts, parts, trucki trucking, ng, cateri catering, ng, data data processing, and accounting. Thus, modular organizations are like hubs that are surrounded by networks of suppliers that can be added or removed as needed. By outsourcing noncore activities, modular organizations are able to keep unit costs low and develop new products more rapidly. They work best when they focus on the right specialty and have good suppliers.

Learning Organizations The The

conc co ncep eptt

of

a

Lear Le arni nin ng

Org Or gan aniiza zattion ons s

doe oes sn’ n’tt

inv nvo olve

a

spec sp eciifi fic c

organ or ganiz izati ationa onall des design ign.. Lea Learni rning ng Or Organ ganiza izatio tions ns is an or organ ganiza izatio tion n tha thatt has a developed the capacity to continuously adopt and change because all members take ta ke an ac acti tive ve ro role le in id iden enti tify fyin ing g an and d re reso solv lvin ing g wo work rk re rela late ted d is issu sues es.. In a Learni Lea rning ng Or Organ ganiz izati ations ons,, em empl ploye oyees es ar are e pr pract actici icing ng kno knowl wledg edge e man manage agemen mentt continually acquiring and sharing new knowledge and are willing to apply that knowl kno wledg edge e in ma makin king g dec decis ision ions s or per perfor formi ming ng wo works rks.. Som Some e or organ ganiz izati ationa onall designs theorists even go so far as to say that an organization’s ability to do thiisth s-th that at is, to lea earrn and to ap appl ply y th that at lea earrning as th they ey per erfo form rm th the e Sabaragamuwa University of Sri Lanka

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orga or gani niza zati tion on’s ’s wo work rk ma may y be th the e on only ly su sust stai aina nabl ble e so sour urce ce of co comp mpet etit itiv ive e advantage. In a Learning Organization, it is a critical for members to share information and coll co llab abor orat ate e on wo work rk ac acti tivi viti ties es th thro roug ugho hout ut th the e en enti tire re or orga gani niza zati tion on,, ac acro ross ss different functional specialties and even at different organizational levels. This can be done by minimizing or eliminating the existing structural and physical boundaries. In this type of boundaryless environment, employees are free to work together and collaborate in doing the organizations work the best way they can and to learn from each other. Because of this need to collaborate, team te ams s al also so te tend nd to be an im impo port rtan antt fe feat atur ure e of a le lear arni ning ng or orga gani niza zati tion on’s ’s structural design. Employees work in teams on whatever activities need to be done, don e, an and d the these se emp emplo loyee yee tea teams ms are emp empowe owered red to ma make ke dec decis ision ions s abo about ut doing their work or resolving issues.

With these empowered employees and teams, there’s little need for “bosses” to direct and control. Leader Lea dershi ship p pla plays ys an im impor portan tantt ro role le as an or organ ganiza izatio tion n mo moves ves to bec becom ome e a learning organization. organization. Leaders should facilitate the creation of a shred vision for the orga organizat nization’ ion’s s futur future e and then keepi keeping ng orga organizat nizationa ionall memb members ers work working ing towards that vision. Also Al so or orga gani niza zati tion onal al cu cult ltur ure e is an im impo port rtan antt as aspe pect ct of be bein ing g a le lear arni ning ng organization. A learning organization’s culture is one in which everyone agrees on a sh share ared d vis visio ion n and eve everyo ryone ne rec recog ogniz nizes es the in inher herent ent in inter terrel relati ations onship hip amo am ong

the th e

orga gan niza zati tio on’ n’s s

pro pr oce ces ss,

act ctiivi viti ties es,,

fun fu nct ctiions

envi en viro ronm nmen ent. t. In le lear arni ning ng or orga gani niza zati tion ons, s, em empl ploy oyee ees s

and an d

exte ex terrnal

feel fe el fr free ee to op open enly ly

comm co mmun unic icat ate, e, sh shar are, e, ex expe peri rime ment nt,, an and d le lear arn n wi with thou outt fe fear ar of cr crit itic icis ism m or punishment. Learning can’t take place without information. For a learning organization to “learn”, information must be shared among members, that is organizational members must engage in knowledge management. Sabaragamuwa University of Sri Lanka

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Summary We can identify there are three traditional organizational design such as simple, functional, divisional. Organizations face more strength and weakness in these stru struct ctur ures es.. We can can see see ther there e are are many many stre streng ngth th and and weak weakne ness ss in thes these e struct structur ures. es. Nowada Nowadays ys they they try to ignore ignore that that weakne weakness ss and develo develop p these these organizational designs as Team structure, Matrix structure, Project structure, Boundaryless structure and Learning structure. Entire organization is made up of work team is define as team based structure. Assign specialists from different functional departments to work on projects led by project managers as matrix structure. Project structure is Employees work continuously on projects. Design is not define by, organization limited to, the horizontal vertical, organization external boundaries imposed by a predefined struct structur ure e is bounda boundaryl ryless ess struct structure ure.. An organ organiza izatio tional nal mindmind-set set rathe ratherr than than specific organizational design is learning structure. Using those contemporary organizational designs organizations gain there are many advantages. Finally Sabaragamuwa University of Sri Lanka

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we can ident identify ify contem contempor porary ary organ organiza izatio tional nal design designs s have have more more impo importa rtant nt things rather than traditional organizational organizational designs.

References 1. Management, Stephen P. Robbins, and Mary Coulter, Seventh Edition 2003, Prentice-Hall of India (pvt) Limited, New Delhi.


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Contemporary Organizational Designs

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