Organizational Structure and Design – BBA/MBA Notes

(f) Matrix Organization

Matrix organization, also known as grid, is an answer to the growing size and complexity of the undertaking, which require an organization structure more flexible and technically oriented than the line and staff and functional structures.

In matrix organization structure, a project manager is appointed to coordinate the activities of the project. Personnel are drawn from their respective functional departments. On completion of the project, these people may return to their original departments for further assignment. Thus,- each functional staff has two bosses— his administrative head and his project manager. During his assignment to a project, he works under the coordinated command of the project manager and he may be called upon by his permanent superior to perform certain services needed in the project. Thus, a subordinate in matrix structure may receive Instructions from two bosses. Therefore, he must coordinate the instructions received from two or even more bosses. Similarly, matrix superior has to share the facilities with others. He reports in a direct line to the up, but does not have a complete line of command below. A matrix organization structure Is presented in the figure below:

Matrix organization

Features

The important features of the matrix organization are as follows:

(i) Built around specific projects
The matrix organization is built around specific projects. The charge of the project is given to the project manager who has the necessary authority to complete the project in accordance with the time, cost, quality and other conditions communicated to him by the top management.

(ii) Personnel front various departments
The project manager draw’s personnel from various functional departments. He assigns the work to the various functional groups. Upon completion of the project, the functional groups return to their functional departments for reassignment to other projects.

(iii) Different roles
The project and the functional manager have different roles. The project manager exerts a general management viewpoint with regard to his project. Each functional manager is responsible for maintaining the integrity of his function. However, both the project and functional managers are dependent on each other as they have to take several joint decisions in order to execute the project. So there is proper co-ordination between the project and the functional groups.

(iv) Management by Objectives
Management by project objectives is paramount to the way of thinking and working in it.

Sometimes, matrix and project structures are considered to be the same. However, there is difference between the two. In project organisation, separate identifiable units are created for taking and managing projects, and complete responsibility for the tasks as well as all the resources needed for their accomplishment are usually assigned to one project manager. In a large project with long life, the project division resembles a regular division, relatively independent of any other division. In matrix organisation, project manager is usually not assigned complete responsibility for resources. Instead, he shares them with others in the organisation. Project organisation Is preferred when the organisation has small number of major projects. For projects of major magnitudes, a project type organisation can be established, but rest of the organisation can be managed through functional structure. In such a case, there are well-established functional departments which have skills and capabilities for the performance of a variety of programmes. Essentially, programmes flow through the functional complex and receive the services of these specialized departments. Matrix organisation structure, on the other hand, is applied when’ the organisation has large number of smaller projects so that when one project is completed, its resources are directed to other projects.

Merits

i. Matrix structure focuses resources on a single project, permitting better planning and control to meet the project deadline. In project management, time is of prime Importance and, therefore, it should be completed within the specified time. However, since the organisation cannot create many project divisions, matrix serves the purpose adequately.

ii. It is quite flexible structure as compared to traditional hierarchical structure. Therefore, it can work very well in dynamic environment by absorbing the inevitables that may occur as work progresses on projects.

iii. It emphasises professional competence by elaborating authority of knowledge rather than authority of position. This type of internal environment in the organisation provides personnel to develop and test their professional competence and widen their scope to contribute maximum in the organisation.

iv. It improves motivation because people can focus more directly on completion of one project than they can In the traditional functional structure It also improves communication by discarding traditional hierarchical system which produces more inhibiting factors.

v. It relieves top management for taking long-term course of actions so that the organisation can design Its strategics suitable to environmental needs.

Demerits

i. There Is always power struggle in matrix structure. The essence of matrix structure is dual command, and to survive such a form, there needs to be balance of power. However, this power balance shifts constantly as people try to maximise their benefits. This results in power struggle among people which may become dysfunctional If top management does not play active role In balancing the power.

ii. Matrix structure can develop anarchy if not managed properly. People have to work under multiple command. Besides, there may be Informal relations among people. Thus, whole concept of flexibility may result in problem because people may not be clear about what they should do; what they are expected to contribute.

iii. This structure may not work very well when there is economic crunch. In the case of economic crunch, the organisation may not be in the same position as there may be many changes In market position, pressure on profit margin, and financial problems. In order to overcome these problems, the organisation may be required to change its strategy which may not correspond to matrix structure. For example, decision process has to be centralised in order to arrive at quick decisions to face adversaries.

iv. If matrix organisation Is not followed properly, there Is delay in decision making. The decision-making process is such that many persons are involved in the decision; each person may hold veto power or may not give consent because of power struggle and conflict. In this situation, top management may remain busy in solving internal problems of the organisation and find less time for external affairs.

v. At the initial level, matrix structure becomes quite costly because of top heavy management. It does seem to double up management because of dual chain of command. However, this is only initial problem, and in the long run, this can be offset by the benefits accrued from matrix structure.

(g) Team Based Organization

A team is a small group of individuals with unique features.

Characteristics of a team:

(i) A team consists of small number of people.
(ii) It consists of people with complementary skills to get the things done.
(iii) A team has common purpose and performance goals which sets the direction of the team.
(iv) A team evolves a common approach which is followed b team members in true spirit.
(v) A holds itself mutually accountable for results, rather than merely meeting a manager’s demands for results.

In recent years, more and more organizations have put emphasis on creating teams for better organizational performance. Teams are more viable options for better organizational performance. The importance of teams can be seen in terms of enhanced performance, employee benefits, reduced costs and organizational enhancements.

(h) Free-form Organization

Free form organization, also known as naturalistic, organic or ad hoc organization, is based on the premise that the organization is an open system and the basic task of a manager is to facilitate change in the organization.
Bennis observes that free-form organization is “a rapidly changing, adaptive, temporary system organized around problems to be solved by groups of relative strangers with diverse professional skills.”

Free-form organizations are suitable for those industries which have to work in highly dynamic environments. Such environments are characterized by high flexibility and ever-changing character. To be successful in such an environment, the organizations are required to put more pressure on information processing, quick decisions, and independent status to the various units which are directly exposed to the environment. Apart from the environmental pressure, there is another reason for adopting free-form of organization, and that is the democratic values of the society. The democratic values put more emphasis on equality and de-emphasis on boss-subordinate relationships. In free-form organizations, both these things are possible. However, to some degree, all the organizations place some emphasis on change and realization of individual satisfaction in the organizations but they may not be following the basic theme of the free-form organizations. Two recent developments in the category of free-form organizations are virtual organization and virtual office.
Free-form structures reduce the emphasis on positions, departments, and other formal units, and on the organizational hierarchy. Forrester even suggests that in free-form organization, the traditional man-boss relationship disappears. He has emphasized that profit centres rather than functionally-divided budgetary units should be major entities. Profit centres place all contributions to an integrated single unit with unified goals so that all gain or lose by the results. Such a system can be managed as a team or a cohesive group, but its organization structure would be fluid and dynamic.

Virtual Organization

The concept of virtual organization or corporation along with virtual team and office has entered management field very recently. Virtual organization is also known as networked organization as Its various components are linked through communication network only. The literal meaning of virtual is having the efficacy without the material part; unreal but capable of being considered as real for the purpose.

Definition
Virtual corporation is a temporary network of independent companies – suppliers, customers, even erstwhile rivals- linked by information technology to share skills, costs and access to one another’s markets. It will have neither central office nor organization chart. It will have no hierarchy, no vertical integration.

Thus, virtual organisation is a temporary alliance between two or more organizations that band together undertake a specific venture.

Features of Virtual Organizations

i. Technology
Informational networks will provide far-flunged companies and entrepreneurs to link up work together from start to finish. The partnerships will be based on electronic contracts to keep tire lawyers away and speed the linkups.

ii. Opportunism
Partnerships will be less permanent, less formal, and more opportunistic. Companies will band together to meet a specific market opportunity and, more often than not, tall apart once the need evaporates.

iii. Excellence
Because each partner brings its core competence to the effort, it may be possible to create a best-of –everything organisation. Every function and process could be world class- something that no single company could achieve.

iv. Trust
These relationships make companies far more reliant on each other and require far more trust than even before. They will share a sense of co-destiny, meaning that the fate of each partner is dependent on other.

v. No Borders
The new corporate model redefines the traditional boundaries of the company. More cooperation among competitors, suppliers, and customers makes it harder to determine where one company ends and another begins.

Virtual Office

Along with virtual organsations, the concept of virtual offices has also emerged. Office automation has led to the development of virtual office concept. A virtual office works just like a physical officer but devoid of physical space and facilities. Employees interact with others through portable communication tools, such as electronic mail, cellular phone, thinkpad, voice mail system, laptop computer, fax machine and audio/video conferencing system. Employees armed with these tools can perform their work from any place-their homes, cars, restaurants, airports, customer’s offices and so on. These electronic communication tools allow organisations to greatly reduce the office work needed for each employee, sometimes, enabling them to replace dozens of desks with a single ‘productivity centre’ that the employees can use for holding meetings and accomplishing other short-term tasks.

Merits

i. Reduced Facility Cost

Virtual office enables an organisation to reduce its cost that is required in setting up a physical office. Instead of having a large physical office, the organisation can reduce its size considerably as many employees work for office without attending it physically. This helps in reducing real estate cost, maintenance cost, and cost of physical commuting of employees.

ii. Reduced Equipment Cost

A physical office requires equipment to be used by employees while working in the office. In a virtual office, no such equipment is required. What is required is the development of local area network through which employees are connected. This arrangement is more relevant for information workers. For other categories of employees, other electronic communication tools are required.

iii. Emphasis on Formal Communication

A virtual office places emphasis on formal network of communication which ensures the orderly flow of communication throughout the organisation. This further ensures that only officially-relevant communication passes through the network unlike the physical offices in which much time is wasted in informal communication without much meaningful exchange of ideas and thoughts.

iv. Reduced Work Stoppages

A virtual office can work even during some tolerable events which may hamper the work of physical offices, such as storms, hurricanes, floods, etc. Since the employees are not required to attend the office physically, they can continue to work during such events.

v. Social Interaction and Social Contribution

A virtual office enables employees to engage in social interaction as they can save time because of absence of physical commuting which otherwise consumes lot of employees’ time. Similarly, a virtual office enables those persons to work who might not be in a position to attend office physically, such as handicapped people, elderly people, parents with young children, and so on.

Demerits

i. Lack of Belongingness

In a virtual office system, employees are not able to develop sense of belongingness among each other as well as with the organization. They never treat themselves as members of the organisation or members of a team for which they are working. Because of lack of belongingness, employee turnover rate tends to be higher. This is detrimental to the organisation concerned.

ii. Psychological Fear of Job Loss

Employees working in a virtual office, generally develop a psychological fear of losing their job as a feeling is created in their mind that they are not indispensable for the organisation. Persons having similar knowledge can replace them much more easily than is the case with a physical office. This psychological fear lowers their morale which ultimately leads to lower productivity.

iii. Family Tension

Though it appears to be unconvincing but the fact is that a virtual office system creates family tension. Families which are accustomed of seeing elder members going office in the morning and coming in the evening, hardly reconcile with the view that these members remain in die home during office hours. This feeling starts creating family tension.
Apart from this, family tension created by other factors leads to lower productivity among virtual office workers.

Measures for Making Virtual Offices Effective

i. Providing Computer Resources

Virtual office working revolves around computer resources. These resources must by provided by the employing organisations. While providing these computer resources, it must be ensured that these are commensurate with the requirements of the employees concerned.

ii. Providing Access to Information

Adequate provisions must be made to enable employees to have easy access to information which they need. As the society is becoming increasingly information-oriented, employees’ access to relevant Information is a pre-requisite for successful operation of virtual offices.

iii. Arrangement for Forwarding Phone Calls

Every virtual office requires some sort of help from a physical office. Malting arrangement for forwarding phone calls to concerned employees is one of these helps. Therefore, there should be someone at the fixed office with the responsibility for forwarding phone calls to telecommuters. Organisation can also make use of a voice messaging system that enables the telecommuters to access it from their own workplaces.

iv. Arranging Conference Calls

A conference call enables more than two persons to participate in a telephonic conversation at the same time. This helps the telecommuters to exchange their views and ideas among themselves without meeting physically. Such views and ideas are quite helpful in solving those problems that cannot be solved individually. In order to take file advantage of this phenomenon, the organisation should arrange conference calls at regular intervals.

v. Arranging Regular Meetings

Though in virtual office systems, face-to-face meeting among employees may not be required to do their work technically, it is better that they meet their fellow workers on certain pre-determined time at regular intervals. Such meetings help them in understanding each other in a much better way and develop belongingness and community feeling. Therefore, the organisation should make arrangement for such meetings and informing all the concerned telecommuters.

vi. Follow-up of Work Routine

Telecommuters should be encouraged to develop and follow their own work routine so that their attention is not distracted during their working hours. If the telecommuters develop and follow such a work routine, perhaps, their family members, friends, and others may hesitate in disturbing them during their working hours even at home or any other place.

v. Objective Evaluation of Work Performance
The organisation should develop some objective criteria for the evaluation of work performance of telecommuters. As far as possible, these criteria may be in quantitative form so that the work performance can be measured precisely against these criteria. Wherever work performance measurement criteria cannot be quantified, these may be developed in qualitative form with precise definition of each qualitative criterion. After finalizing work evaluation criteria, these should be communicated to telecommuters so that they are very clear about what the organisation expects from them This may infuse a kind of discipline among telecommuters that is beneficial to them as well as to the organisation.

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