BBA Management Forms Organisation Structures Study material Notes

BBA Management Forms Organisation Structures Study material Notes: Line organization structure merits line and staff organization structure demerits functional organization structure demerits divisional organization structure problems in functional structures suitability of functional structure Design of divisional organization structure problems in divisional structure suitability od divisional structure :

MCom I Semester Human Resource Policies Practices Study Material

Forms Organization Structure

Design of organization structure is considered to be a matter of choice among a large number of alternatives. There are various forms of organisation structure; however, not all of them are suitable for all situations because of the differences in contextual variables which affect the organisation structure as discussed in Chapter 11. From this point of view managers must be aware of the various alternatives so that they are able to choose a suitable structure for their organisations.

The classification of organisation structure is based on the way various activities are grouped together to create departments and units and prescribing their relationships in the organisation. Thus, there are seven types of organisation structure-line, line and staff, functional, divisional, project, matrix, team based, and free-form. Each of these emphasises different arrangement of organisational activities. Some of these are designed on mechanistic pattern, for example, line, line and staff structures; some are designed on organic or dynamic pattern, for example, matrix and free-form structures. Others have a combination of both mechanistic and organic patterns in varying degrees. Further, some of the structures are basic, for example, functional, divisional, etc.; some emerge because of overlays which denote superimposition of one element over another, for example, matrix structure. Besides the basic organisation structure, organisations may create committees taking personnel from different departments where the processes are quite different as compared to a department.

Henry Mintzberg has given a different scheme of classification of organisation structures. Rather than focusing on structural imperatives, people, or rules, his description of structure emphasises the ways activities are coordinated. Accordingly, there are five types of structures-simple structure, machine bureaucracy, professional bureaucracy. divisionalised, and adhocracy. In each structure, arrangement of activities and, therefore, coordination mechanisms differs. In the further analysis of forms of organisation structure, we shall take earlier classification as it deals with various forms in more comprehensive way.

Forms Organisation Structures

Line Organisation Structure

Line organisation structure is also known as scalar, military, or vertical organisation and perhaps is the oldest form. This concept holds that in any organisation or hierarchy derived from a scalar process, there must be a single head who commands it. Although an executive can delegate authority, he has ultimate responsibility for results. Line organisation can be designed in two ways: 1. Pure Line Organisation Structure. Under this form, similar activities are performed at a particular level. Each group of activities is self-contained unit and is able to perform the assigned activities without the assistance of others. Pure line organisation structure has been depicted in Figure 13.1.

1 Departmental Line Organisation Structure. Under this form, entire activities are divided into different departments on the basis of similarity of activities. Each department is placed under one departmental head. All persons in the department are subject to control by the departmental head. The basic objective of this form is to have uniform control, authority, and responsibility. Departmental line organisation structure has been depited in Figure 13.2.

Line organisation structure has following characteristics:

1 Lines of authority and instructions are vertical, that is, they flow from the top to the bottom.

2. The unity of command is maintained in a straight and unbroken line. It implies that each subordinate receives instructions from his immediate superior alone and is responsible to him only.

3. All persons at the same level of organisation are independent of each other. It implies that all the departmental heads are supreme in their respective areas and independent of one another and are responsible to the chief executive. This applies to all other positions also.

4. This structure specifies responsibility and authority for all the positions limiting the area of action by a particular position holder. Merits Line organisation structure has following merits or advantages:

5. Simplicity. This organisation is quite simple in both understanding and implementation. Every person is clear about what is expected of him. Since a person is receiving orders and instructions from only one superior, he does not have any confusion in his mind about his role and responsibility in the organisation,

6. Discipline. Since each position is subject to control by its immediate superior position. often the maintenance of discipline is easy. Unity of command and unity of direction foster discipline among the people in the organisation.

7. Prompt Decision. Most of the decisions in such organisations are taken by the superiors concerned. This makes the desicion-making process easier and less time-consuming. Moreover, since they have not to consult others or look for others’ advice, they can make the decisions very quickly.

8. Orderly Communication. Line organisation follows scalar chain method of communication. It implies that communication going up and down will pass through the immediate superiors. This system of communication is easy to maintain, orderly in nature, supports the authority of the superior, and provides for closeness of contact thereby reducing! chances of miscommunication.

9. Easy Supervision and Control. The line organization provides for easy supervision and control because each subordinate is controlled by a single superior. The superior has direct! and close contact with his subordinates which facilitates supervision and control.

10. Economical. The line organization is quite economical because it does not use staff specialists whose appointment is a costly affair specially for small organizations. Every person in the organization is directly responsible for his contribution to the organizational objectives.

11. Overall Development of the Managers. Since the line organisation does not have provision for staff specialists, various managers have to combine among themselves the expertise of a staff member. Thus, the functions of managers are more comprehensive which leads to the overall development of the managers concerned.

Forms Organisation Structures

Demerits

Line organisation structure offers many problems and limitations which are as follows:

1 Lack of Specialisation. The line organisation does not offer scope for specialisation. A manager has to perform a variety of functions which may not necessarily be closely interrelated. Any manager, whatever may be his qualities, cannot cope up with the requirement of various intricacies of business system. The result is that he cannot make a very valid decision for all requirements in the organisation. The quality of management is, thus, not very satisfactory in this type of organisation structure.

2. Absence of Conceptual Thinking. The managers in this system do not find time for conceptual thinking so essential for organisational growth and development because they remain quite busy in their day-to-day managerial problems. A man’s ability being limited, he cannot meet the diversified and varied demands of his functions because he has too much and too numerous activities to perform. Many times, even the managers are involved in non-managerial functions also which not only hamper their efficiency but leave little scope, whatsoever may be, for concentrating on long-term problems of the organisation.

3. Autocratic Approach. The line organisation is based upon autocratic approach. The line of authority, being direct, demands high level of obedience on the part of the subordinates. It leaves little consideration to them which ultimately dampens the initiative on their part. This may also result in one-way communication, that is, only downward communication, and the manager at the top may sometimes be devoid of the actual knowledge of the situation.

4. Problems of Coordination. Coordination among various activities and the departments is achieved through horizontal relationship, whereas the line organisation stresses only vertical relationship. Thus, there is acute problem of coordination, particularly in a large organisation.

5. Lack of Groundwork for Subordinates’ Training. In line organisation, the superiors take decisions and subordinates merely transform them into action. Thus, they are mostly Involved in routine type of activities which prevent them from learning new methods of taking overall view of the organisation concerned as they are quite unrelated er parts of the organisation. Thus, a succession problem is there, and if a high retiring or leaving the job, or unavailable for other reasons, his position level person is retiring or leaving the job in easily by existing organisational personnel. cannot be filled up easily by existing organization line organisation structure is not suitable for large-scale organisations because it cannot fulfil the requirements of large organisations. However, it is quite suitable to smallscale organisations where the number of subordinates is quite small. The need for small organisations is centralised control, only few levels of authority, direct inter personal communication, and direct control and supervision. The various limitations of the line structure for large-scale organisations give way for the emergence of other types of structures.

Forms Organisation Structures

Line and Staff Organisation Structure

Line and staff organisation structure refers to a pattern in which staff specialists advise managers to peform their duties. When the work of an executive increases, its performance requires the services of specialists which he himself cannot provide because of his limited capabilities on these fronts. Such advice is provided to line managers by staff personnel who are generally specialists in their fields. The staff positions or departments are of purely advisory nature. They have the right to recommend, but have no authority to enforce their preference on other deparments.

In actual practice, somtimes it is difficult to determine which departments are line or staff. The problem can usually be solved by classifying activities within an organisation in two ways: () that which is substantive (direct) in its contribution to the organisationi’s overall objectievs, and (tl) that which is objective (indirect) in its contribution. The departments performing former group of activities are line ones, and those performing latter group of activities are staff ones. Line and staff organisation structure may be presented as shown in Figure .

The positions and departments in rectangles are staff and others are line. These staff specialists may provide services to a particular position, department, or organisation as a whole. A complete picture of line and staff relationships has been presented in Chapter 15.

Merits

As against line organisation structure, line and staff organisation structure offers the following advantages:

1 Planned Specialisation. The line and staff structure is based upon the principle of specialisation. The line managers are responsible for operations contributing directly to the achievement of organisational objectives whereas staff people are there to provide expert advice on the matters of their concerns. Thus, there is ample chance for creative thinking for generating new ideas and actions which are quite important for the organisations. It is said that “routine keeps the ship of industry afloat, but creative thought is the motive power that gives it headway.”

2. Quality Decisions. The quality of decisions in line and staff structure is high because the decisions come after careful consideration and thought. Each expert gives his advice in the area of his specialisation which is reflected in the decisions.

3. Prospect for Personnel Growth. This system of organising offers ample prospect for efficient personnel to grow in the organisation. Not only that, it also offers an opportunity for concentrating in a particular area, thereby increasing personal efficiency. This is also according to the personal liking, that is, one is expected to work better in one’s main discipline.

4. Training Ground for Personnel. It provides training ground to the personnel in two ways. First, since everybody is expected to concentrate on one field, one’s training needs can easily be identified. Second, the staff with expert knowledge provides opportunities to the line managers for adopting rational multi-dimensional approach towards a problem. Thus, by observing how staff people look at and solve a particular problem, line managers themselves sharpen their diagnostic and problem-solving abilities. Thus, they easily take the totality of view of the organisational functioning.

Forms Organisation Structures

Demerits

The line and staff structure suffers from some limitations which particularly become acute when it is not implemented properly. Following are some basic problems and limitations:

1 Lack of Well-defined Authority. Though it is easy to say about line and staff authority, often in practice, it becomes difficult to differentiate clearly between line and staff because, in actual practice, the authority is often diffused. Thus, the managers may not be clear as to what is expected of them or what is the actual area of the operation of their authority. Thus, confusion may be created in the organization.

2. Line and Staff Conflicts. The main problem of line and staff structure is the conflicts between line and staff managers, as discussed in Chapter 15. Such conflicts may be because of various reasons and sometimes the organisational conflicts may be taken as personal conflicts resulting in interpersonal problems.

Suitability

This structure can be followed in large organisations where specialisation of activities is required because it offers ample opportunity for specialisation. When employed in the large organisations, its success depends upon the degree of harmony that is maintained among various departments and personnel, the clarity in line of authority, and interpersonal contact of executives particularly in line and staff positions. In the natural course of growth, an expanding organisation may adopt this structure to enhance the efficiency. This structure. however, is not suitable for small organisations as it is quite costly for them. Moreover, they cannot take the full advantage of experts because of lack of adequate activities for them.

Forms Organisation Structures

Functional Organisation Structure

Functional organisation structure is most widely used in the medium and large organisations having limited number of products. This structure emerges from the idea that the organisation must perform certain functions in order to carry on its operations. It seems natural that the organisation begins its operations by emphasising the kind of work it must do to meet its objectives. As it grows and division of labour leads to specialisation, the organisation has more work to do; it adds new specialities and further divides its presently employed specialities.

Functional structure is created by grouping the activities on the basis of functions required for the achievement of organisational objectives. For this purpose, all the functions required are classified into basic, secondary, and supporting functions according to their nature and importance. The basic or major functions are those which are essential for the organisation. For example, in a manufacturing organisation, production and marketing are basic functions when departments are created on the basis of basic functions and a manager feels that his span of management is too wide to manage effectively, which invariably happens in large organisations, several departments are created on the basis of dividing a basic function into sub-functions. For example, marketing may be subdivided into marketing research, advertising, sales, and so on. Thus, the process of functional differentiation may continue through successive levels in the organisation. Apart from basic and secondary functions, departments are also created to take advantages of specialisation and to support basic and secondary activities. Such departments may be finance, accounting, personal, industrial relations, legal, etc. These departments may be created and placed according to their role in the organisation. For example, if the organisation emphasises product development and innovation, research and development department may be given high status.

Authority relationships in functional structure may be in the form of line, staff, and functional. In fact, the concept of functional authority is very appropriate for functional structure. Thus, functional structure is characterised by the following:

1 Specialisation by functions,

2. Emphasis on sub-goals,

3. Pyramidal growth of the organisation,

4. Line and staff division,

5. Functional authority relationship among various departments, and

6. Limited span of management and tall structure. The organisation chart of fnctional structure can be presented in Figure 13.4.

Suitability of Functional Structure

Functional structure has certain potential advantages and disadvantages. Whether or not these advantages are realised depends on the specific organisation’s situation. The establishment of a functional structure becomes necessary as a small organisation grows and business activities become more and more complex. In such a situation, there is a need for more formalised and systematic approach to major activities and for increased delegation of authority of decision making throughout the organisation. However, top management will continue to control decisions that involve strategic and coordinative variables. The functional structure works better if the organisation has one major product or similar product lines. In such a case, the organisation may take the following benefits:

1 Functional structure can result in high degree of specialisation because a unit or department is concerned only with one aspect of total activities. Thus, the organisation can employ greater variety of skills.

2. Functional structure brings order and clarity in the organisation by prescribing what one is expected to do. Everyone understands his job clearly which adds to efficiency.

3. It promotes professional achievement as a person is restricted to his own area of specialisation. Thus, it provides satisfaction to specialists.

4. There is economy in the use of organisational resources because various units of the organisation use the centralised resources of a kind. Thus, there is no duplication of activities and processes which save resources.

5. There is high degree of control and coordination of functions because all work of one kind is under one manager. Also, there is a clear chain of command for communication and authoritative decisions. However, from total organisation’s point of view, this poses problems in control and coordination. Problems in Functional Structure

The relative advantages of functional structure are like two-edged swords; they can cut both ways. In some circumstances, they can lead to disadvantages. For example, specialisation may lead to parochialism and goal displacement, or control and coordination may lead to overload for a manager. Therefore, if there is too much emphasis on any aspect, there may be dysfunctional behaviour of that aspect. The functional structure is not suitable to an organisation which takes up diversification, as the new activity may be quite different than the activities being performed by the organisation. Thus, diversification cannot be managed properly within the context of functional structure; or at least at some level, there may be violation of functional structure. In such a situation, functional structure presents following problems:

1 Responsibility for ultimate performance cannot be fixed in functional structure because no one is responsible for product cost and profit. Each department focuses on its contribution to the product, but not the entire product. Only top man is pulling everything together. Not only does this place the burden of control and coordination for the operations at the top, where the emphasis should be on longer range problems but it makes judging the performance of each department difficult.

Forms Organisation Structures

2. Functional structure essentially generates slow decision-making process because the problem requiring a decision has to go through various departments as all of them have something to say on the matter. As against this, complex and markedly different activities require faster decision making because time factor is of prime importance.

3. Functional structure lacks responsiveness, necessary to cope up with he changing work requirements. For example, if the organisation decides to add a new business, there is a question as how to add this because it may mean a new functional structure as the new business cannot be easily absorbed by old functional structure.

4. Functional structure offers usually line and staff conflict and interdepartmental conflict. The heightened degree of such a conflict becomes detrimental to organisational efficiency.

Forms Organisation Structures

Divisional Organisation Structure

The second basic structural form employed by organisations is the divisional structure. While growth through expansion in same line of business forces a small organisation to organise on functional basis, growth through geographic and product diversification necessitates the adoption of divisional structure. In India, many companies have diversified Into unrelated businesses and have found functional structure quite unsuitable for them. For example, companies like DCM Limited, Voltas Limited, Century Spinning Mills, Gwalior Rayon, etc., adopt divisional structure.

Divisional structure, also called profit decentralisation by Newman and others, 2 is built around business units. In this form, the organisation is divided into several fairly autonomous units. Each unit is relatively self-contained in that it has the resources to operate independently of other divisions. For example, each division has its own manufacturing, engineering, marketing, etc. Each unit is headed by a manager who is responsible for the organisation’s investment in facilities, capital, and people as well as for unit’s development and performance. Divisional structure is similar to dividing an organisation into several smaller organisations but it is not quite the same, since each smaller organisation is not completely independent. Each unit is not a separate legal entity: it is still part of the organisation. Each unit is directly accountable to the organisation.

Forms Organisation Structures

Basis of Divisionalisation

There are different bases on which various divisions in an organisation can be created. The two traditional bases are product and territory. Later, many organisations have moved from these bases to create divisions on the basis of strategic business units. In each of these bases, functions involved and, therefore, departments created are different.

Product Divisionalisation. In this form, each major product or product line is organised as a separate unit. Each unit has its own functional structure for various activities necessary for the product. Multi-product organisations use this as basis for divisionalisation. This is appropriate specially when each product is relatively complex and large amount of capital is required for each product. The product requires different type of efforts as compared to others in terms of marketing and/or production. For example, Century Mills has separate divisions for textiles, cement, and shipping. Reliance Industries Limited has six product divisions: textiles, polyster, fibre intermediates, polymers, chemical, and oil and gas. Each division caters to different customers and has different types of competition.

Territorial Divisionalisation. In this form, regional offices are established as separate units. Each regional office has its own set of functional departments and operates under the strategic policies and guidelines established by corporate management. This is useful for those organisations whose activities are geographically spread such as banking, transport, insurance, etc. For example, Life Insurance Corporation of India runs its life insurance business on the basis of territorial divisionalisation in which the entire geographical area of the country has been divided into five zones-eastern, central, northern, southern, and western. Each zone has further been divided into appropriate number of divisions, for example, northern zone into four divisions located at Jalandhar, Chandigarh, New Delhi. and Ajmer. Each division has a number of branches at different places covered by the division concerned.

Strategic Business Unit. In multi-product or multi-geographical area companies, divisions are created in the form of various strategic business units (SBU). SBU concept was evolved by General Electric Company (GEC) of USA to manage its multi-product business. The fundamental concept in SBU is to identify the independent product/market segments served by an organisation. Since each independent product/market has a distinct environment, a SBU should be created for each such segment. Thus, different SBUs are involved in distinct strategic business areas with each area serving the distinct segment of the environment. For example, GEC was earlier having nine product groups and forty-eight divisions which were reorganised into forty-three strategic business units, many of which crossed group, division, and profit centre lines. For instance, three separate divisions in food preparation appliances were merged in a single SBU to serve houseware market. In creating SBUs, following features become important:

1 Each SBU is managed as a portfolio of the organisation with a clearly-defined product/market segment and clearly-defined strategy.

2. Each SBU develops its strategy tailored to its needs with aligning it to corporate capabilities and needs.

3. Each SBU is allocated resources-both physical and human-according to its needs and contributions to the achievement of organisational objectives. In India, many companies have organised their businesses on the concept of SBU. In fact, most of the companies in information technology sector which are engaged in development of software for different purposes and for different customer segments have adopted this approach. Exhibit 13.1 presents the example of Satyam Computer Services Limited to show how different SBUs have been created.

Forms Organisation Structures

Design of Divisional Organisation Structure

In designing divisional structure, there are several issues divisionalisation, which should be adequately taken care of. These are delete Structure, there are several issues, besides the basis of number of divisions, provision of corporate staff activities, and relationship between ately taken care of. These are determination of and divisional management.

1 Number of Divisions. Determination of number of divisions is quite related will us problem of basis of divisionalisation. The basic guiding principle in this context 15 at a separate division should be able to generate revenue enough to contribute to organisational objectives alter meeting its expenses. The number of divisions will be determined oni uc basis of diversity in the base which has been selected for divisionalisation. Thus, higher the diversity, more will be number of divisions. However, apart from this, cost factor should also be taken into account.

2. Provisions of Corporate Staff Activities. The provisions should be made for corporate staff activities because regardless of the degree of divisionalisation, certain activities are likely to be centralised as part of corporate staff. The basic problem in this context is what activities should be retained at the corporate level to make maximum use of resources. Some activities which can be shared easily by all divisions can be centralised at the corporate level like legal activities, research and development, etc. Further, some activities which may not fall within the purview of any division can be taken at the corporate level, for example, company law matters, determination of distribution pattern of earnings, etc.

3. Relationship between Corporate and Divisional Management. The relationship between corporate and divisional management will depend on the degree of autonomy granted to divisions. On the one hand, strong corporate management may be constantly involved in divisional affairs; on the other hand, divisions may be allowed to operate independently. only being monitored through control system. The resolution of this dilemma depends on the respective corporate and divisional strategies and working and the abilities of corporate and divisional managers.

Organisation chart of a divisional structure appears as in Figure 13.5. At the corporate level, some departments will be created to look after the activities which do not strictly fall within the purview of any division. These departments often provide services to divisional management.

Forms Organisation Structures

Suitability of Divisional Structure

Divisional structure is suitable to organisations having several products with each product having distinct features, or for organisations having coverage of wide geographical area, or having distinct market segments. Dividing the organisation into several autonomous divisions allows it many advantages of functional structure. At the same time, it makes available certain additional advantages, particularly of following types:

1 Divisional structure emphasises the end result, that is, product or customer through which revenue is generated in the organisation.

2. Since a division focuses its attention on a particular product or service. Its performance measurement is easier as the performance can be measured in the light of contributions made by the division

3. There is higher level of managerial motivation because managers work in an environment of autonomy.

4. Through divisional structure, more managers with general outlook can be developed who can easily take up the job at the corporate level. Thus, there is no problem in managerial succession.

5. Organisational size can be increased without any problem as new divisions can be opened without disturbing the existing system.

6. Each product or customer is able to get specialised service because the attention is focused by a division exclusively for it. Problems in Divisional Structure There are certain disadvantages and problems of divisional structure. Some of these problems are inherent in the system while others emerge because of wrong approach of management. Following are the major shortcomings of divisional structure:

1 Divisional structure is quite costly because all the facilities have to be arranged for each division. Therefore, unless a division justifies its cost, it should not be opened but its activities should be carried out by another division.

2. Since there is lack of emphasis of functional specialisation, many professionals do not feel satisfied with this structure.

3. Often there is a lack of managerial personnel when a new division is opened because managers working within a division cannot work with same efficiency in other division as they must have acquired the technical competence of that division.

4. Control system is a major problem of divisionalisation. Though each unit is measured in terms of its contributions to the organisation, this system does not work properly specially if information monitoring system is not suitable. Many of these problems can be overcome through sharp focus on tasks and responsibilities of corporate and divisional management, measurement of performance of divisions, long-term policy for performance and incentives, creating more autonomy and decentralisation of authority, and the explicit strategies for both the organisation as a whole and its various divisions.

Project Organisation Structure

The Major reform in the traditional functional structure has come from a group of closely titles such as project management, programme management. related structures having titles such as project man systems organisation, product management, brand management, and brand management, and matrix structure. All common that they provide a horizontal grouping together of a number which might otherwise be labelled as functional departments and exercising and functional authority. Out of these, project organisation structure and matrix 51com structure have become quite popular. The basic idea behind these structures is unat since environment changes very rapidly, the organisation must take up various activities on project basis, that is, adding the required ones and deleting the unnecessary ones. Thus, the organisation can be organic-adaptive one. The project work can be managed in two forms of organisation: pure project organisation and matrix organisation. The pure project organisation is suitable for taking small number of larger projects with long duration so that a separate division can be created for each project. Matrix organisation, on the other hand, is suitable for taking large number of smaller projects and the activities of various projects can be accomplished through temporary departments.

Project organisation appears like a divisional structure, except that in the latter, various divisions are created on permanent basis while in the former they are created only for the life time of a project. When a particular project is completed, the concerned division may disappear. However, since a project may continue for quite a long time, a project may become a sort of permanent feature. For example, Middleton observes that “a project organisation can also be the beginning of an organisation cycle. The project may become a long-term or permanent effort that eventually becomes a programme or branch organisation. The latter, in turn, may become separated from the parent organisation and be established as a fullfledged division functionally organised.”

The establishment of project organisation calls for appointment of a project manager who is responsible for the completion of the project. He coordinates the activities of the project. He prescribes what is to be done, when it is to be done, and how much resources are required. The functional personnel are drawn from various functional departments and functional managers decide who in their department will perform the task and how it will be done. Thus, project manager is a unifying and focal point for the project activities.

A project manager really does not have vertical authority on the personnel drawn from various functional departments unlike a divisional manager who has line authority over the people working in various functional departments assigned to his division. In the absence of any vertical authority, the project manager must convince the functional people so that they help him to finish the undertaking within the time. In reality, project manager faces an authority gap. He has responsibility for completing the project but does not have direct authority over the people associated with his project. Project organisation structure can be presented as in Figure 13.6.

Forms Organisation Structures

Suitability of Project Organisation

For activities which are undertaken on project basis, project organisation is most suitable. Such an activity has following features:

1 It is one-time task and is definable in terms of a single, specific goal.

2. It is infrequent, unique, and unfamiliar to the present organisation. Unfamiliarity usually leads to a disagreement as to how the activity should be managed.

3. It is complex and calls for a high degree of interdependence among the tasks.

4. There is a high degree of stake in the successful completion of the project. The time factor is critical because if the project is not completed within the stipulated time, the organisation may lose heavily because of fine provision due to delay. When project organisation structure is adopted for this type of activity, following advantages emerge:

5. Project organisation allows maximum use of specialised knowledge which is available to all projects on equal basis. Knowledge and skills can be transferred from one project to another project.

6. It enables the organisation to adapt to environmental demands particularly when environmental factors are fast changing.

7. It provides more flexibility for the utilisation of resources in the organisation by allocating them to the projects where these are needed.

Problems in Project Organisation

In fact, many of the flexibilities of project organisation may turn into problems if proper arrangement is not made for overcoming these problems. A project manager has to face unusual problems resulting from the project management. Following problems are usually experienced in project organisation:

1 Project organisation creates feeling of insecurity and uncertainty among people in the organisation. It has an ad hoc arrangement with limited life. Therefore, a question comes in mind what will happen after the project is over.

2. People are not able to identify themselves with any particular department in the organisation because they do not have permanent tenure with any project. Thus, there is less loyalty of people with the organisation.

3. There is lack of clarity among members about their role in the organisation. For example, project relationships are not based on the principles of clarity of authority and responsibility and fixed amount of authority. Thus, only those persons can work better who have high level of tolerance for ambiguity.

4. Often, project manager faces numerous problems because he has to carry responsibility without authority. Thus, he has to rely on his personal qualities rather than on his official authority. Therefore, if organisational climate is not very congenial, there is high chance of his failure.

These problems are real and a challenge lies before the project manager. If he believes in traditional system of organisation, he may not be able to work. He has to change the total philosophy of managing. For example, Cleland and King stress that a project manager has to take a new approach to his job. Such approach may be: (( he must become reoriented away from the functional approach to the management of human and non-human resources un he must understand that purposeful conflict may very well be a necessary way of life as he manages his project across many vertical organisational lines; and (itt hem that project management is a dynamic activity where major changes are alm of the day.”

Forms Organisation Structures

Matrix Organisation Structure

aux urgaunsauon structure is essentially a violation of unity of command and, whole classical concepts related to the principle of unity of command are violates structure is the realisation of two dimensional structure which emanates directly dimensions of authority. Two complementary structures-pure project structure functional structure-are merged together to create matrix structure. Thus, matrix su not only employs a multiple command but also related support mechanism and associated organisational culture and behaviour. It shows many organisational overlaps not only terms of command system but also in terms of whole organisational processes and behaviour For example, Davis and Lawrence have presented matrix structure as follows: Matrix

Matrix Matrix Matrix + Matrix organisation structure systems culture behaviour 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 specialised 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.

Forms Organisation Structures

Design of Matrix Structure

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 coordinative 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 organisation structure is presented in Figure 13.7.

Forms Organisation Structures

Suitability of Matrix Structure

Matrix structure is of recent origin but its use has spread in various fields. For example, Davis and Lawrence have observed that matrix structure can be successfully applied to the following types of activities: manufacturing activities-aerospace, chemicals, electronics, heavy equipment, industrial product, and pharmaceutical: service activities—banking, brokerage, construction, insurance, and retailing: professional activities-accounting, advertising, consulting, and law; and non-profit organizations-government agencies, hospital, United Nations, and universities. They emphasize that this list is suggestive and not exhaustive. In fact, matrix structure has been evolved to overcome the limitations of traditional organization structures.

This is being applied to various fields of activities because of pressure for dual focus: pressure for high information processing and pressure for shared resources. Wherever these conditions exist, use of matrix structure is beneficial. Matrix structure results in the following benefits:

1 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.

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

3. 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.

Forms Organisation Structures