1. MANAGING ORGANIZATIONS
Session 4: Structural Groupings
Sourav Mukherji
PGP 2012-14 Section C & E
Associate Professor of Organization & Strategy
Term 1:June-September 2012 Indian Institute of Management Bangalore, India

2. 2
RECAP: THERE ARE VARIOUS WAYS OF ANALYZING STRUCTURES
Configurations Dimensions Groupings
Five key parts in organizations Centralization :decision making Functional structure
rights and responsibilities
Line functions, support functions Divisional structures
and managerial functions Formalization: extent of rules
and regulations Matrix structure
Specialization : structural Hybrid structure
differentiation , departments,
Geographic spread Team / Project based structures
Network structures
© S Mukherji

3. 3
WE WILL LOOK AT DIFFERENT WAYS OF GROUPING EMPLOYEES
Configurations Dimensions Groupings
Five key parts in organizations Centralization :decision making Functional structure
rights and responsibilities
Line functions, support functions Divisional structures
and managerial functions Formalization: extent of rules
and regulations Matrix structure
Specialization : structural Hybrid structure
differentiation , departments,
Geographic spread Team / Project based structures
Network structures
1. How do we leverage diversity (of skills) and develop specialization ?
2. How do we ensure unity of effort ?
3. How do we handle interdependencies between various groups?
© S Mukherji

4. FUNCTIONAL STRUCTURE: COMMON STRUCTURAL FORM FOR 4
POST-ENTREPRENEURIAL ORGANIZATIONS
Single product company General
Manager
Purchase Manufacturing Sales
Prod 1 P1 P2 P3 M1 M2 M3 S1 S2 S3
Pi : ith kind of activity
for function P
Weak forms of specializations emerge within a function
© S Mukherji

5. FUNCTIONAL STRUCTURE: EMPLOYEES HANDLING MULTIPLE 5
PRODUCTS FROM SAME FUNCTION
Multi- product company General
Manager
Purchase Manufacturing Sales
Prod 1 P11 P12 P13 M11 M12 M13 S11 S12 S13
Prod 2 P21 P22 P23 M21 M22 M23 S21 S22 S23
Prod 3 P31 P32 P33 M31 M32 M33 S31 S32 S33
Super-specialization emerging within functions
© S Mukherji

6. 6
PRODUCT AFFILIATIONS DEVELOPING WITHIN FUNCTIONS
Multi- product company General
Manager
Purchase Manufacturing Sales
Prod 1 P11 P12 P13 M11 M12 M13 S11 S12 S13
Prod 2 P21 P22 P23 M21 M22 M23 S21 S22 S23
Prod 3 P31 P32 P33 M31 M32 M33 S31 S32 S33
Product affiliations developing across functions
© S Mukherji

7. 7
SWITCHING OVER TO A PRODUCT BASED STRUCTURE
Multi- product company General
Manager
Product 1 Product 2 Product 3
Purchase P11 P12 P13 P21 P22 P23 P31 P32 P33
Manufacturing M11 M12 M13 M21 M22 M23 M31 M32 M33
Sales S11 S12 S13 S21 S22 S23 S31 S32 S33
Functional specialization within product units © S Mukherji

8. 8
THE FUNCTIONAL STRUCTURE
Functional grouping places employees together who perform similar
functions or bring similar knowledge or skills to the work being done
Advantages of functional Disadvantages of functional
grouping grouping
• Economies of scale within • Need for horizontal coordination
functional departments • Restricted view of organization goals
• Enables in-depth knowledge • Slow response to change
and skills development • Not suitable for innovation that involves
• Promotes efficiency cross functional collaboration
• Social interdependencies • Bureaucratic
Common initial structure, suitable for organizations
with lesser number of products
© S Mukherji

9. 9
REAL LIFE ORGANIZATIONS HAVE HYBRID STRUCTURES
HEAD OFFICE
HR
FINANCE
LEGAL
TELEVISION REFRIGERATOR WASHING
MACHINE
PURCHASE SALES PURCHASE SALES PURCHASE SALES
PRODUCTION PRODUCTION PRODUCTION
© S Mukherji

10. CENTRAL MARKETING ORGANIZATION TO ADDRESS CUSTOMER 10
NEEDS COMPREHENSIVELY
HEAD OFFICE
CENTRAL HR FINANCE
MARKEING
& SALES
LEGAL
TELEVISION REFRIGERATOR WASHING
MACHINE
PURCHASE SALES PURCHASE SALES PURCHASE SALES
PRODUCTION PRODUCTION PRODUCTION
© S Mukherji

11. 11
REAL LIFE ORGANIZATIONS HAVE HYBRID STRUCTURES
FINANCE
HEAD OFFICE
HUMAN
CMSO RESOURCE
LEGAL
TELEVISION REFRIGERATOR WASHING
MACHINE
PURCHASE DIV HR PURCHASE DIV HR PURCHASE DIV HR
PRODUCTION PRODUCTION PRODUCTION
© S Mukherji

12. HORIZONTAL LINKAGES NECESSARY TO 12
OVERCOME FUNCTIONAL DEFECIENCIES
Teams
HIGH
Full-time integrators
Necessity for Task forces
Horizontal linkages
Liaison roles
Information
LOW systems
LOW HIGH
Complexity of linking device
© S Mukherji

13. 13
A TALE OF TWO PRODUCT DEVELOPMENT TEAMS
Corporate
Head Office
Project
Manager
Chevrolet Oldsmobil Buic Cadillac
Engineering Engineering Engineering Engineering
Production Production Production Production
Marketing Marketing Marketing Marketing
Procurement Procurement Procurement Procurement
© S Mukherji

14. 14
THE DIVISIONAL STRUCTURE
• In ‘divisional structure’, an organization is grouped on the basis of ‘outputs’
- Products , services, projects, programs, businesses or profit centers
• Divisional structure may also be known as
- Product structure or strategic business units
• Geographic grouping is a special case of divisional structure
- Customer or market based grouping
Advantages Disadvantages
• Achieves coordination across functions • Redundancy of functional
• Suitable for adaptation and change departments
• Helps in innovation if it requires inputs • Weak coordination across
from multiple functions product / service lines
• Decentralizes decision making • Lower scope for in depth
• Suitable for organizations with specialization
multiple products or services • Diminished sense of professional
• Modular nature worth, impedes contact among
specialists
© S Mukherji

15. 15
ORGANIZATION DESIGN INVOLVES DIFFICULT TRADEOFFS
FUNCTIONS In depth expertise
Flexibility
Multiple ways
and Order
to group
tasks in order PRODUCTS / Responsiveness Set of
to take SERVICES Specialize contradictory
and Integrate
advantage of demands
division of
labour Decentralize &
GEOGRAPHIES Coverage Unity of effort
A Matrix structure tries to achieve best of all possibilities
• Complex to design and implement
• Ambiguous and in a state of constant flux
• Operating on the edge
• Interpersonal in nature – constant bargaining and negotiation
debates and discussions between enlightened individuals !
© S Mukherji

16. 16
THE MATRIX STRUCTURE
• In Matrix structures, both functional and divisional structures are
implemented simultaneously.
• Product managers and functional managers have equal authority within the
organization and employees report to both of them.
• It is a strong form of integration mechanism and may be temporary or permanent
Conditions suitable for matrix structure
• Rapidly changing environment that calls for fast response and innovation driven
by in depth specialization
• Need for high degree of coordination and information processing across
multiple dimensions
• Scarcity of resources that prevents creation of redundancies
• Organization reasonably large to absorb the overheads of coordination and communication
• Suitable organizational culture that can accommodate dual reporting
A Matrix structure is for grown up organizations – where managers are prepared to resolve
their conflicts through informal negotiations among equals rather than recourse to
formal authority – Sayles , Galbraith
© S Mukherji

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MATRIX STRUCTURE IS FLEXIBLE IN NATURE
Varieties can explode as one moves away from the one-person-one-boss formula
MEDICAL SCHOOL MNC CHEMICAL ORGANIZATION
Departments
Programmes Cardiac GI Renal Function
Undergraduate
Graduate
Research Product Geography
MNC MICROPROCESSOR ORGANIZATION
Temporal Objectives
Strategy
Product Tactics
Function
• Structure draws in people to collaborate, rather than restrict any activity
• Renders temporariness to the entire structure such that structure ceases to remain important
and processes and behaviour dominate
• Prevents development of power bases, making it easier to handle changes
• Develops orientation towards learning and adapting – suitable for innovations in large organizations
© S Mukherji

18. 18
MATRIX DEMANDS NEW ROLES
• Power balancing
Dual budgeting, dual evaluation
• Managing the decision context
MATRIX LEADER Bring out conflicts in the open
Open debates and transparency
Timely resolution
• Setting performance standards
Provide direction
Stretch and challenge
• Expertise or superior customer
knowledge as a source of power,
and not position in hierarchy
• Treat the other dimension as an
internal customer / client
• Remember the bigger goal of the
organization that is common to both
MATRIX BOSS MATRIX BOSS
• Be fidel to the task at hand , rather
than developing affiliations with either
• Resolve conflicts by involving
both the bosses
• Cultivate unique position as a
convergence for critical information
and reconciliation
TWO- BOSS MANAGER © S Mukherji

19. THE MATRIX AS MEANS OF CREATING A 19
COMPLEX ORGANIZATION
Leader
The matrix provides a fast track
for the competent individual to
Organization
develop skills in general management
Zone of organizational General and leadership
pathologies
Manager
• communication and openness
Business • tolerance for ambiguity
• flexibility
• capacity to deal with change
• learning ability
• balancing power
Function • identification with organizational goals
• Dealing with responsibility without
having to wield authority
Individual Team
© S Mukherji