Approaches in an Organization

Probably the most widespread trend in various departments in recent years has been the implementation of team concepts. The vertical chain of command is a powerful means of control, passing all decisions up the hierarchy takes too long and keeps responsibility at the top. The team approach gives managers a way to delegate authority, push responsibility to lower levels and be more flexible and responsive in the competitive global environment.

There are two ways to think about using teams in organizations. Cross functional teams consist of employees from various functional departments who are responsible to meet as a team and resolve mutual problems. Team members typically still report to their functional departments, but they also report to the team, of which one member may be the leader. Cross functional teams are used to provide horizontal coordination to complement an existing divisional or functional structure. A frequent use of cross-functional teams is for change projects, such as new product or service innovation. A cross functional team of mechanics, flight attendants, reservations agents, ramp workers and luggage attendants and aircraft cleaners, for example collaborated to plan and design a new low fare for some Airways.

The second approach is to use permanent teams, groups of employees who are brought together similar to a formal department. Each team brings together employees from all functional areas focused on a specific task or project, such as parts supply and logistics for an automobile plant. Emphasis is on horizontal communication and information sharing because representatives from all functions are coordinating their work and skills to complete a specific organizational task. Authority is pushed down to lower levels and front line employers are often given the freedom to make decisions and take action on their own. Team members may share or rotate team leadership. With a team based structure, the entire organization is made up of horizontal teams that coordinate their work and work directly with customers to accomplish the organization’s goals. A company say Imagination Ltd is based entirely on teamwork. Imagination puts together a diverse team at the beginning of each new project it undertakes, whether it be creating the lighting for Disney cruise ships or redesigning the packaging for Ericsson’s cell phone products. The team then works closely with the client throughout the project. Imagination has managed to make every project a smooth, seamless experience by building a culture that supports team work, as described.

The virtual Network approach

The most recent approach to departmentalize extends the idea of horizontal coordination and collaboration beyond the boundaries of the organization. In a variety of industries, vertically integrated hierarchical organizations are giving way to loosely interconnected groups of companies with permeable boundaries. Outsourcing, which means framing out certain activities, such as manufacturing or credit processing that has become a significant trend. In addition partnerships, alliances, and other complex collaborative forms are now a leading approach to accomplishing strategic goals. In the music industry firms such as Sony and some other companies have formed networks of alliances with Internet service providers, digital retailers, software firms and other companies to bring music to customers in new ways. Some organizations take this networking approach to the extreme to create a new kind of structure. The virtual network structure means that the firm subcontracts most of its major functions to separate companies and coordinates their activities from a small headquarter in the organization.

The organization may be viewed as a central hub surrounded by a network of outside specialists, as illustrated. Rather than being housed under one roof, services as accounting, design, manufacturing and distribution are outsourced to separate organizations that are connected electronically to the central office. Networked computer systems, collaborative software, and the Internet enable organizations to exchange data and information so rapidly and smoothly that a loosely connected network of suppliers, manufacturers, assemblers and distributors can look and act like one seamless company.

The idea behind networks is that a company can concentrate on what it does best and contract out other activities to companies with distinctive competence in those specific areas. This enables a company to do more with less.

With a network structure it is difficult to answer the question- Where is the organization? In traditional terms, the different organizational parts may be spread all over the world. They are drawn together contractually and coordinated electronically, creating a new form of organization. Many like building blocks, parts of the network can be added to take away or to meet changing needs.

A similar approach to networking is called the modular approach, in which a manufacturing company uses outside suppliers to provide entire chunks of a product, which are then assembled into a final product by a handful of workers. Automobile plants, including General Motors, Ford, Volkswagen and Daimler-Chrysler are leaders in using the modular approach. GM has a modular factory in Brazil and is building several more. The modular approach hands off responsibility for engineering and production of entire sections of an automobile such as the chassis or interior, to outside suppliers. Suppliers design a module making some of the parts themselves and subcontracting others. These modules are delivered right to the assembly line, where a handful of employees bolt them together into a finished vehicle.

Each of these approaches to departmentalize – functional, divisional, matrix, team and network – has strengths and weaknesses.

Functional approach:

This includes grouping employees on the basis of common task permit, economies of scale and efficient resource use. For example, all information technology (IT) people work in the same, large department. They have the expertise and skills to handle almost any IT problem for the organization. Large, functionally based departments enhance the development of in-depth skills because people work on a variety of related problems and are associated with other experts within their own department. Because the chain of command converges at the top, the functional structure also provides a way to centralize decision making and provide unified direction from top managers. The primary disadvantages reflect barriers that exist across departments. Because people are separated into distinct departments, communication and coordination across functions are often poor, causing a slow response to environmental changes. Innovation and change require involvement of several departments.