The nature of the organizational structure that enterprises choose for its operations function should be an outgrowth of its strategic choices for the productive system. The choice of productive system type is influenced by the balance of competitive factors that emphasize quality, volume of output and cost, flexibility, and dependability of supply to customers. If the choice based on these competitive factors results in an intermittent system with a process focus, then the organization must be structured to reflect these values, giving primary support to product design flexibility and quality. Conversely, if the choice of productive system type results in a continuous system with a product focus, then the organizational structure must give primary support to dependability of supply to its customers, cost, and price competitiveness. In either situation we do not mean that the other factors should be ignored but simply that competitive priorities have been established.
The primary supervisory structure follows the physical department differentiation. First level supervisors also tend to be experts in the production technology they supervise, and they must coordinate the utilization of people, machines, and material. Higher levels in the production organization involve a broader span of control by managers. The first aggregation of responsibility involves more producing departments, as with the manufacturing manager. But at the plant manager level, the functions that support production are added, such as materials control, quality control, industrial engineering, finance and accounting, marketing, and personnel and industrial relations. In general, process focused organizations have highly developed staff functions at higher levels in the organization, and cost and profit responsibility is also at a high level.
In large organizations, which may operate a number of plants, the plant manager must necessarily have an even larger span of control over additional functions. These usually include at least some aspects of personnel and industrial relations and accounting and, depending on the nature of products and plant specialization, may include some aspects of product engineering and marketing. Thus, the production function is apt to be rather hierarchical in nature and usually includes some functions in addition to production at the higher levels. These higher level managers of production systems function as more general managers and this may account for their generally high salaries.
Why does the process focused structure give stronger support to the competitive priorities of product flexibility and quality? The product engineering function is separate and independent and is at a high level in the organization. Taking account separate and independent and is at a high is the responsibility of high level managers, who are not compromised by trade-offs that might be made for the strictly production objectives of standardization and low cost. Quality control is separate and independent from the production organization. The disadvantages of this structure are that management must provide a great deal of coordination between organizational units to make the system work and that cost and supply time are not given high priority in the structure.
Product focused organizations:
The general structure for a product focused manufacturing organization. Organization at the primary level is by product or product line. The first level supervisor is primarily responsible for the execution of plans, but he or she is supported by staff experts in production planning and scheduling, inventory control, and quality control who are responsible directly to the manager of the product department. In general, profit and cost responsibility is held by the product groups in product focused organizations; higher level staff provides coordination, but it has much less direct influence over operating decisions.
In the product focused organization, the close association of the control elements that bear on costs, on-time delivery, and quality makes the entire local organization tuned to perform effectively in achieving these goals. Authority is highly decentralized, which contributes to achieving the specialized objectives of the unit. Each manager of the production of a product line functions more nearly like an independent small organization with relatively little oversight and coordination from corporate levels.
The disadvantages of the product focused organization are in the lack of flexibility of personnel who may be specialized to a high degree and the inability of the organization to accommodate customer needs for variations in product design.