Good morning, ladies and gentlemen!Today we’ll discuss the problem that often appears towards the manager. This isa problem of organizational choice or how to group product activities byproduct or by function. In other words, should all specialists in a givenfunction be grouped under a common boss, regardless of differences in productsthey are involved in, or should the various functional specialists working on asingle product be grouped together under the same superior.
But the aim ofour presentation is not to persuade you that only one way is the right and onlythis way should be used in each organization. We’ll try to show you that eachreorganization is temporary and manager always have to find some middlepositions between that two ways of organization, he have to find somecompromise. Another point I’d like to underline that all our presentation willbe told from the behavioral scientist’s viewpoint.
So, during ourpresentation we’ll offer you some elements to consider, then we’ll talk aboutbehaviorist’s findings on that matter and consider the example with two plants.After that we’ll summarize all our presentation and maybe give some usefuladvice for managers.
/>If that clear let me beginour presentation.
First of allwe have to understand what makes those issues so difficult. It is useful toreview all the criteria often relied on during making decisions. Typically,managers have used technical and economic criteria. For example, they may askthemselves “Which choice will minimize payroll costs?” or “Which will bestutilize equipment and specialists. This approach shows us the real logic oftraditional management and has strong support from classical school oforganizational theory. The classical school theorists suggested that themanager should make the choice based on the following three criteria:
· Whichapproach permits maximum use of special technical knowledge?
· Whichprovides the most efficient utilization of machinery and equipment?
· Whichprovides the best hope of obtaining the required control and coordination?
As you can see there is nothing wrong with these criteria, but theyfail to recognize the complex set of trade-offs involved in these decisions,cause managers often make changes that produce unanticipated results and evenreduce the effectiveness of organization. For example there is an organizationwhich few years ago shifted from a product basis to a functional basis. Thereason was that it would lead to improved control of production costs andefficiencies in production and marketing. While the organization didaccomplished these aims, it found itself less able to obtain coordination amongits local sales and production units.
This example pinpoints the major trade-off that the traditionalcriteria omit. Developing highly specialized functional units makes itdifficult to achieve coordination or integration among these units. On theother hand, having product units as the basis for organization promotescollaboration between specialists, but the functional specialists feel less identificationwith functional goals.
Now lets turn to another point of view. Behaviorists’ recent studieshighlighted three other important factors about specialization andcoordination. They are:
· Differentiation
· Integration
· Communication
Lets talk about these three factors in more detail. First, differentiation,which simply means the differences in behavior and thought pattern that developamong different specialists in relation to their respective tasks. Differentiationis necessary for functional specialists to perform their jobs effectively.
Differentiation is closely related to achievement of coordination,or what behavioral scientists call integration. This means the collaborationbetween specialized units or individuals.
/>While achievement of both differentiation and integration is possible,it can occur only when well-developed means of communication amongspecialists exist in the organization and when the specialists are effective inresolving the inevitable cross-functional conflicts.
These recent behaviorists studies point to the following threequestions that managers must consider when they choose between a product orfunctional basis of organization.
1. How will the choice affect differentiation amongspecialists?
2. How does the decision affect the prospects ofaccomplishing integration?
3. How will the decision affect the ability oforganization members to communicate with each other resolve conflicts and reachthe necessary joint decisions?
There appears to be a connection between the appropriate extent ofdifferentiation and integration and the organization’s effectiveness inaccomplishing its economic goals. What the appropriate pattern is depends onthe nature of external factors – markets, technology and so on – facing theorganization, as well as the goals themselves. The question of how theorganizational pattern will affect individuals members is equally complex.Management must consider how much stress will be associated with a certainpattern and whether such stress should be a serious concern.
To explore in more detail the significance of modern approaches toorganizational structuring, we shall describe one recent study conducted in twomanufacturing plants – one organized by product, the other on afunctional basis.