Types Of Organizations PDF

TYPES OF ORGANIZATIONS Chapter 7 Types of Organizations Objectives: At the end of this chapter, you will be able to: Have knowledge about line organization, functional organization, Line &Staff organization, various aspects related to them...

TYPES OF ORGANIZATIONS Chapter 7 Types of Organizations Objectives: At the end of this chapter, you will be able to: Have knowledge about line organization, functional organization, Line &Staff organization, various aspects related to them, advantages/ disadvantages. Committee organization, project organization, matrix and free form organization, various aspects related to them, advantages/ disadvantages. 165  TYPES OF ORGANIZATIONS Structure: 7.1 Introduction 7.2 Line, military or scalar Organization 7.3 Functional Organization 7.4 Line and staff Organization 7.5 Committee Organization 7.6 Project Organization 7.7 Matrix Organization 7.8 Free form Organization 7.9 Case examples 7.10 Activities for the students 7.11 Summary 7.12 Self-Assessment Questions 7.13 Multiple Choice Questions 166  TYPES OF ORGANIZATIONS 7.1 Introduction Purpose of studying this chapter is as follows: When an organization is created, it has got its structure and span of control, which is nothing but the interrelations between various employees working in the company. There are seniors, middle managers, and the operation level people at the bottom. Different types of requirements need different type of structures of organizations. Depending upon certain factors, we have to design our organizations accordingly. It gives us a snapshot about under what conditions we need what kind of organization. After learning this chapter, you will be able to correlate and understand as to which type of business requires which type of organization. Organization is designed on the basis of principles of division of labor and span of management. The success of the organization depends upon the experience and competence of the officers of the organization. There is a necessity of chalking out the line of authority among the people who are working in an organization to achieve the desired results. Further, it involves determination of duties among the officers and combining the activities of all officers to get the desired results. Nature, scale and size of the business are the normal factors which determine the forms of an internal organization. The following common types of organizations find a place in the structure of an internal organization: 1. Line, military or scalar Organization 2. Functional Organization 3. Line and staff Organization 4. Committee Organization 5. Project Organization 6. Matrix Organization 7. Free form Organization 167  TYPES OF ORGANIZATIONS 7.2 Line, Military Or Scalar Organization Line Organization is the simplest and the oldest type of organization followed in the company. Under this organization, each department is generally a complete self-contained unit. A separate person will look after the activities of the department and he has full control over the department. There are certain powers which will be given to the line executives to take decisions whenever a need arises. He communicates his decision and orders to his subordinates. The subordinates, in turn, communicate the decisions to those who are immediately working under them. Such decision making authority flows from the top management level to the bottom. The top management people have greater decision making authority than the bottom level executives. In this type of organization, an executive is independent of other executives of the same level, say departmental heads. In other words, the same level executives do not give or receive orders amongst themselves. But they receive orders from their immediate boss - General Manager - and give orders to their subordinates. It is clear that all the departmental heads are responsible to the general manager, who, in turn, is responsible to the Board of Directors. 168  TYPES OF ORGANIZATIONS Since this type of organization is followed in the Army, it is also called as MilitaryOrganization. Under this organization, the line of authority flows from top to bottom vertically. So, it is called Line Organization. Characteristics of a Line Organization: 1. Direct vertical relationships 2. Authority flows from top level to bottom level. 3. Departmental heads are given full freedom to control their departments. 4. Each member knows from whom he would get orders and to whom he should give orders. 5. Operation of this system is very easy. 6. A senior member has direct command over his subordinates. 7. Existence of a direct relationship between the superiors and subordinates. 8. Each member knows to whom he is responsible for the accomplishment of objectives of the organization. 9. The superior takes the decision within the scope of his authority. Advantages of Line Organization: 169  TYPES OF ORGANIZATIONS Disadvantages of Line Organization: 1. Lack of specialization: Each person is responsible for the overall exhibition of activities relating to his department alone. He is not expected to be an expert in all aspects of managerial tasks. He simply gives instructions to his subordinates but does not specialize in certain phases of operation. 2. Overloading: Whenever the scale of operations increases, this system overloads the existing executives. So they are not able to direct and control their subordinates properly. 3. Lack of initiative: Since maximum authority is invested with the top management, the departments lose their initiative. 4. Scope for favoritism: Only one person controls the activities of the department. So, there is scope for favoritism and nepotism. 5. Dictatorship: A subordinate has to carry out the instructions and orders given by the superior. If the subordinate fails in this, he is penalized. This results in an autocratic and aristocratic approach. 6. Limited communication: In normal time, the communication moves downwards, but very rarely does it move upwards. The downward communications can be orders, instructions etc. If upward communication is allowed, the management may know the grievances of the employees. However, upward communication is not appreciated by management. 7. Unitary administration: Activities of each department are looked after by a single executive who takes all the decisions relating to the department. Hence, the successful functioning of the department depends on his abilities. 170  TYPES OF ORGANIZATIONS 8. Subjective approach: The degree of availability of authority is more to the superior than to the subordinates. So the superior takes the decisions without considering the opinions of the subordinates. 9. Instability: The success of this type of organization depends mostly on the ability of a few strong persons and if they are not capable enough, the organization fails. 10. Lack of proper coordination: Coordination among the departments is not easy to achieve. The reason is that the executive of the department does not consider other departments important. This results in lack of cooperation and team spirit. 11. Unsuitability for large scale enterprises This is not suitable for organizations requiring specialization. 12.The business activities may be divided according to the will of the manager rather than according to any scientific plan. 13.The system has no means of appreciating efficient workers or punishing inefficient workers. 14.It is very difficult to find efficient persons which are essential for the top management. 15.The required time and efforts are insufficient for managerial planning, research & development and controlling activities of the organization. Suitability: 1. Suitable for small size business units 2. Suitable for routine nature or machine based activities 3. Suitable for service minded business activities 4. Suitable for less number of persons working. 5. Suitable for operations simple in nature. 6. Suitable for a business unit having straight methods of operations. 171  TYPES OF ORGANIZATIONS 7.3 Functional Organization Under a Functional Organization, various specialists are selected for various functions performed in the organization. These specialists attend to the work common to different functions of various departments. The workers receive instructions from various specialists. The specialists work at a supervision level. Thus the workers are accountable to not only one specialist, but also to the specialist from whom instructions are received. F.W.Taylor advocated this organization as a point of Scientific Management. In this type of organization, directions of work are decided by functions, and not merely by authority. Video Link 1 Video Link 2 172  TYPES OF ORGANIZATIONS The need for a Functional Oganization arises out of: 1. A desire to use the specialization in full 2. To avoid workload of line managers with complex problems and decision making 3. To deal with complexity of modern and large scale organizations. Characteristics of a Functional Organization: 1. The work is divided according to specified functions. 2. Authority is given to a specialist to give orders and instructions in relation to a specific function. 3. Functional authority has a right and power to give command throughout the line with reference to his specified area. 4. The decision is taken only after making consultations with the functional authority relating to his specialized area. 5. The executives and supervisors discharge the responsibilities of functional authority. Video Link 1 Video Link 2 173  TYPES OF ORGANIZATIONS In the above diagram, various specialists are mentioned as follows: 1. Route clerk: He fixes the route through which each work should travel up to the stage of completion. 2. Instruction card clerk: He is expected to draft instructions to workers on the basis of the route fixed by the route clerk. 3. Time and cost clerk: He fixes the standard time and cost incurred for each work. He gives instructions to workers to record the time actually spent by them and actual cost incurred for completion with reference to the standards. 4. Gang boss: This worker is expected to see the various machines and materials are kept ready for workers to perform the work. 5. Speed boss: He advises the workers to complete the work within the standard time considering the speed of the machines. Further, the speed boss sees whether each work is completed in time or not. 6. Inspector: The inspector checks up the quality of each work and certifies it as standard. Actually, the accuracy of work is checked with reference to the specification. 7. Repair boss: His work starts only after the actual work is performed by the workers. He is concerned with the upkeep of machines and equipments. It means that his responsibility is maintenance of machines. 8. Disciplinarian: He implements the rules and regulations of the entire organization. He is a peacemaker of the organization. He also checks whether each work is performed in a systematic and perfect manner. 174  TYPES OF ORGANIZATIONS The Route clerk, Instruction card clerk and Time & cost clerk work in the Planning department. The Gang boss, Speed boss, Inspector and Repair boss belong to the factory section. The Disciplinarian is not a staff of any section, but is responsible for the workers' conduct. Advantages of Functional Organization: 175  TYPES OF ORGANIZATIONS Disadvantages of Functional Organization: 176  TYPES OF ORGANIZATIONS Suitability: It is very suitable to a business unit which is engaged in manufacturing activities of special processes. 177  TYPES OF ORGANIZATIONS 7.4 Line and staff Organization In order to reap the advantages of both the Line organization and Functional organization, a new type of organization is developed, which is the Line and Staff organization. In this, the disadvantages of line as well as functional organization can be avoided to some extent. The line officers have the authority to take decisions and implement them to achieve the objectives of the organization. The line officers are assisted by the staff officers while framing the policies and plans and taking decisions. In the fast developing technical world, the line officers are not in a position to acquire the technical knowledge. E.g. for taking decisions in production, technical knowledge is needed to take correct decisions. This gap will be bridged by staff officers who are experts in a particular field. The line officers can get expert advice from the staff officers before taking any final decisions. The authority flows from the top level to the lower level of the organization through the line officers, while the staff officers attached to the various departments advise the departments. The staff officers do not have any authority to control anybody in the organization. Further, the staff officers are not in a position to compel the line officers to follow the advice given by them. Each department is headed by a line officer who exercises full authority regarding planning, implementation and control of workers under him with the help of staff officers. The workers get instructions only from line officers. Hence, there is unity of command and specialization. 178  TYPES OF ORGANIZATIONS Types of Staff: 1. Personal Staff: Personal staff means a person who assists another person in the performance of work effectively. This type of a person is appointed at the top level of an organization. The personal staff members do not supervise the subordinates of line officers. 2. Specialized Staff: The specialized staff members render service to the line officers at all levels of the organization. 3. General Staff Assistant: They are a group of persons who are rendering service as advisors to the top management in specific matters. The primary feature of the general staff is that they give advice regarding overall plans and policies of the organization. But they are not specialized in any area. Functions of Staff Officers: The staff officers assist the line officers in the planning of business activity. The board of directors frame the policies of the business on the basis of recommendations given by the staff officers. The managers can get advice from the staff officers regarding the selection, training, placement and remuneration fixation of the personnel. The staff officers give advice regarding the method of improving the product, the technique of reducing the cost of production, increasing the profits of the concern etc. The staff officers prescribe the procedures to be followed by the line officers in the execution of policies and programs. The staff officers of a department help the manager in the preparation of budget of the department. 179  TYPES OF ORGANIZATIONS The staff officers may be called to solve the administrative problems encountered by the line officers in general. The line officers have to extend their full cooperation to staff officers and vice versa. This ensures smooth functioning of the organization. In certain circumstances, conflicts may arise between them. However, blaming each other should be avoided. Arguments of Line Officers against Staff Officers 1. The staff officers have only theoretical academic knowledge but not practical knowledge. 2. Frequently, the staff officers go beyond their sphere of activity and assume that they have the line officers' authority. 3. Much of the advice given by the staff officers is impractical. 4. Since the staff officers are not responsible for the results they suggest unfruitful ideas. 5. The staff officers unnecessarily increase the paperwork of the officers. 6. The staff officers give advice without considering the nature of business as a whole. 7. The ideas of staff officers take into consideration only the objectives of the departments to which they are attached, instead of the broad objectives of the business. 8. Staff officers are very much interested in becoming line officers of the organization rather than imparting advice to them. 9. Staff officers blame the line officers for the failure of the project, but are keen on getting credit for the success of the project. 180  TYPES OF ORGANIZATIONS Arguments of Staff Officers against Line Officers 1. The line officers completely neglect the advice given by the staff officers. 2. The line officers hesitate to accept new ideas. 3. The line officers do not follow the advice of staff officers properly. 4. Some line officers simply reject the advice the staff officers give without considering its validity. 5. Some line officers are not ready to ask for any advice from the staff officers. 6. The line officers do not exploit the full services of the staff officers. 7. The line officers dissuade the management from giving authority to staff officers to implement new schemes. Solution to the conflict between Line Officers and Staff Officers: 1. Both line officers and staff officers should clearly understand the nature of relationship prevailing between them. 2. A separate staff member should be appointed to bring about co- operation between the line officers and staff officers. 3. The line officers should be encouraged to use the advice of staff officers. 4. Only qualified persons should be selected and placed as staff officers. 5. The line officers should convince the staff officers if their advice is not accepted. 6. The responsibility for results could be fixed on both line officers and staff officers. 181  TYPES OF ORGANIZATIONS 7. Some line officers may resist the change, when it is the duty of staff officers to encourage the line officers to participate in the proposed scheme of change. 8. Only experienced persons should be promoted as line executives. 9. The staff officers can give full credit to the line officers for the results obtained. 10.Remove the fear of both line officers and staff officers whether the new ideas of advice would be properly put into use or not. 11.If favourable results are obtained, the line officers may appreciate the staff officers. 12.A special privilege may be given to the line officers to reject or accept the advice given by the staff officers. Advantages of Line and Staff Organization: 1. It facilitates the workers to work faster and better. 2. Specialization is attained when the staff officers concentrate on the planning function and the line officers concentrate on the execution function. 3. It enables the organization to effectively utilize the staff officer's experience and advice. 4. The line officers can take sound decisions with the help of proper advice from the staff officers. 5. A new technology or a new procedure may be introduced in the organization without any dislocation. 6. A new variety of responsible jobs can be given to skilled workers. 7. The work of line officers would be reduced to some extent if they were relieved of the work of taking decisions. 8. It promotes the efficient functioning of the line officers. 182  TYPES OF ORGANIZATIONS 9. The Principle of the unity of command is followed in the line and staff organization. Hence, the line officers can maintain discipline among the workers and exercise control over the workers. 10.A very good opportunity is made available to the young person to get training. Disadvantages of Line and Staff Organization: 1. If the powers of authority pertaining to the line officers and staff officers are not clearly defined, confusion may arise throughout the organization. 2. It is very difficult to control the line officers when they reject the advice of the staff officers. 3. The line officers may reject the advice without assigning any reasons for their action. 4. The staff officers may under-estimate the authority of line officers. The reason is they might think they are superior to the line officers. 5. The staff officers are not involved in the actual implementation of the program. Therefore, it is not obligatory on their part to give advice with care and caution. 6. The staff officers are not responsible if favourable results are not obtained. 7. It requires the appointment of staff officers who are specialized in various areas. It increases the administrative expense of the organization. 8. There is no authority to the staff officers to compel the line officers to accept and implement the advice given by them. 9. There is a communication gap between line officers and staff officers. It reduces the degree of co-operation between them. 183  TYPES OF ORGANIZATIONS 10.The differences of opinion between line officers and staff officers will defeat the very purpose of specialization. 11.The line officers may misunderstand the advice given by the staff officers and proper results cannot be obtained. Sometimes, the staff- officers cannot give unambiguous advice to the line officers. 12.Line officers blame the staff officers for unfavourable results and want to get rewards for favourable results. 13.Frequently, the line officers want to get advice from the staff officers not only on important matters, but also on ordinary matters. It reduces the effectiveness of control of line officers. 7.5 Committee Organization In the modern business world, a single person alone cannot perform some administrative tasks. When two or more persons are required to perform the same administrative task collectively, it shapes into a committee of an organization. A Committee is a group of persons to whom certain managerial functions are assigned and from whom some advice or recommendation are expected. According to Hicks, "A committee is a group of people who meet by plan to discuss or make a decision for a particular subject." The top management fixes the duties, responsibilities and authority and the committee is accountable to the management. Terry has defined the committee as "Body of persons elected or appointed to meet on an organized basis for the discussion and dealing of matters brought before it.” Webster's New International Dictionary defines committee as a, "Body of persons appointed or elected to consider, investigate or take action upon and usually repose concerning some matter or business, as a court, legislative body or a number or persons." 184  TYPES OF ORGANIZATIONS Haimahh has defined a committee as a "group of persons either appointed or elected who are to meet for the purpose of considering matters assigned to it." Types of Committees: 1. Advisory Committee (or) Problem Solving Committee This committee examines the problems which are referred to it. If a committee is requested to solve a given problem, it should give the best solution. The reason is that committee members have wide knowledge, offer different opinions and suggest approaches to solve a problem. Before solving a problem, the problem is analyzed by the committee after considering the pros and cons of the proposed solutions. 2. Fact-finding Committee This type of committee is formed only with the purpose of collecting information on a particular subject. A detailed report is submitted with recommendations to the management. This is the most common committee formed in any organization. 3. Action Committee (or) Executive Committee This committee consists of line officers. This committee can take decisions and it has power to implement the decisions. The committee is permanent in nature. Board of Directors of a company is the best example of an Action committee. Functions of a Committee: 1. Collect the necessary information from different sources and arrange the information orderly. 2. Critically analyze the collected information. 3. Draft a detailed report containing the recommendation for the purpose of implementation. 4. Formulate the standard of performance for the purpose of evaluation of actual performance in future. 5. Take a decision if the committee is requested to do so. 185  TYPES OF ORGANIZATIONS 6. Frame the policies if the organization. 7. The committee can select personnel or carry out the business operations. 8. Direct and control the officers at regular intervals to achieve the above mentioned goals. Advantages of Committee Organization: 1. The committee can take valuable decisions. The committee members can make use of their experience and knowledge while taking decisions. 2. Hasty decisions are avoided by the committee. Normally, hasty decisions do not give maximum benefit to the organization. Hasty decisions are not worthy from a long term of point view. 3. The committee members are encouraged to participate in the decisions making process. Each committee member can acquire knowledge of and understand the feelings of the people in other parts of the company. Keeping these in view, the decision is taken by the committee. 4. The committee decisions will certainly be the best ones. There is proverb.”Two heads are better than one." 5. By participating in the decision making process, an officer is persuaded to accept the decision and implement the decision without any delay. 6. Co-ordination between the various departments becomes very easy. The reason is that the committee consists of members from various departments. According to Koontz and O'Donnell, "The Committee is a useful device for co-ordinating business planning and the executing of the business polices." 7. The committee members have authority to implement the decisions. If any individual takes a decision, the committee may not implement the decision. The reason is that there is no authority for the committee to implement the decision taken by an individual. 186  TYPES OF ORGANIZATIONS 8. If a young person is motivated to participate in the decision making process of a committee, he can get very good training. It is one way of utilizing the opportunity offered to him. 9. Normally the committee consists of specialists from various fields. Then, new ideas may be developed by the committee in the areas of production, sales, customer service and the like. 10.Whenever a decision is taken in an organization, it should be communicated to all the employees. The committee members can disseminate the decision taken by the committee to the employees immediately. It saves considerable time in communication. 11.The decision taken by the committee reveals the feelings, ideas and thoughts of all the members of the committee. The decision is taken only after obtaining the approval of all the persons who are participating in the decision-making. 12.Sometimes the decision is arrived at after getting the approval of the majority of the members participating in the decision making. Therefore, the committee follows a democratic process in decision- making. 13.Even if a person is opposed to the decision taken, he may accept the decision taken by the committee. He will act so, even though he will not be compelled to accept the decision. It means voluntary acceptance on the part of the concerned persons. 14.Committee members are requested to express their views, ideas and feelings freely. It will minimize the clashes of interests among the employees of the organization. The discussion may be pertaining to wages, salary, bonus, welfare schemes and the like. 15.The line executives are included in the committee for decision-making. It prevents the line executives from feeling that they are not consulted while taking decisions. 16.If any problem is to be solved by the committee, it can be done by following the principle of division of labor. Each committee member can 187  TYPES OF ORGANIZATIONS analyze the problem from various angles at the same time and arrive at a fruitful solution. 17.An individual is empowered to take a decision and implement it when he has full authority and responsibility. In other words, there is a concentration of authority and responsibility. Concentration of authority and responsibility is avoided in the committee organization. In this organization, all the members of the committee have authority and responsibility. 18.Normally, the committee is formed with the interested persons of the organization. Disadvantages of Committee Organization: 1. Men from various fields are included in the committee. Each member expresses his own ideas and decisions or solutions. It results in delay in taking a decision. 2. It increases the administrative expenses of the organization. Expenses are incurred whenever the committee is convened for solving a problem or taking a decision. 3. In case, if there is an absence of mutual co-operation, and the members do not have confidence in the ability of the other members of the committee, they fail to work efficiently and the committee is dissolved without any decision being taken. 4. The secrecy of the committee's decision cannot be maintained under the committee organization. The reason is that there are a large number of members in a committee. 5. The responsibility cannot be fixed on any one person if the decision does not produce favorable results to the organization. Each one blames the other for faulty decision making and unfavorable results. 6. Sometimes, the decisions may be taken on the basis of compromise, when the decision does not reflect the viewpoints of the members of the committee. 188  TYPES OF ORGANIZATIONS 7. It has been observed that irrelevant matters are at times discussed. The decision should be taken by a committee within a short period of time. 8. In the committee organization, each members is expected to express his own ideas. It may result in heated arguments among the committee members. It does not give any benefit to the organization. 9. The members of a committee do not use their initiative because of their ignorance, or dominance by the committee members. Thus, the representative character of the decision taken by the committee is not preserved. 10.The committee members who meet frequently, may not be able to devote full attention to their duties. 11.A committee is formed to reap benefits as in a democracy. But, in majority of the cases the committee acts as a puppet of the management. 12.The committee members are not able to develop their own ability or talents individually. Further, it deteriorates the ability of the committee members in various other fields. Recommendations for efficient functioning of a Committee: 1. Clear objectives. A committee can function efficiently if the objectives of the organization are clearly stated. The scope of the function of a committee should be clearly laid down. 2. Size of the committee. The number of members of a committee should not be too large or too small. Only necessary members should be included in a committee. The members who are working at executive levels should not be members of more than three committees. The ideal number of members of a committee is 6 to 8. 189  TYPES OF ORGANIZATIONS 3. Selection of Committee Members The success of a committee depends upon the members of a committee. Therefore, the management should be very careful while selecting a member of a committee. Due weightage should be given to skill, knowledge and experience of the person while selecting a committee member. 4. Role of a committee The authority and responsibility of a committee should be clearly laid down, so that the members of a committee will act according to the regulations of the committee formed. 5. Role of the Chairman Great care should be taken while selecting the chairman at a committee. Sometimes, the chairman of a committee may be selected by the committee members or nominated by the management. The chairman should act as a man to whom every member at the committee could have easy access to and he should encourage the members and extend his cooperation to each and every one of the members of the committee. 6. Preparation for a meeting The committee meeting should be periodically convened so as to take prompt decisions and actions to tackle the problems of the management. The flow of work should be maintained by taking correct decisions. It is desirable to collect essential information necessary to take a decision. 7. Follow-up The minutes of the meeting should be intimated to all the members of a committee. The follow-up procedure is also carried on for the purpose of ensuring proper implementation of the decisions. 8. Evaluation The functioning of the committee should be periodically evaluated. If any need arises, certain members may be included in or excluded from the committee. The benefits accruing the committee should overbalance the expenses incurred for the functioning of a committee. 190  TYPES OF ORGANIZATIONS 9. Selection of subject matter Only an individual can deal with certain kinds of subjects. Such type of subjects cannot be placed before the committee for discussions. The committee can handle only complicated matters. 7.6 Project Organization The idea of a Project Organization was developed after the Second World War. This organization is developed to eliminate the defects of a Functional organization. Delay in taking in decisions and lack of co-ordination are some of the defects of a functional organization. The Project organization is designed to accomplish a program or project. The project organization is dispensed with, after the accomplishment of a program or project. The project organization is composed of a core of functional department in addition to its specific programs or projects. In other words, a project organization consists of important functional departmental heads. A Project Organization is suitable for the accomplishment of a small number of large projects. According to Middleton, "A project organization can also be the beginning of an organization cycle. The project may become a long-term or permanent effort that eventually becomes a program or branch organization. The latter may, in turn, become separated from the parent organization and be established as a full-fledged product division functionally organized." 191  TYPES OF ORGANIZATIONS Features of a Project Organization: 1. The success of the project organization depends upon the co-ordination of activities. 2. There is a grouping of activities for each project. It leads to the introduction of a new line of authority. 3. The responsibility is fixed for each group with regard to the respective projects and it results in meaningful control. Drawbacks of Project Organization: 1. Professionals are deputed for the project, but there is no assurance of continuous work for the professionals in a project organization. 2. Under the project organization, there is an absence of proper communication and standards for comparing the performance. It reduces the motivation and control over the staff in an organization. 3. The decision is taken in the project organization under pressure of the top management. It results in dangerous consequences. 4. The top management does not extend its full co-operation for the effective functioning of the project organization. The top management may cause some hindrance. 192  TYPES OF ORGANIZATIONS 7.7 Matrix Organization It is a type of organizational management in which people with similar skills are pooled for work assignments, resulting in more than one manager (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts). For example, all engineers may be in one engineering department and report to an engineering manager, but these same engineers may be assigned to different projects and report to a different engineering manager or a project manager while working on that project. Therefore, each engineer may have to work under several managers to get his or her job done. There are several departments under the Matrix organization. Each department is assigned with a specified task. The available resources of the organization can be used by each department along with the co-ordination of other departments in an organization. 193  TYPES OF ORGANIZATIONS According to Stanley Davis and Paul Lawrence, Matrix organization is "Any organization that employs a multiple command structure but also related support mechanisms and an associated organization culture and behavior pattern." The Matrix organization may be followed where a large number of small projects have to be managed. Video Link 1 Video Link 2 Conditions for an effective Matrix Organization: The Matrix organization can effectively function if the following conditions are present: 1. The principle of scalar chain of command is not followed in the matrix organization. A project manager should give his report to more than one superior. 2. There should be an agreement among the managers regarding the authority of utilizing the available resources. The term resources includes physical resources, financial resources and human resources. 3. A conflict may arise among the managers regarding the utilization of available resources. There should be a common willingness among the authority holders to face the conflicts with a view to resolving them. Merits of a Matrix Organization: The merits or advantages of a matrix organization are discussed below: 1. Achievement of objectives The matrix organization reaps the benefits of a functional organization and line and staff organization. It ensures the achievement of objectives with technical specialization. 2. Best utilization of resources The available resources are used by the managers for the specified project. At the same time, the resources are utilized by the managers-with full understanding among them. 194  TYPES OF ORGANIZATIONS 3. Appropriate structure A Matrix organization is an appropriate structure of an organization to adopt to the external changes. For example, in order to survive the competition, a matrix organization is used to meet customer demands according to the expectations without affecting the marketing of the existing product. 4. Flexibility A Matrix organization is a highly flexible organization. The rules and procedure are framed on the basis of the experience of the organization. 5. Motivation If any department is functioning slowly towards the completion of the particular project, proper motivations provided to the concerned department, result in speeding up the process. 6. Personal development. A Matrix organization gives an excellent scope for training and development of efficient persons. Demerits of a Matrix Organization: The following are the demerits or disadvantage of a matrix organization. 1. Complex relationship The matrix organization does not follow the principle of scalar chain of command. Here, a single person gives report to more than one superior. It entails in having less opportunity for having rapport with their respective superiors. 2. Struggle for power Many superiors control a subordinate. It means many authority holders use their power over one subordinate. It results in delay in the completion of the project. 195  TYPES OF ORGANIZATIONS 3. Excessive emphasis on group decision-making The department utilizes the available resources for taking group decisions. There is no spirit of accommodation and understanding under the matrix organization. So, there is delay in taking a group decision which further leads to a delay in the completion of the project. 4. Arising conflict resolution The resolution or the decision is taken under the matrix organization with too much self-analysis of decision makers. Thus, the work of decision makers or the managers may be slow in the accomplishment of the project. 5. Heterogeneous A matrix organization is created by deputing the staff temporarily. They are skilled professionals of various departments. It is difficult to co-ordinate the work of the skilled staff members when there is a lack of unity of command in an organization. 7.8 Free form Organization This type of organization is formed whenever a need arises to form an organization, for achieving a particular object. It will be dissolved after achieving the object of the organization. In many ways, the Free Form Organization resembles the project and matrix organization. It is otherwise called Organic or Ad hoc (ratio) Organization. The formation of the Free Form Organization depends upon the external environment of the business. If the business is highly affected by the external environment, the Free Form Organization will be established. Decision is taken under the Free Form Organization without following the policies or guidelines, which are determined in advance. Normally, the decision is taken in any organization by following the organizational policies, rules and regulations. These are framed well in advance and followed while taking decisions. 196  TYPES OF ORGANIZATIONS The structure of a Free Form Organization is related to individual expertise used in resolution of the problems at hand. The nature of problems may be changed according to the situations prevailing in the business world. When there is change of structure of a Free Form Organization, no task is assigned to it specifically. But tasks are assigned to the superiors and subordinates according to their level of experience and competence. Therefore, the authority is available to the persons according to their competence in performing the given task under this organization. There is no channel of communication due to the absence of a formal structure in the Free Form Organization, So, the communication flows in any direction viz., upwards, downwards, and horizontally. 7.9 Case examples Dow Chemical Dow Chemical and Du Pont of USA, ICI of great Britain, BASF, Hoechst and Bayer of Germany are the handful major players who compete head to head. The environment of severe recession, free flow of chemicals etc ushered in intense price competition. The company that won the race was Dow Chemical which had lowest costs. 197  TYPES OF ORGANIZATIONS Dow Chemical managers believed that some credit for the success belonged to the Matrix Organization. The organizational matrix had three interacting elements: Functions such as R&D, manufacturing, marketing Businesses such as ethylene, plastics and pharmaceuticals Geography such as Spain, Germany, Brazil The manager's job tiltle was like "Plastics Marketing Manager for Spain"which had all the three elements. Most managers reported to at least two bosses. The Plastics Marketing Manager for Spain might report to both, the head of worldwide plastics business and the head of Spanish operations. But the results were less than promising. Multiple reporting channels led to confusion and conflict. Too many bosses created an unwieldy bureaucracy. The overlapping responsibilities resulted in battles and lack of accountability. Instead of abandoning the matrix structure, Dow decided to make it more flexible to better accommodate different businesses such as pharmaceuticals. After priorities were identified for each business sector, one of the three elements of the matrix was given primary authority in decision making. In 1995, the company decided to divest itself of the pharmaceutical business and abandon its matrix structure in favor of a more streamlined structure based on global market divisions. The matrix structure was just too complex and costly to manage in the intense competitive environment of the time, given the company's renewed focus on its commodity chemicals where competitive advantage often went to the low cost producer. As Dow's CEO put it in 1999, "We were an organization that was matrixed and depended on team work but there was no one in-charge. When things went well, we did not know whom to reward and when things went poorly, we did not know whom to blame. So we created a global divisional structure and cut out layers of management. There used to be 198  TYPES OF ORGANIZATIONS eleven layers of management between me and the lowest level employees. Now there are five.” 7.10 Activities for the students Activity A Based on a manufacturing industry, study the types of problems a staff officer and a line officer can have. Make suggestions to them as to how they can resolve the problematic issues. ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ Activity B If you were CEO of DOW, how would you have handled the issue there? ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ 7.11 Summary The success of the organization depends upon the experience and competence of the officers of the organization. There is also necessity of chalking out the line of authority among the people who are working in an organization to achieve the desired results. A few types of organizations find a place in the structure of an internal organization. Line organization Functional organization Line and staff organization Committee organization Project organization Matrix organization Free form organization 199  TYPES OF ORGANIZATIONS 7.12 Self Assessment Questions 1. Write about the conflicts between line and staff officers and about how they can solve them. 2. Talk about the types of committee organizations and discuss their merits. 7.13 Multiple Choice Questions 1. The following characteristics are of --------organization. Direct vertical relationships Authority flows from top level to bottom level. Departmental heads are given full freedom to control their departments. Each member knows from whom he would get orders and to whom he should give orders. Operation of this system is very easy. Options: a. Line and staff organization b. Matrix organization c. Line organization d. Functional organization 2. The following characteristics are of -----------organization: The work is divided according to specified functions. Authority is given to a specialist to give orders and instructions in relation to specific function. Functional authority has a right and power to give command throughout the line with reference to his specified area. The decision is taken only after making consultations with the functional authority relating to his specialized Options: a. Line and staff organization b. Matrix organization c. Line organization 200  TYPES OF ORGANIZATIONS d. Functional organization 3. The following are the functions of ---------------- Collect the necessary information from different sources and arrange the information orderly. The collected information is critically analysed. Draft a detailed report containing the recommendation for the purpose of implementation. Formulate the standard of performance for the purpose of evaluation of actual performance in future. Options: a. Committee b. Project manager c. CEO d. Staff organization 4. It is otherwise called organic or ad hoc (ratio) organization. Options: a. Matrix b. Project c. Free form d. Line and staff 5. This type of committee is formed only of the purpose of collecting information on a particular subject. A detailed report is submitted with recommendations to the management. This is the most common committee formed in any organization. Options: a. Advisory committee b. Fact finding committee c. Action committee d. Executive committee Correct Answers:- 1)- c, 2)- d, 3)- a, 4)- c, 5)- b 201  TYPES OF ORGANIZATIONS REFERENCE MATERIAL Click on the links below to view additional reference material for this chapter Summary PPT MCQ Video Lecture - Part 1 Video Lecture - Part 2 202