Part – IV: Organizational Development and Design

# Organizational Development:Theory and practice of planned, systematic change in the attitudes, beliefs, and values of the employees through creation and reinforcement of long-term training programs. Organizational development is a field of study that helps organizations to introduce planned change. OD is action oriented. It starts with a careful organization-wise analysis of the current situation and of the future requirements, and employs techniques of behavioral sciences such as behavior modeling, sensitivity training, and transactional analysis. Its objective is to enable the organization in adopting-better to the fast-changing external environment of new markets, regulations, and technologies.

In the word of Cummings and Worley - “Organization development is a system wide application and transfer of behavioral science knowledge to the planned development, improvement, and reinforcement of strategies, structures, and processes that lead to organization effectiveness”

There is no single definition of organizational development. It is defined by different scholars in many different ways. If we go to these definitions, we summarize OD in the following points.

OD is systematic approach to planned change. OD values human and organizational growth. The goal is to increase the health and

performance of organization, while enriching the lives of its members. OD is an educational approach to change the belief, attitudes, values and structure of

organization. OD involves the application of behavioral science theory and research to enhance

organizational functioning. The purpose of OD is to increase motivation, remove obstacles, and make change easier.

# Organizational Development Process:

- Mukesh Kumar Goit 1 Kantipur Valley College

1. Initial Diagnosis: The initial diagnosis refers to finding the inadequacies within the organization that can be corrected by OD activities then it is necessary to find out the professionally competent persons within organization to plan and execute OD activities. The outside consultants can be also employed to help in diagnosing the problems and diagnosing OD activities. The consultants adopt various methods and that primarily includes interviews, questionnaires, direct observation, analysis of documents and reports for diagnosing the problem.2. Data Collection: The survey method is employed to collect the data for determining organizational climate. It also helps in identifying the behavioral problems that are rising in the organization.3. Data Feedback: The collected data are analyzed and reviewed by various work groups that are formed for this purpose. It is done in order to intervene in the areas of disagreement or confrontation of ideas or opinions.4) Selection of Interventions: The interventions can be described as the planned activities that are introduced into the system to achieve desired changes and improvements. The suitable interventions are to be selected and designed at this stage.5) Implementation of Interventions: The selected intervention should be implemented progressively as the process is not a one shot, quick cure for organizational problems. Consequently, it achieves real and lasting change in the attitudes and behavior of employees.6) Action Planning and Problem Solving: To solve the specific and identified problems by using the collected data, groups prepare recommendations and specific action planning.7) Team Building: The consultants explain the advantages of the teams in OD process and encourage the employees throughout the process to form into groups and teams.8) Inter-group Development: After the formation of groups/teams, the consultants encourage the inter-group meetings, interaction etc.9) Evaluation and follow up: The organization should evaluate the OD programmes and should find out their utility, and develop the programmes further for correcting the deviations. The consultants make great significance to the organization in this respect. The entire steps in the OD processes should be followed by the organization in order to derive full range of OD benefits. # Organizational Design: The term organizational design refers to the structure or architecture by which organization operates. To organize and control, management must design an organizational architecture that makes the best use of resources to produces the goods and services customers want. Organizational design thus constitutes the building block of an organization. This architecture is the combination of the organizational structure, control systems, culture, and human resource management system that determines how efficiently and effectively organizational resources are used.

# Basic challenges of organizational Design:The two basic building block of organizational design are: differentiation (allocation of people to tasks) and integration (coordination between people or functions or divisions). The principal design challenge is how to manage differentiation and integration to achieve its goals. The principal challenges of organizational design are as following:

- Mukesh Kumar Goit 2 Kantipur Valley College

a) Differentiation:Differentiation is the process by which an organization allocates people and resources to organizational tasks and establishes the task authority relationships that allow the organization to achieve its goals. In other words, it is the process of establishing and controlling the division of labor, or degree of specialization, in the organization. In simple organization, differentiation is low because the division of labour is low. Few people perform all organizational tasks, so there are problems with coordinating who does what, for whom and when. With growth, however, comes complexity. In large and complex organization division of labour and differentiation is high.

i) Vertical differentiation: Vertical differentiation refers to the way an organization designs its hierarchy of authority and creates reporting relationships to link the organizational roles (set of task related behaviors required in a position) and subunits (functions). Vertical differentiation establishes the distribution of authority between levels to give the organization more control over its activities and increase its ability to create value. ii) Horizontal differentiation: Horizontal differentiation refers to the way an organization groups organizational tasks into roles and roles into subunits (functions and divisions). Horizontal differentiation establishes the division of labour, which enables people in the organization to become more specialized and productive and increases the organization’s ability to create value. iii) Organizational Roles: An organizational role is a set of task-related behaviors required of a person by the concerned positions in the organization. Certain role with identifiable tasks and responsibilities of an individual employee helps to make accountable in his/her duty. As the division of labour increases in an organization, managers specialize in some roles and hire people to specialize in others. Organization structure is based on the system of interrelated roles, and the relationship of one role to another is defined by task-related behaviors. Some roles require managers to make them accountable by monitoring and controlling using authority. The differentiation of an organization into individuals and individual organizational roles results in clear authority and responsibility requirements for each role in the system. Authority is the power to hold people accountable for their actions, where as control are the act to coordinate and motivate people in the organization’s interest. iv) Subunits (Functions and Divisions):People with similar and related roles are grouped into a subunit. The main subunits that are developed in organizations are Functions (departments) and divisions. A function is a subunit composed of a group of people working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs. Similarly, a division is a subunit that consists of a collection of functions or departments that share responsibility for producing a particular goods or services. The number of different functions and divisions that an organization possesses is a measure of the organization’s complexity –its degree of differentiation. Differentiation into functions and divisions increases an organizations control over its activities and allows the organization to accomplish its task more effectively. As organizations grow in size, they differentiate into five different kinds of functions:

1. Support function: Facilitate an organization’s control of its relations with its environment and its stakeholders. Support functions include purchasing (to handle the acquisition of inputs), marketing and sales (to handle the disposal of outputs), and public relations and legal affairs (to respond to the need of outside stakeholders).

- Mukesh Kumar Goit 3 Kantipur Valley College

2. Production function: Manage and improve the efficiency of an organization’s conversion process so that more value is created. Production may include production operation, production control, and quality control.

3. Maintenance function: Enables an organization to keep its departments in operation. Maintenance function include personnel (to recruit and train workers and improve skills), engineering (to repair broken machinery and maintenance service).

4. Adaptive function: Allow an organization to adjust to changes in the environment. Adaptive functions include research and development, market research, and long range planning, which will allow an organization to learn from and attempt to manage its environment and thus increase core competencies.

5. Managerial function: Facilitate the control and coordination of activities within and among departments. Managers at different organizational level direct the acquisition of, investment in, and control of resources to improve the organization’s ability to create value.

b) Integration:Horizontal differentiation is supposed to enable people to specialize and thus become more productive. However, it may limits communication and coordination between subunits and prevent from learning from one another. As a result of horizontal differentiation, the members of different functions or divisions develop a subunit orientation towards self goals and interest. Hence, different function see things differently, communication fails and coordination becomes difficult. To avoid the communication problems arisen from horizontal differentiation, organization try to find new or better ways to integrate functions. To maintain balance between differentiation and integration, organizations may use fallowing mechanisms. i) Delegation of authority: As hierarchy dictates who reports to whom, it coordinates various organizational roles. Managers must carefully divide and allocate authority within a function and between function to promote coordination. ii) Direct contact: Direct contact between people in different subunits is an integrating mechanism that is more complex than creating hierarchy and delegating authority. The main problem with integration across functions is that a manager in one function has no authority over a manager in another. Direct contact between managers helps them to work together to solve common problems.iii) Liaison role: When the need for communication among subunits increases, one member or few members from subunits are likely made responsible assigning such role for coordinating with subunits. This role helps to overcome communication barriers between subunits. iv) Task forces or teams: As organizations grow, a taskforce, a temporary committee is setup to facilitate communication and coordination among different units. This task force makes each department and units put their effort together to serve customers effectively. When the issue a task force is dealing with becomes an ongoing strategic or administrative issue, the task force becomes a permanent team. v) Integration of roles and departments: As organizations become large and complex, communication barriers between functions and divisions are likely to increase. To overcome this problem, an integrating role or an integrating department is created to coordinate the activities of functions or divisions.

- Mukesh Kumar Goit 4 Kantipur Valley College

c) Centralization and Decentralization: When the authority to make important decisions is retained by managers at the top of the hierarchy, authority is said to be highly centralized. By contrast, when the authority to make decisions about the use of organizational resources to initiate new projects is delegated to managers at all levels in the hierarchy, authority is highly decentralized.Each alternative has certain advantages and disadvantages. Centralizations becomes problem, when top managers become overloaded and so involved in operational decision making that they have no time for long term strategic decision making. The advantages of decentralization is that it promotes flexibility and responsiveness by allowing lower level managers to make on-the-spot decisions. However, over high decentralization may leads to weak coordination and control.

d) Standardization and Mutual Adjustment: Strictly following written rules and standard operating procedures, and unwritten values and norms may discourage innovation, leave no space for creativity, and slow downs the decision making and performance level. The change facing all organizations is to design a structure that achieves the right balance between standardization and mutual adjustment.Standardization is conformity to specific models; for example –defined by set of rules and norms that are proper in a given situation. Standardized decision making makes organization inflexible, inadoptive and highly bureaucratic. Mutual adjustment on the other hand is the process through which people use their judgment rather than standardized rules to address problems, guide decision making, and promote coordination. It gives employees the freedom to behave in such a way that they can respond to new and changing situations creatively.

# Organizational Structure and Authority & Control:Tall shape and flat shape of organizational structure are two widely used structures to put effort together to attain the desired objectives. Different hierarchies are made to furnish the structure and facilitate coordination and control. Deciding how much authority to centralize at the top of the hierarchy and how much to decentralize to middle and lower levels is a basic challenge to design organization structure. The shape of the organizational structure determines how effectively the organizations decision-making and communication works. Decisions concerning the shape of the hierarchy and the balance between centralized and decentralized decision making establishes the extent of vertical differentiation in an organization. An organization’s hierarchy begins to emerge when the organization experiences problems in coordinating and motivating employees. As an organization grows, employees increase in number and begin to specialize; performing widely different kinds of tasks; the level of differentiation increase, and the coordinating and controlling employees’ activities become more difficult. The division of labour and specialization produce motivational problems. Moreover, if people are cooperating to achieve a goal, it is difficult to measure individual contributions and to reward individuals for their personal contributions. An organization does two things to improve its ability to control i.e. to coordinate and motivate -its members.

1. Increases number of managers: Number of managers it uses to monitor, evaluate and reward employees is increased.

2. Increases the number of hierarchy: The number of hierarchical levels is increased there by making the hierarchy of authority taller.

- Mukesh Kumar Goit 5 Kantipur Valley College

Increasing both the number of managers and the levels of management increases vertical differentiation and gives the organization direct, face-to-face control over its members –managers personally control their subordinates. Direct supervision is vital because managers can continually question, probe, consult, motivate promote on-the-job learning and enhance self skills in the work place. Thus, personal supervision can be a very effective way of motivating employees and promoting behaviors that increase effectiveness. Personal authority relationship in an organization is taken as the most significant to crate and bond people into an organization.

# Tall and Flat Organizations: An organization in which the hierarchy has many levels relative to the size of organization is a tall organization. An organization that has few levels in its hierarchy is a flat organization. Tall organization has more levels and thus uses more managers personally to direct and control members’ activities in comparison to flat organizations. There are large number of job titles and a career path to the employee. Fewer numbers of subordinates a particular manager is required to guide, the organizational structure would be taller. Contrarily, a flat structure would have wide span of management. The number of hierarchy would be less. Larger the number of subordinates a particular manager is required to guide the organizational structure would be flatter. Choosing an appropriate span of management is important for two reasons. First, it affects efficiency. Too wide a span may mean that managers are over extended and subordinates are receiving too little guidance or control. When this happens, managers may be pressured to ignore or condone serious errors. In contrast, too narrow a span may mean that managers are underutilized.Thus, the extent of division of work, the nature of delegation of authority, the process of departmentation and the requirement of effective supervision i.e., span of control influence the designing of organization structure.

The advantages and disadvantages of tall and flat organization structure are:

1. Tall Structure:

a) Advantages of Tall Organization

1. The quality of performance will improve due to close supervision.2. Discipline will improve.3. Superior - Subordinate relations will improve.4. Control and Supervision will become easy and convenient.5. The manager gets more time to plan and organize the future activities.6. The efforts of subordinates can be easily coordinated.7. Tall Organization encourages development of staff.8. There is mutual trust between superior and subordinates.

b) Disadvantages of Tall Organization

1. Tall Organization creates many levels of management.2. There are many delays and distortion in communication.3. Decisions and actions are delayed.

- Mukesh Kumar Goit 6 Kantipur Valley College

4. It is very costly because there are many managers. (managers are paid high salaries)5. It is difficult to coordinate the activities of different levels.6. There is strict supervision. So the subordinates do not have any freedom.7. Tall Organization is not suitable for routine and standardized jobs.8. Here, managers may become more dominating.

2. Flat Structure:

a) Advantages of Flat Organization

1. Flat Organization is less costly because it has only few managers.2. It creates fewer levels of management.3. Quick decisions and actions can be taken because it has only a few levels of management.4. Fast and clear communication is possible among these few levels of management.5. Subordinates are free from close and strict supervision and control.6. It is more suitable for routine and standardized activities.7. Superiors may not be too dominating because of large numbers of subordinates.

b) Disadvantages of Flat Organization

1. There are chances of loose control because there are many subordinates under one manager.2. The discipline in the organization may be bad due to loose control.3. The relations between the superiors and subordinates may be bad. Close and informal relations

may not be possible.4. There may be problems of team work because there are many subordinates under one

manager.5. Flat organization structure may create problems of coordination between various subordinates.6. Efficient and experienced superiors are required to manage a large number of subordinates.7. It may not be suitable for complex activities.8. The quality of performance may be weak.

# Ideal Organizational Structure: An organizational structure that optimizes the capabilities to compete in a given market is said to be an ideal organization structure. Several factors affect the structure of an organization. Following are the key factors to be considered in designing optimal or ideal organizational structure where effective coordination and control is possible at minimal cost. a) Chain of Command:A general principal for designing a hierarchy is the principal of minimum chain of command. According the principal of minimum chain of command, an organization should choose the minimum number of hierarchical levels consistent with its goals and the environment in which it exists. In other words, the organization should be kept as flat as possible, and managers should be evaluated for their ability to control organizational activities with the smallest number of managers possible. An organization with a flat structure will experience fewer communications, motivation, and cost problems than will a tall organization. The only reason why an organization should choose a tall structure over flat structure is that it needs a high level of direct control or supervision over subordinates.

- Mukesh Kumar Goit 7 Kantipur Valley College

b) Span of Control:Too much tall structure may create problems in the organization. To prevent from making tall organization, organizations can increase the managers’ span of control –the number of subordinates a manager directly manages. If the span of control of each manager increases as the number of employee increases, then the number of managers or hierarchical levels does not increase in proportion to increase in the number of employees. However, while determining the span of control, the complexity of tasks should be considered because if managers become overloaded, the organization can lose control of its activities.c) Shape of the Hierarchy:Generally large organizations increase the level of horizontal differentiation for effective operation. Horizontal differentiation leads to the emergence of specialized subunits –functions or divisions. For making effective structure, each function should choose the lowest number of hierarchical levels i.e. should be flat as far as possible. Horizontal differentiation avoids many of the problems of tall hierarchies because it leads to the development of many subunits hierarchies, which allow the organization to remain flat. d) Decentralization: Decentralization largely overcomes the work load of managers for close monitoring and supervision. When authority is decentralized, the authority to make significant decisions is delegated to people throughout the hierarchy, not centralized at the top. Decentralization of authority to the lower level managers reduces the monitoring burden on upper level managers and reduces the need for managers to monitor subordinates. This also enhances quick and efficient decisions to solve the problems at the work place. e) Standardization: Managers can gain control over organizational activities by standardizing work activities to make them predictable. Standardization reduces the need for managers and extra levels in the hierarchy because rules and standard operating procedures substitute for direct supervision. Organizations standardize activities by creating detailed work rules and by socializing employees to organizational norms and values. As subordinates’ tasks are increasingly standardized and controlled by means of rules and norms, and the amount of supervision that is required lessens, a manager’s span of control can be increased.

# Organizational Structure and Specialization & Coordination:The working relationships — vertical and horizontal associations between individuals and groups — that exist within an organization affect how its activities are accomplished and coordinated. Effective organizing depends on the mastery of several important concepts: work specialization, chain of command, authority, delegation, span of control, and centralization versus decentralization.

One popular organizational concept is based on the fundamental principle that employees can work more efficiently if they're allowed to specialize. Work specialization, sometimes called division of labor, is the degree to which organizational tasks are divided into separate jobs. Employees within each department perform only the tasks related to their specialized function. When specialization is extensive, employees specialize in a single task, such as running a particular machine in a factory assembly line. Jobs tend to be small, but workers can perform them efficiently.

- Mukesh Kumar Goit 8 Kantipur Valley College

Organizations exist to coordinate complementary activities in the presence of specialization. Different organizational structures, through their impact on the information available and the incentives of decision makers, involve tradeoffs in the type and level of synergies and coordination that can be achieved.

a) Functional Structure: A functional structure is arguably the most common type of organizational structure. The objective of most small companies is to group their workers by department as their businesses grows, and grouping workers by various functions often makes the most sense. Companies that use functional structures divide their departments by functions such as marketing, accounting, engineering and business development. An advantage of the functional structure is that grouping jobs by skills and knowledge enables a greater efficiency of human resources. Departments are likely to make the right management decisions because of the combined expertise.

Functional structure is the bedrock of horizontal differentiation. An organization groups tasks into functions to increase the effectiveness with which it achieves its principal goal: providing customers with high-quality products at reasonable prices. As a function specializes, skills and abilities improve, and the core competencies that give an organization a competitive advantage. Advantages:1. Division of labor:The natural division of labor associated with the formation and maintenance of functional groups allows the members of each group to become more specialized and productive and creates opportunities for them to continuously learn and improve through their interactions with other group members. 2. Consistency in task and training:Since the members of each functional group are brought together and linked by their common skills, education and training, it is easier for them to supervise one another and control the activities and behavior of all of the members of the group. 3. Functional efficiency:The consistent interaction and collaboration among group members ultimately leads to a team orientation that makes the group more effective in tackling and completing the projects assigned by the senior managers overseeing all of the functional groups. 4. Efficient use of resources:The functional structure facilitates segregation of company assets and resources into the areas that are most important for the company’s success and thus makes it easier for senior management to identify, manage and control resource deployment during a time when the company is growing rapidly and adding new resources quickly.

- Mukesh Kumar Goit 9 Kantipur Valley College

Disadvantages:1. Communication problem: As the company creates more functional groups, and each of those groups expands and develops it own unique hierarchy and system of interaction among members of the group, the chances of communication problems between groups increases substantially. Not surprisingly, each functional group begins to develop its own orientation towards its own goal.2. Measurement problem:As the company grows and creates new functional groups and adds new products and services it becomes more difficult for senior management to identify and measure the contribution that each employee and functional group is making to the necessary activities of the company.3. Control problem:The problem facing a successful organization is how to keep control of increasingly complex activities as it grows and differentiates. As it produces more and more products, becomes geographically diverse, or faces increasing competition for customers, control problems impede the organization’s ability to coordinate and control activities.4. Customers problems:Serving the needs of new kinds of customers and tailoring products to suit them are relatively difficult in a functional structure. Functions like production, marketing, and sales have little opportunity to specialize in the needs of a particular customer group; instead, they are responsible for servicing the complete product range.5. Strategic problems:Top management may spend so much time trying to find solutions to everyday coordination problems that they have no time to address the longer term strategic problems facing the company. As a result, the organization may lose the direction.

b) Divisional Structure:Divisional structure typically is used in larger companies that operate in a wide geographic area or that have separate smaller organizations within the umbrella group to cover different types of products or market areas. A divisional structure group functions according to the specific demands of products, markets or customers. Divisional structure can be formed on different base. The type of divisional structure managers select depends on the specific control problems to be solved. If the control problem is due to the number and complexity of products, the organization will divide its activities by product and use a product structure. If the control problem is due to the number of locations in which the organization produces and sells its products, the organization will divide its activities by region and use a geographic structure. Similarly, if the control problem is due to the need to serve a large number of different customer groups, the organization will divide its activities by customer group and use a market structure. The benefit of this structure is that needs could be met more rapidly and more specifically; however, communication is inhibited because employees in different divisions are not working together. Divisional structure is costly because of its size and scope.

i) Product divisional Structure:A product divisional structure is a structure in which a centralized set of support functions service the needs of a number of different product lines. In other words, in product structure products (goods or services) are grouped into separate divisions, according to their similarities or differences, to increase control. This design decision increases the differentiation within the organization, for each division a separate manufacturing unit that has its own hierarchy headed by a product division manager. Each product manager is responsible for his/her division’s manufacturing, services and coordination.

- Mukesh Kumar Goit 10 Kantipur Valley College

An organization producing completely differentiated products, such as automobiles and food items, product divisional structure cannot provide a proper control the organization needs. For this purpose a multidivisional structure is used. In multidivisional structure, each division is independent and self- contained. When divisions are self contained, each division has its own set of support functions and controls its own value creation activities.

Advantages:1) Organizational effectiveness:A division of labour generally increases organizational effectiveness. In a product structure there is a clear division of labour between different product groups. In multidivisional structure division of labour can be found to a large extent. 2) Control:The control position in simple product structure and multidivisional structure is much strong. The extra control provided by the corporate office can encourage the stronger pursuit of internal organizational efficiency by divisional managers.3) Profitable growth:The corporate executives can make better capital resource allocation decisions to products and divisions so that investment of fund is likely to yield higher returns.4) Employees career paths:Since, there are more levels, divisions and functions, employees have more chance to be promoted and enhanced their professional career. A large divisional company possesses an internal labour market, which increases motivation for people at all levels to increase organizational performance level.

- Mukesh Kumar Goit 11 Kantipur Valley College

Disadvantages:1) Coordination problem:When multidivisional structure is created, divisions may begin to compete for resources and the rivalry relations may be developed which may prevent them from cooperating with each other. 2. Bureaucratic cost:Product structure and multidivisional structures are very expensive to operate. Each division has a full complement of support functions, including research and development. Thus increases bureaucratic costs.3. Communication problem:Tall hierarchies tend to have communication problems, particularly the distortion of information. These problems are common in product and multidivisional structure.

ii) Geographical Structure:Under geographical structure, organizations organize divisions according to the requirements of the different geographical locations. A geographical structure allows some functions to be centralized at one headquarters location and others to be decentralized to a regional level.

When transportation and other management become costly to carryout from the central level, different business units are dispersed at different geographical locations.

Advantages:1. Garb the local resources.2. Specialized business units3. Effective control

Disadvantages: 1. Communication problem2. Costly3. Coordination problem

c) Matrix Structure:The matrix structure combines functional and divisional structures. This form brings numerous skilled workers from various parts of the organization together as a team. They focus on a specific project that is to be completed within a set time frame and often have more than one manager. This organizational structure form is often used in multinational companies.

- Mukesh Kumar Goit 12 Kantipur Valley College

A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of strengths and make up for weaknesses of functional and decentralized forms. The defining feature of a matrix structure is the fact that team members have two superiors. The team is both the basic building block of the matrix and principal mechanism for coordination and integration.

The matrix structure relies on minimal vertical control from the formal hierarchy and maximum horizontal control from the use of integrating mechanism –teams which promote the mutual adjustment. Strengths and weaknesses of this structure are similar to those encountered with functional and divisional structure.

Advantages: 1. Reduce functional barriers:The use of cross-functional team is designed to reduce functional barriers and overcome the problem of subunit orientation. The matrix’s team structure facilitates integration, adaptation and learning for the whole organization. It is designed to make the organization flexible and able to respond quickly to changing product and customer needs.

- Mukesh Kumar Goit 13 Kantipur Valley College

2. Foster innovations: Matrix structure opens up communication between functional specialists and provides an opportunity for team members from different functions to learn from one another and develop their skills. Thus matrix structure facilitates technological progress because the interaction of different specialists produces the innovations that give a company its core competencies. 3. Efficient use of resources:The matrix enables an organization to maximize its use of skilled professionals, who move to produce product as needed. People move around the matrix to wherever they are most needed; team membership is constantly changing to suit the needs of the product.4. Optimize quality and cost:The dual functional and product focus promotes concern for both cost and quality. The primary goal of functional specialists is likely to produce the highest quality, most innovative products possible. Similarly, the primary goals of product managers are likely to concern cost and speed of development. Disadvantages:1. Bureaucratic complexities:A matrix structure lacks the advantages of bureaucratic structure. As there are projects along with hierarchies, the cost associated with the structure is comparatively higher. There can be role conflict because of overlapping direction from product and function. 2. Possibility of conflict:The lack of a clearly defined hierarchy of authority can also lead to conflict between functions and product teams over the use of resources. The cost and resource allocation between functions and products may increase conflict between them. Power struggle may emerge between product and functional managers, and politicking takes place to gain the support of top management. 3. Intervention from top management: When top managers do not get the results they expect, they sometime try to increase their control over the matrix and to increase their power over decision making. Slowly but surely, people struggle for power and authority, a system started with very flat and decentralized turns into a centralized and less flexible structure.

d) Network Structure: A group of legally independent companies or subsidiary business units that use various methods of coordinating and controlling their interaction in order to appear like a larger entity. We can characterize network structures as long-term agreements among companies, which enable them to obtain and maintain competitive advantages in relation to other companies not belonging to the network. Network agreements are characterized as specific system of values. The specific system of values is based on mutual trust, which is a compulsory condition for existence and stability of the network and common responsibilities.

There are formal and informal contracts, based upon norms typical for every network. Another sign of the specific system of values is the common support and willingness of individual participants of the network to abnegate short-time advantages on behalf of the common development. The network form of arrangement of the company enables the companies involved to gain a lot of advantages, for instance cutting production costs due to specialization and division of labor, having access to modern technologies and information, forming common databanks, faster introducing of the new methods and obtaining possibilities for entering the new markets.As long as we speak about organizational-managerial aspect of network structures, managerial parts are different than in the organization, which has hierarchical structure. In network structures a managerial center is created for the purpose of a coordination of all cooperating companies on the basis of the contract. The responsibility is divided among all parts of the network. In the network structure, centralized

- Mukesh Kumar Goit 14 Kantipur Valley College

control of operations does not exist (in contrast to hierarchical structure) and the main company only co-ordinates the plans and activities.

Advantages:1. Competitive advantages:Network with partner organizations can perform a specific functional activity reliably, and at a lower cost, production costs are reduced. So, employing and adopting this structure leads to competitive strengths.2. Less costly:As the organization contracts with other organizations to perform specific value creation activities, it avoids the high bureaucratic costs of operating a complex organizational structure. For example the hierarchy can be kept as flat as possible and fewer managers are needed. 3. High flexibility:A network structure allows an organization to act in an organic way. If the environment changes, for example, and new opportunities become apparent, an organization can quickly alter its network in response. But an organization that performs all of its own functional activities would take a longer time to respond to the changes taking place.

Disadvantages:1. Incompatible goods and services:The goods or services offered by the contracting organization may not be consistent to one another. This increases the chance of loosing customers’ trust. 2. Difficult to coordinate and control: It is not easy to coordinate and control the activities of the network organization as it has very flat and dispersed structure. Mangers would lack the means at their disposal to effectively coordinate and motivate the various network partners.

- Mukesh Kumar Goit 15 Kantipur Valley College