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Over time, corporate organizations grew to accommodate their success. For instance, automobile manufacturers increased production volume and added models and features. Additional machines were required to produce the increased volume and diversity of products. More machines required more people to run them, which, in turn, required more people to manage the people who were running them.
Next are the policies and procedures required and control the additional size of the work force and the complexity of the tasks. And in a never ending upward spiral, more people were needed to develop and manage the new policies and procedures. As such, success drove vertical corporate organizations into bureaucratic organizations
The business needs which created the bureaucratic organizations was just an extension of the vertical organizations model. For the vertical organizations, jobs were created to take responsibility for specific aspects of the work process.IN the bureaucratic organizations, jobs and additional layers of management were created to take responsibility for coordination of specific business processes and policies bureaucratic organizations, characterized by multiple layers of management, and broad-reaching policies and procedures were usually unable to effectively respond to rapid changes in the marketplace. Therefore, as the need to be more responsive to the market became evident, organizations too restructuring again. (Conrad, Charles.1994)
Clear policies and procedures
Stable organization systems and processes
Consistent service and quality levels
Clear performance expectations
Clear roles and responsibilities
Effective strategy deployment
Optimization at a micro level
Policies and procedures create inflexibility
Potential for long cycle times when process crosses many responsibility areas
Glacial responsiveness to change
No individual judgment or empowerment
Performance expectations tend to be internally focused
Cooperation across role and responsibility areas is difficult
Difficult to dramatically change
Potential for suboptimal performance at an enterprise level
This time, corporations came to the realization that as size and complexity of the organization is increased, so did the costs of maintaining a centralized bureaucracy to support this organization. The next logical move was simply to break big organizations into smaller ones
As a result, organizations began to break themselves up into smaller decentralized units with each unit a profit center reporting directly to an operations manager. Generally, each unit had complete authority, within "corporate guidance" to create whatever policies and procedures were needed to maintain profitability and generate adequate returns to shareholders. In automobile industry, for example, they divided their organization into units, each responsible for different make of car
Decentralization provides several advantages shown in table below. Smaller business units tend to be more flexible and are therefore more responsive to market demands. Additionally, smaller business units usually require less managerial overhead. However, the coordination is less effective between these independent units as compared to divisions within more centralized organization responsiveness is gained at the costs of coordination
As such, decentralized organizations often face a problem of coordinating with customers. A common scenario is multiple salespeople attempting to service the same account, with none of them able to provide full line of solutions in a seamless manner. Two divisions of leading automobile parts supplier were not only competing with each other for the same customers, but were unknowingly being played off against each other to lower their prices
Strong customer focus
Business units responsive to changes in customer needs and market demands
Business units are focused on the needs of their segments
Self-sufficiency at the business unit level
Accumulation of customer-related knowledge is enhanced
Business units empowered to focus competency development efforts in areas which support their own success
Business units empowered to develop own standards within corporate guidelines
Accountability and control at business unit level
Reduced enterprise focus
Enterprise-wide ability to act in concert is difficult
Business units are hard to coordinate when a customer is in multiple segments
Duplication of resources and inefficiency at an enterprise level;
Knowledge transfer across business units is difficult
Difficult to maintain consistent functional competency levels across the enterprise
High potential for inconsistent processes, technologies applications and competence levels
Internal tension and competition for resources based on measurement system
(Khandwalla, Pradip N.1977)
My organization of choice
One of the most prominent advantages of non-bureaucratic organization is that it enhances the development of management talent within the organizations. Managers in a decentralized environment are forced to develop skills as decision makers and problem solvers. This allows the organization to have a better sense of who has the necessary abilities and talent to be promoted in the organization and allows those basic abilities and talents to be cultivated through experience. Lower level manager often have better morale if they are in positions of greater authority, and their performance levels are likely to be higher than if all decisions are made for them
Another key reason for having high degrees of decentralization is that it puts the power for decision making at the level where the best information is available. As information about individual units and departments moves up through the organization, it tends to become distorted and dated. The manager on the scene is the most likely to be able to make a timely and informed decision
A final significant advantage of non-bureaucratic organization is that it allows the health care organization to manage by exception rather than by rule. General rules are adequate in most cases. However, when exceptions arise in which rules are not likely to lead to the best outcomes, there is a need to be able to have an exception to the rule. Centralized organizations tend to fear any exceptions, and rules are almost always enforced. Decentralized organizations have the flexibility to relax the rules when appropriate. (Gottlieb, Marvin.1999)
It is very important for every organization to have an appropriate organization structure. Some companies do not have an organization structure, which creates problems. Some organization structures are meaningless, for the managers and supervisors do not delegate properly. Many companies take the organization structure too seriously however, thinking that having the correct organization structure will solve their problems. They think that where people are in the organization structure determines their importance to the company, rather than their importance being determined by what they know and contribute. Although it is very important for a company to have an appropriate organization structure, it is more important for a company to have strong teamwork.
When Corning was having problems in the 1960s and 1970s getting its country managers to cooperate with its product managers in the United States to introduce new products in their local markets, the top management assumed that the problem was due to Corning's having an inappropriate organization structure. During the 1970s, therefore, Corning changed its structure a few times until it had an excellent matrix structure. The problem persisted, however. The problem was finally solved when the top management of Corning realized in the early 1980s that the problem was not due to its organization structure but was due to the lack of a teamwork culture. Therefore, in 1982, James Houghton, CEO of Corning, introduced a teamwork culture. Thereafter, cooperation between Corning's country managers and product managers improved.
( E. Lawler and C. Worley.2006)
Understanding Matrix Management
Perhaps matrix management is best defined in the way its structure contrasts with functional and divisional forms. Most organizational structures use the concept of ''departments'' to align the workforce and other resources according to products or functions. Functional organizations are segmented by key functions. Responsibilities for production, marketing, and finance might be grouped into three respective divisions. Within each division activities would be departmentalized into sub-departments. For example, the marketing division might include sales, advertising, and promotion departments.
The matrix structure represents an attempt to combine functional and product departmentalization. The objective is to simultaneously organize part of a company along product or project lines and another part of it around functional lines to get the advantages of both. Within a matrix, each of the product groups intersects with each of the functional groups, signifying a direct relationship between product teams and administrative divisions. Theoretically managers of project groups and managers of functional groups share some level of authority within the organization. For example, in a balanced matrix the authority would be equal. The structure also dictates that many employees report to at least two managers. Some matrix structures exist on a temporary or ad hoc basis. Various work configurations or teams are created to deal with a particular problem or project. Once the objectives are reached, the team disbands and the members are reassigned to other duties or projects.
Structuring the Matrix
One of the challenges of highlighting the theoretical underpinnings of matrix management is that a pure matrix form is highly elusive. Matrix processes can exist in a variety of structural arrangements and accompanied behaviors. Several of the early theorists viewed the matrix form as transitional. The matrix phenomenon was seen as representative of various stages in an historical progression from one organizational form to another. Kolodny points out that where an organization was with regard to the adoption of matrix management depended on the information processing demands of its environment. Those organizations that depended primarily on rules, hierarchy, plans, and direct contact with one another internally were classified by Kolodny as conventional, functional product forms. Those organizations that employed information processing designs that incorporated liaisons, task forces, and teams tended toward the matrix end of the continuum.
Discovering our Organization's Matrix
In its most advanced form, matrix management does put the balance of power in the hands of the project manager. However, in less advanced forms, functional managers have powerful forces on their side. As previously pointed out, the functional manager is normally perceived by project personnel to be the real boss. After all, the general perception is that functional management is part of the unchanging ladder in the management hierarchy and is therefore perceived to be ''permanent'' by the employees. The functional organization represents home base, to which project personnel expect to return after the completion of the project.
If the matrix is to succeed, it requires more than a balance of power. Even very strong support from upper management will not guarantee that the initiative will be conducted successfully. The key is the relationship between the project and the individual functional managers. Building and conducting these relationships so that they operate in a positive and contributory way is the major organizational challenge. As we look at the various manifestations of the matrix that currently exist in the organization, we need to keep that point in mind.
Despite the wide variety of permutations that the matrix can take, there are three variants of matrix design that serve as guideposts and have received some common acceptance among several of the primary matrix management theorists including Galbraith, who was the first to describe them. This three-part definition, which includes ''functional matrix,'' ''balanced matrix,'' and ''project matrix,'' was more recently used by Sy and D'Annunzio in their study.
The functional matrix is also referred to as a ''weak matrix.'' In this form, the organization retains most of the characteristics of a pure functional organization. It follows the classical hierarchical management model. The functions of the organization are separated, and each employee reports to a supervisor in that function. A functional matrix occurs when an individual is designated as either a project manager or a project administrator and is assigned to oversee cross-functional aspects of a project. To support this effort, there is encouragement in the environment for cross-functional collaboration, which often takes the form of processes and procedures designed to help facilitate the interchange of communication.
The balanced matrix is sometimes referred to as the classic matrix model. This is actually a misnomer. When the origins of matrix management are traced back to the aerospace industry, it is clear that the earliest forms were not ''balanced.'' A good case in point is the McDonnell Aircraft Corporation in the 1950s. While the term ''matrix organization'' did not appear in the vernacular until the 1960s, its origins can be traced to the development of ''program management.''
McDonnell in the 1950s was moved toward being a product organization by a combination of external factors. The Armed Services Procurement Act allowed the defense department to award sole-source contracts and gave McDonnell more control over its subcontractors. It was also a time when McDonnell was receiving more missile contracts, which was a new technology both for McDonnell and for the armed services. As a result, the oversight functions that were currently in place did not work effectively for missile contracts.
The term project matrix is descriptive of how the balance of power shifts from the functional manager in a functional matrix to shared authority in a balanced matrix and finally to the center of authority being placed on the project manager. As with the balanced matrix, there is a need for horizontal and vertical coordination. However, project managers become alternative authority figures to those with hierarchical position power.
A project matrix is most effective in organizations where tasks are assigned to projects of limited duration but need to develop results quickly. These projects enjoy a high degree of decision-making autonomy. In its most mature form, a project matrix moves from a temporary to a permanent task orientation. The project manager at this stage becomes a product manager, or a mini general manager. He or she is responsible for the complete business, including its profit and loss, its success and failure, and its future potential. Staff members in the project matrix are seen as fully functioning members of both the department and the project. Functional and project managers contribute equally to the employees' evaluation. However, the rewarding of recognition such as offices or titles is the purview of the project manager. Another characteristic of project matrix organizations is the existence of comprehensive team building and interpersonal skill development programs. Information flows freely throughout the organization. Managerial roles are reassessed and result in lower specificity. The physical space reflects the organizational structure. It is not unusual for project managers to maintain operational space in two or more places. This is also true of functional personnel who have been assigned to a project. They are expected to physically move their locations as they phase in and out of projects or programs.
Figure below provides an example of one type of planned matrix. In this case, one functional manager is given a problem that requires input from most or all of the other functional areas. As an example, a CFO may be required to overhaul the accounts receivable and accounts payable processes in the company. In order to accomplish this effectively, he or she needs the input and collaboration of the IT, manufacturing, and sales departments in order to provide a comprehensive solution. In one example, the CFO takes on the role of project coordinator and asks the other functional managers to suggest staff members whom they feel will be able to provide the necessary input.
In a typical scenario, the CFO might kick off the first meeting, get some ideas about how to proceed from the participants, set up an action plan,
and then allow the participants to move forward on their own. The expectation is that they will come up with a collaborative solution and report back to the CFO with what they believe is a workable plan. In this type of planned matrix, all of the authority and responsibility for the ultimate outcome remains with the functional manager. In one variant, he or she may appoint a staff member with a direct reporting relationship as project coordinator or team leader. I call this a planned matrix since it is created out of a felt need for collaboration to address an issue that impacts all of the various functions.
Anyone who has worked for a long period of time in a large organization has examples such as this. Perhaps another way to look at the accidental matrix is that it should have been a planned matrix to start with. However, in highly structured functional organizations, this type of redundancy is almost always inevitable. Waiting for this type of cross-functional collaboration to take place on its own can be very damaging to the organization.
While it is possible that staff members at all levels might find themselves in circumstances where it becomes obvious that working together cross functionally will provide the best solution for everyone's needs, it is most likely that this connection will happen at the functional managers' level.
Functional managers have the greatest opportunities to collaborate cross functionally because inmost organizations they periodically meet and interact with each other. When a group of functional managers is confronted with an issue that affects several of them, there is motivation for them to collaborate on a solution. Whether or not a spontaneous matrix occurs depends a great deal on the climate created by the executive to whom the functional managers report.
The classic example of the isolated matrix is the ''SkunkWorks'' formed in 1943 at Lockheed Aircraft Corporation. There is much to be learned about effective team operation from the way the Skunk Works was set up and led by its founder Clarence L. ''Kelly'' Johnson. However, the example of how it operated in isolation is the important point here. Charged with developing the first U.S.-built jet aircraft, XP-80, Kelly and his group of engineers demanded and were provided an unprecedented opportunity to work outside of conventional organizational approaches.
In hierarchical functional organizations, it is not uncommon to find most employees interacting almost exclusively with other people in their functional areas. However, for a variety of reasons, there are always individuals in an organization who strive to make contact outside of their functional boundaries. Figure below illustrates an informal matrix. They establish relationships with others in the organization for several reasons. They may require information or resources that are not available locally. They may be strategically making these connections in order to enhance their influence in the broader organization. They could be joining activities outside of the mainstream of the business for social enhancement.
The Matrix Out of Bounds
For many organizations, globalization means expanding their operations to foreign countries-parsing the world into European, Asian, South American, and other geographic divisions. For others globalization may also include the building of alliances with organizations not directly under their control, such as suppliers and, in some cases, even competitors. Many companies no longer just do business in multiple regions or countries, adapting to local market differences. Rather, they are thinking and acting globally and locally-executing integrated strategies and operating in each market in the most effective manner. Whether global or local, strategic alliances present an interesting matrix component.
There are three basic attitudes that management can take in an international setting.
â€¢ Ethnocentric attitude (home country oriented)
â€¢ Viewing the world with domestic references.
â€¢ Managers tend to treat international departments as outlets for dealing with domestic issues.
â€¢ Polycentric attitude (host country oriented)
â€¢ Viewing the world with some domestic references.
â€¢ Each national market is looked upon as a unique market requiring a separate, independent, and different strategy.
â€¢ Geocentric attitude (world oriented)
â€¢ The company views itself as citizens of the world, not of a particular country.
â€¢ Gradual elimination of the very idea of a home or host country.
â€¢ National borders are ignored, and the world is conceptualized as a single market.
The attitude that managers adopt depends largely on the industry. For example, many IT firms are setting up offices overseas and adopt a more polycentric attitude so they can have a strong base in the local technology markets. IT companies need service and support from the local people if problems arise. Having a strong base in the local market by recognizing the uniqueness and independence of the foreign country allows for greater support from the local community.
IBM is a major case in point. The company boosted its Indian staff from 9,000 at the end of 2003 to 23,000 at the end of 2005, and, according to an internal planning document made public by a union; the total is on its way to 38,000. In another significant move, IBM announced on October 12, 2006, that its global procurement headquarters is moving from Somers, New York, north of New York City, to Shenzhen, China. This is the first time the headquarters of a corporate-wide organization (IBM) has been located outside the United States.
According to the company, the move illustrates a shift underway at IBM from a multinational corporation to a new model-a globally integrated enterprise. ''In a multinational model, many functions of a corporation were replicated around the world-but each addressing only its local market,'' said Chief Procurement Officer John Paterson, who is relocating to China. ''In a globally integrated enterprise, for the first time, a company's worldwide capability can be located wherever in the world it makes the most sense, based on the imperatives of economics, expertise and open environments. '' IBM has been operating multinationally for a long time, and it has paid a lot of attention to managing cross-border assignments and to matching individual interests, capabilities, and development needs with business requirements and local circumstances. However, with this move the company is giving more attention to the broader strategic challenges of building business that is global and not simply all over the world. ''IBM is a global company,'' Paterson said. ''And today that is as much about making efficient and effective use of skills everywhere in the world and integrating them globally to serve clients, as it is about developing deep local relationships in markets around the world. We are becoming a globally integrated company that allows us to do both.''
Perhaps following IBM's lead more companies need to develop the mind-set and capabilities among their people so their organizations can extend their influence beyond local and regional boundaries and gain the significant leverage of being global. The most effective companies will pursue long-term commitment, investment, and risk management to achieve results in targeted markets. They will make decisions and implement actions with an understanding of global economics and market potential. They will also help managers and associates understand the global threats and opportunities and engage them in developing effective strategies for addressing them.
The key challenge for global matrix management is loyalty. Most people develop their loyalties locally. They connect more easily with people they see daily, socialize with, and share a clear set of cultural norms with, in terms of both the broader culture and the culture of the local organization. Simply drawing dotted lines on an organization chart to someone in another country doesn't create a working relationship.
Because employees in a matrix often receive competing demands on their time from managers more senior than they are, there is a need for a mechanism to escalate and openly challenge competing managers. According to Hall, matrix structures are most successful in cultures where there is relatively low ''power distance'' between the individuals and their managers-North West Europe, the United States, and Australia. Where management styles have traditionally been more paternalistic or directive (Asia, Southern Europe, and Arab cultures, for instance), it is relatively hard to challenge your manager, much less give loyalty to another boss where the relationship may not be as long-standing. In managing trade-offs and escalation in these cultures, individuals will normally give much more weight to their local manager.
USING THE MATRIX STRATEGICALLY
The key to using organization design strategically appears to center around accountability. If the company is trying to serve both local and global markets at the same time without assigning accountability to both local and global business units, the competition may have a strategic edge.
One of the world's most profitable retailers addressed this challenge by creating both global category and local market business units, each with accountability for its end-to-end value creation. However, each business unit was also assigned speciï¬c ''decision responsibilities'' that relate to the decision factors it alone can execute to maximize end-to-end value of the overall business. This created a dramatically improved strategy, because the business units can react much faster to both local market and global category issues.
For example, a price-based competitor in one local market was countered by selectively shifting certain key levers of pricing to local management. Strategic thrusts became more sophisticated as the company combined global category and local market intelligence. For example, a new premium range was launched only in prime central city sites instead of nationwide. Instead of focusing on revenues and costs that they alone can control, business unit management teams now focus on how to drive the end-to-end economics of the total business. This encourages a high level of global/local coordination without the need for coordinating bureaucracy.
While it's hard to argue with success, the world's largest retailer Wal-Mart could potentially benefit from this strategy. On a recent search through a South Florida Wal-Mart for beach toys in January, I discovered that there were none available. It seems that Wal-Mart purchases everything seasonally, and the centralized purchasing authority allows no flexibility. So because beach toys would languish on the shelves in Chicago, on a perfect beach day in Florida you can't buy a pail and a shovel.
Effective management of a matrix organization calls for the use of behavioral skills and structural mechanisms in ways that contrast sharply with those of traditional organizations. This web of relationships as described by John Mee has become even more complex with the growth of organizations organically, through acquisition, and as global entities, which not only provide fuel for matrix systems but complicate them because of their virtual nature.
We need to learn about matrix systems because they are here and they are growing in complexity with every turn of the wheel. The dynamic pressures that a matrix system places on the organization provide opportunities for both conflict and redundancies in the way the organization operates.
The underlying premise of the matrix is that authority at some level must be shared between two or more individuals. Whenever a matrix is introduced into an existing organization; functional managers mostly stay in their functional areas. As a result, many perceive this as a loss of authority to the project manager who holds domain over project activities that are in some cases operational as well as executive. Functional managers can come to feel that their involvement in a matrix system is limited to maintaining departmental resources. Project managers, on their part, feel unduly restricted by functional managers' control over departmental resources. As a result, the potential for conflict arises in which both parties try to enforce their will. If this condition is recognized and there is a well-understood methodology for facilitating agreement between these divergent points of view, these conflicts can actually result in higher quality decisions. However, without proper facilitation, they can spiral into mutual distrust and the conflict interferes with the effective functioning of the organization as a whole. (E. Lawler and C. Worley.2006)