During the past thirty years there has been a so-called hidden revolution in the introduction and development of new organizational structures. Management has come to realize that organizations must be dynamic in nature; that is, they must be capable of rapid restructuring should environmental conditions so dictate. These environmental factors evolved from the increasing competitiveness of the market, changes in technology, and a requirement for better control of resources for multiproduct firms. More than thirty years ago, Wallace identified four major factors that caused the onset of the organizational revolution:
● The technology revolution (complexity and variety of products, new materials and processes, and
the effects of massive research)
● Competition and the profit squeeze (saturated markets, inflation of wage and material costs, and
production efficiency)
● The high cost of marketing
● The unpredictability of consumer demands (due to high income, wide range of choices available,
and shifting tastes)
Much has been written about how to identify and interpret those signs that indicate that a new organizational form may be necessary. According to Grinnell and Apple, there are five general indications that the traditional structure may not be adequate for managing projects2:
● Management is satisfied with its technical skills, but projects are not meeting time, cost, and other project requirements.
● There is a high commitment to getting project work done, but great fluctuations in how well performance specifications are met.
● Highly talented specialists involved in the project feel exploited and misused.
● Particular technical groups or individuals constantly blame each other for failure to meet specifications or delivery dates.
● Projects are on time and to specifications, but groups and individuals aren’t satisfied with the
achievement.
Unfortunately, many companies do not realize the necessity for organizational change until it is too
late. Management looks externally (i.e., to the environment) rather than internally for solutions to problems.
A typical example would be that new product costs are rising while the product life cycle may be decreasing. Should emphasis be placed on lowering costs or developing new products?
If we assume that an organizational system is composed of both human and nonhuman resources, then
we must analyze the sociotechnical subsystem whenever organizational changes are being considered. The social system is represented by the organization’s personnel and their group behavior. The technical system includes the technology, materials, and machines necessary to perform the required tasks.
Behavioralists contend that there is no one best structure to meet the challenges of tomorrow’s organizations. The structure used, however, must be one that optimizes company performance by achieving a balance between the social and the technical requirements. According to Sadler3:
Since the relative influence of these (sociotechnical) factors change from situation to situation, there can be no such thing as an ideal structure making for effectiveness in organizations of all kinds, or even appropriate to a single type of organization at different stages in its development.
There are often real and important conflicts between the type of organizational structure called for if the tasks are to be achieved with minimum cost, and the structure that will be required if human beings are to have their needs satisfied. Considerable management judgment is called for when decisions are made as to the allocation of work activities to individuals and groups. High standardization of performance, high manpower utilization and other economic advantages associated with a high level of specialization and routinization of work have to be balanced against the possible effects of extreme specialization in lowering employee attitudes and motivation.
Organizations can be defined as groups of people who must coordinate their activities in order to meet
organizational objectives. The coordination function requires strong communications and a clear understanding of the relationships and interdependencies among people. Organizational structures are dictated by such factors as technology and its rate of change, complexity, resource availability, products and/or services, competition, and decision-making requirements. The reader must keep in mind that there is no such thing as a good or bad organizational structure; there are only appropriate or inappropriate ones.
Even the simplest type of organizational change can induce major conflicts. The creation of a new position, the need for better planning, the lengthening or shortening of the span of control, the need for additional technology (knowledge), and centralization or decentralization can result in major changes in the sociotechnical subsystem. Argyris has defined five conditions that form the basis for organizational change requirements:
These requirements . . . depend upon (1) continuous and open access between individuals and groups,
(2) free, reliable communication, where (3) independence is the foundation for individual and departmental cohesiveness and (4) trust, risk-taking and helping each other is prevalent so that (5) conflict is identified and managed in such a way that the destructive win-lose stances with their accompanying polarization of views are minimized. . . . Unfortunately these conditions are difficult to create. . . . There is a tendency toward conformity, mistrust and lack of risk-taking among the peers that results in focusing upon individual survival, requiring the seeking out of the scarce rewards, identifying one’s self with a successful venture (be a hero) and being careful to avoid being blamed for or identified with a failure, thereby becoming a “bum.” All these adaptive behaviors tend to induce low interpersonal competence and can lead the organization, over the long-run, to become rigid, sticky, and less innovative, resulting in less than effective decisions with even less internal commitment to the decision on the part of those involved.
Organizational restructuring is a compromise between the traditional (classical) and the behavioral schools of thought; management must consider the needs of individuals as well as the needs of the company. Is the organization structured to manage people or to manage work?
There is a wide variety of organizational forms for restructuring management. The exact method depends on the people in the organization, the company’s product lines, and management’s philosophy. A poorly restructured organization can sever communication channels that may have taken months or years to cultivate; cause a restructuring of the informal organization, thus creating new power, status, and political positions; and eliminate job satisfaction and motivational factors to such a degree that complete discontent results.
Sadler defines three tasks that must be considered because of the varied nature of organizations: control, integration, and external relationships.5 If the company’s position is very sensitive to the environment, then management may be most concerned with the control task. For an organization with multiple products, each requiring a high degree of engineering and technology, the integration task can become primary. Finally, for
situations with strong labor unions and repetitive tasks, external relations can predominate, especially in
strong technological and scientific environments where strict government regulations must be adhered to.
In the sections that follow, a variety of organizational forms will be presented. Obviously, it is an impossible task to describe all possible organizational structures. Each form describes how the project management organization evolved from the classical theories of management. Advantages and disadvantages are listed for technology and social systems. Sadler has prepared a six-question checklist that explores a company’s tasks, social climate, and relationship to the environment.
● To what extent does the task of organization call for close control if it is to be performed efficiently?
● What are the needs and attitudes of the people performing the tasks? What are the likely effects of
control mechanisms on their motivation and performance?
● What are the natural social groupings with which people identify themselves? To what extent are satisfying social relationships important in relation to motivation and performance?
● What aspect of the organization’s activities needs to be closely integrated if the overall task is to
be achieved?
● What organizational measures can be developed that will provide an appropriate measure of control and integration of work activities, while at the same time meeting the needs of people and providing adequate motivation?
● What environmental changes are likely to affect the future trend of company operations? What organizational measures can be taken to insure that the enterprise responds to these effectively? The answers to these questions are not easy. For the most part, they are a matter of the judgment exercised by organizational and behavioral managers.
Source : Project management A system approach to planning, scheduling and controlling [EIGHTH EDITION] By HAROLD KERZNER, Ph.D.