One
reason organizations exist is to do things that would be hard for
one person to do by themselves. For example, it's hard to conceive
of one person building an office building. Instead, we have organizations
of thousands of people with diverse skills that work together to
build buildings. However, coordinating, controlling and just keeping
track of a lot of individuals introduces its own problems.
One
way to solve these problems is to create a hierarchical system of
supervision, so that small groups of workers (up to say, 50 people)
are supervised by coordinators (managers). Depending on how many
people there are in the organization, the coordinators themselves
need to be organized into groups supervised by higher level managers,
and so on. Part and parcel of this hierarchical supervisory system
is the cutting up of the organization into groups (departments).
The
question arises: On what basis should we carve up the members of
the organization into subunits? What would happen if we did it randomly,
without regard for tasks? One problem would be that each manager
would have to be aware of what needed to be done in every area of
the organization, in order to direct his/her workers. This would
be impossible in most cases.
Common
Bases For Departmentation
What
organizations actually do is group people in a way that relates
to the task they perform. This still leaves a lot of possibilities.
Here are six common bases for departmentation:
Knowledge
and Skill. People are grouped by what they know. For
example, hospitals have departments like Neurology, Allergy, Cardiology,
Internal Medicine, Gastro-Enterology, etc.
Work
Process. Workers are grouped based on the process or
activity used by the worker. For example, a manufacturing company
may create separate casting, welding and machining groups. Often,
it is the underlying technology that determines the departmentation.
For example, a print shop may have separate letterpress and offset
departments -- two different processes for getting the same outputs.
Business
Function. Grouping by the basic function in the organization:
purchase supplies, raise capital, generate research, etc. This
leads to the familiar departments of manufacturing, marketing,
engineering, finance, and so on.
Time.
When work is done. For example, shifts in a factory or hospital
or hotel.
Output.
Grouping based on the products or services that the employee works
on. For example, a manufacturer may have different divisions for
each of its product lines.
Client.
Grouping based on the type of clients their work is ultimately
sold to. For example, computer companies often have different
sales departments for home, small business, educational, government
and large business customers.
Place.
Groups are based on the geographical areas that they serve. For
example, during WW2, the US War Dept. was organized into 7 "theatres"
corresponding to regions of the world where the US was fighting.
Similarly, Post Offices are often divided by regions and zipcodes.
Actually,
some of these (like #1-Knowledge and #2-Work Process) can be impossible
to distinguish. In general, it is more useful to think in terms
of two basic categories, which are generally called function and
market, but which you might think of as Means and Ends. Here's how
the seven categories above fall into the two supercategories, along
with some other information about the two categories:
Means
(Function)
Ends
(Market)
Specific
Types
knowledge
& skill
work
process
business
function
time
Output
Client
Place
Kinds
of
Companies
small
organizations of various kinds
large-scale
manufacturing — assembly line production
professional
bureaucracies: universities, hospitals
Often
found in really big orgs and multinationals
divisionalized
forms & conglomerates
Orgs
with high product line heterogeneity
Orgs
in fast moving industries
Orgs
with extra resources available, like Microsoft
Strengths
Works
well with smaller organizations
Groups
skill sets so they can consult with each other and socialize
each other: put all the accountants together, all the
factory workers together, etc.
Avoids
duplication of efforts: just one HR dept., one operations
division, etc.
Allows
economies of scale: single purchasing dept. can order
large quantities of paper for all parts of the organization
Allows
different parts of org to evolve in different ways at
different speeds to adapt to the complex environment
Some
sense of ownership of product: in effect creates many
small companies responsible for one small product.
Sense
of belonging to team and of common fate.
Weaknesses
Does
not create sense of ownership/responsibility for final
product:
Encourages
finger-pointing: "not my department"
People
in different functional areas don’t understand
the whole, nor other parts
Can
create significant duplication of effort and knowledge
throughout org.
Innovations
don't spread: brilliant new time management system in
one division is unknown in other divisions
No
economies of scale
Matrix
& Project-based Organizations
An
attempt to organize company according to both function and market
dimensions simultaneously, so that each person belongs to both a
functional department and a product/market department. Some people
therefore report to two bosses.
The
big advantage of matrix organizations is that they are great for
sharing of information and enabling people to coordinate their efforts
with larger organizational goals and strategies.
The
problem, of course, is that having two bosses can be confusing,
and is a situation that is easily exploited by subordinates, who
can pit their bosses against each other. The subordinates can also
be unwitting victims of power struggles among the bosses.
The
matrix form works best when one dimension is a permanent affiliation
(typically functional), and the other is a temporary dimension,
such as a client project. So a person is, say, a marketing research
analyst, and is presently assigned to the Carnation project, which
will take 6 weeks, and will then be assigned to the R.J. Reynolds
project, and so on.
Criteria
For Choosing
An
organization can divide itself into departments any way it wants
using any criteria it wants -- there is no law about it. It doesn't
have to be rational. However, there is a theory (developed by James
Thompson) about what is the best way to do it. According to the
theory, there are 4 basic rational criteria for choosing the bases
for departmentation:
1.
Work-flow interdependence
This
refers to the flow of product from person to person as it is being
constructed. There are four kinds of increasingly tight interdependence:
pooled:
sharing of resources and consequences only. In other words, the
positions have really nothing to do with each other, they are
only interdependent in the general sense of being part of the
same company, so they are funded by the same budget.
sequential:
work is fed from one position to the next, like an assembly line
reciprocal:
work passed back and forth between a pair of positions/tasks
team:
work flows around and through a network of positions, like the
ball in a basketball game.
Now
here is the key idea: where work-flow interdependence is critical,
rational organizations try to group tasks/positions together
which are more tightly interdependent. That is, operations
which are team-interdependent should be grouped first (i.e., at
the lowest levels in the organization), operations that are reciprocal-interdependent
should be grouped second, and so on. This is illustrated in the
figure below, which gives the organization chart of a hypothetical
manufacturing organization.
Counting
from the bottom up, the first and second groupings are by work process,
the third is by business function, and the fourth is by output (product).
Now think about it in terms of interdependencies. The tightest interdependencies
are between the turning, milling and drilling operations. These
are team or reciprocal interdependencies. So they are the first
to be grouped together (under "General Foreman: Fabricating").
The
next tightest interdependencies are the sequential interdependencies
between fabrication and assembly, since first you make the materials,
then you assemble them. So these are grouped together under "Manager:
Manufacturing". There
are also sequential interdependencies between the business functions
of design (engineering), manufacturing, and marketing. So at the
next level up, we merge all of these under "Vice-President: Snowblowers". Above
this level, most of the workflow interdependencies are only of the
pooled variety: the snowblower department really has little to do
with the frostbite remedy department, except that they all dip into
the same general pool of organizational resources (capital, management
talent, physical assets, etc.).
2.
Process interaction
This
refers to consultations among people about how to do things. For
example, lawyers in a corporation consult each other to take advantage
of specialized skills and to develop a common approach to things.
3.
Economies of scale
Groups
formed in order to achieve economies of scale. For example, if each
department in a factory has a maintenance person, it may be inefficient
because the small departments don't have quite enough work for a
fulltime maintenance person, while the big departments have too
much. This
approach also encourages specialization, as within a central maintenance
department there can be specialists for different kinds of problems.
4.
Social considerations
Groups
are formed in order to minister to people's social needs. This often
leads to functional groupings because people are comfortable with
their "own kind" (as in technical people prefer technical people,
sales types like sales types, etc.). Often
there are individual concerns, like two people who don't get along,
the force certain departments to be placed under other departments,
or not placed under certain departments.
