DEPARTMENTALIZATION BY TERRITORY OR GEOGRAPHY PDF

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Class notes about formal and informal organization, informal organization, organizational levels and the scope of administration, problems with organizational levels, the factors that determine an effective scope, and the need for balance....

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DEPARTMENTALIZATION BY TERRITORY OR GEOGRAPHY

Territory-based departmentalization is common in companies operating in broad geographic areas. Although territorial departmentalization is especially attractive to large-scale companies or other companies whose activities have a large physical or geographical dispersion, a plant that is local to its activities can assign its security department staff on a territorial basis, for example by placing two guards on each of the south and west gates. Department stores assign floor guards on this basis and it is a common way to assign cleaning staff, window cleaners, etc. Business companies use this method when similar operations are undertaken in different geographic areas, such as automotive assembly, chain and wholesale sales, and oil refining. Many government agencies—the tax department, central bank, courts, postal service, and more—adopt this organizational basis in their efforts to provide similar services simultaneously across the country. Territorial departmentalization is most commonly used in sales and production; not in finance that is usually concentrated in the main offices. Departmentalization by customer group Grouping activities to reflect a primary interest in customers is common in a variety of companies. Customers are the key to how to group activities when each customer group is managed by a department manager. The industrial sales department of a wholesaler who also sells to retailers is a good example. Business owners and their managers often arrange activities on this basis to meet the requirements of well-defined customer groups. Product departmentalization Grouping activities on the basis of products or product lines has become common practice in large-scale multiline companies. It can be seen as an evolving process. Companies that adopt this type of departmentalization were usually organized by functions. With the company's growth, production managers, sales and service managers, and engineering executives faced size issues. The managerial position became complex and the scope of management limited managers' ability to increase the number of immediate subordinate managers. At this point, reorganization on the basis of product division became necessary. This structure allows senior management to delegate to a division executive extensive authority on manufacturing, sales, service and engineering functions that relate to a particular product or product line and obtain a considerable degree of utility responsibility from each of these managers. The danger of over-simplification

When considering the benefits, it is essential to avoid over-simplification. Product line managers may be overwhelmed by heavy indirect costs allocated by the expense of operating head offices, perhaps a central research division, and often many central service divisions. It is understandable that product managers resent the cost charge over which they have no control. Matrix organization Another type of departmentalization is matrix, grid, or project or product management organization. However, pure project management does not involve a grid or matrix. The essence of matrix organization is typically the combination of functional and project or product departmentalization patterns in the same organizational structure. Hay functional managers in charge of engineering functions and an embedding of project managers responsible for the final product. While this form is common in engineering and research and development, it has also had extensive use, though rarely plotted as an array in product marketing organizations. This type of organization often occurs in construction (e.g. building a bridge), in the aerospace industry (such as designing and launching a weather satellite), in marketing (an advertising campaign for an important new product), in the installation of an electronic system for data processing, or in administrative consulting companies where management experts work together on a project. Guides to Making Matricial Administration Effective Matrix administration can become more effective by applying the following guidelines: • •  • • • • •

Define the goals of the project or task. Clarify the roles, authority, and responsibilities of managers and team members. Ensure that the influence is based on knowledge and information without rank. Balance the power of functional and project managers. Select an experienced manager who provides leadership for the project. Promote organization and team development. Install appropriate cost, time, and quality controls that report standard deviations in a timely manner. Reward project managers and team members fairly.

Strategic business units Companies have used an organizational device in general called a Strategic Business Unit (UEN). UENs are separate companies established or as units in a larger company to ensure that certain products or product lines are promoted and managed as if each were an independent company. One of the first users of this

organizational device was General Electric, as it wanted to ensure that every product or product line of the hundreds offered by the company received the same attention that it would receive as if it were developed, produced and marketed by an independent company. In some cases, large companies have also used the device for an important product line. For example, Occidental Chemical Company used it for products such as phosphates, alkalis and resins. In general, to be called an UEN, the business unit must meet certain specific criteria. For example, having its own mission, other than the missions of other UENs; have defined groups of competitors; prepare their own integration plans, very different from those of other UENs; manage your own resources in key areas, and have an appropriate size: neither too large nor too small. Obviously, in practice, it might be difficult to establish UENs that meet all the criteria. For each UEN, a manager (usually a business manager) has a responsibility to guide and promote the product from the research lab through product engineering, market research, production, packaging and marketing with responsibility on the baseline of their profitability. Thus, an UEN receives its own mission and goals, in the same way as a manager, with the assistance of plant or part-time staff (people from other departments assigned to the UEN part-time), will develop and implement strategic and operational plans for the product. The organization of a typical UEN, such as Occidental Chemicalphosphates. Obviously, the main benefit of using a UEN organization is to provide the security that the product will not be "lost" among other products (usually the best-selling and profit-highest) in a large company. It preserves the attention and energies of a manager and staff whose task is to guide and promote a product or product line. Thus, it is an organizational technique to preserve the business attention and impulse so characteristic of the small company. In fact, it's an excellent way to promote entrepreneurship, which is probably not in the big company. Positions shown with dotted lines are reported administratively to the general manager of the division, but functionally are responsible to the company manager in the phosphate operation. Potential problems with strategic business units C. K. Prahalad and Gary Hamel, two professors of strategic management, suggest that companies should invest in their core competencies and take care of the tyranny of UENs. The core competence is the collective learning of the organization, especially the ability to coordinate the different production skills and the integration of these skills into what they call "technology flows". For example, for Honda, the car manufacturer, engines are the central product to which the design and development skills that result in end products such as cars and motorcycles are directed. If the motorcycle division had received resources for development, it cannot share this technology with the car division. Allocating

resources to individual UENs can result in low investment in core competencies (such as engines) that benefit the entire organisation. Also, UEN managers may not be willing to share talented staff and hide it instead of sharing it with another UEN. Global organizational structures Organizational structures differ to a greater degree for companies operating in the global environment. The type of structure depends on a variety of factors, such as the degree of international guidance and commitment. A company can internationalize its operation simply by creating an international department at its headquarters, headed by an export manager. As the company extends its international operations, foreign subsidiaries and later international divisions can be established in various countries, with reports to the manager in charge of the global operation at the parent company, or perhaps to the CEO. With the additional growth of international operations, several countries can be grouped into regions such as Africa, Asia, Europe and South America. Moreover, the European community (as well as other communities) can be divided into groups of countries such as European Union (EU) countries, non-EU countries and Eastern European countries. Companies can also choose other forms of departmentalization in addition to the geographic guide. For example, an oil company can subdivide the exploration functional group by region, such as exploration in Alaska or the Persian Gulf. Similarly, functional refining and marketing groups can be subdivided into the various regions. Clearly, petroleum products can be marketed in areas other than those where exploration and production occur. The virtual organization Virtual organization is a somewhat loose concept of a group of companies or independent people generally connected through information technology. These companies can be suppliers, customers and even competing companies. The goal of virtual organization is to gain access to another company's competition, gain flexibility, reduce risk, or respond quickly to market needs. Virtual organizations coordinate their activities through the market where each party sells its products and services. Virtual organization has pros and cons. When IBM developed the personal computer in 1981, all major components were acquired from other companies. This allowed IBM to market the product in 15 months. The microprocessor was purchased from Intel and the software was developed by Microsoft. The "open" architecture was based on well-known standards and components could be purchased from many vendors. When using third parties, IBM had to invest little for its decentralized strategy. Later, however, the open architecture strategy revealed

its downside. Other companies could purchase microprocessors directly from Intel and the operating system from Microsoft. Virtual organizations may not have a letter of organization, or a centralized office building. The modern library may not be a building with many shelves. We may never have to visit a library, database, computer, modem, and access key can be all it takes to access the library. The UK Open University can be an example of a university without a physical location. It has a central base with an administrative body, but no students, which are scattered all over the world, as are teachers. They may never know each other. Technological possibilities are exciting, but how do we manage people we never see? It is clear that many unanswered questions surround the virtual organization. The borderless organization Jack Welch, former CEO of General Electric, established his vision of the company as a "borderless company." By this he meant an "open anti-parish environment, friendly in the search for and share new ideas, regardless of their origin". The purpose of this initiative was to remove barriers between the various departments and between domestic and international operations. To reward people for adopting the "integration model," bonuses were awarded to those who not only generated new ideas, but shared them with others. Choosing the guide for departmentalization There is no better guide to departmentalization that is applicable for all organizations and all situations. Managers should determine what is best when examining the situation they face; the work to be carried out and how it should be done, the people involved and their personalities, the technology used in the department, the users to attend and other internal and external environmental factors of the situation. However, if they know the various patterns for departmentalization, the pros and cons, and the dangers of each, practicing managers should be able to design the most appropriate organizational structure for their particular operations. The goal: to achieve goals Departmentalization is not an end in itself, but simply a method of providing activities and facilitating the fulfillment of objectives. Each method has its advantages and disadvantages. As a result, the selection process includes considering the relative advantages of each guide at each level of the organization's structure. In all cases, the central issue relates to the type of organizational environment the manager wants to design and the situation he faces. The analysis that prependses the alternative departmentalization method shows that each method yields certain gains and includes certain costs. Mixing types of departmentalization

Another point to highlight refers to the mixing of departmentalization types within a functional area. For example, a wholesale drug company groups beverage-related purchasing and sales activities into one product department, but groups other sales activities at the same level on a territorial basis. A manufacturer of plastic articles allocates by territories both the production and sale of all its products, except dishes that themselves are a product department. In other words, a functional department manager can use two or more bases to group activities at the same organizational level. Such practices may be justified on logical grounds. The objective of the departmentalization is not to build a rigid structure, balanced in terms of levels and characterized by consistency and identical bases, but group activities that contribute better to achieving the objectives of the company. If a variety of bases achieve this, there is no reason why managers should not take advantage of the alternatives before them....