they
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tend to reorganize around products, territories or customers served. Such structures allow more
rapid response to specific customer needs, but at the expense of less efficient utilization of
functions. The timing of a structural change is a matter of judgment. Symptoms of a need to
change are excessive red-tape and delayed decision-making in a function-based structure. As we
shall see, cross-functional teams allow retention of the advantages of function-based structures,
but offset its main disadvantages.
Systems and processes should support structure. Processes include conversion of raw materials
into products (by fabrication and assembly) and organization of data into useful information or
the performance of services. Processes also include movement of materials/information between
departments, and decision-making to coordinate or allocate activities or resources. The
company’s organizational structure influences how many departmental boundaries such
processes must cross. For example, processes must cross more departmental boundaries in
function-based structures than in product-based structures, and generally require more complex
coordination mechanisms. Related boundary management issues apply to companies that
outsource processes or collaborate in performing processes with partners. Systems are designed
to plan (e.g., what and how much to produce) and control (e.g., assure that plans are met or
corrected mid-course). For example, accounting and human resources systems help senior
management to meet its planning and control responsibilities.
Work is shown in the upper left quadrant in Figure 3. Work can be performed by shop-floor and
technical/professional employees as individuals or members of teams. Individual employees
may be members of the same department because they perform similar tasks or perform a
common function. Teams may be a better unit for organizing work if their members perform a
highly interdependent set of tasks or produce a common output. Managers coordinate the work
of individuals or teams through schedules or real-time adjustments and by rewarding employees
for performing tasks according to instructions, such as who does what and when, and for
cooperating with others in achievement of common goals.
People (upper right quadrant on Figure 3) possess varying degrees of knowledge, skills, and
abilities (KSAs) when they are hired. Even with the utmost care in selecting the most qualified
people, companies still need to devote considerable time for education and training and
socialization of employees. Education, training and on-the-job experience, as well as the formal
and informal organization tend to reduce some of the variation that people bring with them when
they are hired and encourage them to internalize company norms, values and beliefs that will
lead them to act consistently on the company’s behalf.
The informal organization (lower left quadrant on Figure 3) potentially includes everything that
is not formally designed as work or organization structure or specified as work for people to
perform (Kotter and Cohen, 2002). There is always some need for elaboration in structure and
work beyond what is initially specified formally. Sometimes people improvise to compensate
for what has been left unspecified, but they also may improvise to get around ineffective or
poorly designed structures. Companies vary considerably in the freedom or discretion that
permits employees to elaborate beyond what is specified.