Organizatinal Change

8/3/2019 Organizatinal Change

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Managing Change in an Organization

Abstract


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Firms using dynamic networks use a small amount of capital to fund growth

allowing them to grow rapidly. They usually have a small staff. They subcontract

work and outsource noncore functions. They hire superior talent, avoid idle

capacity, and reduce inventory allowing them great flexibility. Dynamic networks

have vertical disaggregation, brokers, market mechanisms, and full-disclosure

information systems. Firms that function in a global environment have special

challenges and environmental pressures. They must respond to local laws and

customs, and conditions in their host country. Firms structure their division of labor

through horizontal differentiation, vertical differentiation, personal differentiation,

and special differentiation depending on the type of firm. Firms are decentralizing

responsibility for decision making to more people in the firm allowing for increasing

autonomy.


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Characteristics of Dynamic Networks

Dynamic networks (modular organizations) combine a variety of subcontractors

into a working organization. Modular organizations have a small staff that develops

strategy, subcontracts work and outsources noncore functions, and monitors the

interface with various subcontractors allowing managers to decrease overall costs

and speed the development of new products. This allows the company to hire

superior talent to perform certain functions, avoid idle capacity, reduce inventory

costs, and avoid becoming committed to a technology that becomes obsolete.

These companies can grow rapidly since they use a small amount of capital to feed

rapid growth. For example, a core firm may sell computers, but contract out design,

manufacturing, sales, and distribution. The firm can add or subtract subcontractors

as needed. This allows great flexibility for the firm. The modular structure meets

the need for innovation and efficiency since subcontractors pursue different

strategies, yet complement each other as part of the network (Gordon, 2002, pg.

414).

The dynamic network takes different forms. Individual firms join in partnerships

to work in international projects. High-tech firms strategically collaborate with each

other to form network organizations. General contractors and subcontractors in the

construction business form a stable and continuous network over time. Dynamic

networks have four characteristics. They have vertical disaggregation in which

independent organizations within the network perform the business functions. It is

used in product design, marketing, manufacturing, and other functions. They have

brokers that assemble the business groups by subcontracting for required services,

creating linkages among partners, or locating such functions as design, supply,

production, and distribution. They have market mechanisms such as contracts or


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payments for results, rather than plans, controls, or supervision, hold the functions

together. In addition, there is full disclosure information systems link the various

network components. A modular structure also can exist inside an organization.

The company creates entrepreneurial and market components, such as distribution,

information technology, or research and development that operate as separate

divisions or profit centers with bottom-line responsibility (Gordon, 2002, pg. 414).

Horizontal organization focuses on core processes, emphasizes on empowering

workers by reducing the management hierarchy, and encourages employees to

focus on customer requirements and satisfaction. It includes cross-functional teams

that manage and run processes. Horizontal structures organizes work around key

processes instead of tasks, flattens the hierarchy by empowering workers and

eliminating non-value-added work, uses teams to manage everything, and lets

customers satisfaction drive performance. It uses information technology to reach

performance objectives and deliver value to customers. Process owners take

responsibility for an entire core process. It rewards workers for their team-related

performance and maximizes contact with suppliers and customers (Gordon, 2002,

pp. 410-411).

Lattice Organizations emphasizes teamwork and employee empowerment that

results in structures that reduce or eliminate organizational hierarchy. It can

eliminate assigned or assumed authority. Sponsors rather than bosses work with

associates instead of employees. This structure emphasizes strong interpersonal

communication. Individuals responsible for accomplishing various objectives are

tasked with setting the objectives (Gordon, 2002, pp. 411-412).

Some firms unite and form alliances to pursue a set of agreed-upon goals.

Rather than acquiring and developing their own resources, some organizations find


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it faster and cheaper to form alliances with another organization. They share control

over the performance of assigned tasks and make continuing contributions to the

alliance. The linkages between organizations in alliances strengthen companies by

bringing additional resources to solving organizational problems and competing in

the marketplace. Strategic alliances also create opportunities for learning from a

partner. Successful alliances view partnership as an opportunity, attach importance

to the results of the collaborative efforts, demonstrate a reasonable level of trust,

and demonstrate a willingness to learn from each other. It creates shared goals and

realistic expectations, uses conflict productively, redesigns and creates integrated

systems, and believes in honest communication. In addition, these alliances have

committed leadership; plan and budget jointly, have congruent measurement and

reward systems, and provide necessary resources (Gordon, 2002, pp. 412-413).

The virtual organization is a network of independent suppliers, customers, and

even competitors, tied together by computer technology. The Internet and

information technology allows them to share skills, costs, access to markets, and

supports the development of this structure. Once the network achieves its

objectives, it may dissolve. Each organization participating in the network

contributes only its core competencies. Companies frequently regroup which into

new virtual corporations which creates flexibility to seize new opportunities. These

organizations usually have flat structures in which information and decision making

move horizontally. Electronic communication supports multidisciplinary work

arrangements that link people across formal organizational boundaries. Virtual

organizations may be temporary, and firms may participate in multiple alliances

simultaneously. In virtual corporations, computer networks link companies,

entrepreneurs, and partnerships. Each partner brings its core competencies


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allowing the creation of a best-of-everything organization. Partnerships are more

opportunistic, less permanent, and less formal. Since members rely on each other

to achieve their goals, there must be a level of trust. The virtual corporation

redefines the traditional boundaries of a company. Increased cooperation among

competitors, suppliers, and customers makes it difficult to determine companys

borders. Virtual organizations can exist within a single company. They have of a

pool of employees from whose expertise various business units can draw which

allows all parts of the organization access to a broader pool of talent and enables

information technology staff to work on a broader array of projects and problems

(Gordon, 2002, pg. 416).

Differences between Global Management and Multinational Management

Increasingly, companies function in a global environment, with special

challenges. Managers in high-performance companies structure their organizations

to increase effectiveness of their interactions with the environment. Many of these

firms are moving to a decentralized structure that allows managers to respond

more quickly and effectively to customer requirements. Organizations that

function in the global environment face special environmental pressures. They

must respond to local laws and customers, as well as to those of their home

country. Multinational companies typically choose the extent to which they create

special local structures that respond to conditions in their host countries (Gordon,

2002, pp. 432-449).

There are many challenges in the global environment such as the rapidly

changing environment, the constant development, and availability of new


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technology, and the increased number of knowledge workers in the labor force.

Firms that start and develop as part of the dot-com companies face many

challenges in structuring themselves so that they are responsive to the changing

environment. Companies in this environment tend to implement organic structures,

such as horizontal organizations, network structures, and even virtual corporations.

Frequent reinvention and restructuring occurs as these companies respond to new

product launches, increased competition, and a general environment. These firms

combine mechanistic structures and organic structures to create a hybrid firm as

they become more established. There may be variations in laws and regulations

that require special support staff in various countries to ensure compliance.

However, with the elimination of economic boarders between countries and

comparable consumer demands, global structures have emerged thus eliminated

the need to differentiate horizontally into regional divisions or product subsidiaries.

With the Internet and communication technologies of today, coordination across

long distances is simple and effortless (Gordon, 2002, pg. 449).

Managers of multinational organizations create structures and management

strategies that respond to their needs. Firms with similar products in different

regional markets such as oil companies, use a global management style. These

firms compete worldwide by creating few or no distinctions between markets and

developing global economies of scale in manufacturing, distribution, and sales.

Firms in the electronic industry or consumer products industry such as the food

industry, use a multinational management style. These firms design marketing,

sales, and products to meet specific country or regional requirements.

Pharmaceutical firms use an international management style that falls between

global and multinational management. These firms sell similar products in all


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countries but tailor them to meet local requirements. A transnational management

style combines elements of each of these approaches. This style adds elements

from the other styles to meet special market needs, a changing environment, or

cost-reduction pressures (Gordon, 2002, pp. 449-450).

Some firms represent a new breed of multinational companies. They outsource

part of the manufacturing and distribution process to other countries and focus on

their core competencies.

Companies that form international alliances need to add a cultural dimension to

their normal financial, legal, and strategic planning. There are eight stages in

developing a culturally responsive alliance: (1) create cultural profiles of each

partner, (2) compare profiles and identify incompatibilities, (3) develop a joint

business purpose, (4) identify the desired degree of operational independence, (5)

carefully choose the legal structure for the alliance, (6) agree to the management

systems for the alliance, (7) staff the alliance, and (8) assess the alliances demands

on its parent company cultures and change practices as needed. To increase the

likelihood that the international alliance will succeed, companies identify and

address cultural incompatibilities. The firm can create a shared vision and smooth

its development and operation by involving managers and employees in the

alliance. Some companies have moved from high-cost U.S. and European sites to

locations in developing countries (Gordon, 2002, pp. 450-451).

Multinational firms are organizations that function in numerous countries. They

must deal with the unique characteristics of numerous cultures and countries,

experiences even greater environmental complexity. They have employees with

different cultural backgrounds, experiences, values, and education. A companys

employees within a given country may come from both the home country and the


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host country. Reconciling differences in employees perspectives, as well as taking

advantage of their different views, is challenging when designing organizations.

Establishing structures that allow for the fluid exchange of employees at various

sites across the world is important. Many companies have shifted work outside the

United States to locations with lower-cost labor. The transfer of skills and the

translation of knowledge among locations occur more easily in product or project

structures, in which people are used to working with diverse groups. Functional

structures, in contrast, tend to perpetuate a more holistic viewpoint. Network

structures provide the greatest opportunity for taking advantage of synergy from

diverse countries and using it to make the parent organization more competitive

(Gordon, 2002, pp. 440-450).

Global organizations have the same basic structures as domestic ones; they face

particular challenges in creating a cohesive structure across countries. They must

respond to differences in culture, language, and laws while creating an integrated

enterprise. For example, Hewlett-Packard reorganized its global structure so that

multinational clients can purchase from a single sales and marketing group in their

local area. Other companies have moved key operations to specific business

locations. Companies that tend to have longer-lasting international joint ventures

are those with experience in forming domestic joint ventures and those that are

international, wholly owned subsidiaries (Gordon, 2002, pp. 416-450).

Division of Labor

The division of labor at Orion College is personal differentiation in which labor is

divided according to the workers expertise or training. Orion emphasizes the

personal division of labor and organizes labor around workers specialties. With

personal differentiation, departments within the organization can vary the degree in


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their differentiation. Orion may also organize groups within its management

department around professors expertise, such as strategy, organizational behavior,

human resource management, and social issues in management. This type of

division of labor is also valuable in business situations that require special expertise

in firms such as high-technology manufacturing or specialty marketing. Orion

College divides its labor according to expertise and specialty. For example, the

Admissions Department answers questions about the admissions process, makes

admissions decisions, and communicates with students until they arrive on campus.

This department sends students information about financial aid but does not answer

questions about the financial aid process. The Financial Aid Department receives

applications for financial aid, makes decisions about financial aid, and then

administers it during the students four years in college. The registrar handles all

course registration. In this division of labor, CEOs, CROs, or Executive Vice

Presidents are usually at the top. The specialties report to these executives is

divided into the Director of Admissions, Registrar, Director of Financial Aid, Director

of Housing, and Controller. With this division of labor, Orion College has received an

increasing amount of student complaints. The students feel that they must deal

with too many departments and that Orion is not customer-oriented and sensitive to

student issues (Gordon, 2002, pg. 399).

There are other types of division of labor. With horizontal differentiation, jobs

are grouped at the same level in the hierarchy according to their function,

customer, product, process, or geographical area. There can be a high or low

division of labor. The amount of horizontal differentiation varies. It depends on

factors as the managers preference and the employees abilities, as well as the

organizations size, age, goals, and product or service. As a firm grows and


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differentiation increases, barriers to communication also increase. Electronic

communication can reduce these barriers since communication as it makes

communication across units as easy as communication within the unit (Gordon,

2002, pg. 399).

Vertical differentiation exists in tall organizations that have many levels in the

hierarchy. This division of labor describes the number of hierarchical levels in a

company. Flat organizations usually have few vertical levels. Medium-size firms

may have seven or eight levels. Vertical differentiation increases the checks and

balances in a company and can help the firm minimize or avoid mistakes by

employees. Higher-level employees more often check the decisions made by lower-

level employees. In tall structures, there are many levels of positions, which

provide more avenues for advancement within the organization, which a closer

fitting of employees personal needs, and abilities to jobs. However, tall structures

can slow decision making if people at many levels in the hierarchy participate.

Since higher-level managers make the important decisions, workers low in the

hierarchy have be less motivated.

With a vertical division of labor, the responsibility for decision-making is usually

limited to those at the top of the firms hierarchy. Firms decrease inefficiency by

centralizing functions. Decentralization refers to extending the responsibility for

decision making to workers at all levels in the organization. This gives workers

more responsibility and autonomy. Problems can occur when employees lack

training in their roles and can contribute to failure. Decentralization assumes that

people closest to the problem have the most knowledge and can make the best

decisions on how to fix it. In the vertical division of labor, flatter structures have the

potential for faster communication and greater adaptability, however even tall


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structures can allow the decentralization of decision-making (Gordon, 2002, pp.

399-403).

Spatial differentiation describes the grouping of jobs according to geographical

location. This type of division of labor responds best to differences in customers,

suppliers, or even regulation in different locations (Gordon, 2002, pp. 399-401).

Coordination Mechanisms

Firms such as Orion College create positions and departments or other groupings

of workers. The firm must finds ways to coordinate the various groups.

Coordination refers to the extent and means by which an organization integrates or

holds together its various parts and helps them work together to accomplish a

common goal or activity. Coordination methods include mutual adjustment, direct

supervision, standardization of work processes, standardization of outputs, and

standardization of skills (Gordon, 2002, pg. 401).

OrionCollege uses mutual adjustment. With this type of coordination, a firmutilizes informal but direct communication between individuals. It also occurs with

electronic media in which employees can have immediate access to co-workers

around the world through e-mail, telephone communication, or videoconferencing.

Simple organizations rely heavily on mutual adjustment to coordinate the work.

Large, bureaucratic firms rely on it in small departments or among top

management. Complex firms use it to reduce uncertainty in communication and

task performance (Gordon, 2002, pg. 401).

Orion College is categorized as a mechanistic structure. Mechanistic structures

have relative stability and inflexibility in the way they organize activities and

workers. They usually have centralized decision-making accompanied by a unitary

chain of command. They rely on extensive horizontal and vertical division of labor


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to encourage specialization of activities throughout the organization. Orion has a

horizontal division of labor in which there is job specialization. For example, the

Admissions Department answers any questions about the admissions process,

makes admissions decisions, and communicates with the students until they arrive

on campus. Although the Admissions Department sends incoming students

information about financial aid, it does not answer questions about it or process aid

applications. The Financial Aid Department receives applications for financial aid,

makes decisions about financial aid, and then administers it during the students

four years in college. The registrar handles all course registration (Gordo, 2002, pg.

403).

Firms use direct supervision when more formalized control is needed. A

manager directly supervises or has responsibility for the work of one or more other

employees. The director of Human Resources may coordinate the work of her

employees through direct supervision by providing guidance, timetables, and

feedback to employees about their performance. Direct supervision uses the chain

of command to ensure that workers do their jobs correctly. Many organizations

have substituted mutual adjustment for direct supervision of employees.

Horizontal, lattice, modular, and virtual organizations emphasize mutual adjustment

rather than direct supervision for coordinating work-related activities. In some

cases, it is used with other coordinating mechanisms, such as mutual adjustment or

standardization of work processes. With the increased emphasis on empowering

workers and using teams in the workplace there has been a trend of reducing the

amount of direct supervision (Gordon, 2002, pg. 401).

Standardization of work processes occurs when managers specify the actual

steps employees should follow in performing the work. Standardization of work


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processes is used in production that uses assembly-line technology, such as

manufacturing tires, parts, or hamburgers at a fast-food restaurant. This

standardization uses equipment, computer programs, or written directions to define

each step in the process. This reduces the need for other forms of coordination.

Empowered teams of the modern firm have the autonomy to adjust work processes

to meet the needs of the firm. Coordination also occurs by specifying the nature of

outputs, known as standardization of outputs. For example, managers who are

judged based on their groups productivity or profitability have their work

coordinated by standardization of outputs and motivate workers to accomplish

goals based on outcomes. Standardization of outputs coordinates the work of top

management by allowing managers discretion to devise the best processes to get

the job done. This results in worker empowerment by allowing more workers to

respond creatively to changing conditions or customer demands (Gordon, 2002, pp.

401-402).

Other professions such as teachers, nurses, and pharmacists rely on their

training and expertise to coordinate their work through the standardization of skills.

Licenses, certification programs, and training offer ways of standardizing skills. For

example, certified public accountants and board-certified surgeons participate in

new programs directed at creating and maintaining skill standards. Through

training, school, and on the job, nurses know how to interact with physicians and

other medical personnel. Through legal training, lawyers know their responsibilities

in the courtroom. In addition, these professionals may also use mutual adjustment

supplement the standardization of skills (Gordon, 2002, pp. 401-402).

Organizations can Solve or Create Problems


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Orion College has a functional organizational structure. In functional structures,

employees are grouped according to major categories of work activity. At the

corporate level, companies may group employees into marketing, information

systems, and human resources functions, among others, and then into further

groupings within each major function. At Orion College, there is horizontal

differentiation that characterizes the structure. The functional structure works best

when the roles or jobs in the organization are grouped into functional areas,

employees need relatively little communication outside the groupings, the

organization has a well-developed product or service, and few exceptions occur. In

addition, the company has a relatively benign environment, such as a stable and

predictable market, and the organization is small-to medium-sized, making face-to-

face communication feasible (Gordon, 2002, pg. 405).

There are three types of functional structures: simple structure, machine

bureaucracy, and professional bureaucracy. Firms that have a simple structure are

small and young use mutual dependence and direct supervision as coordinating

mechanisms. The top manager has significant control. As the organization grows,

the simple structure either departmentalizes by function or develops a more

complex form that relies on other means of coordination. As organizations, grow in

size, horizontal and vertical differentiation increase, leading to the standardized and

formalized behavior characteristic of machine bureaucracy. They key coordinating

mechanisms are direct supervision and standardization of work processes. Large-

scale firms such as automobile, steel, equipment, and consumer goods

manufacturers organize this way (Gordon, 2002, pg 405-406).

Orion is considered a professional bureaucracy. This structure has the

formalized characteristics of the machine bureaucracy, but emphasizes


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standardization of skills rather than standardization of work processes for

coordination. A professional bureaucracy typically has little vertical or horizontal

differentiation, but extensive personal differentiation. Firms train workers to ensure

that they have the required skills for organizational functioning (Gordon, 2002, pg.

406).

The advantage of a functional structure is that it encourages people with jobs in

the same area of specialization to work together. This type of interaction builds a

strong loyalty to the functional group and offers extensive expertise in specified

areas. The relatively high vertical division of labor that often accompanies this

structure provides employees with many opportunities for advancement within a

functional discipline. This structure avoids duplication of effort in different parts of

the organization since typically only a single human resources department,

operations division, or accounting group services the entire company. The

disadvantage is that the high horizontal and vertical differentiation can cause

problems. Dysfunctional performance and competition results when communication

is limited between functional areas. There may be a call for communication up the

hierarchy when dealing with problems, which slows the response time and hinders

the response time to customer demands. Although this specialization can work well

in predictable situations, it tends to slow decision-making and impede effective

communication as seen with the increasing number of complaints from students.

Students feel that they must deal with too many departments and the college is not

customer-oriented (Gordon, 200, pp. 403-406).

Effective Types of Organizations

Mechanistic structures rely on standardization of work processes and direct

supervision. These approaches limit the discretion of most workers in the


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organization for processing information because they use the hierarchy for

communication and problem solving. In Orion College, each individual reports to

one supervisor. This results in clear lines of authority. Each person knows whom to

communicate problems or questions. Although each individual reports to a single

person, many organizational members have more than one subordinate as seen

with Orion College. A managers span of control is the number of people who report

to him. Orion focuses on standardization of skills and personal differentiation. This

structure seems to work best for universities however; Orion can increase the skills

of workers, through cross training and reduce the number of departments students

must involve. By providing training to increase the knowledge and empower

employees with responsibility, employee morale can improve as well as customer

service. Employees can focus on their main role; however through training

employees can answer a wider range of student questions. For example, the

Admissions Department and Student Accounts Department may be trained to

answer certain questions regarding financial aid (Gordon, 2002, pg. 403).

Market-Oriented structures groups employees according to functional areas

according to the market they serve. For example, a consulting firm may organize

its workers into projects for a particular industry. In market-oriented structures, a

product, project, client, or geographical grouping exists at one level, but other

forms may exist elsewhere such as a product structure. A product manager may

supervise various functional groups where the top level of a geographical structure

emphasizes location. In addition, a more typical functional structure may exist

within each geographical division. Larger firms may create market-based divisions

or separate subsidiaries. Firms can respond to a mixed environment and diverse

cultures by setting up mini-organizations that meet unique needs of various


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countries and cultures. The market-oriented structure responds effectively when

the company faces a dynamic and unpredictable market situation, success requires

rapid communication for rapidly changing conditions. In addition, the organization

has abundant resources for meeting customer needs (Gordon, 2002, pp. 407-408).

The advantage of market-oriented structures is that it focuses on the needs of

particular products, projects, customer, or geographical areas. Teams develop the

common goal of meeting market demands, which is advantageous when market

needs require a fast response. This structure speeds problem solving and

adaptation when combined with decentralization. The disadvantage is that it

increases costs since it can duplicate knowledge throughout the organization. The

focus on market requirements also prevents workers from developing a wider,

functional expertise that lets workers moved from market group to market group as

necessary (Gordon, 2002, pg. 408).

The integrated structure is a combination that incorporates both functional and

market-oriented structures. It responds to the needs of a changing and complex

environment (adhocracy). It uses a variety of ad hoc or temporary liaison devices

such as task forces, projects teams, and matrix structures, to encourage mutual

adjustment among members. Flexible structures respond to a complex, changing

environment. It incorporates sophisticated information technologies that support

teamwork and information. The integrated structure has flexible groupings of

individual and change as the organizations needs change. It groups individuals that

emphasize a market focus. With decentralized decision-making, there is increased

autonomy, responsibility, and accountability of all employees allowing them to

respond faster to unpredictable conditions. It also groups employees that combine

functional specialties. Some firms have an integrated structure (matrix), which


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combines the best aspects of functional and product structures (Gordon, 2002, pp.

408-409).

The advantage of integrated structures is that they respond well to a changing

environment. Firms can add or delete product of project groups as necessary.

Firms adopt this structure when they have high information processing needs.

Since project teams share functional sources, some cost economies can occur.

Workers retain a strong functional identity that helps bring special expertise to the

needs of various products or projects. The matrix form of an integrated structure

has special costs such as overhead costs from more managers and personal costs

for workers from reporting to more than one boss. There may be conflict and stress

among workers from working for people with different standards, expectations, and

work priorities. There may be power struggles from competition among managers.

The matrix structure slows time-to-market in new product development. Although

these situations can improve from clarifying responsibilities and quickly identifying

problems, firms look for other ways to combine functional and market-oriented

structures. More adaptive structures include horizontal organizations, lattice

organizations, alliances, modular organizations, and virtual organizations (Gordon,

2002, pp. 409-410).

Horizontal organization focuses on core processes, emphasizes empowering

workers by reducing the management hierarchy, and encourages employees to

focus on customer requirements and satisfaction. It includes cross-functional teams

that manage and run processes. Horizontal structures organizes work around key

processes instead of tasks, flattens the hierarchy by empowering workers and

eliminating non-value-added work, uses teams to manage everything, and lets

customers satisfaction drive performance. It uses information technology to reach


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performance objectives and deliver value to customers. Process owners take

responsibility for an entire core process. It rewards workers for their team-related

performance and maximizes contact with suppliers and customers (Gordon, 2002,

pp. 410-411).

Lattice Organizations emphasizes teamwork and employee empowerment that

results in structures that reduce or eliminate organizational hierarchy. It can

eliminate assigned or assumed authority. Sponsors rather than bosses work with

associates instead of employees. This structure emphasizes strong interpersonal

communication. Individuals responsible for accomplishing various objectives are

tasked with setting the objectives (Gordon, 2002, pp. 411-412).

Some firms unite and form alliances to pursue a set of agreed-upon goals.

Rather than acquiring and developing their own resources, some organizations find

it faster and cheaper to form alliances with another organization. They share control

over the performance of assigned tasks and make continuing contributions to the

alliance. The linkages between organizations in alliances strengthen companies by

bringing additional resources to solving organizational problems and competing in

the marketplace. Strategic alliances also create opportunities for learning from a

partner. Successful alliances view partnership as an opportunity, attach importance

to the results of the collaborative efforts, demonstrate a reasonable level of trust,

and demonstrate a willingness to learn from each other. It creates shared goals and

realistic expectations, uses conflict productively, redesigns and creates integrated

systems, and believes in honest communication. In addition, these alliances have

committed leadership; plan and budget jointly, have congruent measurement and

reward systems, and provide necessary resources (Gordon, 2002, pp. 412-413).


21/23

Modular organizations (dynamic networks), combines a variety of subcontractors

into a working organization. Modular organizations have a small staff that develops

strategy, subcontracts work and outsources noncore functions, and monitors the

interface with various subcontractors allowing managers to decrease overall costs

and speed the development of new products. This allows the company to hire

superior talent to perform certain functions, avoid idle capacity, reduce inventory

costs, and avoid becoming committed to a technology that becomes obsolete.

These companies can grow rapidly since they use a small amount of capital to feed

rapid growth. A modular structure has vertical disaggregation in which independent

organizations within the network perform the business functions. It is used in

product design, marketing, manufacturing, and other functions. Brokers assemble

the business groups by subcontracting for required services, creating linkages

among partners, or locating such functions as design, supply, production, and

distribution. Market mechanisms such as contracts or payments for results, rather

than plans, controls, or supervision, hold the functions together. There is full

disclosure information systems link the various network components. A modular

structure also can exist inside an organization. The company creates

entrepreneurial and market components, such as distribution, information

technology, or research and development that operate as separate divisions or

profit centers with bottom-line responsibility (Gordon, 2002, pg. 414).

The virtual organization is a network of independent suppliers, customers, and

even competitors, tied together by computer technology. The Internet and

information technology allows them to share skills, costs, access to markets, and

supports the development of this structure. Once the network achieves its

objectives, it may dissolve. Each organization participating in the network


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contributes only its core competencies. Companies frequently regroup which into

new virtual corporations which creates flexibility to seize new opportunities. These

organizations usually have flat structures in which information and decision making

move horizontally. Electronic communication supports multidisciplinary work

arrangements that link people across formal organizational boundaries. Virtual

organizations may be temporary, and firms may participate in multiple alliances

simultaneously. In virtual corporations, computer networks link companies,

entrepreneurs, and partnerships. Each partner brings its core competencies

allowing the creation of a best-of-everything organization. Companys band

together to meet a specific market opportunity. They disband after meeting the

need. Partnerships are more opportunistic, less permanent, and less formal. Since

members rely on each other to achieve their goals, there must be a level of trust.

The virtual corporation redefines the traditional boundaries of a company.

Increased cooperation among competitors, suppliers, and customers makes it

difficult to determine companys borders. Virtual organizations can exist within a

single company. They have of a pool of employees from whose expertise various

business units can draw which allows all parts of the organization access to a

broader pool of talent and enables information technology staff to work on a

broader array of projects and problems (Gordon, 2002, pg. 416).

References


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Gordon, J. R. (2002). Organizational Behavior: A Diagnostic Approach (7th ed.). NewJersey: Prentice Hall.

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Organizatinal Change