Corporate Functional Management in Organization

Abstract

Many organizations are currently organized as functional organizations. The idea is to manage across functional areas rather than managing down the functional structure. The focus in these organizations is the customer, not the interests of the functional areas.

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A functional organization has departments such as marketing, engineering, production, and human resources, with strong boundaries between departments. Positions were recorded as “top management,” “general management other than top management,” and “functional management.” The move from functional to process management is an essential part of becoming an innovative organization. Only by coordinating all pertinent departments through process management can the customer’s need be adequately satisfied. The paths into corporate level functional management and into top division management are quite different, however.

Many see the organizational structure of the future as some form of network in which employees are free to move in any direction, even across boundaries of function and level, to link up with anyone to accomplish a task. However, we should not fall into the trap of thinking that an innovative organization will assume only one form. The same organization may adopt many different forms over time, and many different structures may emerge within a single organization as it attempts to accommodate continuous change.

Main part

Competing internationally in the creation of value for customers requires the cross functional management of supra-systems to integrate diverse organizational resources. Many organizations are currently organized as functional organizations. Functional organizations tend to establish barriers that prevent the creativeness and problem-solving abilities of employees. The idea is to manage across functional areas rather than managing down the functional structure. The organization might have only three or four layers of management between the CEO and the members of a team. The focus in these organizations is the customer, not the interests of the functional areas (Higgins, 1995).

Brief History of functional management positions in a large company (staff, department, project management)

The study of functional management and functional strategy is a relatively new discipline, when compared with many of the social and natural sciences. However, as Meredith and Amaoaka-Gyampah (1990) states, when it comes to the study of organizations, business and management, ‘We in the field of functional management consider our field to be one of the oldest in business schools pre-dating the emergence of finance and accounting by decades’.

The study of corporate strategy is a relatively recent phenomenon. Edith Penrose (1959) was one of the earliest academics to argue that what happened inside the firm was just as important as the marketplace outside the firm. Until this time, the main focus of economics had been upon the latter, with a detailed consideration of market demand and supply issues. Penrose argued that the growth of the firm was related to its use of resources, its past history and its evolution over time; previous history was a key influence on future development. The US strategist Alfred Chandler (1962) also published a substantial study concerning the growth of the firm.

Describe staff corporate functional management positions

A functional organization has departments such as marketing, engineering, production, and human resources, with strong boundaries between departments. Employees look to their bosses for direction and authorization for actions; they are loyal to their own disciplines, and little communication occurs across functional boundaries. For example, in many traditional companies, marketing managers do not understand the problems of the production manager, production managers do not talk to engineers, and there is little coordination between the human resources department and all the other functional areas (Bartlett & Ghoshal, 1989).

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Positions were recorded as “top management,” “general management other than top management,” and “functional management.” Positions carrying the title of chairman, vice chairman, president, CEO, chief operating officer, and chief administrative officer, or any combination of these were classified as top management. Executive vice presidents and senior vice presidents whose titles dearly indicated responsibilities in more than one functional area were classified as general management other than top management (Bartlett & Ghoshal, 1989).

Focus

The preference for functional area seems to depend on the needs or strategy of the organization or division at a particular point in time. This supports the strategic contingency approach to executive succession. These needs may be rather stable and predictable or may change rapidly over time. The move from functional to process management is an essential part of becoming an innovative organization. It is difficult to serve external customers well when the company is organized to serve internal functional managers. The customer-focused company has no choice; it must look at itself from the customer’s perspective and then reorganize to improve the processes that satisfy the customer’s requirements (Bartlett & Ghoshal, 1989).

Responsibilities

In functional management the stress is put on process to align all the operations of the company in order to best produce a product for the customer, is far different from the emphasis in functional management. In a functional organization, each function is primarily interested in maximizing the output of its function rather than maximzing the total output of the entire process (Bartlett & Ghoshal, 1989).

In a functional organization, there are many company problems that cannot be effectively solved by any one vertical division or department or simply by issuing top-down executive orders. One example is the meeting of customer expectations in regard to quality or warranty management. In a functional organization there is no single department solely responsible, and certainly no single department is a “quality or warranty assurance department.” Only by coordinating all pertinent departments through process management can the customer’s need be adequately satisfied (Kotter & Heskett, 1992).

Similarities among other management positions

Corporate management is the primary feeder into the top and is, in turn, fed from two primary sources. These are corporate functional management and top division management. The paths into corporate level functional management and into top division management are quite different, however. Relatively few top divisional managers came from a different industry. Here it appears that knowledge of the firm or at least of the industry is essential for success. On the other hand, the functional managers do specialize in one professional area and their skills seem to be more easily transferred across companies and even across industries. There is some movement across these two paths at lower levels, but there seems to be a major convergence at the corporate general management level. In this position, the functional specialists must finally learn more general skills before making the last step to the top. Our findings indicate that the candidate for top management need not have general management experience during the mid-career phase-it can come later. A functional specialist path exists which allows for more inter-firm and inter-industry mobility (Kotter & Heskett, 1992).

Differences among other management positions

There are certain functional areas that are more likely to lead to the top. The “right” area depends upon a number of factors, however, it is likely to be a function that contributes to what are believed to be the critical tasks facing the organization. It is likely to be a “line” function such as marketing or production or a critical control function such as accounting or finance. It is not likely to be a supporting “staff” function such as personnel/ human resource management or public relations/communications, although this may be changing. The latter areas are where many women choose to work or where they are assigned due to stereotypical thinking (Nonaka & Takeuchi, 1995).

Describe department corporate functional management positions

Functional activities are organized according to the principles of task similarity, specialization, and division of labor. Typical functions within an organization include accounting, marketing, product/service design, process design, production, maintenance, procurement, distribution, and sales. As with subsystems, the two roles of middle managers in relation to managing functional activities and processes are those of ownership and assistance. (Nonaka & Takeuchi, 1995)

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Focus

For functional management ideas to flourish, several rules need to be widely understood by managers and workers. The first rule is that product and service requirements are customer focused. Doing only what the producer thinks best is no longer viable in markets crowded with competitors. The second rule is continuous process improvement, or the steady monitoring and correction of problems as they occur. Standing still is not a competitive strategy. The third rule is collaboration, concurrency, and integration in the management of work activities across the entire process. This leads not only to improved horizontal communications, but to shorter development cycle time and to greater quality of work (Nonaka & Takeuchi, 1995).

Customer focus is first and foremost a business philosophy — a way of looking at the world. It requires focusing outward, not inward. It requires always keeping customer wants and needs at the center of decision making. It demands a genuine commitment to satisfying the customer, no matter how much effort is required. Without this kind of outlook — and perhaps even obsession a firm cannot be customer focused, no matter what techniques it employs (Nonaka & Takeuchi, 1995).

Responsibilities

The managers attempting to adapt from their historic roles in traditional companies to their newly defined tasks in transformed and re-engineered organizations should have following priorities. (Schein, 1992)

  • developing properly defined corporate objectives;
  • determining marketing strategies to meet those objectives;
  • appreciating the operational implications for the markets in which the firm operates;
  • understanding the essential attributes of product and service combinations;
  • establishing operations strategy competitive priorities using the main building blocks of the operations strategy (tactical and support activities, core competencies and processes, resources and technologies);
  • determining the strategic fit between these building blocks, the operational implications of the market and the choices customers make, in particular product.

Similarities among other management positions

Functional structure separates employees from customers. Few employees in the functional organization have direct contact with the customers or even a clear idea of how their work combines with the work of others to satisfy customers. The functional structure tends to insulate employees from learning about customer expectations and their degree of satisfaction with the service or product the firm is providing. Being insulated from customers encourages workers to hold a narrow conception of their responsibilities (Schein, 1992).

No organizational unit has control over a whole process, although many processes involve a large number of functions. This is because the breakup of the organization into functions is usually unrelated to the processes used to deliver a product to the customer. This structure is likely to create complex wasteful processes as people do things in one area that must be redone or undone in another. This deficiency is especially important, since the product development process is one of the major processes of an innovative organization (Schein, 1992).

Differences among other management positions

Functional structure overemphasizes vertical relationships. The functional structure promotes the idea that one’s boss is the prime customer that must be satisfied. Each manager is more interested in satisfying the next-level manager than the real customer. Managers in functional organizations are usually rewarded for satisfying functional goals, such as meeting design deadlines and limiting manufacturing costs, rather than for providing value to customers. This emphasis on vertical reporting relationships to the exclusion of horizontal coordination has led many authors to refer to departments in functional organizations as “chimneys” or “silos” (Schein, 1992).

Describe project management corporate functional management positions

Project management activities are woven through the vertical structure of a firm by teams with company-wide representation. The most effective process teams consist of line people, with day-to-day responsibilities, taken from across a company’s divisions, departments, suppliers, or customers. Through such teams, one part of the company must take the needs of another into account and must treat this other part as its own customer (Schein, 1992).

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Even though project teams have existed on an ad hoc basis and project management has been broadly discussed by academics and practitioners for many years, managing the total company-wide product development process has received little attention until lately. We need to learn how to manage the whole new product development process, and not just a specific new product development project (Schein, 1992).

 Focus

The advanced international strategies in the Industrial Age took on a more global outlook, and such strategies were typically implemented with global area, product, or matrix structures. However, those structures still retained all of the disadvantages of traditional hierarchies and bureaucracies. With the advent of network organizations, a truly global perspective could begin to develop. The need for international responsiveness required that firms became adaptable as well as efficient (Deal & Kennedy, 1982).

Responsibilities

A project management team’s responsibility is to optimize information flows across departmental barriers. This runs against decades of corporate (and broad cultural) development that actively encouraged specialization and compartmentalization as a desirable end. Greater and greater specialization of activities breeds withdrawal into smaller and smaller social units more and more insulated from one another. The counterpoint to this trend is the belief that, rather than limit contact, the purpose of the process organization is to maximize the opportunity for human interaction. Since one purpose of human interaction is to exchange information, a corollary could be that the purpose of the process organization is, also, to maximize the opportunity for information exchange (Deal & Kennedy, 1982).

Similarities among other management positions

It must be emphasized that project management is not the conventional two boss matrix management, with the vertical functions on one axis and project teams on another. Neither is it a patchwork of disciplines brought together as an ad hoc team. It is a deliberate effort to build a structure and a process that enable communication and action to occur horizontally across the organization. The ability to undertake coordinated horizontal action and communication is crucial (Deal & Kennedy, 1982).

Middle managers must work with broader systems and continuously direct functional activities toward the strategic purposes of the larger systems of which they are a part. The integration of middle management activity represents a key to competing through customer value.

Differences among other management positions

Upper management must create opportunities for individuals to utilize their individual talents and acquire new skills. Crossfunctional systems can provide opportunities for managers beyond their regular duties either as leaders of such systems or as valuable resources and team members. Such opportunities offer individuals challenges and a better understanding of how the entire organization operates. The company will benefit from greater flexibility and enthusiasm throughout the organization (Deal & Kennedy, 1982).

Under industrialization, bureaucracy was the dominant form of organization. The factory was designed to produce standardized products; the bureaucracy, to produce standardized decisions. Most major corporations developed in an industrial society, based on a bureaucratic model of machine-like division of function, routine activity, permanence, and a very long vertical hierarchy. It was a world of mass markets, uniform goods and services, and long production runs (Deal & Kennedy, 1982).

Conclusion

The overall functional management structure has been unchanged. The functional structure not only hinders an organization’s innovativeness but also has a strong negative effect on the creativity and innovativeness of the individual. People feel they cannot change their environment and thus never seek the information and ideas that might change it. The top-down authoritarian management style is yielding to a networking style of management, where people learn from one another horizontally, where everyone is a resource for everyone else, and where each person gets support and assistance from many different directions.

Many see the organizational structure of the future as some form of network in which employees are free to move in any direction, even across boundaries of function and level, to link up with anyone to accomplish a task. However, we should not fall into the trap of thinking that an innovative organization will assume only one form. The same organization may adopt many different forms over time, and many different structures may emerge within a single organization as it attempts to accommodate continuous change.

References

  1. Bartlett, C. and S. Ghoshal (1989) Managing Across Borders: the Transnational Solution, Boston: Harvard Business School Press.
  2. Chandler A. (1962) Strategy and Structure, MIT Press, Cambridge, MA.
  3. Deal Terence E., and Allan A. Kennedy (1982). Corporate Cultures. Addison-Wesley.
  4. Higgins James M.(1995) Innovate or Evaporate. Management Publishing.
  5. Kotter John P., and James L. Heskett (1992) Corporate Culture and Performance. Free Press.
  6. Penrose E. (1959) The Theory of the Growth of the Firm, Basil Blackwell, Oxford
  7. Ghoshal, Sumantra and Christopher A. Bartlett (1997) The Individualized Corporation: A Fundamentally New Approach to Management, New York, NY: HarperBusiness Books.
  8. Meredith J.R. and Amoaka-Gyampah K. (1990) ‘The Genealogy of Operations Management’, Journal of Operations Management 9, 2, 146-67
  9. Nonaka, I. and H. Takeuchi (1995) The Knowledge-Creating Company, New York, NY and Oxford: Oxford University Press.
  10. Schein Edgar H. (1992) Organizational Culture and Leadership, 2d ed. Jossey-Bass.
  11. Trice H. M., and J. M. Beyer. (1993) The Cultures of Work Organizations. Prentice-Hall.
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