Organizations must be dynamic in nature. Organizational structures are dictated by a number of factors including technology, complexity, resource availability, product and or services, competition and decision making requirements (Kerzner, 2009). The two fundamental concepts of structuring organizations are differentiation and integration. An organization composed of many different units that work on different kind of tasks using different skills and working methods, is said to be differentiated. While integration is putting back together the differentiated units to coordinate work into an overall product (Kerzner, 2009).
Differentiation is created through division of labor and job specialization. In division of labor work is subdivided into smaller tasks performed by various individuals and units throughout the organization. On the other hand in specialization different people or groups perform specific parts of the larger task. Differentiation is mostly used when an organization has many sub-units and many kinds of specialists who think differently. Some organizations develop a high degree of differentiation to cope with complex challenges. Therefore, companies in simple and stable environments have low levels of differentiation while those in intermediate environment have intermediate differentiation (Kerzner, 2009).
The vertical dimension structure of an organization runs from the top down beginning with the board of directors. Decisions are made from the upper level managers. This type of structure can be quite effective as it promotes efficient production and in depth skill development. The hierarchy of authority enables efficient mechanism for supervision and control in large organizations. This is however not effective in a rapidly changing environment because the hierarchy becomes overloaded. Top executives cannot be able to respond rapidly enough to problems (Daft, 2009).
The horizontal structure organizes employees around the core processes. Organizations shift toward a horizontal structure during reengineering simply meaning redesigning of the vertical organization along its horizontal workflows and processes (Daft, 2009). Horizontal structure enables employees to have easy access to one another so that they can communicate and coordinate their efforts. The horizontal structure eliminates the vertical hierarchy and old departmental units (Daft, 2009).
The aspects of departmentalization are functional, divisional and matrix. Functional organization is where departments are specialized and grouped according to organizational functions and the skills that are required.
The advantage of the product and customer/geographical approaches to departmentalization is the ability to focus on needs and provide quality services to customers though it is expensive (Daft, 2009)
A matrix form of organization is where functional and divisional forms overlap. Managers and the staff report to two bosses these are the fictional manger and the divisional manager. Reporting to two bosses can create confusion and difficult interpersonal situation. Problems can be prevented if the managers learn the behavioral skills required in the matrix situation (Daft, 2009). This structure is a response to profound changes that have occurred in the organizational environment. Customers need better and faster services while the employees want to learn new skills and assume greater responsibility, thus organizations have shifted to horizontal mechanisms such as cross functional teams to achieve coordination across departments to accomplish projects (Daft, 2009).
Most large organizations use a hybrid structure that combines various approaches tailored to specific strategic needs. Most organizations combine functional, divisional, geographical, horizontal and vertical structures to take advantage of their strengths. Hybrid structures are effective in rapidly changing environments as they offer greater flexibility to organizations (Daft, 2009).
Organizations can become large over time hence the need to split them into manageable units. This can be done through geographic regions making it the most suitable structure for organizations where goods are manufactured, stored or delivered (Saville & Higgins, 1994). Customer based structure recognizes that the organization must structure itself to meet specific customers group’s needs. Some organizations such as Toyota operate separate divisions to service each customer segment. Each type of customer is catered for in his/her own particular terms (Campbell & Craig, 2005)
Product based structure is suitable for organizations that operate within several different product areas. These areas require some degree of specialization in its management. This type of structure is evident in the Toyota Company where engineers are specialized in different areas of the auto industry (Campbell & Craig, 2005).
The one thing that Toyota is working to fulfill is the ideal standard used globally by people working to fulfill the mission of the organization. Toyota faces different cultural challenges. It has faced challenges from Indians who are often sensitive to criticism resisting Toyota’s culture of constant improvement through identifying problems. Toyota Company has worked hard to localize its business in India. “Specifically Toyota has invested millions in recent years through multiple joint ventures to help the local suppliers to become more competitive (Magee, 2007, p. 169)”.
At the Valenciennes factory in France employees have adapted a hybrid language mixing French with English to make Toyota production a cross cultural success. To integrate the company further, Toyota built a design center in the southern part of the country to develop cars most suitable for the European market (Magee, 2007). Toyota human resource guidelines fit the French employees. Toyota embraced a 35 hour workweek tradition that was perceived as an obstacle to foreign investment incorporating it into planning. The concept goes against executives having and using power and authority (Magee, 2007).
In Toyota Company the superiors delegate powers to lower ranks thus the primary source of continuous improvement and change. “The Toyota Company is not run on the popular whims of one; instead it runs in an amalgamated fact based platform formed by groups of people” (Magee, 2007, p. 178). Employees are encouraged to share to share information and higher ranking employees are encouraged to serve as mentors of lower level employees thus making it a more horizontal organizational structure (Magee, 2007).
Another key component is the matrix structure employed for some aspect of the company. Employees who do one type of work are put in a pool in order to work with several managers from different departments. While traditional hierarchical management is common throughout the company, the matrix structure is applied to generate responsibility from the bottom up. In this system the employers are not isolated into internal cliques thus information is more easily shared across functions and workload shifts faster across a more flexible workforce.
Toyota management is rooted to its philosophy of achieving more with less. The Toyota bottom up empowerment turns the management into coordinators than bosses. Toyota horizontal structure applies not just to its employees but to different divisions of the company as well (Magee, 2007).
Campbell, D. & Craig, T. (2005). Organizations and the Business Environment (2nd ed). Burlington, MA: Butterworth-Heinemann.
Daft, R. (2009). Organization Theory and Design (10th ed.). Florence, KY: Cengage Learning, Inc.
Kerzner, H. (2009). Project Management: A Systems Approach to Planning, Scheduling, and Controlling (10th ed.). River Street Hoboken, NJ: John Wiley and Sons, Inc.
Magee, D. (2007). How Toyota became #1: Leadership Lessons from the World’s Greatest Car Company. Hudson Street, NY: Portfolio.
Saville, J. & Higgins, M. (1994). Australian Management: A First-Line Perspective. Claremont Street, Palgrave Macmillan Australia.