Arthur H. Walker and Jay W. Losch in their article “Organizational choice: product vs. function” provide research that seeks to answer the old question of corporate management: is it better to organize management along product or functional lines, and in which case? Focusing on two large plants, one organized along functional structures, while the other includes groupings by product pision, the authors consider the problem from various angles.
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In their consideration of the issue, Walker & Losch (2000) use two approaches that they explicitly contrast. One is the classical management theory. This approach operates with such criteria for decision-making as technical and economic. Namely, managers take into account minimization of payroll costs, effective use of resources, specialization, coordination, and departmentalization. The main criteria are then the effective use of technology, people’s expertise, and required control and coordination (Walker, Losch, 2000, p.131).
An alternative approach used by authors is the behaviorist perception of organizational behavior. This approach has uncovered other important dimensions that “fall through the cracks” of classical management. First, there is a link to consider between specialization patterns and an inpidual’s patterns of thought and behavior. For instance, scholars consider the effect of working in functional departments on achievement orientation and skill development. Second, they consider inverse relationship between differentiation and integration creating a difficulty in uniting specialists with distinctly different patterns of behavior. Third, the inevitability of cross-functional conflicts can be mitigated only through effective communication. Addition of the behaviorist perspective to the evaluation of the material presented in the article does make it more relevant to the modern needs, contributing more insights to the process of investigation.
In terms of gathering information, the article is in line with classical management theory, though, because authors rely on personal observation and do not include objective or subjective measures. Their focus on the management of organization also fits well with the classical approach. The same can be said about the end result since the article is clearly intended as a guide for management practice. It also yields a theoretical framework within which to evaluate different organizations in terms of degree of integration, differentiation, and performance. The comparison of the two plants demonstrating different structures led the authors to one important conclusion: each type of structure should be compared with the needs of a particular enterprise.
More specifically, “a functional organization seems to lead to better results where stable performance of a routine task is desired, while the product organization leads to better results in situations where the task is less predictable and requires innovative problem solving” (Walker, Losch, 2000, p.137). This is an interesting idea that has implications for corporate managers. The question for them is what they consider their business to be: a stable operation with routine tasks or an innovative enterprise that requires problem solving relying on the abilities of the staff. Most are sure to pick the latter category, which is why product organization seems preferable in many cases.
The authors proceed to give tips to managers seeking to define whether they want a functional or product organization. Naturally, repetitiveness of the tasks, desire for the level of integration and differentiation, requirements for innovative problem-solving are all cited as issues to consider. Not surprisingly, conflict management is also included, and it is assumed that an organization with functional management will have less conflict, and it will be more easily managed through a hierarchy.
An interesting point made by authors is that there is actually no strict need to rely on exclusively on functional or product approach. Within each organization, they recognize, there are tasks and assignments that necessitate using this or that technique alternative to the other pisions. Depending on the degree of interdependence among personnel and the standardization of tasks, managers in the same organization can choose to compromise. In one area of the organization, a functional approach can be more appropriate, while in another a product pision approach is more successful. Authors list such opportunities for compromise as cross-functional teams, “appointment of full-time integrators and coordinators around a product”, and a matrix organization that “overlays” product and functional lines (Walker, Losch, 2000, p.138).
In my experience, I worked in an organization that fluctuated between product and functional lines. Being a matrix organization, they at least once in the term of my employment shifted focus from giving priority to product managers to putting functional managers first. This did not work very well, perhaps because not all people liked a change in authority when the power was taken from product managers and given to functional ones. In addition, the functional structure did not suit very well to the needs of an organization because it involved innovative products that needed to be marketed to consumers unaware of their needs for such products.
This experience makes me agree with the authors that the choice of structure should be made based on strict criteria and with great care, as it can ultimately affect the success of the whole organization. Besides, when compromising, managers need to take into account the specific situation in their organization and make room for different approaches as long as it does not lead to confusion.
The theoretical model used in Walker & Losch (2000) uses the assumption that there are two distinctly different approaches to the organization of structure: functional and product pisions. The authors then examine the impact of structure on the performance of plants P and F organized along these lines. Plant performance was evaluated in terms of the goals that both managerial teams set for themselves (by chance or by choice, these goals proved similar):
“Maximizing current output within existing capabilities” (Walker, Losch, 2000, p.136).
“Improving the capabilities of the plant” (Walker, Losch, 2000, p.136).
The two plants demonstrated different performance on both issues: Plant P was superior in terms of achieving the second objective, while Plant F was more advanced on the first one. The authors also bring employee attitudes into the picture, stating that employees in Plant P were “more deeply involved in their work” (Walker, Losch, 2000, p.136).
In between the discussion of performance and goals, the authors also discuss integration and differentiation, the topics that have been declared as important part of behaviorist theories. Although this consideration is interesting and reveals many important facts about product vs. function, it seems a little disconnected with the goals and performance. My personal opinion is that the article would have been stronger if the concepts of integration, differentiation, goal achievement, and employee attitudes had been tied together in some common idea.
As it stands, it appears that these four concepts are entirely separated from each other or loosely connected in organizational analysis. The authors would do a better job if they had explained how integration and differentiation could improve or dampen performance, and how this relates to their discussion. The outcomes of increased or decreased integration and differentiation and comparison of trade-offs is something that the authors would have to compare to make their point even more salient and the content of the article more useful.
Besides, the use of a personal observation as a method to obtain information seems to offer loose guidelines for action. For example, the idea that employees in Plant P seem to be “more deeply involved in their work” can be a product of the researchers’ expectations. It would be useful to measure this concept in numerical terms or at least specify how many employees have been contacted to obtain this information.
An alternative theory of organizational structure can be the two-fold pision of organization into mechanistic and organic advanced by Burns & Stalker (1961). This framework, too, can be used to evaluate the performance of an organization. One with an organic structure can be compared to another with a mechanistic one to assess the effectiveness of each type.
A mechanistic structure is one where job functions are clearly defined, hierarchy is strict, and there is a formal chain of command. An organic structure lacks such attributes as it is less rigid and more open to change and innovation, more concerned with result than with rigidity of its structure. It also allows a greater degree of flexibility when it comes to a change in structure.
This theoretical framework is distinctly different from the functional-product pision. The latter captures organizational design and not rigidity of job functions and degree of innovation. In theory, a functional organization can be more innovative and less rigid than a product-oriented one, and vice versa. The presence of absence of a strong chain of command can be a feature of any organization. This makes the organic versus mechanistic organization approach contrast with the functional-product pision.
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