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 Welcome to this lecture. The title of this lecture is Organization and Work Design, part 4. This is the last part about organization and work design. We will talk about the modified charts. In the previous part we talked about the basic charts, the basic structures. What is important is that the modified charts are related with some particular situation that organization can face. When there are some growth strategies, organization want to follow some growth strategies, or they do want to adopt some diversification strategies, they need to swap from, for example, a functional solution to a divisional solution. But usually if we move from the functional solution to the divisional solution, we will dismantle the possibility of achieving scale economies. And sometimes the need for exploiting again and maintaining scale economies without changing the structural function lead to try to find a way for integrating the functional structure, modifying the functional structure in order to be able to cope with the uncertainty and the flexibility required for growth strategy and diversification strategy and at the same time maintaining the main advantage of efficiency of the functional solution, the functional structure. So if you want, when we talk about modified charts, we are talking about functional structure, modify in order to maintain the high level of efficiency and the high level of adding, the annihile level of flexibility with respect to the product, the market, or the segment of customer and clients required. Let's have a look at the agenda of the lecture of today. We will divide the lecture in two parts. First of all, we will work on the basic chart. We will, if you want, synthesize the lesson learned from the previous part of the lecture, from the part three. Then we will move in order to maintain a red line with the third part of this lecture. We will move to the modified chart and we will see the three main modified functional structures, the functional structure modified by products, by projects and by matrix. How do we modify the function? Well, the functional approach. We modify the functional approach inserting a new job position. But before talking with these change on the functional, let's have a look at the basic chart in order to remind us all the main tenets related with the basic structure, the basic structure, the basic solution for organizational design. So, let's talk about the elementary chart. As for the elementary chart, I want to remind you that this is a very simple solution with only two hierarchical levels, the economical and managerial direction unit and the imperative unit. The first level, the economical and managerial direction unit, is responsible for all the decisions, while the operative units are only asked to accomplish tasks. The managing direction takes all the decisions and give orders to the operative units. There is a high level of centralization and a low level of formalization because of the direct supervision of the managing director. The leadership style is authoritative and paternalistic and it has a short term orientation rather than a long term orientation. There is a huge backlog of unsolved problems because of the bottleneck of the managing director who have to solve all the problems. And there is a high level of efficiency and fast reaction to different exception coming from the environment. And there are good relationships. This is mostly for very simple organization with a very simple strategy, one product, one line of product in one market. Then we have the functional solution, the functional chart. The functional chart introduces a more hierarchical level, the functional level. So, we have three different hierarchical levels, the economical and managerial direction unit, the functional level and the operative level. What is the main characteristic of this functional solution? The main characteristic is that for still medium-sized, medium-complexity organization with a simple strategy, one product or one line of product in one market, the division of labor is for homogeneity of techniques, homogeneity of tasks, homogeneity of activity that should be done within the same department. Within the same department, all the homogenous activity are performed. So, we have functional directors. The functional directors are responsible for those, that group of activity allocated to them. And if you want, the main advantage of this chart is the efficiency. For the developing of high level of scale economies and experience economies. And there are also good relationships. There are some disadvantages. The disadvantages are related with the possible conflicts and the possible conflict between the different functional directors and the different units, therefore. And the difficulties are related with the communication between the different business units. Then we have the divisional chart. The divisional chart implies again three levels of hierarchy, the economical and managerial direction unit, the business unit and the operative unit. The most important characteristics of the divisional chart is that it's the flexibility because it's this solution fit for complex, huge, big organization with complex strategies, diversified and with lot of product strategies. And also with lot of reference markets. The grouping criteria is by how put within the same business unit are allocated all the tasks needed for being able to achieve the goal related one product, one market, one segment of customer. The most important concept for the divisional chart is the concept of strategic business area. Each business unit serves a specific strategic business area. And what is important is that the activity are so homogeneous that should be replicated in total under each business unit. Under each business unit we have a functional structure replicated under each business unit. These are the three basic chart we have seen in the last previous lecture. Now we move from this basic chart. In particular we move from the functional one and we try to maintain the advantages of the functional solution introducing some modification to its natural regular structure in order to achieve some of the advantages of the divisional solution. How do we achieve this goal? How do we combine the advantages of the functional solution with the advantages of the divisional chart? We achieve this inserting some specific organism, some specific job position within the functional chart. This organism can be without authority and can be temporary or permanent within the functional structure. It has two main characteristics. One is related with the level of hierarchical power, hierarchical authority and one is related with its possibility of staying forever within the structure or being active only for a limited time span. What is important is that this organism is cut with an horizontal dimension, the vertical- hierarchical line of the functional structure. At each intersection of the vertical- hierarchical line if you want, it interacts with the functional unit, the functional job position with which it has some relationship. What are the possible situations that we can cope with the consideration of the two characteristics of this organism? I would like to remind you that the two characteristics is that the presence of the absence of authority and being or not some time-limit to the presence within the structure. If we combine these two dimensions, these two characteristics, we can design these matrix. These matrix identify four different solutions, four different situations. The organism, the job position, the inserted job position can be temporary or permanent without authority or without authority. There are four potential situations, without authority and temporary, without authority and permanent, with authority and temporary, with authority and permanent. But considering that this situation without authority and temporary will create a harmful situation because who will follow the indication of an organism or of a job position, which is temporary, will stay for a few times and has no authority, so he will never be considered as a coordination tool. This is excluded as a possible solution. Three different solutions could remain. The first one is when we have a situation without authority and a permanent organism. In this case, we have a functional chart modified by product. The other situation is when we insert the job position for temporary time and we give them authority. In this case, we have the functional chart modified by project. When the inserted organism is permanent and without authority, we have the functional chart modified by matrix. But now, let's start with the first situation, the functional chart modified by product. The functional chart modified by product is a situation where we insert a job position with a situation of permanence and without authority. In a functional chart modified by product, we insert this organism without authority but permanent. This job position is called product manager. If you want, we insert within the structure of function, the functional structure we insert what they are called production. Production product managers. They are responsible for managing growth and or diversification strategy. They are usually the dependents of the economical and managerial unit. But they are also alternative. We will see alternative solutions. We will see therefore two different types of functional modified structure by product. The type one and the type two. What is important is that product manager intersect horizontally the vertical line which derive directly from the functional structure. The product manager are responsible for the ultimate results of the products. If you want, they recover what is the main goal assigned to a business unit in the divisional unit. They will have to in some way integrate themselves with the responsibility of the functional lines, vertical functional lines which are responsible for different goals. Let's have a look at the modified functional chart by product type one. As you can see, we have the first level managing director and then we have the normal functional director. And then we add what we call the product managers, would depend directly from the managing directors. We have the product manager one, product manager two, product manager three. And all of them intersect the vertical lines, the vertical lines of the functional structure. When these modified solution fit, well these solution fit for firms which are very diversified in terms of products. So they have really different line of products or different products that should be care of and they do not want to dismantle the high level of scale that have reached within the functional structure. Product manager, as I said, depend, so they are at the same hierarchical level of functional directors. So they depend directly from the managing director. And they have usually strategic tasks and resource allocation goals between the different functional vertical lines. What will happen if, when they intersect, going back to the chart, what happens when they intersect the vertical lines horizontally? Well, in this case, sometimes some conflicts could arise because they can ask for accomplishing some task for they could assign some goals to the vertical lines, which can be in contrast with the mandates that the functional director has given to those two positions. How to manage these conflicts? Well, the job position which receives the double mandate, the formal without authority mandate vertical line and the without authority horizontal mandate informal, if you want mandate from the product manager, have to stop immediately and say, I'm in front of conflict. And this solution should be searched by a dialogue. So through a mutual adjustment between the functional directors implied in the conflict and the product manager, since they are at the same level, at the same hierarchical level, and if the conflict is not solved at that level, can be taken to the managing director for the exception principle of a yaw. So we have the way out for exiting conflict, for solving conflict in this case. A alternative solution less complex for less complex situation is demotified by product type two. Let's have a look at this second alternative. Here we have the managing director has before and the different functional director. But in this case, in this chart, the product managers depend directly from the marketing managers. So they intercept all the vertical lines, the vertical functional lines except that one of marketing. When these modified solution type two could be adopted, what could be adopted in situation of not so huge diversification but with many products. So the products are not so dis-homogeneous between them. And in this case, PM depends completely from the marketing department and they are responsible for the managing of the marketing of the products and the integration with the vertical functional lines. So there is a big, a huge difference from the previous type one product manager. The previous product manager type one were full responsible of the competitive and the economic financial response goals of the products while type two product manager are responsible only of the effectiveness of the marketing activities of the different products. Again, also for this case, some conflicts could arise when they interact with the vertical functional line. What are the ways for managing these possible conflicts? The ways for managing these conflicts is that they should immediately talk with the marketing director in order to solve with the corresponding functional director the conflict, the potential conflict or the conflict that has been arise in the intersection between the vertical functional line and the horizontal functional line. These are the functional structure modified by product. Let's now move to functional structure modified by project. In this case, we insert, in this case we insert a job position, an organism which is temporary but we give it authority. If you want, the big difference now from the product solution by product solution is that the job position now can give orders and assign task directly to the vertical lines. Where the functional structure modified by project can be applied? The situation in which they can be applied is for highly sophisticated situation in terms of techniques and at the same time, when there is a peculiar goal to be achieved, peculiar goal related for a job order, for example. Think about, for example, where big ships are built. The building of a ship takes for two or three years. So we need to tackle for all the incentives of these project. And this could be the case for adopting these form of organizational structure. And what is important is how to solve possible conflicts, how to solve possible conflicts that could arise within the functional structure modified by project inserting a job position with who has authority. Why there is the emergence of conflicts? There is the emergence of conflicts because when there is a job position which has authority, intersect the vertical, hierarchical line, they will have authority. So they will create a situation of a double binding mandate for those positions in which they intersect. And how can we solve these potential conflicts? Well, we can adopt what is called a coordination principle. The coordination principle implies that all the people at the intersection between horizontal line of authority and vertical line of authority will follow the horizontal mandate when it works, when he or she works on the project. On the other hand, at a time, will follow the vertical mandate. But let's have a look at the... Let's have a look at the modified by project chart which is its characteristics. How usual? We have the managing director and we have the functional directors. Then we insert the job position which is temporary and without authority. These job positions are called project managers. Project manager one, project manager two, project manager three in these examples. As you can see in the intersection of the vertical line by the horizontal with authority hierarchical lines, there are some positions. These positions can be characterized by a double mandate. There are a double mandate. One is following the techniques and one is following the outputs, the project actually. How do we avoid conflicts? We talk about the coordination principle. When those people work on the project, they respond to the horizontal mandate. When they do not work on the project, they respond to the vertical mandate. But we know that the uncertainties and unforeseen events can come whatever during time. So how to try to avoid conflicts and how to manage conflict that could arise. In order to avoid conflicts, what is important is to create a very good planning of all the activities. So each people at the actors section should know when they are supposed to work within the project and when they are not. These are implied to adopt very sophisticated forms of project management techniques in order to define deadlines, milestones, gants of actions and so on. On the other side, when there will be for unforeseen events, for uncertainty, there will be some conflicts, emerging conflicts. We can tackle with them using a sort of exception rule. Again, as in the case by the functional structure modified by product, when these guys, going back to this chart, when these guys find a conflict for the mandate of the research and development director and the project manager mandate, he has to talk with both of them and they can solve heat through a mutual adjustment and if they do not find a solution, they can go to the upper level, that is, to the managing director. So what are the advantages of this solution? Well, the advantages are that we will succeed in a better project control and if you want also better relationship with clients and for sure, an higher level of coordination at level of the project, because we have dedicated resources, the project manager, who can follow the developing during all the time of the project, the developing of the project itself and therefore this structure, the modified by project structure is more goal oriented than other. What are the cons? What are the disadvantages of the structure? The disadvantages of the structure are the high level of conflicts deriving from the double mandate of all the intersection, all the people within the structure will have two bosses. So they will ask for a lot of coordination and these conflicts will ask for a lot of coordination, coordination between the different functional directors and the different project managers. But let's now have a look at the third functional chart modified by matrix. So we will talk now with the matrix structure. What is the matrix structure? The matrix structure is the most complex and sophisticated functional modified chart. If you want the first level, the first hierarchical level position, has specialized both by product that is included the divisional perspective and functional unit. So in the matrix we have both the dimension, techniques if you want inputs and outputs. And therefore in the matrix structure for sure again as in the project we will have a double line hierarchical line of mandates. But in this case we will solve potential conflicts introducing a job position called two boss managers who will if you want mediate the conflicting mandates that will be no more the need for going for multiple adjustment between functional directors and divisional directors. The solution of the double mandate is up to these two boss managers. But let's have a look at the chart of the matrix chart in order to understand the role of the boss managers. Well as you can see the matrix chart has two different first line the functional units and the product project units. Here we have the functional dimension and here we have the divisional dimension. Here we have the functional units in the example we have three different functional units and three different business units. The business units have their own hierarchical lines and the same have the functional units have their own hierarchical lines. So if you want in this case there are nine different intersections there are three functional units three divisional units which intersect in nine different points. In each intersection we pose a two boss manager the two boss manager is a role for mediating the conflicting mandates coming from the functional line the hierarchical line and the divisional hierarchical line. Under the two boss manager there is a team. So here in the example we will have nine different team, two boss manager position three multiplied three intersection and in each intersection we will pose a two boss manager so nine boss manager, two boss manager and under each of these nine two boss manager we will have nine different teams. What is important therefore? The important is that these two boss manager should be more relationship oriented than task oriented. They should adopt a leadership style more relationship oriented because they have to mediate the double mandate. Their social skill should be more important than professional competencies. That's very important in selecting people who have to cover those job positions. What are the main characteristics of the matrix chart? First of all there is a double grouping criteria input output, functional and divisional units. Secondly there is a double structural double line of authority one which follows the functional orientation and one which follows the divisional orientation. There are a lot of managerial integration roles. In the case, in the example we have seen in the slide there are at least nine different integration roles the two boss managers nine different two boss managers. There is a high level of participation and autonomy. All the teams under each the two boss managers have their own autonomy and the two boss managers can articulate, distribute tasks to its teams with different orientation. Then there is a huge implication, a huge adoption of the mutual adjustment as a coordination mechanism and this mutual adjustment is mostly accomplished mostly performed by the two boss manager positions due to the fact that they have to interact with the horizontal and vertical lines of the functional and the divisional lines. Therefore last but not least there is a high level of internal complexity due to the fact that we are mixing different tensions one coming from the functional and the other coming from the divisional orientation. Could be the solution for all the problems in terms of managing both efficiency and flexibility? No. This is a really, really complex solution, organizational solution. Usually it fits for really complex organization, really big organization with really complex strategies but at the same time with huge need for efficiency due to their dimension. What are the main advantages of this solution? Well, the first advantage I think is that integrates both efficiency and flexibility. Due to the fact that it embedded, naturally embedded both the dimension, the functional dimension and the divisional dimension, both the main goals of the two basic organizational solutions are, if you want, reflected in this matrix solution. Therefore if you want there is a mix of efficiency and effectiveness that can be rich adopting this solution. But at the same time there are some problems related with the adoption of this matrix solution. Some disadvantages, if you want, some cons of this solution. First of all, we cannot assume that within this solution conflicts will disappear at all. Actually the two boss manager will be completely exposed from different tension coming from the functional dimension and the divisional dimension. And not always will be able, they will be able to mediate these different tensions. So for sure there will be some levels of conflicts around the role of the two boss managers. Secondly, therefore there will be a large need for coordination. We cannot discuss that there are different highlands, different teams under each two boss manager, but the different teams should coordinate themselves in some way. So there is not only the need for coordination at the two boss manager level, but also between different teams. And this is very important. We will ask for the introduction of different coordination mechanism which will cost in terms of organizational solutions. And last but not least, the presence of two boss managers implies also that there could be the case for not having a perfect equilibrium between authority and responsibility. Because the dimension for who is in charge of accomplishing different orders, obtaining different goals, it's really clear, the two boss manager, but who is in charge of the different goals. This is not really clear. Could be the two boss manager, but also the functional and the divisional director. So there could be some problems. Thank you very much as usual for your attention. And if you need more information about this lecture, please go to visit the website of Unid in the Tunnel University. Thank you very much.