Doing the business

 

The need for a solid structure within all business entities is "absolutely fundamental," according to Ms Angela Tripoli, a lecturer in Business Administration at UCD. "Organisational structure concerns who reports to whom in the company and how different elements are going to be grouped together .... a new company cannot go forward without this and established companies must ensure their structure reflects their target markets, goals and available technology," she said.

Depending on its size and the needs of the firm there are several organisational structures companies can choose from. Increasingly though, in the constantly evolving business environment, "many firms are opting for a kind of hybrid of all of them," said Ms Tripoli.

The most recognisable set up is called the functional structure where a fairly traditional chain of command (incorporating senior management, middle management and junior management) is put in place. The benefits of this system are that there are clear lines of communication from top to bottom but it is generally accepted that it can also be a bureaucratic set up which does not favour speedy decision making.

More and more companies are organising themselves along product lines where companies have separate divisions according to the product that is being worked on. "In this case the focus is always on the product and how it can be improved," said Ms Tripoli.

The importance for multinational companies of a good geographic structure, said Ms Tripoli, could be seen when one electrical products manufacturer produced an innovative rice cooker which made perfect rice - according to western standards. When they tried to sell it on the Eastern market the product flopped because there were no country managers informing them of the changes that would need to be made in order to satisfy this more demanding market.

The matrix structure first evolved during a project developed by NASA when they needed to pool together different skills from a variety of functional areas. Essentially the matrix structure organises a business into project teams led by project leaders to carry out certain objectives. Training is vitally important here in order to avoid conflict between the various members of the teams.

One Irish company that combines elements of both the matrix and functional structures is the mobile phone company Eircell. While it makes use of functional divisions and groupings such as marketing, media, finance and technology it also has fewer levels of supervision and a system which allows for matrix-like teams to bring a new product through from inception to launch.

During the 1980s a wave of restructuring went through industry both here and around the globe. This process, known as de-layering, saw a change in the traditional hierarchical structures with layers of middle management being removed. This development was driven by new technology and by the need to reduce costs. The overall result was less bureaucratic organisations.

"The de-layering process has run its course now," said Mr Pat Talbot, a partner in charge of management consultancy with Ernst and Young. Among the trends that currently influence how a company organises itself are the move towards centralisation and outsourcing.

"Restructuring has evolved along with a more customer-centric approach that can be seen to good effect in the banks. They now categorise their customers and their complex borrowing needs into groups instead of along rigid product lines that can be confusing for the customer," he said.

Another development, said Mr Talbot, can be seen in larger companies who are giving their employees more freedom to innovate in order to maintain a competitive edge. "Giving this freedom can be very scary for management but they are gradually recognising the necessity of this approach," said one commentator.

Ms Julia MacLauchlan, Director of Microsoft's European Product Development Centre in Dublin, said the leading software company had a "very flat organisational structure".

"There would not be more than around seven levels between the average software tester and Bill Gates," she said.

Microsoft is a good example of a company that is structured along product lines. In Ireland, where 1000 employees work on localisation of the software for all their markets, the company is split up into seven business units. Each unit controls the localisation of their specific products while working closely with the designers in Microsoft's Seattle Headquarters. It works, said Ms McLaughlan, because everyone who works in the units is "incredibly empowered".

"Without a huge bureaucratic infrastructure people can react a lot more quickly to any challenges and work towards the company objectives," she said.

The latest development in organisation structure is what Ms Tripoli describes as the avant-garde approach. "This is where a company has no structure at all and each employee is just left alone to see how he can contribute to the profitable running to the company," she said. Another relatively new departure is something called adhocracy where companies adopt a different structure depending on the product.

With companies no longer following rigid guidelines in relation to how they organise themselves the list of their structural options looks likely to grow.