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Over the years, the business world has regarded organizational structures and teams as a source of competitive advantage that leverages an organization against changes in its environment and ultimately improve its performance.
This essay will explore the three main organizational structures expounding on the matrix structure and its benefits. The paper further delves into general systems theory and elaborates on the concept of systems thinking and how they can be beneficial to an organization. Moreover, virtual teams and traditional teams will be compared and contrasted and explained. Finally, the essay will define shareholders and stakeholders and pointing out their differences.
As (Galbraith, Downey, & Kates, 2001) elaborate, an organization’s structure refers to how formal power and authority is centralized and how organizational components, their relationships and their hierarchy are determined. It entails grouping together people in an organization around functions, defining their responsibilities and configuring these functions for managerial and decision making purposes.
The Functional Structure
It entails coordination, supervision and task allocation within a business environment through the principle of employee specialization centered on function or role. Traditionally, such functions may include production, marketing, human resources and accounting. A centralized managerial model enables the coordination and specialization of tasks thereby making production efficient and predictable. This structure adopts the silo concept where communication chain between functions happens vertically (Miles & Snow, 1992).
A functional structure is applicable for mass producers of standardized, low-cost goods and services since coordination and specialization of tasks tend to be centralized. The structure maximizes on efficiency by integrating activities vertically. However, the high level of efficiency and centralization undermines cooperation among business units/functions. Moreover, the communication in a functional structure can be rigid making organizational processes slow and inflexible (Jacobides, 2007).
Here, the organization has few to no levels of middle management leading to a large number of people under each manager. Therefore, duties and responsibilities of a manager in a flat organization are much higher and they rely less on guidance from supervisors (Ghiselli & Siegel, 1972).
This structure works best for small firms and technology organizations that are highly specialized. It grants autonomy and self-realization to managers and workers will be included in the decision making process consequently impacting productivity positively. The elimination of middle management expedites customer feedback and decisions can be made more quickly.
However, this self-managing structure may deter valuable employees whose career expectations include promotions. Moreover, the boss less structure may be a problem when handling grievances, ensuring workplace diversity and biased decision making. (Klint , 2014)
The Matrix Structure
As organizations endeavor to achieve multiple objectives with minimal resources, the matrix structure is adopted to link disparate parts of the organization and encourage collaboration among teams. It can combine the best practices of separate organizational structures and it is regarded as one of the most effective ways to force interaction among strategic business units and integrate diverse departments (Kates, & Galbraith, 2007).
This structure is best suited for organizations that already established cohesive teamwork, joint liability and a collaborative managerial process. Ideally, the structure groups employees by function and product. People with the same skills are grouped together to execute work assignments.
Unlike the functional structure, the matrix dynamic approach enables seamless sharing of information among team members across task boundaries. Also, it improves upon the silo concept of functional structure by diminishing vertical communication opting for a more efficient horizontal structure. The structure also allows for employee specialization thus increasing their depth of knowledge with regard to project needs (Hall, 2013).
However, the structure is not without setbacks. Although the matrix is intended to foster cooperation across teams, it tends to increase bureaucracy, more stake holder meetings and ultimately slowing down the decision making process. Moreover, centralizing the management in a matrix leads to high levels of escalation making it slow and expensive to run. Complexity of the chain in command also rises and leads higher manager to worker ratio which may create reporting confusion and conflicting employee loyalties (Galbraith J. R., 1971).
Boundary-Less Organizations and General Systems Thinking
General Systems Thinking
General Systems Thinking is one of several methodologies which use systems approach to understand complex phenomena and problems. It seeks to identify the general relationships of the empirical world by observing patterns in our systems to find an optimum degree of generality. Discovering patterns and discerning them leads to a revelations of principles that can be applied in various research fields. (Johnson, Kast, & Rosenzweig , 1964).
In a managerial sense, GST is a framework for visualizing an organization’s internal and external environments as a whole and recognizing the appropriate place and functions of subsystems. As stipulated by (Smith J. , 2010) we should look at an organization like a living system in continuous exchange with its environment. Moreover, just like a living organism, the system usually operates at an optimum state called homeostasis which self-corrects by relying on feedback. The primary goal of a system therefore is balance by operating at a steady state that is purposeful and self-controlling (Aronson, 1998).
Furthermore, a systems components and attributes are confined within boundaries. In management for instance, organizations have specialized functions different from other system parts but can be integrated with others to perform a complex task. System thinking therefore breaks down a system to its strategic parts, discerns their mutual interdependency and aims to facilitate their compatibility to achieve specific organizational goals (Smith J. , 2010).
This is a contemporary organization design that is highly engaged with its environments. This concept remove bureaucratic divisions that separate the organization and its stakeholders. This is achieved by thriving in change by developing characteristics and adopting new practices that better position the organization against threats and changes in its environments. Boundaryless organizations are of four types: network organization, virtual organization modular organization and strategic alliance (Griffin, 2014).
Apart from traditional face-to-face communication, boundaryless organizations embrace virtual methods like email and video conferencing. This freedom to teamwork international employees improves productivity and allows for flexibility in operations. Such organizations have a free-form workplace that encourages employees to manage and coordinate their own projects thereby fostering strong work ethic.
Virtual Teams Vs Traditional Teams
Today’s reliance on technology by businesses worldwide for communication and administration have led to virtual work arrangements that greatly rely on web-based communication to connect globally diverse teams.
For businesses that have a global presence, or outsource their operations, using virtual organizations cuts on costs and enables teamwork situations in diverse settings. Virtual teams, unlike traditional teams, have overcome geospatial separations while cutting down on office space, travel and time-related expenses. Moreover, virtual teams aid in unifying functions across business units.
On the flip side, the cost of the technology infrastructure, its installation and maintenance is pricier for small and mid-size organizations. Furthermore, the lack of physical interaction among team members leads to social isolation and in turn affects productivity (Bergiel, Bergiel, & Balsmeier, 2008).
Also known as the intact team, this team is functionally oriented and composed of specialists who work together and share the same project goals. The leadership in traditional teams is dependent on the organization’s hierarchical structure and new team members are recruited based on their technical skills. Also, they adopt a top-down communication chain
The traditional structure tends to be stable for many years since team members are replaced as required based on their specialization. The centralized nature of management in traditional teams facilitates faster decision making by top management. Moreover, the focus on specialization identifies individual effort of employees which in turn motivates their performance.
Unlike virtual teams, traditional teams need central office space for the employees which comes at a cost. For virtual teams on the other hand, the cost of office space can be diverted to more profitable ventures. Also, bureaucracy of decision making is a deterrent to creativity and innovation since it is done without the consultation of subordinates (Duggan, 2017).
Shareholders and Stakeholders
These are owners of a company’s stock and they stand to gain directly if the company is profitable Managers are obligated to increase the company profits through open and non-deceptive ways. However, they are not personally liable for the company’s debts even if it goes bankrupt. Shareholders play a minimal role in the day-to-day running of the organization and leadership relies on a board of directors or an executive management.
Stakeholders are individuals or groups who benefit from and are harmed by the actions of a corporation. They include employees, customers and suppliers. Modern corporate social responsibility has seen companies incorporating the general public by making corporate choices that protect social welfare regardless of legal and regulatory requirements.
Ideally shareholders are owners of the company through owning shares/stocks, whereas a stakeholder is interested in the company for reasons other than just its profitability. On the other hand, shareholders advance capital to a company which in turn engages in activities to generate profits. Moreover, the company has a duty to both the stock holders and individuals or groups that directly or indirectly contribute to the company’s activities and profitability and are the company’s beneficiaries and risk bearers. (Freeman, 2010).
As an organization’s external environments become broader and global, there is need for more inclusive and continuous engagement with its stakeholders to identify new groups of people potentially impacted by their activities. Stakeholder analysis is usually conducted to start communication engagements with potential stakeholders. The purpose of these engagements is to build mutually benefiting relationships within the societies the business operates and ultimately improve planning and performance.
In conclusion, the dynamic and ever changing business world requires organizations to be versatile and adaptive to increasing globalization. An array of organizational structures are available to leverage a company within the markets. There is also a choice of the type of teams to adopt and the need to incorporate systems thinking in an organizations continuous improvement strategy.
Aronson, D. (1998). Introduction to Systems Thinking. Retrieved from Thinking.net:
Bergiel, B. J., Bergiel, E. B., & Balsmeier, P. W. (2008). Nature of virtual teams: a summary of their advantages and disadvantages. Management Research News, 99-110.
DiMario, M. J. (2010). Systems Research Series : System of Systems Collaborative Formation. Singapore: World Scientific Publishing co.
Duggan, T. (2017). Differences Between the Traditional Organizational Structure & One That Is Team-Based? Retrieved from smallbusiness.chron:
Freeman, E. R. (2010). Strategic Management: A Stakeholder Approach. Kindle books.
Galbraith, J. R. (1971). Matrix Organization Designs: How to combine functional and project forms. Business Horizons, 29-40.
Galbraith, J., Downey, D., & Kates, A. (2001). Designing Dynamic Organizations : A Hands-on Guide for Leaders at All Levels . AMACOM.
Ghiselli, E. E., & Siegel, J. P. (1972). Leadership and Managerial Success in Tall and Flat Organization Structures. Personnel Psychology, 25 (4): 617.
Griffin, D. (2014). The Structure of a Boundaryless Organization.
Hall, K. (2013). Making the Matrix Work: How Matrix Managers Engage People and Cut through Complexity. Global Intergration inc.
Jacobides, M. G. (2007). The inherent limits of organizational structure and the unfulfilled role of hierarchy: Lessons from a near-war. Organization Science, 455-477.
Johnson, R. A., Kast, F. E., & Rosenzweig , J. E. (1964). Systems Theory and Management. Management Science, 367-384 .
Kates,, A., & Galbraith, J. R. (2007). Designing Your Organization : Using the STAR Model to Solve 5 Critical Design Challenges (1). Jossey-Bass.
Klint , F. (2014). wired.com. Retrieved from Why Workers can Suffer in Bossless Companies like GitHub:
Miles, R. E., & Snow, C. C. (1992). Causes of Failure in Network Organizations. California Management Review.
Smith, A. (1776). Wealth of Nations (4 ed.). (A. B. Krueger, Ed.) Kindle Classics.
Smith, J. (2010). Systems Thinking- What's That? Retrieved from Blog: Consulting and Organizational Development:
In this modern day world, competition is the key driving force of many organizations in various economic sectors. The need to out-compete each other has become so great that many organizations are willing to do whatever it takes to gain any competitive advantage possible. As a result, many organizations have invested fully in infrastructure and other kinds of technology and software that serve the purpose of increasing their efficiency and productivity as an organization. While this has made some significant improvement on their bottom lines, it is the development of human capital that has had the greatest impact on the productivity and profitability of many such organizations. The ability to harness the power of the human workforce has translated into increased efficiency and productivity levels in many of these organizations. Needless to say, profit increase soon follows.
However, there are some pertinent questions that every organization needs to ask itself concerning the issue of developing human capital at their organization. This is because should the organizations make the wrong decisions concerning this sensitive issue, it could end up losing hefty sums of money as a result of decrease efficiency and productivity. In relation to this sensitive issue, this paper seeks to examine the key areas that form the basis of successfully developing human capital in any organization. It seeks to determine what proves to be the most effective methods and considerations in play when developing human capital is the sole agenda. Through this approach, many organizations will have access to a framework to consider when it comes to developing human capital within the organization. This paper also seeks to examine the linkages, if any, between these different aspects that must be considered in the matter of developing human capital
Keywords: Human capital, efficiency, efficiency, competency.
Strategic Alignment and Business Goals
Every organization is established to fulfill some kind of purpose in its respective niche, at least theoretically. This is hinged on the premise that any organization looking to prosper must have in place proper goals and visions that it seeks to realize in the course of success. This has led many organizations down different paths, with some becoming successful at realizing their goals, while others have failed miserably (Schultz, 1961). One of the causes of either success or failure in this attempt lies within the throes of strategic alignment of the organization or business and their relation to the business goals.
Every organization must question itself on what its key strategic objective sand measures are. Once this question has been answered, many organizations are well on their way to realizing success in their respective fields. The reason why this proves to be very important is because in order to develop the organization, developing human capital is inevitable. Similarly, it is impossible to develop human capital without having the proper plan in place. Understanding what kind of objectives the organization has strategically will enable the management to make more informed decisions in terms of hiring and re-training of staff. This easily results in improved performance, since the employees working for the organization have the right kind of qualifications to take the organization forward in terms of goals and strategy.
The measures of success that count to the manager are also key points in developing human capital. Is success achieved through profit alone or do other parameters such as efficiency and productivity count in the assessment. This proves vital to understanding the organization, and as a result human capital can be developed to realize success in all the different parameters that serve as reference points for success.
The structure of the organization can be referenced as the ‘backbone’ of its operations, and hence success. Having the right kind of structure is not only profitable, but also advantageous. The organizational advantage that an institution possesses just for having the right kind of structure is essential to the success of the institution and to the process of developing human capital. An organization’s structure lays out the communication relationships and protocols in the organization. The result is that there is a smoother flow of communication up the reporting protocols (Heckman, 2000). This structure also educates managers on the clear roles and relationships within their organizations. Through this, managers are able to put into effect adequate delegation and workflow processes. In addition to this, they are able to bestow decision making authority on various levels of the hierarchy. But the question abounds, how does this foster development of human capital?
Well first, the structure of the organization will determine the kinds of employees that are employed. This is essential because having very few managerial positions in an organization will result in heavy workloads for the managers in questions. On the flipside, too many managers and few subordinates will easily result in managerial conflicts. Therefore, having the right kind of structure plays a central role in developing human capital in an organization (Barro, 2001). It allows the organization to develop competent and capable employees at every level of the organization, from the very bottom to the top. This is extremely beneficial to an organization, since the ability of the workforce to gel and produce productive results is a key pointer of success in many organizations.
The effectiveness of the structure also helps the management to develop the human capital. This is because once the unproductive employees and areas are identified all that remains is initiating the process of change or reform. This will enable the organization to determine the kinds of change that are necessary to develop its human workforce. Some of the key areas that the organization will address include the recruitment of additional staff and the improvement of skills for the current staff (Davidsson & Honig, 2003). Either way, this serves as a process of improvement for the organization, seeing that it is able to improve the skill set and competency of its staff, hence ensure the development of human capital.
This is probably the most vital aspect of developing human capital insofar as organizations are concerned. In this matter, there are a number of questions that the organization is forced to answer. First, it must address its strategy for success. What is the strategy that the management wishes to employ to realize success in its endeavors? Understanding this strategy can be the making or breaking point for any organization, since it is this strategy that drives virtually every aspect of the organization, from human capital development to profitability and productivity.
Secondly, the organization need to set is priorities. In order to realize success, there must be some priorities that are ranked in order of importance (Beine, Docquier, & Rapoport, 2008). For instance, developing human capital could be one of the main priorities the organization should pay attention to in order to realize success. The approach that the organization is willing to adopt to realize its goals is also equally important.
In assessing the priorities, one of the points that will come out clearly is the impact of positions within the organization. Understanding the most important positions, and the one that have the most impact directly on the organization will shed light on the areas the organization must first develop human capital. This will allow the organization to recruit or re-train its staff to suit the roles expected of them, especially if it is the position with the most impact.
The tasks involved in the process of assessing the position with the greatest impact are also of equal importance (Benhabib & Spiegel, 1994). The staffing at these positions is also a key aspect to developing human capital. It is clear that success is not a one-man show, and expecting the manager to be solely responsible for success is naïve, as well as impossible. Having a well trained and efficient team behind the manager will easily result in improved productivity, as well as human capital development.
It is also prudent for any organization to assess the need for staffing changes within its structure based on the business conditions at the time. This is because with time comes change, and the need for change, as well. This calls for organizations to be vigilant with the changes at the workplace, and possible future changes. Understanding this will be vital to developing the human capital available, in line with the goals and strategies of the organization.
Individual Competency Assessments
It is rather obvious that to succeed as a team, having the right kind of players is an inevitable prerequisite. Similarly, the kind of employees that an organization recruits as part of its staff is very much likely to determine its success or failure. Developing Human capital at the organization is also hinged on understanding the kind of employees the organization has, and their different levels of competency (Mincer, 1958).
This is essential because it allows the organization to assess each employee’s skill set against the business needs at the workplace. As a result, the organization can understand in which department to place an individual, where their skills and competencies will be fully utilized for the benefit of the organization. This will prove essential when it comes to the human capital development needs. The areas that are least effective, or that have employees with the lowest skill sets will be given priority when it comes to developing the human capital of the organization. It is also noteworthy that establishing performance ratings and channels of compensation are key steps to developing the human capital in any organization.
Assessing the individual capabilities of every employee will help in the decision making processes of the organization. By understanding every employee, the organization can assess the different positions available and their required proficiency levels and skill sets. Based on this information, every employee can be strategically placed where they work best, and where their skills will be utilized. This will help the employees to better their skills, and in the process the organization experiences human capital development.
In addition to this, understanding individual competencies of members of the workforce will allow the organization to determine any skill gaps that are present in the organization (Hitt, et.al., 2001). Determining how these gaps will be filled is itself a process of human capital development. The gaps can be filled by hiring new staff members that are competent in the said field, or by training the present staff to fill these gaps. In the end, the human capital of the organization is developed.
Through this approach, organizations are also able to determine the most skilled employees, as well as the skilled but unrecognized ones. Through this process, an honest assessment into the possibilities of retaining these employees is started. This works to the advantage of the organization, seeing that it can positively use this information to determine what needs to be done to retain its skilled employees (Mincer, 1958). The ability to recognize the skilled but previously unrecognized employees is also of great advantage to the human capital development process.
Through this, the organization is able to ensure that it recognizes and retains its most skilled employees, and as a result, develops its human capital in the process. Through this process, the organization can also determine whether some employees should be placed in different departments or assignments based on their abilities and competencies. Through this, they can virtually improve every department of the organization without hiring new staff, a feat that will be profitable and vital to the human capital development process.
Internal-External Bench Strength
This aspect of human capital development pays attention exclusively to the matter of succession at the workplace. It is rather clear that for any organization to prosper, having the right kind of leaders is compulsory. This is because the leader charts the way forward for the organization. The ability of competent leaders to direct their staff in the right direction is essential to the entire process of human capital development (Mincer, 1958). This is because it allows these organizations to plan ahead of time insofar as leadership at the organization is concerned.
This process addresses the true succession depth of the organization. Having succession depth is essential for human capital development, since it serves as some sort of guarantee that good leadership will continue into the near future. Having enough employees that are ready to assume higher positions at the workplace is essential for the success of any institution. It allows leadership to be stable at all times, and as a result, productivity, efficiency and profitability follow suit (Hitt, et.al., 2001). In addition to this, assessing this bench strength allows the organization to determine whether it is able to meet the training needs of identified successors. Assessing this aspect, will enable an organization to train its future leaders effectively, and thus ensure human capital development.
Rewards and Retention
A reward system is essential in any organization. This is because it is extremely important that institutions learn to appreciate good work, and to reward skilled and hard working employees. It is necessary for every institution that has a human capital development policy to ensure the retention of its highly skilled staff (Sahn & Alderman, 1988). By ensuring its highly skilled staff is retained and not poached by other organizations, then future success and improvement is almost certain. These institutions should also put in place a system that is centered on retaining high potential employees. The vulnerability of these employees is extremely high, hence the need to establish a system that ensures the high potential and skilled employees that an organization has worked hard to train do not depart from the organization. This works to ensure human capital development in the institution.
Barro, R. J. (2001). Human capital and growth. American Economic Review, 12-17.
Becker, G. S. (1985). Human capital, effort, and the sexual division of labor. Journal of labor economics, S33-S58.
Beine, M., Docquier, F., & Rapoport, H. (2008). Brain drain and human capital formation in developing countries: Winners and losers*. The Economic Journal, 118(528), 631-652.
Benhabib, J., & Spiegel, M. M. (1994). The role of human capital in economic development evidence from aggregate cross-country data. Journal of Monetary economics, 34(2), 143 -173.
Davidsson, P., & Honig, B. (2003). The role of social and human capital among nascent entrepreneurs. Journal of business venturing, 18(3), 301-331.
Heckman, J. J. (2000). Policies to foster human capital. Research in economics, 54(1), 3-56.
Hitt, M. A., Biermant, L., Shimizu, K., & Kochhar, R. (2001). Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource- based perspective. Academy of Management journal, 44(1), 13-28.
Lepak, D. P., & Snell, S. A. (1999). The human resource architecture: Toward a theory of human capital allocation and development. Academy of management review, 24(1), 31-48.
Mincer, J. (1958). Investment in human capital and personal income distribution. The journal of political economy, 281-302.
Nehru, V., Swanson, E., & Dubey, A. (1995). A new database on human capital stock in developing and industrial countries: Sources, methodology, and results. Journal of development Economics, 46(2), 379-401.
Sahn, D. E., & Alderman, H. (1988). The effects of human capital on wages, and the determinants of labor supply in a developing country. Journal of Development Economics, 29(2), 157-183.
Schultz, T. W. (1961). Investment in human capital. The American economic review, 1-17.
Organizational development is an incorporative approach to changes implemented in an organization. It is a crucial analysis aspect as it promotes sustainability of desired states of an organization. Normally, organizational development attainment can be through either introduction or new changes (Cheung-Judge, 2011). Attainment of these changes can either be through change in communication strategies or as well introduction of new technology applications supporting the organization objectives and development (Balzac, 2011). During the development process, a key factor is the organizational culture, which incorporates aspects such as employee and managers. The discussion below aims at developing an all-inclusive evaluation of the current trends in organizational development.
Integration of technology in organizations is a significant trend in the corporate world. Technology is among the greatest current and future impacts of organizations (Schroeder, 2011). Technology implemented in organizations differ depending on the nature of operations used in the firms. Implemented aspects such internet and intranets are changing then method of interaction between employees and their managers. Similarly, it is improving the aspect of competition between organizations (Schroeder, 2011). Nevertheless, technology systems require high skill levels. Therefore, attainment of these skills and customer friendly platforms remains as a current and future challenge to organizational development (Cheung-Judge, 2011).
Increased partnership. Progressively, as organizations are realizing it is not desirable managing all stages of chain distribution, managers are opting to partnerships. As a new trend in the corporate world, managers are developing strong attachments towards partnership as alternative methods of managing organizations (Balzac, 2011). However, maintenance of domestic culture as well remains as a challenge during the managerial processes.
In the modern corporate world, organizations are diversifying their operations in a quest of maximizing their outputs (Balzac, 2011). Nowadays, most managers consider diversified management being more effective than strategic management. Henceforth, as time is progressing, diversification will be a global challenge due to the increased globalization of business operations.
Cheung-Judge, M.-Y., & Holbeche, L. (2011). Organizational development: A practitioner's guide for OD and HR. London: Kogan Page.
Balzac, S. (2011). The McGraw-Hill 36-hour course Organizational development. New York: McGraw-Hill.
Schroeder, C. M. (2011). Coming in from the margins: Faculty development's emerging organizational development role in institutional change. Sterling, Va: Stylus Pub.
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