Emerging

Developments

83
Change Management
in Power Distribution 8.1 INTRODUCTION

Managing change is probably the single most important issue for those who
are entrusted with the responsibility to manage organisations. In the past few
years, we have witnessed rapid technological changes and increased global
competition caused by liberalisation and deregulation. These developments
have placed greater demands on organisations, which now have to be even
more flexible, responsive and efficient. Organisations, big and small, the world
over face the inevitable prospect of change, which takes many forms and
involves simultaneously managing resources, processes and emotions. For
these reasons, managing change in the contemporary world is a complicated
and challenging task. There are several management theories, models and
tools but intense competition forces organisations to find ever new ways of
grappling with the rapid rate of change. Restructuring is one of the successful
ways of meeting such demands imposed by rapid change. The current
restructuring models all over the world are manifesting in the form of mergers
and acquisitions.

Organisations are economic and social entities in which a number of persons

perform multifarious tasks in order to attain common goals. Organisations also
act as effective instruments and help individuals in accomplishing their
personal objectives which cannot be achieved by the individual alone. In this
unit, you will learn about emerging trends in the organisations and changes in
their structures.

8.2 TWENTY-FIRST CENTURY ORGANISATIONAL

TRENDS

In the emerging world order, four key organisational trends are visible:
Globalisation, diversity, flatness and networking.

• Globalisation

Manifested in

 Increasingly globalised sales, manufacturing, research, management.

 Movement from direct exports to having sales offices in different
countries spread across the globe.
 Increasingly globalised labour market.

Due to

 Reduced cost and improved quality of international transportation and

communication.
 Search for unsaturated markets.
 Exploit regional cost and expertise differences.
84
• Diversity Emerging
Developments
Manifested in

 Workforce getting more heterogeneous in gender, race, culture,

language, etc.

Due to

 Differentiated customer needs – fulfilling them is a source of

competitive advantage.
 Increasing access of workplace to diverse populations.
 Increased pace of change in technology and markets.
 Diversity in organisations is a source of both innovation and
conflict/communication problem. Managers in such organisations need
to cope with different styles of interaction, presentation, dress, physical
appearance, etc.

• Flatness

Manifested in

 Fewer levels of management.

 Empowerment of workers for making decisions.
 Fewer differences in responsibility (not in pay) across levels.

Due to

 Need for quick decision making.

 Development in information technology.
 Globalisation which forces intensified competition and increases the
need to cut costs.

• Networking

Manifested in
 Direct communication across unit and firm boundaries, ignoring chain
of command.
 Cross-unit team structures.
 Outsourcing and downsizing.
 Strategic alliances with competitors, customers and collaborators all at
the same time.
 Close coordination among firms (e.g., JIT systems) and information
sharing (open computer systems).
 Across the board contact with customers, not just official boundary
spanners.
 Customisation.
 Decentralisation. 85
Change Management Due to
in Power Distribution
 New information technologies, especially, groupware, client-server,
distributed computing.
 Fast changing customer needs and competitor offerings.
 More complicated products require better integration of manufacturing,
design, and marketing functions.

All these trends imply a strong need to design and redesign the organisations
again from time to time to increase their efficiency and effectiveness.
Therefore, you need to understand the organisational designs and structures.

8.2.1 Organisational Design

Organisational design deals with structural aspects of an organisation. It aims

at analyzing roles and relationships of various categories of staff so that
collective effort can be explicitly organised to achieve organisational goals.
The design process leads to development of an organisational structure
consisting of units and positions. The relationships involving exercise of
authority and exchange of information between these units and positions are
depicted in Fig. 8.1.

Fig. 8.1: Organisational Design - The dashed arrows mean, “creates the need
86 for”, while the solid arrows mean “causes” or “enables”.
Thus, organisational design is the process of systematic and logical grouping Emerging
of activities, delegation of authority and responsibility and establishing working Developments
relationships that will enable both the company and employee to realize their
mutual objectives.

SAQ 1: Current organisational trends

Study Fig. 8.1 and answer the following questions:

a) What factors create the need for globalisation, flexibility, flat
organisations and networking? List them in the form of a table.

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

b) Which factors cause or enable globalisation, flexibility, flat organisations

and networking? List them.

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

8.2.2 Organisational Structure

Organisational structure defines how tasks are formally divided, grouped and
coordinated. Managers need to address the following six key elements when
they design their organisation’s structure:

• work specialisation;
• departmentalisation;
• chain of command;
• span of control;
• centralisation and decentralisation; and
• formalisation.

Their descriptions are presented in Table 8.1. 87

Change Management Table 8.1: Key Elements in the Design of Organisational Structure
in Power Distribution
Elements Description

Work Specialisation Specifies degree to which tasks in the organisation are

sub-divided into separate jobs. It is also called the
division of labour.

Departmentalisation The basis on which jobs are grouped together.

Chain of Command Refers to the unbroken line of authority that extends

from the top of the organisation to the lowest echelon
and clarifies who reports to whom.

Span of Control Defines the number of subordinates a manager can

efficiently and effectively direct.

Centralisation and Centralisation refers to the degree to which decision

Decentralisation making is concentrated at a single point in the
organisation. Decentralisation is the degree to which
decision discretion is pushed down to lower level
employees.

Formalisation Specifies the degree to which jobs within the

organisation are standardised.

SAQ 2: Organisational structure

Describe the structure of your organisation. What changes, if any, are

required in it to address the six elements described in this section?
………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

8.3 TYPES OF ORGANISATIONAL STRUCTURES

In this section we acquaint you with the different types of organisational

structures in vogue today.

8.3.1 Spaghetti Organisation

It is a form of boundary-less organisation, which seeks to eliminate the chain
of command having limitless span of control and replaces departments with
empowered teams. In such an organisation, vertical and horizontal boundaries
88 within the company are eliminated and external barriers between the company
and its customers/suppliers are broken down. By removing vertical Emerging
boundaries, the management flattens the hierarchy. Status and rank are Developments
minimized. In this way, the organisation looks more like a silo than a pyramid.

The boundaries can be eliminated by creating cross-hierarchical teams,

participative decision-making practices and the use of 360-degree
performance appraisals. Horizontal boundaries can be reduced by replacing
the functional departments with cross-functional teams and by organizing
activities around processes. These boundaries can also be cut through job
rotation of people into different functional areas. This turns specialist into
generalists.

The external barriers can be removed with the help of globalisation, strategic
alliances, customer-organisation linkages and telecommuting.

The one common technological thread that makes the boundary-less

organisation possible is a networked computer, which allows people to
communicate across intra- organisational and inter-organisational boundaries.

In Table 8.2, we present the advantages and disadvantages of this type of

structure.

Table 8.2: Advantages and Disadvantages of Spaghetti Organisation

1. In the absence of vertical or horizontal boundaries,

communication is faster in the organisation, which
facilitates quick decision making.

2. This kind of organisational structure promotes

participative decision making which motivates the
Advantages employee and develops their analytical and creative
abilities.

3. Job rotation leads to the development of an

employee in all the functional areas.

4. The reach of the organisation spreads, as there are

no external boundaries.

1. In the absence of vertical and horizontal boundaries

the relationship between superior and subordinates
is not clearly established.
Disadvantages 2. The authority and responsibilities are not clearly
delegated as a result of which there may be
confusion regarding “Who is responsible for What”
in the organisation.

89
Change Management 8.3.2 Amoeba-shaped Organisation
in Power Distribution
It is another form of boundary-less organisation, which is structured like an
amoeba with a central nucleus and a flexible operating structure enabling it to
move into different types of projects and markets while operating as cross-
functional teams.

An amoeba structured company could spin off into smaller independent

companies. For example, ENTACT Inc. environmental services company
based in Texas, U.S. divides like an amoeba to form new companies. When it
has about 40 employees, it spins off into another business with the first
company retaining a 90 percent stake hold in the new business, while the
employees of the spin off unit retain 10 per cent. In this manner, ENTACT Inc.
has been able to attract new companies. Since it operates without much of a
structure and has no middle level management, there is a lot of latitude and
freedom in its operations and it can be divided into new operative units with
ease. Table 8.3 presents the advantages and disadvantages of the amoeba
shaped organisation.

Table 8.3: Advantages and Disadvantages of Amoeba Shaped Organisation

1. Flexibility in operations.

Advantages 2. Freedom to take decisions in the organisation,

which motivates the employees.

1. Absence of middle level management affects the

flow of communication from first line employees to
the top management.
Disadvantages
2. Increase in the number of operating units may drive
the organisation into confusion if there is lack of
cooperation and coordination.

8.3.3 Vertical/Tall Organisations

Vertical/tall organisation (Fig. 8.2) refers to increase in the length of the

organisational chain of command. The hierarchical chain of command
represents the company’s authority-accountability relationship between
superiors and subordinates. Authority and responsibility flows from the top to
the bottom through all the levels of hierarchy. Accountability flows from the
lowest level to the highest level.

90
 Table 8.4: Advantages and Disadvantages of Vertical/Tall Organisation Emerging
Developments
1. Effective analysis of factors and efficient decision
making are possible as a number of officials at
different levels supervise and check the activities.

2. Communication of the company’s mission goals

Advantages and objectives to all employees is better.

3. Coordination of functional areas is enhanced and

ensures that each area is working closely with
other functions.

1. Too many hierarchical levels may waste time in

communication, which may, in turn, lead to delays
in decision making.
Disadvantages
2. There is too much centralisation.

3. Tight operational control delays the decision

making process.

Fig. 8.2: Hierarchical Levels in Vertical/Tall Organisations

8.3.4 Horizontal/Flat Organisation

The horizontal organisation is a more appropriate model for the knowledge

age. Companies are increasingly finding this structure more effective as it
promotes more decentralized, downsized, team-oriented organisations with
empowered workers. Horizontal structure emphasizes the need to start with
an understanding of an organisation’s core competencies.

In the U.S.A. some well known corporate giants such as AT&T, Du Pont,
General Electric, and Motorola are moving towards “the horizontal corporation”
in which traditional internal departmental divisions and well defined layers of
authority are blurred or destroyed to allow an organisation to respond more
quickly and effectively to market changes.
91
Change Management Box 8.1: Fundamental Principles for Creating Horizontal Organisation
in Power Distribution
DESIGNING THE ORGANISATION
1) Organise cross-functional processes.
2) Install process owners.
3) Form teams, not individuals, as the cornerstone of organisational
design and performance.
4) Integrate with customers and suppliers.
5) Decrease hierarchy by eliminating non-value-added work and by giving
team members the authority to make decisions.
INSTITUTIONALISATION OF CHANGE
6) Build a corporate culture of openness, cooperation and collaboration, a
culture that focuses on continuous performance improvement and
values employee’s empowerment, responsibility, and well-being.
7) Empower people by giving them the tools, skills, motivation and
authority they need to discharge their responsibilities.
8) Use information technology to help people reach performance
objectives and deliver the value proposition to the customer.
9) Measure for end of process performance objectives as well as
customer satisfaction, employee satisfaction, and financial
contribution.
10) Redesign functional departments or areas to work as partners in
process performance with core process groups.
11) Emphasize multiple competencies and train people to handle issues
and work productively in cross functional areas.
12) Promote multi-skilling, the ability to think creatively and respond
flexibly to challenges that arise in the work that teams do.

All core processes lead to one end objective: Creating and delivering
something of value to the customer.

Table 8.5: Advantages and Disadvantages of Horizontal/Flat /Tall Organisation

1. Quick decision making as there are fewer levels of

hierarchy.
2. Low administration costs, freedom and autonomy to
Advantages the managers to operate.
3. This structure motivates the managers to accept
responsibility and commit themselves towards
organisational objects.

1. Absence of control, effective coordination and

Disadvantages proper reporting to superiors because of
decentralisation.

92
8.3.5 Inverted Pyramid Emerging
Developments
The traditional business is styled in the form of a pyramid with the chief
executive officer at the top, senior executives underneath, and so on. There
are many layers in the management structure, which reflects who reports to
whom. In the inverted management pyramid (Fig. 8.3), customers have the
most important role in driving the business. It also gives the front line
employees a similar ability as they are closest to the customers. Since the
customers are considered primary, it also helps to improve the business. The
flow of communication from the customers and within the enterprise improves
vastly. Once the inverted pyramid idea is accepted, the role of management
needs to undergo a change: From a commanding role, it should become a
supporting one.

Fig. 8.3: Inverted Pyramid

Table 8.6: Advantages and Disadvantages of Inverted Pyramid Structure

1. In this structure the customers are given the first preference.

This way it becomes very easy to understand their preferences
and plan the strategies of the organisation accordingly.
2. Front line employees are given more responsibility and
authority in the organisation than the top management
Advantages because they are closest to the customers.
3. Decentralization of authority and responsibility place a very
important role in prompt and timely decisions.
4. The inverted pyramid structure motivates the employees as
they are placed in a better position than the top management.

1. This structure may be dangerous because the role of top

management is shifted to supporting one from that of
commanding one which ultimately leads to the direction less-
organisation.
2. In this structure there is absence of clear authority and
Disadvantages
responsibility levels as a result of which people become
confused and business veers out of control.
3. Frontline supervisor cannot make strategies regarding
organisations even though they have proper understanding of
the customers because they are not equipped to do so.
93
Change Management 8.3.6 Orchestra
in Power Distribution
A firm styled as an orchestra could be an efficient management structure. You
may know that an orchestra has a conductor and a team in which every
member plays a different instrument and at different times to operate a
musical score (Fig. 8.4).

Fig. 8.4: Musical Orchestra

The conductor ensures that each player performs in synchrony with the
others.

Table 8.7: Advantages and Disadvantages of Orchestra Structure

1. There is a lot of cooperation and coordination

between the employees and the management.

2. The objectives are clearly defined.

Advantages
3. The flow of information in the organisation is
perfect because it is more of information based
management rather than the bureaucratic
command control.

1. A perfect synchrony cannot be expected from the

top management and the employees always
because there may be some hindrances in
communication flow as there is no middle level
management.
Disadvantages
2. The authority-responsibility aspects are not
clearly defined.

3. The control of whole organisation by the top

management alone without the help of middle
level management may not give good results.

94
8.3.7 Cluster Organisation Emerging
Developments
An organisation may be restructured around certain clusters that are inter-
locked or networked representing a cluster organisation. Each cluster consists
of a group of people drawn from different functional and staff areas working
together on a semi-permanent basis to accomplish certain preset goals. A
cluster handles its administrative functions, develops the required expertise,
relates to customers, and is accountable for its actions. Each individual within
the cluster has responsibility for his/her particular area of activity and also of
the performance of the cluster as a whole.

Individual clusters in an organisation may differ in size consisting usually of 30

to 50 members to provide for a broad range of functional and staff expertise.
Within itself a cluster may have smaller teams of 5 or more individuals to
facilitate its work.

A typical cluster organisation would have a number of interlocked circles with

the CEO at the centre and the senior and middle level management in
adjacent circles (Fig. 8.5), while others are grouped around in a number of
independent clusters (each cluster with a specific mission or purpose.)

Fig. 8.5: Cluster Organisation

95
Change Management Table 8.8: Advantages and Disadvantages of Cluster Organisation
in Power Distribution
1. Well defined responsibilities.
Advantages 2. This structure empowers the employee by
fostering individual and team work.

1. Employees in this structure work on a semi-

permanent basis. The state of being not
employed on a permanent basis by the
organisation may depress the employees and
dampen their initiative.

Disadvantages 2. A cluster, which manages all the activities

associated with accomplishing their corporate
goals may lose speciality.

3. There is lack of formal hierarchical structure,

which may lead to lack of direction in the
organisation.

8.3.8 Virtual Organisation

A firm is said to be having a virtual organisational structure when it contracts

out almost all functions. The only function retained by the organisation is the
name and the coordination among the parties. A virtual organisation might not
have even have a permanent office. This is especially common in the fashion
industry where you can have clothing labels that are just that. Say the label is
“XXX”. The label has a clear identity in the public eye, but when you try to
track down the XXX Taylor Company, you find there are no XXX designers, no
XXX manufacturers. There are just 3 people in an office subcontracting out all
functions.

Thus, a virtual organisation is a network of firms held together by the product

of the day. It is an open-ended system of ideas, activities and firms.

Table 8.9: Advantages and Disadvantages of Virtual Organisation

1. These structures enable business with less

capital, less human resources and other inputs.
Advantages
2. These structures provide flexibility of operation.
3. These structures develop ancillary industries.

1. Companies do not have strong foundations or

strengths in their operations.
2. Organisations have to heavily depend on outside
Disadvantages
support.
3. Failure in the network results in failure of the
organisation.
96
8.3.9 Matrix Organisation Emerging
Developments
Matrix organisation structure (Fig. 8.6) processes a dual chain of command.
Both functional and project managers exercise authority over organisational
activities in a matrix structure. The strength of the matrix lies in the ability to
facilitate coordination when the organisation has a multiplicity of complex and
inter dependent activities. The direct and frequent contacts between different
specialities in a matrix make for better communication and greater flexibility.
Information permeates the organisation and more quickly reaches those
people who need to take account of it.

Managing Director

General Manager

Manager Manager Manager Manager

Human Manager
Resource Finance Production Marketing R&D

Project A HR Finance Production Marketing R&D

Manager Specialists Specialists Specialists Specialists Specialists

Project B HR Finance Production Marketing R&D

Manager Specialists Specialists Specialists Specialists Specialists

Fig. 8.6: A Matrix Organisation

Matrix also facilitates efficient allocation of specialists. When individuals with

highly specialised skills are lodged in one functional department or product
group, their talents are monopolized and under-utilised. The matrix achieves
the advantages of economies of scale by providing the organisation with the
best resources and an effective way of ensuring their efficient development. 97
Change Management
in Power Distribution
Table 8.10: Advantages and Disadvantages of a Matrix Organisation
1. This structure has considerable flexibility. The
personnel can be transferred form one project to the
other depending upon the need of the project.

2. The lower level functional employees are highly

motivated and satisfied with their job, as they are
involved in decision making.
Advantages
3. Promotes making trade off decisions on the basis of
what is the best for the organisation as a whole.

4. Encourages cooperation, consensus building, conflict

resolution and coordination of related activities.

5. Makes efficient use of functional expertise.

1. It is very complex to manage.

2. The authority is so much shared that it can result in

misappropriated amounts of time being spent on
communications.

Disadvantages 3. This structure violates unity of command.

4. Requires too much time for meetings and

collaboration.

5. It is hard to move quickly and decisively without

getting clearance from many other people.

8.3.10 Functional Organisation Structure

In this structure (Fig. 8.7) each functional department consists of those jobs in
which employees perform similar jobs at different levels. The commonly used
functions are: marketing, finance and accounting, human resources,
manufacturing, research and development, and engineering.

Fig. 8.7: Functional Organisation Structure

98
 Table 8.11: Advantages and Disadvantages of a Functional Organisation Emerging
Structure Developments

1. In-depth specialisation and focussed

concentration on performing functional tasks can
enhance operating efficiency and development of
core competencies.

2. This structure promotes maximum utilisation of

up-to-date technical skills and enables the firm to
capitalise on specialisation and efficiency.
Advantages

3. This structure promotes common values and

goals among employees of the department,
facilitating cooperation and collaboration with the
functional department.

4. Enhances operating efficiency where tasks are

routine and repetitive.

1. The department members will see the activities

from the view point of the department rather than
the total organisation. This results in the absence
of inter-departmental coordination and
cooperation.

2. The narrow specialisation kills the initiative of

entrepreneurs and the zeal of innovativeness and
creativeness.
Disadvantages

3. This kind of structure promotes over

specialization and narrow management
viewpoints.

4. This kind of structure is effective only in stable

environment.

5. This also results in absence of accountability.

8.3.11 Product Organisation Structure

Companies producing more than one product, structure their organisations

based on product structures (Fig. 8.8). Activities are divided on the basis of
individual products, product line, services and are grouped into departments in
99
Change Management product organisation structure. All important functions, viz. marketing,
in Power Distribution production, finance and human resources are located within each department.

Table 8.12: Advantages and Disadvantages of a Product Organisation Structure

1. This organisation structure is appropriate for

those firms which produce multiple products.
2. Coordination among functional areas like product
Advantages design, production, marketing is effective as all
functions are in the same department.
3. Responsibility and accountability for market
share, sales, profit/loss can be clearly fixed.

1. Each department will have production, marketing,

human resource, finance managers, secretarial
and supporting staff, computers and testing
equipment. As such specialised personal and
Disadvantages
equipment cannot be procured.
2. Inter departmental conflicts arise regarding
sharing of common resources, allocation of
common and overhead expenses etc.

Fig. 8.8: Product Organisation Structure

SAQ 3: Types of organisational structure

Which of the organisational structures described in this section are suitable

for the electricity industry? Justify your answer.
………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

100
 Emerging
8.4 MERGERS AND ACQUISITIONS Developments

Every merger or acquisition goes through a learning process of its own. If

managed properly, mergers and acquisitions (M&A) can help the organisation
take a path of growth and prosperity. In this section, we describe mergers and
acquisitions, in brief.

Mergers and acquisitions reached new heights in the 1990s that eclipses the
peaks set in the 1980s. This period witnessed the development of the most
unusual merger wave in the US economic history. Large scale mega mergers
became common place. Hostile deals captured media headlines on a regular
basis. This wave collapsed in 1980s and many of the highly leveraged deals of
that period became fashionable in the early 1980s. However, just when it
appeared that the frantic pace of mergers had clearly ended, the trend got
reversed and a new period of M&A began in 1993. These periods are
characterised by cyclic activity, that is, high levels of merger followed by a
period of relatively few mergers.

Mergers are often categorised as horizontal, vertical and conglomerate

mergers.

A horizontal merger occurs when two competitors combine. The Hewlett

Packard and Compaq merger is an example of horizontal merger. If a
horizontal merger causes the combined firm to experience an increase in
market power that will have anti competitive effects, the merger may be
opposed on anti trust grounds. In recent years, however, governments all over
the world have been liberal in allowing many horizontal mergers to take place
unopposed.

A vertical merger is a combination of companies that have a buyer-seller

relationship. Merck, the world’s largest drug company acquired Medco, the
largest marketer of discount prescription medicines in the U.S. This is an
example of vertical merger. This transaction enabled Merck to be not only the
largest pharmaceutical company but also the largest integrated producer and
distributor of pharmaceuticals. This transaction too was not opposed by anti
trust regulators even though the combination clearly resulted in a more
powerful firm. Recent acquisition of Corus by the Indian corporate Tata is also
an example of this type.

A conglomerate merger occurs when the companies are not competitors and
do not have a buyer-seller relationship. For instance, Phillip Morris, a tobacco
company acquired general foods and these companies were in very different
lines of business.

8.5 SUMMARY

• Organisations are economic and social entities in which a number of

persons perform multifarious tasks in order to attain common goals. Four 101
Change Management key organisational trends are visible currently: Globalisation, diversity,
in Power Distribution flatness, networking.

• Organisational structure defines how job tasks are formally divided,

grouped and coordinated. Managers need to address six key elements
when they design their organisation structure: work specialisation,
departmentalisation, chain of command, span of control,
centralisation and decentralisation, and formalisation.

• There are different types of organisational structures:

− Spaghetti Organisation is a form of boundary less organisation.

− Amoeba-shaped organisation is another form of boundary less

organisation which is structured like an amoeba with a central nucleus
and a flexible operating structure enabling it to move into different
types of projects and markets while operating as cross-functional
teams.

− Vertical/tall organisations refer to increase in the length of the

organisation chain of command. The hierarchical chain of command
represents the company’s authority-accountability relationship between
superiors and subordinates. Authority and responsibility flow from the
top to the bottom through all the levels of hierarchy. Accountability
flows from the lowest level to the highest level.

− Horizontal/flat organisations are a more appropriate model for the

knowledge age. These promote more decentralized, downsized, team-
oriented organisations with empowered workers. Flatness, or the
absence of an organisational hierarchy, does not mean the elimination
of individual roles or responsibilities. It does mean the end of people
with more over-riding authority over other people’s work.

− Inverted pyramid structure has the chief executive officer at the top,
senior executives underneath, and so on. There are many layers in
the management structure, which reflects who reports to whom.

− A firm styled as an orchestra could be an efficient management

structure, in which the CEO/top management and the
employees/managers operate with the same objective. It is an
organisation of specialists of different kinds directing themselves and
doing different kinds of work (the roles and responsibilities of each is
clear in relation to his/her own task and that of others).

− Cluster organisation is an organisation structured around certain

clusters that are inter-locked or networked representing a cluster
organisation. Each cluster consists of a group of people drawn from
different functional and staff areas working together on a semi
permanent basis to accomplish certain preset goals. A cluster handles
its administrative functions, develops the required expertise, relates to
customers, and is accountable for its actions. Each individual within the
102
 cluster has responsibility for his/her particular area of activity and also Emerging
of the performance of the cluster as a whole. Developments

− Virtual organisation is the kind of structure in which a firm contracts

out almost all functions. The only function retained by the organisation
is the name and the coordination among the parties. A virtual
organisation might not have even have a permanent office.

− Matrix organisation structure processes a dual chain of command.

Both functional and project managers exercise authority over
organisational activities in a matrix structure.

− Functional organisation structure has functional departments

consisting of those jobs in which employees perform similar jobs at
different levels. The commonly used functions are: marketing, finance
and accounting, human resources, manufacturing, research and
development, and engineering.

− Product organisation structure has activities being divided on the

basis of individual products, product line, services. These are grouped
into departments and all important functions viz. marketing, production,
finance and human resources are contained within each department.

• Mergers and acquisitions are quite common in businesses and are often
categorised as horizontal, vertical and conglomerate mergers. A
horizontal merger occurs when two competitors combine. A vertical
merger is a combination of companies that have a buyer-seller
relationship. A conglomerate merger occurs when the companies are not
competitors and do not have a buyer- seller relationship.

8.6 TERMINAL QUESTIONS

1. Explain the reasons why organisations design and redesign in order to be

efficient and effective.

2. Discuss different types of organisational structures. Which type fits the

best in your context?

3. Suppose your organisation requires restructuring. Which type of structure

would you choose and why? Give reasons.

4. Explain the concept of mergers and acquisitions.

103