Organizational Structure

 

I have seen companies spending extravagant amount of time and money changing their organization structure. Just recently Infosys Ltd redesigned its organization structure realigning its services around four verticals - BFSI, ECS, Retail and Manufacturing. It makes complete sense since the company wants to present a uniform and consistent deal to its clients and avoid the problems of multiple deals across different offerings. But this was the same company which was split across Geographies in the late 90's. By 2003, the geographies were merged and company was realigned based on respective delivery units. Gradually the whole company was re jigged across six different verticals. Come 2007 and five horizontal units were embedded within these verticals. Finally just a year back, it was realigned on the lines of four verticals with most of the horizontal business units being merged to respective verticals. So coming back to the question. Why does companies spend so much of their money and time on re-jigging their organization structure?

One word answer - because it is that important to the success of the firm. While the strategic decisions are taken by the top line management, it is the effectiveness of the organization structure which translates this strategy into successful implementation. 

Changing Times > Different Strategy > Continuously changing Organization Structure.

In this context we should look at the four main blocks of Organizational Structure:

Let us take the example of Infosys:

Division of work: Complex work can be better executed by dividing it among different people. For example, every project has some people working on different technologies. Some people working on high level design, others doing project management etc.

Departmentalization: This involves grouping people into departments based on some logic. In Infy they are categorized into departments like Delivery, Marketing, HR etc. Also verticals like BFSI, ECS etc. 

Hierarchy: Chooses who reports to who. Engineers reports to lead. Lead reports to PM. PM reports to GPM etc.

Coordination: This involves the integration of departmental activities as a whole and monitoring the effectiveness of this integration.

There are mainly 3 types of Organizational Structures:

Functional Organization:

Product/Market Organization:

Matrix Organization:

One example of Matrix Organization in real life example is the Organization structure of Accenture. 

This organizational method is more common in the consulting world and has the following characteristics:

• Each worker is assigned to two bosses in two different hierarchies. The first hierarchy is the executive aspect and is there to get projects completed using the resources that the company has.
• The second kind of hierarchy in the matrix structure is the functional aspect and its purpose is to train employees in industry specific knowledge.

At Accenture this functional aspect is also a matrix and is made up of five industry-based operating groups and three capability groups as shown in the figure:

These are some of my observations and experience of the different organization structure in IT Industry.