Page 21 - The Handbook for Quality Management a Complete Guide to Operational Excellence

8 B u s i n e s s - I n t e g r a t e d Q u a l i t y S y s t e m s O r g a n i z a t i o n a l S t r u c t u r e s 9

engineering, quality control, human resources, and cost accounting.
This de-skilling of the workforce creates an increasingly large number of
transactions to manage, which leads in turn to larger bureaucracies and
decreasing returns to management, an issue described earlier by Coase.
The traditional organization structure has come under pressure in
recent years. One problem with the structure is that it tends to produce a
“silo mentality” among those who work in a particular stratum: they tend
to see the company from the perspective of an “accountant” or an “engineer”
rather than from a companywide perspective. This produces a tendency
to optimize their function without regard for the effect on the rest of the
organization—a tendency that produces markedly suboptimal results
when viewed from a holistic perspective. Cooperation is discouraged in
such an organization. In these structures, employees tend to think of their
superiors as their “customers.” The focus becomes pleasing one’s boss
rather than pleasing the external customer. Finally, the top-down arrange-
ment often results in resource allocation that does not optimally meet the
needs of external customers, who are generally served by processes that
cut across several different functions.
Given these problems, one might wonder why such organizations still
dominate the business scene. There are several reasons, chief among them the
comfort level employees have with this model: this has been the dominant
model for decades, so there is an organizational resistance to change. Further-
more, such organizations maximize the development and utilization of spe-
cialized skills. They produce a cost-effective division of labor within the
subprocess (but not necessarily across the system). In many organizations,
particularly larger ones, the functional/hierarchical structure provides econ-
omies of scale for specialized activities. Finally, these organizations provide
clear career paths for specialists. A case in point is the quality function, where
one can enter into the specialty out of high school and potentially advance to
progressively higher positions throughout one’s career.

Matrix Organizations
In a matrix organization the functional hierarchy remains intact but a hor-
izontal cross-functional team structure is superimposed on the functional
hierarchy. The matrix form is depicted in Fig. 1.3.
The matrix form was used extensively in the 1970s as a general method
of organizing work. Most businesses concluded that organizing routine
work in this way was impractical. Still, because of this experience, the
matrix structure is well understood. Also, the matrix did prove to be use-
ful as a method of conducting large, cross-functional projects. To an extent,
the matrix form overcomes the “silo” mentality of the functional hierar-
chy by creating cross-functional teams.
When used for projects, the matrix approach creates structures that
are focused (on the project) and can exist temporarily. In fact, most large,

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