ADHOCRACY: A CLOSER LOOK

Adhocracy

Not a structure, but a group of specialists meeting and coordinating a new task.

Can be members of an existing organization and external consultants.

Matrix Structure

• The search for better and faster ways to• develop products and meet customer needs• led to the matrix structure.

• A matrix structure groups people and • resources in two ways simultaneously:• -by function and • -by product

Matrix structure

Object 1F

unction 2

Fun ct io n 1Object 2

Object 3

Function 3

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Matrix StructureCEO

Vice PresidentEngineering

Vice PresidentFinance

Vice PresidentPurchasing

Vice PresidentSales and Marketing

Vice President Research and Development

Product AManager

Product BManager

Product CManager

Product DManager

Product Team

Two-boss employee

Matrix Structure• The matrix is a structural design that assigns specialists from specific

functional departments to work on one or more interdisciplinary teams, which are led by project leaders.

• a) The matrix combines two forms of departmentalization--functional and product.

• 2. The matrix evolved in the 1960s, initially among aerospace firms, as a way for organizations to gain flexibility while still maintaining bureaucracy's economies of specialization.

• 3. In the late 1980s, many multinationals went to a modified matrix--having country managers report to both a regional boss and a product-group executive.

• 4. Today, you'll find the matrix still used in the aerospace industry and in many advertising agencies, research and development laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies.

• 5. The strength of functional departmentalization lies in putting like specialists together.

• a) Minimizes the number of specialists necessary, while it allows the pooling and sharing of specialized resources across products.

• 6. Major disadvantage is the difficulty of coordinating the tasks of diverse functional specialists so that their activities are completed on time and within budget.

Matrix Structure• 7. Product departmentalization, on the other hand, has exactly the

opposite benefits and disadvantages. • a) It facilitates coordination among specialties to achieve on-time

completion and meet budget targets. • b) It provides clear responsibility for all activities related to a product,

but with duplication of activities and costs. • 8. The matrix breaks the unity-of-command concept. Employees in the

matrix have two bosses--their functional department managers and their product managers. Therefore, the matrix has a dual chain of command.

• The strength of the matrix lies in its ability to facilitate coordination when the organization has multiple complex and interdependent activities.

• 11. Another advantage: it facilitates the efficient allocation of specialists. The matrix achieves the advantages of economies of scale by providing the organization with both the best resources and an effective way of ensuring their efficient deployment.

• 12. The major disadvantages of the matrix lie in the confusion it creates, its propensity to foster power struggles, and the stress it places on individuals.

• 13. Overall, the matrix has met with mixed success.

The adhocracy

• Characteristics– prime coordinating mechanism: mutual adjustment

– key part: support staff (together with the operating core in the operating adhocracy)

– main design parameters: liaison devices, organic structure, selective decentralisation, horizontal job specialisation, training, functional and market grouping concurrently

– situational factors: complex, dynamic (sometimes disparate) environment; young (especially operating adhocracy); sophisticated and often automated technical system (in the administrative adhocracy); fashionable

Design• Focus on innovation, cannot rely on standardisation

• Goes away from the principle of unity of command

• Gives power to experts, but cannot rely on their standardised skills to achieve coordination

• Mutual adjustment in and between project teams

– project coordinators, meetings, etc

• Matrix structure common

– experts formally in functional units

– project teams based on (market) needs

The operating adhocracy

• Solves problems on behalf of its clients

– think-tanks

– applied R&D institutes

– creative advertising companies

– manufacturer of prototypes

– experimenting theatre company

• May easily turn into a professional bureaucracy if more focused and with standardised methods

The administrative adhocracy

• Solves problems, runs projects, on behalf of itself• Typically a company where the operating core is truncated

– done in a separate organisation– contracted out (outsourcing)– by full automation (c.f. discussion of machine bureaucracy)

• Tricky issue of combining efficient production with high degree of innovation

– machine bureaucracy with a venture team is not an adhocracy

Administration and support

• A lot of coordination needed

• Managers participate in project teams

• Ensuring proper management and anchoring of projects often demanding

• Need to monitor and redirect projects

• Distinction between line and staff becomes unclear

Strategy in adhocracies

• Hard to split strategy formulation and strategy implementation

• Strategy tends to evolve– formed implicitly by decisions made– strategy formation, emergent strategy,

strategising

Conditions• Dynamic and complex environment• Interdependencies that need to be handled• Frequent product changes• Often young (esp. operating adhocracies)• Sophisticated and sometimes automated

technical system• An element of fashion

– all the right words: dynamic, expertise, projects, etc.

Some issues

• Ambiguities– Unclear, multiple and changing lines of

authority

• The most politicised configuration

• Not very efficient

• Danger of inappropriate transition

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Network structure

A network structure is a cluster of different organizations whose actions are coordinated by contracts and agreementsrather than through a formal hierarchy.

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Network structures often result from outsourcing.

Outsourcing is the process of moving activities that were previously performed inside the organization to the outside (where they are done by other companies).