Formal and Informal Organization Structure - Essay Example

Formal and Informal Organization Structure Company Portfolio The company that has been chosen for the organization structural analysis is a software house that develops ATM software. It is considered to be a market leader in their respective market and caters to clients in over 20 countries. They offer a range of reliable softwares, some of them are; SMARTdeposit: for cash deposit machines/terminals. SMARTcash: for cash withdrawal machines/terminals. INSIGHT: to monitor the performance of machines/terminals. Their major client population is in the Middle Eastern countries. Formal Organization Structure The company under discussion is driven by their projects; therefore they are a good example of a projectized organization. Project Management Institute (2008) stated that in a projectized organization, the project manager enjoys full authority over the decisions concerning the project and is answerable for all outcomes of the project, whether good or bad. Since it is a software house, their technical staff is considered to be their asset who is responsible for making good quality products for their clients. Therefore, it makes sense to give the project manager full command over the projects as he is technically sound and has the required skills to make best possible decisions. The organization under discussion hires technical people on the basis of their skills and then assigns them positions in the most appropriate ‘Product Team’. Every product has its own respective team and ‘Team Lead’. These team members are entirely responsible for this one product and are involved in its development, deployment, support etc. The ‘Team Lead’ will be managing and leading the projects in which his team members will be involved. This enables the technical staff to gain expertise in their product and induces product loyalty to a great extent. Whenever the company gets a new project, a new project team is made (which is discussed in more detail later in the report). Informal Structure and Reporting There is another type of structure that prevails in many organizations. At times, the formal structure is not sufficient to get work done quickly. In such situations, informal structure and reporting comes in play. Informal communication tends to ignore the complex chain of command and jump starts stalled activities. It helps in meeting deadlines exceptionally well. Informal structure promotes communication among the employees and management, integration, flexibility etc. Some degree of informal reporting is also present in the company under discussion. The members of different product team have informal brainstorming sessions for most efficient solutions to problems. Marchewka (2009) stated that power in the organization is not always governed by the hierarchy but by the degree of connectedness with the colleagues. Informal communication between the employees also has great importance because it develops an amiable environment in the organization thereby promoting supportive attitudes towards each other. How Teams are Formed When the company lands up with a new deal or project, the respective ‘Product Team’ is contacted to make a ‘Project Team’ for the project at hand. A situation might come where the project is so extensive that more than one ‘Product Team’ is needed to execute it. In such scenarios, the ‘Project Team’ will be made from multiple ‘Product Teams’. Example of such a project is; a client wants cash deposit machines deployed at 20 locations in the city and they want a software to monitor the performance of all of them. This project would require SMARTdeposit team and INSIGHT team to select the appropriate technical resources from their respective teams and make a combined team to make the project a success. The ‘Project Manager’ for this project will ideally be one of the ‘Team Leads’ of the product teams. Project Management Institute (2008) states that at the completion of this project, all the team members will return back to their product teams. How Teams are Managed As stated earlier, the project manager who is assigned to head a certain project has maximum authority over the project. Study guide states that Project managers even have the authority to acquire and assign resources in the project. The team members are only answerable to their respective project managers. This creates a comfortable environment for the team members as they have to deal with only one boss. The relationship between the team members and the project manager is very casual and comforting since the team members don’t have to follow a long hierarchy to communicate with their boss. The project manager reports directly to the CEO of the company. Effects of Formal Structure Positive Effects The project manager is fully responsible for the project; from the initial planning to the budgeting. This has a good effect on the project since he is the person who understands the needs of the project and thus the team members. Project Management Institute (2008) states that he has the technical knowledge to judge the duration for each task; therefore he can give realistic deadlines to his team and finish the project on time. Verma (1995) stated; the fact that the project manager is able to focus all his attention on the ongoing projects serves well for the complex projects. These kind of projects require constant monitoring and brainstorming sessions in the team to reach the most efficient solution. Safina (2009) discussed that project manager and team members portray a spirit of loyalty to their projects and products therefore work more for their quality and success. Public Procurement Directorate (2008) states that project manager and team members tend to respond to client’s changing requirements more efficiently and quickly than any other structure since they are totally dedicated to these projects. Marchewka (2009) stated that the team members also feel comfortable in this structure as they have only one manager to please and satisfy with their performance. They need to go to only one manager for their problems and grievances. In such a situation, it is easier to keep track of their performance, strengths and weaknesses. Negative Effects Once the project manager is used to the projectized structure in which he enjoys all power during the projects, it gets difficult for him to return to a weak matrix organization. Brown (1997) states that it has been noticed that project managers tend to occupy some team members and company’s resources even if they are not needed at that particular time, they keep the employees for a “just in case” need. The might cause the resource to be wasted as they might be idle without any work. Therefore, there might exist inefficiency in the utilization of the resources. As mentioned earlier, one of the advantages of the project manager and the team members being assigned to a single project is of the loyalty to the project. But this can also have a bad effect on some of the employees as they start having a “we-they” attitude towards the other teams in the organization. Marchewka (2009) stated that more resources might have to be hired in a situation when an organization wants the projects from a certain area to be run simultaneously. Although an overlap might be created among the resources that have expertise in that area. This increases the resource cost for the organization. Effects of Informal Structure Positive Effects Safina (2009) stated that at times, informal structure helps in meeting business objectives more than the formal structure. Safina (2009) further explained that it provides the employees an opportunity to express their grievances and anxieties and thus the company to improve job satisfaction among the employees. Informal structure promotes a friendly and cooperative environment in the organization that improves performance of the employees. It also supports the idea of constant learning among the employees by means of discussions and exchange of ideas. Negative Effects ICMR (2009) explained that informal organizations may hinder in the process of bringing about a change in the organization. ICMR (2009) further explained that informal organization is developed on the basis of personal statuses and relationships among the employees. An individual might find himself excluded from informal organization due to these differences. These network and organizational ties might prove to be a disadvantage for the organization. A conflict may arise due to the diversity of the roles played in a formal work group and then in an informal one. Need for Change in the Organization Every organization has its own set of factors that should be changed to achieve greater success. A requirement for change that has been in the organization under discussion is the need for more management staff. The prevailing setup has the project manager managing the projects as well as taking care of the human resource activities in the ongoing projects; for e.g. choosing new resources for the project and training them under his supervision. This might divert his attention from the projects. The project manager should state the factors and skills that he seeks in a resource and then the human resource department should carry out the task of hiring or training the individual. This will not reflect the power and authority of the project manager over the proceedings of the project but will lighten the workload for the project manager. ICMR (2009) stated that another element that should be introduced in the organization is that informal organization should be monitored regularly to ensure that it is not working against the norms and objective of the organization. The leaders of the informal organization should be identified and cordial relations should be maintained with them to ensure a productive environment in the organization. Conclusion After a thorough analysis of formal and informal structure of organization, it can be concluded that an organization should strike a balance between the two so that none of them overshadow advantages of the other one. A good integration of both of these concepts directs the company to a path of great success. References Brown, K., (1997), Project Management: A Managerial Approach, Meridith and Mantel Computer Software Training, 2009, Understanding Risk Management / The Project Environment pt.2, http://www.vtc.com/products/PMIRiskManagementProfessionalPart1/UnderstandingRiskManagement/81521 ICMR, (2009), Informal Organizations, Case Studies and Management Resources  http://www.icmrindia.org/courseware/Organizational%20Behavior/OB-DS16.htm Marchewka, J., T., (2009), Information Technology Project Management, John Wiley & Sons, ISBN 978-0-470-37193-0 Project Management Institute, (2008), A guide to the Project Management Body of Knowledge (PMBOK Guide) Fourth Edition. Public Procurement Directorate, (2008), Public Procurement Best Practice Guide, [Online] Available at: http://www.publicprocurementguides.treasury.gov.cy/OHS-EN/HTML/index.html?7_2_3_organizational_structure.htm\ Safina, T., (2009), What are the advantages and disadvantages of informal and formal organisation? http://uk.answers.yahoo.com/question/index?qid=20080909053722AABcZGz Verma, V., K., (1995), The Human Aspects of Project Management, Project Management Institute, Vols 1-3, PA, US, http://www.maxwideman.com/issacons3/iac1358/tsld003.htm Read More