Advantages and Disadvantages of Interrelationships between Organizational Functions and Impact on Organisational Structure

1. Advantages and Disadvantages of Interrelationships between Organizational Functions and Impact on Organisational Structure
Organizational Functions
The functions of an organization take into account the different aspects undertaken by the business including production or manufacturing, marketing, sales, accounting as well as research and development. In accordance to Sherman and Thompson (2019), the organizational structure delineates the relationship and interrelations between the functions of a business and ascertains the manner in which the chain of command operates through the various levels. The interrelationship between organizational functions and organizational structure is akin to a flow chart. This is in the sense that an entity can set up its business structure around the organizational functions. However, even if the entity fails to do so, the organizational functions and structure will have an impact on one another (Sherman and Thompson, 2019).
Functional Organizational Structure
A functional organizational structure creates distinct and separate departments. Plenty of businesses adopt a functional organizational structure that includes a pecking order or chain of command within the entity. Basically, the inference of this is that various functions do into distinct departments or divisions that report to the managers that head them, who subsequently report to an individual positioned higher up in the ranking (Aquinas, 2008). One of the key advantages of espousing a functional structure includes clear and well outlined lines of authority, which include the fundamental decision-makers in every department responsible for setting the general mission and tasks. In addition, there is the advantage that this functional structure permits every employee to lay emphasis on his or her specific mission. Nonetheless, the functional structure does have its shortcomings. First of all, this can give rise to different departments that fail to communicate with one another or collaborate properly. Ultimately, a consumer may get moved from one department to another in the event that his or her issue fails to be in relation to one specific function (Vitez and Baligh, 2011).
Divisional Organizational Structure
The interrelationship between functions implies that a divisional structure has numerous branches. Basically, a divisional organizational structure extends functions across various branches. That is, if an organization has dissimilar lines of production, the department for every line of production has its own functional groups, for instance, accounting, research and development, and marketing (Jones, 2013). The advantage of this is that every division of the organization has the staff to undertake all the essential functions. Fundamentally, every division can undertake its business operations relatively independently. The disadvantage is that with personnel in every department undertaking similar functions, the organization could ultimately be adversely impacted by plenty of redundancy or inefficiency. A fitting instance is the aspect of having to manage six different human resources or accounting operations, instead of a single, centralized operation. This implies that there is repetition of functions, systems of management, development of policies and others (Daft, 2015).
Matrix Organizational Structure
The matrix organizational structure facilitates flexibility. An organization utilizing a matrix structure within its business operations can bring about increased flexibility within business functions as compared to a progressively more hierarchical entity (Cunlifee, 2008). Within a matrix organizational structure, the advantage is that every employee operates within a function-oriented department, for instance, finance or sales and marketing, but the employee can be apportioned to projects under various supervisors or managers and also placed into teams with other employees who have dissimilar functions. In addition, there is the advantage that the structure adapts organizational functions to the changing necessities of the organization. The shortcoming, however, is that the pecking order within the matrix can grow to be overcast and disputed (Cunliffe and Luhman, 2012).
Case of Air India
Taking into consideration that Air India is a statutory company, it submits a report encompassing its activities on an annual basis to the Indian Parliament via the Ministry of Civil Aviation. The company relishes functional independence. Air India’s center of operations situated in Bombay comprised of well delineated divisions and departments. All matters regarding organizational policies are decided at the H.Q. level and carried out through field and branch offices. Imperatively, the field stations as well as branch offices are disseminated in a significant number of cities not only in India but also overseas. The hierarchical structure of Air India comprises of a Managing Director who supervises the Deputy Managing Director and a group of Directors in charge of different functions and departments (Rani, 2013).
Air India comprises of significant functions that are conducted by various departments. The operations department of the company is culpable for flight operations and also takes care of issues pertaining to navigation, training and development as well as licensing of the organization’s air crew. Secondly, Air India’s engineering department deals with matters pertaining to maintenance, repairing and renovating of aircrafts. In addition, the department is responsible for manufacturing of basic equipment necessitated for the airplanes. The commercial department of the organization deals with sales and revenues, business promotion and publicity, as well as matters that pertain to public relation and advertisement. What is more, the personnel department of Air India is liable for recruitment, assessment and hiring of employees. It is also responsible for training and maintaining the records of all members of staff. In addition, the stores and procurement department of Air India is responsible for all of the organization’s purchases and maintenance of the stores. There is also the tourism division of Air India, which is a separate and distinct cell that is purposed to promote tourism (Rani, 2013).
Structure, Size, and Scope of Organizations and Linkage to Business Objectives and Products and Services
Structure
Organization structure is delineated as the totality of the methods and approaches by which an organization splits its labor into separate tasks and subtasks and thereafter conducts their coordination (Koontz, 2010). Organizational design is the process of evaluating the strategic objectives and environmental demands of the organization, and thereafter, ascertaining the suitable organizational structure (Cichoki and Irwin, 2014). The diagrammatical exemplification of structure could be an organizational chart, which demonstrates the interrelationships amongst units and lines of authority by making use of categorized boxes and joining lines. There ought to be a suitable matching between the structures of an organization with its overall strategy. It is established that, whenever the strategy or objective of an organization is not linked with the most suitable structure and control, it results in a decline in its performance (Harris and Hartman, 2002). Basically, the organizational structure delineates the official reporting associations of the firm, in addition to the procedures and controls and decision-making processes. What is more, organizational structure impacts the manner in which managers work and the decisions emanating from that work. It also stipulates the work to be undertaken and the manner in which to do it, bearing in mind the strategy of the firm, and it offers the stability that an organization necessitates to efficaciously carry out its strategies and sustain its competitive advantages (Kaul, 2015).
In accordance to Guerra (2017), the organization structure of an airline is reliant on the size of the airline and also depends on whether it is a private or publicly traded corporation. By and large, major airlines bear down the workload responsibilities as well as accountability to different departments. More often than not, these are referred to as flight operations and maintenance, for instance. Frequently, an airline’s management of all aspects is undertaken using a board of directors as well as a chief executive officer (Guerra, 2017). A great deal of commercial airlines comprise of a chief executive officer (CEO) who is reliable for administering the operations of the corporation. Secondly, there is a board of directors that is headed by a chairman, which frequently conduct meetings with the CEO and the underlings (Guerra, 2017).
The success or failure experienced by global organizations can be largely impacted by how effectively groups and teams of people work together. Despite the fact that individuals can be exceptional in terms of capability, in the end, it is the team that delivers. Therefore, a great deal of focus and attention is placed on being able to work in team and capability of leading team. Most experienced managers comprehend that their individual and organizational success is reliant on how efficaciously they can create a well-functioning team. One of the fundamental factors is the composition and structure for the team. Subsequent to ascertaining the agenda of the team and the sort of teamwork necessitated, it is imperative for managers to select team members with the essential knowledge and competencies to satisfy the agenda. Imperatively, if the wrong team members are selected, it will be difficult for the team to be efficacious and successful. In terms of composition, diversity is a pivotal aspect that needs to be taken into account. Teams that are progressively more homogeneous find it much simpler to create and sustain relationships as it promotes trust and also simplicity in communication. Furthermore, these teams find it easier to assimilate their endeavors and work in tandem in a product manner. The design of the team’s task should be set in a manner that is inherently motivating to all members. It should permit all members to be culpable and offer them prospects to obtain feedback in a timely manner (Polzer, 2003). In the case of Air India, the teams are structured in terms of their expertise and placed into different departments.
In the case of Air India, the management of the company is headed by a Chairman and Managing Director. The role and responsibility of the CMD is to partake in the administration and monitoring of the day to day operations of the company. The CMD works under a Board of Directors. The key role of the Board of Directors is to provide oversight into the undertakings of the CMD and his or her subordinates. It is imperative to note that the board of directors of Air India us re-constituted after a period of every two years and this is undertaken by the Indian Government. Significantly, the Board of Directors is the highest and top-most governing body of Air-India. On the other hand, the CMD operates as the chief executive of the company. At the present moment, the CMD of Air India Limited is Shri Ashwani Lohani. The Board of Directors includes the following individuals:
1. Shri Satyendra Kumar Mishra - Joint Secretary
2. Mr. Vinod Hejmadi - Director – Finance
3. Shri Arun Kumar - Additional Secretary & Financial Advisor, MoCA
4. Dr.Ravindra Kumar Tyagi - Independent Director
5. Shri Syed Zafar Islam - Independent Director
6. Smt Daggubati Purandeswari - Independent Director
7. Shri Kumar Mangalam Birla- Independent Director (Air India, 2019).
The diagram below illustrates the organizational structure of Air India:
Source: http://www.airindia.in/board-of-directors.htm#47
Air India Limited employs a functional organizational in that the staff and personnel of the company are grouped on the basis of their specific skill set and know-how. Basically, the company structures each of its departments with roles ranging from sales, finance and human resources. This particular structure is linked to the company’s business objectives. For instance, there is the market share objective. More often than not, businesses endeavor to attain a greater market share. The main aim of businesses is how to increase the market share of their business operations fundamentally by winning consumers from rivals. This is purposed to dominate the marketplace and also generate greater revenue from product and service offerings. In the case of Air India, the sales function is responsible for this particular business objective. Another business objective is maintaining employee satisfaction. Business organizations must make certain that they bring satisfaction to their employee. Research studies have indicated that there is an existent relationship between employee satisfaction and job performance (Fried et al., 2008).
What is more, there is a direct correlation between employee satisfaction and job performance and that job satisfaction is significantly impacted by job satisfaction (Choo and Bowley, 2007). In the case of Air India, the human resource/personnel objective is responsible for this particular objective. An additional business objective is growth and profitability. The growth of business takes into account an expansion of the business organization. This expansion of the business can come in the form of increased sales turnover, greater market share, increased number of people employed, investment and capital employed and the like. Imperatively, the growth objective of business is also advantageous of employees owing to the reason that it gives security of jobs to personnel and members of staff (Boone and Kurtz, 2001). The finance department or function of Air India is responsible for this business objective.
Size
Customarily, an organization can be classified as either being small, medium and large. Some of the businesses can be classified as being small and more often than not this takes into account a one-person business enterprise or a micro-business that constitutes less than five people. Small and medium enterprises (SMEs) actually constitute more than 90 percent of the number of businesses in several nations, including India. However, these companies solely employ less than 10 percent of all employees. At the other end of the size scale are large businesses. These are deemed to be both national and multinational corporations that hire thousands of individuals and operate either domestically in one nation or in numerous nations. In addition, there are different measurements for determining the size of businesses. Two measures that are appropriate to just about all businesses take into account number of employees and annual turnover. That is, this encompasses the total value of sales that are generated over the period of a year (Pride, Hughes, and Kapoor, 2014).
Air India is categorized as a large company and is India’s premier flight carrier and is also one of the most wide-ranging flight service providers in the country. The history of the company can be traced back to the outset of 1932. In October of this year, J.R.D. Tata, who is considered to be the pioneer of Civil Aviation in India and originator of Air India, flew from Drigh Road Airport, Karachi, in a tiny, light single-engine de Havilland Puss Moth on his flight to Mumbai passing through Ahmedabad. It is imperative to note that Air India was initially referred to as Tata Airlines (Air India, 2019). During its inception, the size of Tata Airlines was considerably small as it comprised of one Puss Moth, one Leopard Moth, one palm-thatched shed, one full time pilot, one part-time engineer, in addition to two apprentice-mechanics. In the year 1946, Tata Airlines as transformed into a Public Company and this gave rise to Air India (Air India, 2019). Two years later, Air India International Limited was established with the main objective of facilitating the company’s international business operations. Mid-year, the airline started conducting its international flight services with flight from Mumbai to London via Cairo and Geneva with a Lockheed Constellation aircraft on a weekly basis (Air India, 2019). In March 2007, the Indian Government sanctioned the merger between the two companies; Air India and Indian Airlines. Following to this particular business formation, a new Corporation through the National Aviation Company of India Limited (NACIL) was amalgamated under the Companies Act, 1956 on 30 March 2007 with its Registered Office at Airlines House in New Delhi (Air India, 2019).
Air India also operates internationally. At the present day, Air India's worldwide network in the present day comprises of 44 destinations by operating services with its own aircraft and through code-shared flights. Major destinations covered by Air India are Bangkok, Hong Kong, Jakarta, Kuala Lumpur, Osaka, Singapore, Tokyo, Seoul, Dar-es-Salam, Nairobi, Frankfurt, London, Paris, Birmingham, Abu Dhabi, Al Ain, Bahrain, Dammam, Doha, Dubai, Jeddah, Muscat, Riyadh, Kuwait, Los Angeles, Chicago, Newark, New York, and Toronto. As at the 2017 financial year, Air India had a total number of 20, 956 employees. The revenues of the company were 222 billion rupees, equivalent to 3.2 billion U.S dollars (Air India, 2019).
Scope
The scope of business is wide-ranging. It encompasses a huge number of activities, which may be perceived in terms of two different perspectives including Commerce and Industry points of view (Sutherland and Canwell, 2004).
Industry
The term industry takes into account different activities including the extraction of raw materials, production, conversion, processing as well as the assembling of products. The products within an industry can be placed into three different classifications including consumer goods, capital goods, and intermediate goods. Notably, consumers goods are the good used by the end-user consumers, capital goods are the ones utilized in the production of other goods and lastly, intermediate goods are finished products of one sector that are utilized as intermediate ones in another sector (Mukaila, 2015). The airlines industry provides air transportation for passengers and cargo by making use of aircraft such as airplanes and helicopters. The airlines industry is designed into three main constituents including commercial, general, and military. Air India operates in both the commercial and general components of the industry. Air India provides different services to consumers. First, there are cabin services including business class, economy class and first class. The airline serves consumers with meals on all domestic flights surpassing 90 minutes and on all international flights. Secondly, there is in-flight entertainment. Third, the airline offers frequent flyer programs, which enables consumers to redeem them for different awards. In addition, Air India has premium lounges not only in different airports in India but also international airports (Air India, 2019).
Commerce
Commerce can be defined as an exchange of goods or commodities, particularly on a large scale between different nations (foreign commerce) or between dissimilar parts of the similar country (domestic commerce) trade (Mukaila, 2015). Air India operates in the transportation service industry. It partakes in both domestic and foreign commerce. The subsidiaries of the company include:
i. Hotel Corporations of India
ii. Air India Charter Limited
iii. Air India Air Transport Services Limited
iv. Air Engineering Services Limited
v. Airline Allied Services Limited
vi. Vayudoot Limited (Shellar, 2018).
Air India operates a fleet of Airbus and Boeing aircrafts providing services to different domestic and international airports. The fleet size of the airline is 133 (including subsidiaries) which takes into account youngest fleets providing superior flight experience to approximately 131 nations (Shellar, 2018).
Complexities of Business Structures and Interrelationships of Organizational Functions
In the present day business setting, the manner in which an enterprise designs as well as structures its different tasks, activities as well as departments, and assigns these undertakings to dissimilar individuals whereas synchronizing their activities in order to survive and succeed, is pivotal. When an entity commences its operations, it organizational design is more often than not simple. Nonetheless, as the environment becomes more intricate and dynamic, transformations in technology take place and corporations begin being pursuant to objectives to facilitate expansion and growth. Therefore, the organizational structure evolves and becomes more intricate (Kaul, 2015).
Hatch (1997) makes the argument that structure takes into account the interrelationships between the parts of organized whole. With respect to organization theory, the term social structure particularly alludes to the relationship amongst persons, positions, as well as organizational units, for instance, divisions and departments, to which they are a part of. The fundamental elements of organizational structure comprise of hierarchy of authority, division of labor as well as rules and procedures (Hatch, 1997). In accordance to Stokes (2005), the structure of an organization comprises of three constituents of complexity, formalization, and centralization. In particular, structural complexity alludes to the magnitude to which there is differentiation, or a division of labor, within an organization. It is imperative to note that a complex structure has a greater necessity for communication across numerous departments either horizontally, or between numerous levels vertically. Robbins (1990) argues that the more complex an organization is, then the greater the requirement for efficacious communication, collaboration, as well as control.
Structure includes three other dimensions that are existent within an organization. Stokes (2005) indicates that organizations might be mechanistic, organic, or bureaucratic, based on their levels of complexity, centralization, and formalization. To begin with, a mechanistic organization comprises of a significantly complex, formalized, and centralized setting in which tasks are substantially specialized, employees obtain minimal freedom of choice through the existence of stringent processes, and decisions are made at the uppermost level of the organization (Stokes, 2005). Secondly, organic settings, which are in contrast to mechanistic organizations, take into account low level of complexity where tasks assigned are generalized, informal environments provide employees with discretion in finishing their tasks, and decentralized structures hand employees the authority and supremacy to make decisions (Burns and Stalker, 2005). A bureaucracy, on the other hand, integrates high levels of complexity and formalization and at the same time sustaining decentralization. This particular kind of organization is administered very carefully by a set of instructions and measures, but personnel at various levels are given the capacity to make decisions in line with those rules (Burns and Stalker, 2005).
In the case of Air India Limited, the organization is mechanistic, which implies that the setting is highly complex, formalized, as well as centralized. In addition, it implies that the tasks are largely specified and the members of staff within the organization barely have the liberty to make decisions on their own owing to the strict processes. In addition, the decisions made across Air India are undertaken at the top most level. In terms of management systems and organizational structure, Air India implements a more formal corporate level structure of management control. It is imperative to note that it is solely the CMD and the Board of Directors that undertake formal management as well as control all through the subsidiaries within the Air India Limited. Therefore, through such a formal structure, it would is conceivable for the company to conduct monitoring of the performance of every subsidiary, provide guidance on every management of the subsidiary regarding appointments, and pinpointing and giving leadership on aspects involving the coordination between subsidiaries (Grant, 2016).
The diagram below is indicative of Air India’s organizational chart and the kind of decision making that is done:
Source: Shellar (2018)
As aforementioned, Air India Ltd. was established under the Companies Act 1956 on 30 March 2007 and the Government of India has ownership of the organization. The Corporation was generated to enable and expedite the merger of the two key state-owned airlines in India including Air India, with its subsidiary Air-India Express and Indian Airlines, together with its subsidiary Alliance Air (Civil Aviation, 2019). Being owned by the government, the ultimate decision making undertaken by Air India is not only formalized but also centralized and the highest level of management reports to the Ministry of Civil Aviation.
Situated at the Safdarjung Airport in the city of New Delhi, the responsibility of the Ministry of Civil Aviation takes into account formulating and articulating nationwide policies and programmes that facilitate the development as well as regulation of Civil Aviation individual within the nation. What is more, the institution is also culpable for the administration of different legislations including the Aircraft Act of 1934 and the Aircraft Rules of 1937 as well as other laws relating to India’s aviation industry. This Ministry carries out directorial and executive control over involved and self-governing establishments such as the Directorate General of Civil Aviation, Bureau of Civil Aviation Security and conglomerated Public Sector activities (Civil Aviation, 2019).
The complexities of Air India’s business structure significantly impact the company’s organizational functions. It is imperative to note that the management of Air India Limited has been entirely Indian, both before and after the merger. The inference of this is that the company should not face problems of intercultural differences. However, India is one of the biggest nations in the world and is more often than not deemed to be a sub-continent comprising of numerous cultures. As a result, these cultural dissimilarities may give rise to clashes between managers and employees in different departments (Karanam, 2012).
India has the second largest population in the world and therefore has a major workforce. In addition, owing to the huge population, there is cheap labor force, an appealing aspect for several businesses such as Air India. India is also experiencing a significant transformation in its culture and lifestyle embracing the Western culture. However, the ancient Hindu caste system continues to have an impact on the societal order (Sharma and Singh, 2015). For instance, there was an instance in June 2009, where a clash took place in the freight operations function of Air India where the pilots poorly interacted with one another. As Air India was conducting its business operations in the sub hubs situated in Frankfurt and London, the key management personnel within the hubs are Indians. In spite of the fact that Indian management in other nations is competent and skillful, the individuals with the local knowledge are necessitated for efficacious handling of local problems (Karanam, 2012). Nonetheless, management insisted that since Air India is a government establishment, then managers ought to be Indian-born. In addition, all of the pilots operating for Air India are Indian born since they are not only skillful but are also accessible at a lesser cost. Bearing in mind that the structure of the company is organic, it implies that the decision making is done centrally and at the highest level. This results in some cultural issues in the international departments (Karanam, 2012).
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