Structural reorganization and matrix organization at Megabyte telecommunications

¶ … Hypothetical Company

Introduction and Terms of Reference

This paper examines the problems faced by Megabyte, a hypothetical company that is facing increasing business problems in some measure because of its reliance on a shrinking segment of the traditional communications business and in some measure because of its own internal structural problems. This case study, after summarizing the problems that this company is experiencing, then suggests an important and pervasive structural overhaul that may well solve many of the company's problems.

Background and Main Points of Concern for the Company

Megabyte is a major telecommunications company

Matrix Organization

Matrix organisation is a relatively new concept - and an even newer term - within the business world as is in many ways a recognition of the profound ways in which business in the last decade has been changed by the rapid pace of change in technological developments. Even as businesses find themselves having to work within what is in many ways an almost entirely new world for them, they still maintain the same goals that businesses have had at the forefront since the rise of the age of commerce in the Renaissance: The desire to make as much money as possible for owners and investors while providing a quality service or product in an ethical manner.

Among the new ways in which businesses are organized in whole or in part include "self-organizing, self-directing or self-managing" forms (http://www.mapnp.org).

Even within the new forms of organisation such as matrix organisation or matrix structure there are in general more traditional elements of business organisation as well. For most businesses, and we can assume that this is include the newly restructure Megabyte, include a basic functional element in the overall organisational plan (http://gobi.stanford.edu).

Most business organizations start out with a functional structure, or a small variation of this structure. This is the basic "building block" for other structures. In this structure, there is a central office which oversees various departments or major functions, e.g., human resources, finances, sales, marketing, engineering, etc. (http://www.mapnp.org).

Such a consideration of functionality is obviously something that is being carried over into the new structure of Megabyte because the company is retaining such functionally defined offices as human resources (http://www.brint.com).

We also see in Megabyte some elements of another traditional business structure, which is the divisional structure. While elements of matrix structure will be used in the newly organised company, it will also use some elements of the divisional structure as well. In a divisional structure:

there is a centralized corporate office and under it, are various divisions each of which is dedicated to producing and/or selling a certain type of business or product, e.g., product 1, product 2, etc.. Each division that is dedicated to a certain business or product is, in turn, is organized as its own functional structure. So, for example, the division dedicated to making product 1 has its own sales department, human resources, etc. Basically, the divisional structure is a bunch of functional structures each of which reports to one central office (http://www.mapnp.org).

We can see in the company's reliance on some regional responsibilities an incorporation of some traditional divisional structural ideas (http://web.mit.edu).

In the matrix structure that Megabyte Global is contemplating, the new primarily matrix form of organisation will seek to provide a "new, single, global organisation." This kind of thinking is at the heart of matrix business organisation (http://www.apqc.org).

Members of [a matrix] group stay together until that product is produced or they continue to sell and service it. This overall structure (made up of a functional structure that also has groups assigned to products) is a matrix structure. This structure is useful because it focuses highly skilled people from across the organization to work on a complex product or service. It can be difficult, though, because each person essentially reports to two supervisors: the supervisor of the functional area (e.g., engineering) and the product manager, as well (http://www.apqc.org).

No company that refuses to change with the times will succeed for long, but neither is it wise to embrace new forms of organisation simply because they are new. Megabyte Global is wise to combine new and old ways of structuring a business, taking the best from both.

What advantages and disadvantages will the matrix form of organisation present to Megabyte?

The primary advantage that the matrix form of organisation will provide the company will that it will allow Megabyte to benefit from various economies of scale - both purely economic ones as well as psychological ones. By combining into a single functional unit work that was previously distributed amongst various semi-independent companies, Megabyte Global will be able to avoid unnecessary and costly overlap amongst its different divisions and ensure that all workers are aware of and working toward common goals.

The primary disadvantage for the company will come in the form of the sluggishness that affects all centrally planned economic units. While even a very large company is, of course, much smaller than a small Communist state, some of the same problems will still surface. The company should be able to overcome some of the problems of having a central office dictate conditions to those actually doing the work by its system of strategic centres, but there will still be some sluggishness caused by too great a reliance on those in a central office as opposed to those on the ground.

How might these changes affect the ways in which individuals in the new work groups communicate with each other?

The individuals in these new work groups may well feel some animosity towards those in the central offices, believing that their autonomy is being undermined and their expertise dismissed. They may also well feel some uneasiness in working with members of other groups because they may believe that - despite the official party line - they are in fact in competition with them.

Why might some people resist change and what might be done to overcome it?

This is the $64,000 question to quote an old game show. Some people may resist change simply because it is a part of their psychological make-up to resist all change. The more carefully the new plan is explained to them, the less threatened they will feel about the changes and the less likely that they will be to resist them.