The 21st century was marked by the fact that the management of organizations began experiments to optimize management and search for new forms that take into account the changed realities of doing business. This is how a network organizational structure appears, which is designed to overcome the shortcomings of traditional models of organizational structures. However, like any innovation, this form of management also has its limitations and features. Let's talk about the advantages and disadvantages of the network organizational structure, its types and practice of application.
The concept of organizational structure
Any company is a set of relationships: between employees, between a manager and subordinates, between suppliers and sellers. In order to make these connections effective, to establish the optimal mode of the production process, and it is necessaryorganizational structure of the enterprise. It streamlines communications, distributes powers, establishes a circle of decision-makers and persons who execute them. The peculiarity of the organizational structure is that it can be represented schematically. And looking at the diagram, you can immediately understand what is in front of us: a linear or, for example, a network organizational structure. These schemes are necessary in order to quickly diagnose failures and problems in the operation of the enterprise.
Thus, the organizational structure is an approved system of interaction between the company's structural divisions within the framework of the production process. The elements of this system are the subordinate-manager relationship, internal norms and instructions, the determination of the personal responsibility of each head of structural divisions and performers for the duties assigned to them to perform work at a certain segment of the production process, the distribution of powers between managers and staff.
Types of organizational structures
Organizational structures depend on many factors, in particular, on the form of ownership, the specifics of the enterprise, the scale and resources of the company, the features of the product being sold, etc. In this regard, various types of organizational structures are distinguished. In the traditional approach, the following types are distinguished:
- Linear. This is the simplest structure in which all departments report to one leader acting on the basis of one-man command. Ateach department has its own head, who reports to a higher manager.
- Functional structure. In such organizations, units are combined into blocks in accordance with the main function, block leaders report to the top manager.
- Linear-functional structure. Combines two previous varieties in different areas.
- Line-staff structure. In such organizations, a linear structure prevails, but to solve special problems, headquarters can be created in which employees from different structural divisions gather. During the existence of the headquarters, these executors are in double submission: to the head of their structural unit and to the chief of staff.
- Project structure. It is typical for her to gather a team only for the implementation of a project, a leader is appointed for the project team, who loses these powers when the project is completed.
- Divisional structure. In such organizations, there is a grouping of the team around a certain product.
- Matrix structure. Combines features of the functional and divisional varieties.
These are the traditional types of organizational structures. However, the market today is rapidly changing, and new approaches to the functioning of enterprises are required, in connection with which new types of organizational structures are emerging. These include: network organizational structure of management, market structure, program-target and adhocracy. A new breed of internet-related companies is also emerging, withvirtual structure.
The concept of a network organizational structure
In the 21st century, markets are undergoing significant changes, this is due to the emergence of new forms of doing business and making a profit: online commerce, cryptocurrencies appear, the Internet penetrates into all areas of human activity. This leads to the fact that traditional organizational structures do not give the desired productivity, new types of relationships are needed. In response to these challenges of the time, a network organizational structure appears. Of course, it originated in the 20th century, but it acquires particular relevance precisely at the present stage of management development.
Its main difference is the decentralization of management. It is a collection of organizations or trade centers, whose activities are coordinated in a single point of control. The network organizational structure is characterized by high versatility, this is due to the variety of external conditions in which such organizations operate. The participants of the network structures are companies-suppliers and manufacturers of goods, trading and financial enterprises, service companies.
Signs of network companies
The diversity of this organizational structure makes it difficult to identify it, it is not always clear whether this enterprise is a network enterprise. A feature of the network approach is that duties and powers are distributed among its departments. Each element of the network has a sufficiently large freedomin choosing actions for running a profitable business, and the center performs coordinating and guiding functions. The network organizational structure is characterized by the following features:
- The main initial principle of these organizations is conformity to the market, and not to administrative approaches in the distribution of resources.
- Members of the structure have greater freedom in making management decisions, and their high activity and interest in ongoing production or commercial activities are assumed.
- Organizations-participants of the structure are united on the basis of cooperation. This is manifested not only in the presence of a common coordinating center, but also in the ownership of business shares in partner companies.
Types of network organizational structures
The variety of forms of network organizational structures leads to the fact that there are several options for their classification. Different researchers offer their own approaches. According to the method of combining companies and in accordance with the principle of distribution of powers and resources, such types of network organizational structures as vertical and horizontal are distinguished. According to the method of distribution of functions between partner companies, they distinguish:
- Chain organizational structures. This is an option when enterprises are united according to the stages of production and movement of goods. In such chains, companies producing goods, transport organizations, warehouses and wholesalers, retail outlets consistently cooperate. This circuit is controlled bybased on a unified strategy, each element of the chain contributes to the achievement of common goals. An example of such network companies are branded retail chains. For example, the company Altaiskaya Skazka successively includes producers of grain crops, then enterprises producing cereals and flour, its own transport company, a company distributing goods in bulk, and finally a chain of retail stores. At the same time, the head office manages the entire network of organizations, which develops a marketing strategy, chooses the direction of development, and distributes resources.
- Functional organizational structures. In such companies, specialized management functions are distributed among partner enterprises. Some are engaged in planning, others in marketing, and others in information support.
- Retail chains. This is the most common and most obvious type of network. In such organizations, companies are combined into retail enterprises, their coexistence can be based on different legal grounds, this forms various design options for retail network structures. There are many examples of retail chains: Eldorado, Sportmaster, Austin, etc.
Design the structure of network companies
Forms of cooperation between enterprises can be varied, this leads to the formation of the most common types of establishing relationships between partner companies. The network organizational structure is characterized by a hierarchy of varying degreesrigidity. There are the following types of network design:
- Distributor. In such organizations, some of the distribution of goods is undertaken by individual distributors. They receive special conditions for the purchase of large quantities of goods, subject to the agreed volumes of regular purchases. The distributor also undertakes part of the work on transportation, storage, advertising, and maintenance of goods.
- Franchise. This is a special form of relationship between a large organization and a small business, in which the parent company provides a small company with the opportunity to trade goods or provide services under the name of a franchisor. At the same time, both parties retain legal independence. But the franchisor reserves the right to control prices, terms of sale, quality of service, etc. The franchisee must pay the franchisor a certain amount of money for providing a name and for marketing support.
- Outsourcing. This is a specific form of interaction between organizations, when one external company undertakes the performance of any work for another, the parent company. For example, you can outsource information systems maintenance, accounting support, etc.
Vertical organizational structures
Traditionally, organizational structures define the hierarchy of parent and subordinate enterprises. The same structure is a characteristic feature of the network company. The pyramidal organizational structure implies the presence of subordination relationships. Typical examples of such structures areretail chains in which each profit point is an independent organization, but strategic management is carried out from a single, head center.
Horizontal organizational structures
In addition to the usual vertically oriented scheme, there are also less orthodox varieties. The horizontal network organizational structure of management is the cooperation of equal companies specializing in the performance of various functions. This system is connected by a common production process and a single development strategy. The integrating function can be performed by one enterprise or several at the same time. The main feature of horizontal networks is the lack of hierarchy, no one is subordinate to anyone, it is a team of equal partners. Each company retains control over its front of work and fits into the overall scheme without dominating other participants.
Benefits of network management structures
The advantage of the new network companies lies in their high adaptability to market conditions. They have a flexible structure, which can change depending on changing external and internal conditions. If necessary, part of the stages of the production process can be given to specialists for execution. So, consulting or marketing is often taken out of the company. The network organizational structure usually centers around some unique technology, priority areas of specialization, in which the company is considered an expert. This allowsoffer the consumer the best service and the best product. An important advantage of this structure is its high efficiency, it allows to reduce the cost of management and redundant production processes, as well as increase the profitability of production.
Another advantage of these structures is their attractiveness for highly qualified personnel and reliable partners. The main secret of the success of network companies is the focus on achieving results, profit, expressed in specific figures. Moreover, each member of the organization sees its benefit in the overall success.
Disadvantages of network management structures
Of course, the network form of organizational structures has a number of disadvantages:
- Since the main distinguishing feature of such organizations is competence, they are very dependent on the qualifications of personnel.
- High-skills are always the target of bounty hunters, which can lead to high turnover.
- Scaling up a company can lead to increased bureaucratization and complexity of the company's structure.
The practice of using network organizational structures
The most common examples of using networked organizational structures can be found in the retail industry. We see that food retail is becoming more and more networked. The food retail market has already been conquered by more than a third of the chains. The secret of their success is precisely in a special organizational structure that allows you to increase marginality and reduce costs.
Another examplenetwork organizational structure can be found in IT and marketing. Companies can unite on a functional basis: one enterprise is engaged in the development of software products, another - filling sites and social networks with content, the third is engaged in branding, but they can all work for one customer.
Main Models
There are two main models of network structures. The first type is characterized by the fact that small companies unite around a large company, which take upon themselves the solution of specialized production tasks. Satellite companies may have their own, quite traditional organizational structure. In this model, hierarchical relationships are built between the parent company and its satellites. Typically, a large company is characterized by dominant behavior, while small organizations, on the contrary, are highly flexible and adaptable.
The second type of network structure combines independent, from a legal point of view, companies of approximately equal size. This is cooperation that allows companies to survive in the market by supporting each other.
