Mixed Organizational Systems

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In a bold move, Chrysler has permanently changed the way it will develop cars in the future. Instead of the slow, functional, sequential approach, platform teams representing all functions are directly involved in the design of a new automobile up front. In authorizing the LH-body project, top management's goal was to meet all design objectives—performance, weight, fuel economy, quality, cost—up front and cut a year off the typical five-year new car development process.

The advantages of being able to design a car quickly are: (1) you can get the jump on competition and incorporate new technolgies before they find out what your design is;

(2) the revenues occur sooner thereby providing higher profits on the investment; and

(3) by starting closer to the target release date, the design will be more in line with what customers are demanding. Although Chrysler had used teams before to develop special vehicles (e.g., minivans, trucks), the team approach had never been institutionalized for regular new car development.

The platform team approach breaks down the barriers between the functions and empowers lower-level personnel with decisionmaking authority. Better communication between functions reduces the overall time to design the car. To speed up the process further, the engineers design the car through computer-based finite element analysis, in eluding structural analysis and testing. Another difference in the team approach is the requirement to meet all design objectives before release, instead of leaving the more difficult ones to be ironed out in future model redesigns a few years later. In the LH project, the car passed all requirements in its first, real 35 mph crash test.

The LH project team was highly successful in meeting its goals, and finished the project in 37 years, six months ahead of schedule. And more recently, Chrysler's new Neon small sedan and mid-sized Cirrus and Stratus, are the hit of the 1994 Detroit auto show. According to media reports, the Neon offers a sporty engine, dual air bags, and a roomy interior for under $9000, a definite challenge to the $1000 more expensive Saturn and $2000 more expensive Civic and Tercel. And the Cirrus and Stratus, with their sophisticated engines, sleek good looks, thoughtful interiors, and 4- or 6-cylinder multivalve engines, are roomier and sportier than their Camry and Accord competitors but are priced $2000 to $3000 less. For now, it looks like the platform team concept has produced some more winners for Chrysler.

Sources: W. Raynal 'Teaming with Enthusiasm," Autoweek. May 4, 1992; O. Suris. "Competitors Blinded by Chrysler's Neon," The Wall Street journal, lanuary 10, 1994.

► 4.4 MIXED ORGANIZATIONAL SYSTEMS

As noted in the introduction to this chapter, divisionalization is a means of dividing a large and monolithic organization into smaller, more flexible units. This enables the parent organization to capture some of the advantages of small, specialized organizational units while retaining some of the advantages that come with larger size.

Organizing projects by product involves establishing each product-project as a relatively autonomous, integrated element within the organization as a whole. Such primary functions as engineering and finance are then dedicated to the interests of the product itself. Software projects are a common type of project organized by "product." Software projects often occur in clusters—several different projects that are parts of the same overall information system or application software. Pursuing such projects as a group tends to ensure that they will be compatible, one with another. and even increases the likelihood that they will be completed as a group.

Consider a firm making lawn furniture. The firm might be divisionalized into products constructed of plastic or aluminum. Each product line would have its own specialized staff. Assume now two newly designed styles of furniture, one plastic and the other aluminum, each of which becomes a project within its respective product division. (Should a new product be a combination of plastic and aluminum, the pure project form of organization will tend to forestall interdivisional battles for turf.)

Similarly, organization by territory is especially attractive to national organizations whose activities are physically or geographically spread, and where the products have some geographical uniqueness, such as ladies' garments. Project organization across customer divisions is typically found when the projects reflect a paramount interest in the needs of different types of customers. Here customer preferences are more substantial than either territorial or product activities. The differences between consumer and manufacturer, or civilian and military, are examples of such substantial differences.

A special kind of project organization often found in manufacturing firms develops when projects are housed in process divisions. Such a project might concern new manufacturing methods, and the machining division might serve as the base for a project investigating new methods of removing metal. The same project might be housed in the machining division but include several people from the R&D lab, and be organized as a combination of functional and matrix forms.

Pure functional and pure project organizations may coexist in a firm. This results in the mixed form shown in Figure 4-4. This form is rarely observed with the purity we have depicted here, yet it is not uncommon. What is done, instead, is to spin off the large, successful long-run projects as subsidiaries or independent operations. Many firms nurture smaller projects that are not yet stable under the wing of an existing division, then wean them to pure projects with their own identity, and finally allow the formation of a venture team—or, for a larger project, venture firm— within the parent company. For example, Texas Instruments has done this with the Speak and Spell toy that was developed by one of its employees.

Figure 4-4: "Mixed" organization.

Figure 4-4: "Mixed" organization.

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