Organizational Structure

Organizational structure depends on the product to be developed. Wheelwright and Clark define a continuum of organizational structures between two extremes, functional organizations and project organizations. Functional organizations are organized according to technological disciplines. Senior functional managers are responsible for allocating resources. The responsibility for the total product is not allocated to a single person. Coordination occurs through rules and procedures, detailed specifications, shared traditions among engineers and meetings (ad hoc and structured). Products that need a high level of specialized knowledge require a functionally organized structure.

A light-weighted matrix organization remains functional and the level of specialization is comparable to that found in the functional mode. What is different is the addition of a product manager who coordinates the product creation activities through liaison representatives from each function. Their main tasks are: to collect information, to solve conflicts and to facilitate achievement of overall project objectives. Their status and influence are less as compared to functional managers, because they have no direct access to working-level people.

A heavy-weighted matrix organization exists of a matrix with dominant the project structure and underlying the functional departments. The product manager has a broader responsibility. Manufacturing, marketing and concept development are included. The status and influence of the product manager, who is usually a senior, is the same or higher as compared to the functional manager. Compared to functional managers, because they have no direct access to working-level people.

A project organization exists of product oriented flows: project and teams. The project members leave their functional department and devote all their time to the project. They share the same location. The professionals are less specialized and have broader tasks, skills and responsibilities. The functional manager is responsible for the personnel development and the more detailed technology research in the functional groups.

Companies can be classified to their organizational structures. Another variable companies can be classified to is the nature of the projects undertaken. We characterize projects by the number of employees needed to perform the tasks, or workload, and the number of tasks that are fundamentally different in nature. An example of the latter aspect is PCB development and structural design.

Another way to classify organization structure is by one of the following four categories:

• The product to be developed is comprehensible for one person. One person is likely to have all the knowledge needed to develop Manufacturing and Assembly. The development departments in companies that undertake these kinds of projects are usually very small. If a company consists of more than one department, it is usually structured as a functional organization.
• The product to be developed has a fairly low complexity, but total work is high. These kind of products are likely to be developed within one functional department. A research department may also be an example of a department in which type II projects are undertaken. Are more departments involved, and then the light weighted matrix structure is preferable. Employees are involved on a full-time basis. Tasks may be performed concurrently. The sequence can be determined using the Design Structure Matrix.
• The product to be developed consists of a lot of different elements, such as software, PCB, power supply and mechanical structure. The product is however in the engineering phase, i.e. it is clear what needs to be done to get the product into production. Various disciplines perform their own tasks. These tasks have mostly a low workload. Employees cannot work full-time on one project. This creates a complex situation that may be compared to a job shop situation in production logistics. Though the comparison between manufacturing and product development is not accepted by all product development managers, it may yield good results. Studying each step in the Product Development Process and fluctuations in workloads reveals ways to reduce variation and eliminate bottlenecks. It is necessary to view the Product Development Process as a process and not as a list of projects. Three important findings regarding this are:

Projects get done faster if the organization takes on fewer at a time.

Investments to relieve bottlenecks yield disproportionately large time-to-market benefits.

Eliminating unnecessary variation in workloads and work processes eliminates distractions and delays, thereby freeing up the organization to focus on the creative parts of the task.

Creating cross-functional concurrent engineering teams is the right way to develop products. However, the pitfall is too many projects at the same time, so that key people from engineering, marketing and manufacturing work at five or more projects at once. This results in congestion. Striving to work at 100% of the product development capacity lengthens product development lead times enormously. A more realistic percentage is 80%. Attention must be focused on bottlenecks, these days most commonly found at the software development side of the project.

• The product is complex. Total work is high. Employees can thus participate on a full-time basis. A project organization is the most appropriate organizational structure for these kinds of products.