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In operations management, we can look at the variety of tasks from a systems view lens or processes view lens; these are also called "systems thinking" and "process thinking" in business lingo. The systems view analyzes an organization as a network of interconnected parts, emphasizing the interdependencies between departments and functions. By contrast, the processes view focuses on individual processes, their sequence, and how they contribute to the overall transformation of inputs into outputs. Both perspectives are valuable: The systems view offers a holistic understanding, while the processes view facilitates detailed analysis and improvement of individual operations.
A system is the tools and interaction of elements to ensure a transaction happens. A process is a sequence of events that produces outcomes. A system is static and can’t be used until a process is in place to make something happen; a process can’t take place without it.
Gordon works for a major automobile manufacturer but would rather ride a bike than drive a car any day! Biking is his greatest passion. One day while pedaling up a hill, he has an idea—what if a small motor automatically kicked in when the cyclist was struggling, giving just the small boost they needed? He knows there are already electric and motorized bicycles, but he feels this “smart bike” will be something new and different, a way to actually detect the needs of the rider and provide support. Because he has been working on safety features for cars for over a decade, he already has a few ideas of how it would work.
As an engineer, he has had ideas in the past, but this one is different. He can’t stop thinking about this electric bike—envisioning the machine that would sit inconspicuously on the derailleur, considering the ways the machine could detect a cyclist’s difficulties and know when to kick in. He talks it through with his spouse, who suggests he take some money they have set aside to pursue this idea.
Gordon is excited to have the green light to chase this dream of designing a bicycle and making it available to the world. He begins designing it using the software he mastered as an engineer, but nagging thoughts start to distract him from the design. What will happen next? Where will he get the raw materials, and who will shape that into a bicycle frame? How will the gears, spokes, and chain be made? Who will put all the parts together and make sure they work properly? How will he make the bicycle available to customers, and how much will it cost?
We will see Gordon a lot in the lessons to follow, as we watch him build his company and answer these questions (and a lot more he hasn’t thought of yet!).
To begin, Gordon can think about his needs in two ways. The first is the systems he needs; these are all the parts he needs to put together: a factory, a warehouse, office spaces, machines, and trucks. To use a bicycle as a metaphor, these are the parts: the handlebar, the seat, the wheels, and so forth. The processes are the way all those parts work together. As with a bicycle, even if each part seems to be perfectly made, they must also be designed to work together. Similarly, the processes are only as good as the parts. He knows better than anybody that a bicycle is only as good as its weakest part.
An organizational system can be arranged according to a variety of structures, which determine how the organization will operate and perform. The structure of an organization is important in terms of a systems view because it addresses processes and workflow. In a functional structure, a common configuration, an organization is divided into smaller groups by areas of specialty (such as IT, finance, operations, and marketing). While this can make perfect sense, sometimes these functional areas turn into silos, entities that are disconnected from each other. Correspondingly, the company’s top management team typically consists of several functional heads (such as the chief financial officer and the chief operating officer). Communication between departments is through the department heads, so there is more room for miscommunication.
A company in the service industry might have a similar functional organization. In a car dealership, for example, there might be a manager of the parts department, a manager of the service department, and a manager for the sales department.
Note that there are no horizontals—or lines of communication—between major units below the executive level. In a functional structure, it is likely the organization will have vertical, top-down systems for communication and decision making, although the processes might be individual within some departments.
Functional departments arguably permit greater operational efficiency because employees with shared skills and knowledge are grouped together by functions performed. Each group of specialists can therefore operate independently with management acting as the point of cross-communication between functional areas. This arrangement allows for increased specialization.
A disadvantage of this structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. Functional structures may also be susceptible to tunnel vision, with each function perceiving the organization only from within the frame of its own operation. In operations management, when departments are siloed, there may be significant disadvantages, such as products being developed without customer input or a comprehensive marketing plan. As you will learn later in this unit, collaboration between marketing and operations is essential to product design and development.
Recent trends that aim to combat these disadvantages include the use of teams that cross traditional departmental lines and the promotion of cross-functional communication, which can be especially useful when innovation and new product development is important to the business. The matrix structure is a common solution that increases horizontal communication by building teams from different units assigned to a project, such as representatives from finance, operations, and marketing developing a new product. Although this improves horizontal communications, the matrix structure has disadvantages. Managers feel less in control, employees feel they have too many managers, and everybody finds there are too many meetings and too much process (Bartlett & Ghosal, 1999).
Functional structures appear in a variety of organizations across many industries. They may be most effective within large corporations where every task has many people assigned to it. Smaller companies require more adaptability and creativity. Many tasks might be done entirely by one person, such as an accountant handling all financial transactions and bookkeeping, or an office manager answering the phones to take orders and provide customer service. These individuals may feel confined by the communicative and creative silos functional structures tend to produce.
Other common structures, specifically in product manufacturing, may include the process departmentalization element. In this structure, the company is organized around the different processes that occur. As you can see in the figure below, departmentalization is based on steps in the process needed to produce furniture. In addition to these departments, we may also see the addition of accounting or marketing departments. In a service business, we might see this structure used in terms of the different parts or steps of the service. If it were a landscaping company, for example, there might be a manager or superintendent, but one group is responsible for tree care, while another is responsible for new planting, and yet another is responsible for hardscape like rocks and pathways. Since this structure is focused on a particular process, to be effective there must also be systems in place for the different individuals to communicate to unite and form a holistic approach to caring for a complete yard or customer, for example.
It is important to note that while large companies often have formalized structures such as the two we’ve discussed, small companies, such as our Esty entrepreneur, may perform several roles, which would then be focused on more of an organic structure. An organic structure is a type of organizational structure that has low formality and is decentralized. Once he grows his business, there may be a need to formalize the structure into a more mechanistic one, such as functional or process departmentalization. The important thing to remember in operations management is that the organizational structure should revolve around what will be the most streamlined and efficient, and allow for the greatest flexibility for manufacturing, production, and the provision of the best service to customers.
Another key to operations management is that however an organization is organized, the departments work smoothly together. For example, in an organization organized around processes, it’s crucial that one process doesn't hold up another process, such as quality assurance creating a bottleneck between production and delivery of products.
Source: This content is adapted from Operations Management by Saylor Academy and NSCC under Creative Commons. https://pressbooks.nscc.ca/operationsmanagement2/
REFERENCES
Bartlett, C.A. & Ghosal, S. (1999, July-August). Matrix Management: Not a Structure, a Frame of Mind. Harvard Business Review. hbr.org/1990/07/matrix-management-not-a-structure-a-frame-of-mind
