The vast diversity of organizations create significant difficulties for their classification. Organizations that, at first glance, can be attributed to one group by one criterion, can vary significantly in another. For a manager or a person engaged in research in the field of management, the typology of organizations plays the role of a guidebook that helps to create a particular image of the surrounding reality. Given the interaction with the external environment, organizations can be mechanistic and organic. The application of the term mechanistic to an organization is used to show that the system is designed like a machine mechanism intended for production operations (Buhler, 2011). The term organic gives the organization the quality of a living organism, free from the shortcomings of a mechanistic structure.
The mechanistic type of control structure is characterized by the use of formal rules and procedures, centralization of decision making, narrowly defined correspondence in work, and a rigid hierarchy of power. The disadvantages of the mechanical structure relate to the lack of flexibility, excess controllability, excessive centralization, and the formation of irrational information flows (Buhler, 2011). The organic type, in contrast to the mechanistic, is a decentralized organization of management, which is characterized by the rejection of the formalization and bureaucratization of processes and relations, lower number of hierarchy levels, a high level of horizontal integration, and orientation of culture of relations to cooperation, mutual awareness, and self-discipline (Mondy and Martocchio, 2015).
According to the interaction of divisions, the organizations are divided into the traditional, divisional, matrix, and virtual. Traditional (flat) organization is a combination of line and functional departments (Corporate Finance Institute, n.d.). It is most useful where the management apparatus performs routine, often repetitive tasks and functions. The lone-functional stage of the organization’s development is mandatory. This stage can be short or long in time. However, it is necessary because skipping over it prevents the organization from working out the relationship between the boss and his/her subordinate and bringing these relationships to a level adequate to the requirements of the external environment (Mondy and Martocchio, 2015). Young commercial structures that do not comply with this rule deprive themselves of the possibility of ever launching effective mass production of a particular product or service.
The solution of problems arising in an organization built on a line-functional scheme was found at the end of the 20s of the 20th century with the advent of the first divisional organizational structure schemes in the enterprises of General Motors (Mondy and Martocchio, 2015). The divisional scheme has great advantages in various industries. In particular, it is useful where production is weakly subject to fluctuations in market conditions and little depends on technological innovations since this scheme is still based on a mechanistic approach to the interaction with the external environment (Corporate Finance Institute, n.d.). In general, the divisional scheme in building the organization allows the latter to continue its growth and effectively manage various types of activities in different markets.
To a certain extent, the shortcomings of the divisional scheme have been resolved in practice with the transition to organizations built with the inclusion of the elements of the matrix scheme, namely project management, temporary target groups, permanent complex groups. The matrix scheme is just not feasible in the framework of a mechanistic approach. It requires a transition to an organic approach, which provides excellent opportunities in designing horizontal, informal, and indirect links, which are mostly attributes of the matrix organization.
Thus, it is necessary to use a systematic approach to the formation and reorganization of enterprises to comprehensively take into account both the internal features of organizations and dynamically changing external circumstances, as well as the emerging progressive trends. The systematic approach to the formation of the organizational structure is manifested in the impossibility of losing sight of the managerial tasks, without which the realization of goals will be incomplete. It is also vital to identify and interconnect a system of functions, rights, and responsibilities concerning these tasks along the vertical of management, explore and institutionalize all relations and relations along the horizontal of management. Moreover, an organic combination of vertical and horizontal control, bearing in mind finding the optimal ratio of centralization and decentralization in management for the given conditions should be provided.
Avon Products, Inc.
The idea of direct sales, bypassing the traditional counter, brought success to the founder of Avon (David Mcconnell) and formed the basis of modern network marketing. Now, Avon is a leader in the sale of perfumery and cosmetic products with an annual turnover of more than $10 billion (Avon Products, Inc., 2018).
Merchants adopted the principle of direct sales and network marketing with a wide variety of goods. Today, the company has focused on several product lines, namely perfumes, cosmetics, jewelry, and accessories, in total – more than 1,000 items (Avon Products, Inc., 2018). Over three hundred specialists and scientists in the field of biochemistry, pharmacology, molecular modeling, bacteriology, and other areas of cosmetology work in the laboratories of Suffern. About 1,000 new products are developed every year, many of which have become unique discoveries in cosmetology.
Avon has millions of people around the world, who are united in the pursuit of beauty, success, and health. The company supports six million representatives in more than 70 countries (Avon Products, Inc., 2018) with a market share of 4.78% (CSI Market, 2019a). Every year Avon offers its customers a lot of new products in the field of perfumery and cosmetics, face, hair and body care products, as well as accessories and jewelry. Avon products are incredibly popular. Today, Avon lipstick is sold every four seconds in the world (McKim, 2018).
Avon’s mission has remained unchanged for decades and reflects the initial view of David Mcconnell about the company’s purpose. From year to year, Avon strives to understand best and meet the needs of women around the world in products, services, and self-expression (Avon Products, Inc., 2018). The company’s values are to maintain the real beauty of a woman, namely her ability to share positive energy with loved ones and make the world a better place day after day (Avon Products, Inc., 2018). After all, when a woman looks and feels beautiful, she becomes brighter and more confident, and her actions are more noticeable. Avon enables every woman to do what she likes and be financially independent, and also takes care of her safe present and healthy future.
The company’s organizational structure is divisional. The divisional structure is typically used in large companies operating in a vast geographic region or having separate smaller organizations within an umbrella group to cover various types of products or markets. The advantage of this structure is that needs can be met more quickly and precisely. However, communication is blocked because employees from different departments do not work together. The divisional structure is expensive because of its size and scale.
International Business Machines Corporation (IBM) is not just another IT corporation. It is primarily a company with a rich history and traditions. IBM has established the nickname of Blue Giant, and this has its reasons. The company began development long before the advent of computers and later had a key influence on their creation and growth. For two decades, IBM has expanded and enhanced its proprietary line of personal computers to the complete success of the ThinkPad PC line. However, the company’s management was not interested in the production of cheap computers. In 2004, IBM withdrew from the personal computer market by selling this business to a Chinese company, Lenovo (IBM Corporation, 2019). Now, IBM manufactures servers, produces software, and provides consulting services. Moreover, the provision of consulting services brings the company the lion’s share of income. The company’s market share is 23.62% (CSI Market, 2019b). IBM operates in virtually every country in the world.
IBM’s mission is to lead in the invention, development, and production of information technologies, including software, computers, information storage systems and microelectronics (IBM Corporation, 2019). The overall goal that IBM is setting when developing artificial intelligence is to complement the capabilities and the human mind (IBM Corporation, 2019). IBM is working to help students, working people, and generally all citizens to gain new experience and knowledge, providing the opportunity to effectively interact with cognitive systems, as well as perform new types of work that will arise in cognitive economics.
IBM and computer manufacturing has dominated the widespread use in the practice of the matrix structure and its elements. It was necessary to create a more significant number of communication channels and decision-making centers to solve large-scale and complex tasks of integrating various types of activity in an organization. For this purpose, various coordination elements, special coordinators, target and integrated teams, autonomous groups, product or project managers, career planning, information networks, intra-company entrepreneurship, etc. were used.
The active use of various semi-autonomous groups is an integral part of the matrix structure. These groups are created for the purpose or for the project to solve a specific problem and enjoy some freedom in organizing their work. Almost 600 managers allowed IBM to separate management functions between managers responsible for ensuring high-end results (heads of project and program groups and departments) and managers accountable for providing the complete use of existing production, material and labor resources (heads of functional divisions) (The Official Board, 2019b). However, managers jointly control the work on drawing up operational production plans and their implementation.
Valve Software (n.d.) is an American computer game development company that has created Counter-Strike, Team Fortress, and Dota 2 computer games, game engines, software, as well as hardware. Valve Corporation is a unique phenomenon. After all, it does not work thanks to, but in spite of. The team members of Gabe Newell managed to push themselves out of the usual gaming business. They are their own publishers and own investors. Valve has no shareholders, and its employees wholly own it. New employees are hired constantly there, and the primary criterion is the benefit that everyone can bring to the common cause. There are not even chiefs and subordinates, positions or hierarchies. There is nothing that should ensure reliable operation. If Valve ceases to be a success, it will not be sold, but simply disbanded. However, for 20 years, the company has been keeping afloat.
It is the example of a traditional (flat) organization (Morgan, 2015). There are no managers in Valve, and all employees are considered equal. Even the instructions (or rather, the recommendations) of Gabe himself are not binding if the employee believes that he/she has a more relevant and essential task. New projects begin spontaneously when someone comes up with a good idea and finds like-minded people to make it happen. To facilitate the process of such cooperation, all the furniture in Valve has wheels. Tables shift together, and work begins. The project participants themselves estimate the size of the award or share of an employee. Given this, everyone decides how and what to work on, and how many days to spend on vacation.
According to Valve Software (2012), the whole unique system works thanks to the careful selection of applicants for work in Valve solely. Employee search begins when a spontaneously established team of a project realizes that it is in dire need of another person. Of course, the emergence of a new person reduces the proportion of each because the team naturally balances while maintaining the optimal number. For a series of interviews, candidate monitors the entire company. Every employee has the right to impose a veto on this or that applicant if it seems to him/her that this person does not fit into Valve for some reason. The main requirements for applicants are the ability to work without an overseer and have a wide range of interests.
The Interrelation of Organization’s Functions
Avon Products, Inc.
Today, Avon is a full-cycle company with own production, supply chain, and distribution system, as well as commercial marketing and sales department. Avon’s business structure includes advanced research centers, by which continuous research work is carried out in the field of creating beauty innovations. The key figures in the management of Avon under divisional structure are not the heads of functional units, but the managers, who lead the production units. There are divisions categorized by geographic criteria (Central Europe, North Latin America, Russia & Eastern Europe, South Market, Turkey & MEA, APAC, and Western Europe).
Avon also created production departments, which were given a certain degree of independence in the implementation of operational activities. The production departments of Avon include Beauty & Brand, Skincare & Personal care, and Fashion & Home (The Official Board, 2019a). The general administration is left with strict control over critical issues of strategic development, research and development, and investments.
The Board of Directors includes 11 people (The Official Board, 2019a). There is a closer connection of production with consumers, an accelerated reaction to changes in the external environment. The company has improved the coordination of work in departments due to the subordination to one person. A clear delineation of responsibility and high independence of structural units reduces the workload of top management. However, it is difficult to conduct a single policy due to the complex coordination and increased costs of the duplication of functions.
At the same time, it must be remembered that within production departments, there is a tendency to shorten goals. Due to the growth of the managerial apparatus caused by the creation of offices, overhead costs are increasing. The centralized distribution of key resources in the event of their shortage may lead to the development of inter-secession conflicts. In large divisional organizations, an interdivisional career is hindered, and with a mechanistic approach, a person is generally lost, and his/her resource is not used effectively.
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