Good morning, ladies and gentlemen! Today we'll discuss the problemthat often appears towards the manager. This is a problem of organizationalchoice or how to group product activities by product or by function. Inother words, should all specialists in a given function be grouped under acommon boss, regardless of differences in products they are involved in, orshould the various functional specialists working on a single product begrouped together under the same superior.

But the aim of our presentation is not to persuade you that only oneway is the right and only this way should be used in each organization.
We'll try to show you that each reorganization is temporary and manageralways have to find some middle positions between that two ways oforganization, he have to find some compromise. Another point I'd like tounderline that all our presentation will be told from the behavioralscientist's viewpoint.

So, during our presentation we'll offer you some elements to consider,then we'll talk about behaviorist's findings on that matter and considerthe example with two plants. After that we'll summarize all ourpresentation and maybe give some useful advice for managers.

If that clear let me begin our presentation.

First of all we have to understand what makes those issues sodifficult. It is useful to review all the criteria often relied on duringmaking decisions. Typically, managers have used technical and economiccriteria. For example, they may ask themselves "Which choice will minimizepayroll costs? "or" Which will best utilize equipment and specialists. Thisapproach shows us the real logic of traditional management and has strongsupport from classical school of organizational theory. The classicalschool theorists suggested that the manager should make the choice based onthe following three criteria:
. Which approach permits maximum use of special technical knowledge?
. Which provides the most efficient utilization of machinery and equipment?
. Which provides the best hope of obtaining the required control and coordination?

As you can see there is nothing wrong with these criteria, but theyfail to recognize the complex set of trade-offs involved in thesedecisions, cause managers often make changes that produce unanticipatedresults and even reduce the effectiveness of organization. For examplethere is an organization which few years ago shifted from a product basisto a functional basis. The reason was that it would lead to improvedcontrol of production costs and efficiencies in production and marketing.
While the organization did accomplished these aims, it found itself lessable to obtain coordination among its local sales and production units.

This example pinpoints the major trade-off that the traditionalcriteria omit. Developing highly specialized functional units makes itdifficult to achieve coordination or integration among these units. On theother hand, having product units as the basis for organization promotescollaboration between specialists, but the functional specialists feel lessidentification with functional goals.

Now lets turn to another point of view. Behaviorists 'recent studieshighlighted three other important factors about specialization andcoordination. They are:
. Differentiation
. Integration
. Communication

Lets talk about these three factors in more detail. First,differentiation, which simply means the differences in behavior and thoughtpattern that develop among different specialists in relation to theirrespective tasks. Differentiation is necessary for functional specialiststo perform their jobs effectively.

Differentiation is closely related to achievement of coordination, orwhat behavioral scientists call integration. This means the collaborationbetween specialized units or individuals.

While achievement of both differentiation and integration is possible,it can occur only when well-developed means of communication amongspecialists exist in the organization and when the specialists areeffective in resolving the inevitable cross-functional conflicts.

These recent behaviorists studies point to the following threequestions that managers must consider when they choose between a product orfunctional basis of organization.
1. How will the choice affect differentiation among specialists?
2. How does the decision affect the prospects of accomplishing integration?
3. How will the decision affect the ability of organization members to communicate with each other resolve conflicts and reach the necessary joint decisions?

There appears to be a connection between the appropriate extent ofdifferentiation and integration and the organization's effectiveness inaccomplishing its economic goals. What the appropriate pattern is dependson the nature of external factors - markets, technology and so on - facingthe organization, as well as the goals themselves. The question of how theorganizational pattern will affect individuals members is equally complex.
Management must consider how much stress will be associated with a certainpattern and whether such stress should be a serious concern.

To explore in more detail the significance of modern approaches toorganizational structuring, we shall describe one recent study conducted intwo manufacturing plants - one organized by product, the other on afunctional basis.