AMBA 610 Question 1 Week 4
University of Maryland University College

1. What are the differences in the design models? Compare and contrast the standard airline organizational functional structure model with the hybrid structure based on independent business units
Functional Structure:
• All functions report directly to a CEO (centralized authority)
• People with the same set of skills are group together (individual specialization)
• Characterized by horizontal differentiation
• Peers in the same function can supervise each other (as per Jones, chapter 15)
• Likely to develop norms to increase effectiveness and develop core competencies, and to use standards as a measure of productiveness.
• As business becomes more differentiated, the functional model can develop problems with effective communication, measurements, locations, new customer groups, and strategic problems.
Hybrid/Business Unit Structure:
• Each “unit” reports to a manager, who is then responsible to the corporate center and CEO (decentralized authority)
• People are grouped into “functions” according to market/customer demands, and work to achieve goals together (joint specialization)
• Characterized by an increase in both vertical AND horizontal differentiation from the functional model. (vertical is 3 levels instead of 2, horizontal is 12 functional groups instead of 9)
• Tasks are coordinated through mutual adjustment, with the different business units working together to increase efficiency between units.
• The greatest potential for problems lies in insufficient integration between units. There is the potential for an incorrect balance of power between corporate and the subunits, coordination problems, expensive overall costs of business, and communication problems.
Does the hybrid structure provide too much differentiation?
The idea of “too much differentiation” is all a function of how well the hybrid model offsets the potential problems of its complexity by using integration techniques. According to the readings this week, a complex organization with a high level of differentiation needs a high level of integration to manage its activities in an effective way. Managers deciding on the amount of differentiation necessary should consider core competencies, competitive advantage, and appropriate coordinating mechanisms. This was addressed in the article, but the appropriate integration measures to take would really depend on each particular airline and its own situation.
How would support structures be the same or different?
In the functional model, one set of support functions was available for the entire business. In the hybrid business unit structure, each “unit” would have its own support systems. Unless this is instituted carefully, it could lead to unnecessary duplication of roles and a rise in overall bureaucratic costs.
To what extent are either models mechanistic vs. organic? Why?
The functional model is mostly mechanistic in nature, because it exhibits the following characteristics:
• Individual specialization
• Clear hierarchy of authority
• Centralized authority
• Standardization
The hybrid/business subunit model is mostly organic in nature, because it exhibits the following characteristics:
• Joint specialization
• Integrating mechanisms
• Decentralized authority
• Mutual adjustment