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Types of Organizational Structures

Write about the Advantages and Disadvantages of Organizational Structure at BHP Billiton.

Structure of an organization is the hierarchy which defines role, function, and reporting of each personnel. The organizational structure is developed to define the approach through which the organization operates to accomplish its targets and future growth. Various types of organizational structures are adopted by different companies which meet their requirement (Robbins et al, 2003). Few key elements of an organizational structure are centralization or decentralization, departmentalization, chain of command, work specialization and formalization etc. Defining a structure has benefits like it establishes a formal line of hierarchy divides the work into specific teams and eases the coordination between diverse organizational tasks, etc. Organizational structure has been categorized into the traditional structure and contemporary structure. In a traditional structure, a line of a hierarchy is designed with the chief executive at the top who deputies some of his command to immediate senior managers who, in turn, have numerous managers reporting to them. The chain of command is very simple and the reporting is very clear but this system lacks flexibility. This system can be adopted if working levels are certain but in case of an unexpected situation, the reaction time is very slow. The examples of a traditional system are functional structure, divisional structure, and simple structure. On the contrary, in the contemporary system, the structure is designed horizontally instead of vertically. The information is spread out to all parts of the organization and hence the reaction time is reduced for any change in working level. Though the flexibility is increased in this structure, it may reduce the efficiency of the organization. It has to be made sure that every employee has the information they may require for making decisions and it increases the cost of coordination. The examples of contemporary design are matrix structure, team structure, and learning structure etc. This report will discuss the organizational structure of BHP Billiton Ltd. Advantages and disadvantages of the identified structure are analyzed based on which few recommendations have been provided against the disadvantages. 

Companies have been restructuring their organizations to increase their responsiveness to the requirement of their clients and staff and to counter the intricate and dynamic working environment (Albers et al, 2016). The contemporary structure is known to be more flexible as the tasks are distributed to teams and coordinated for responding to diverse working circumstances. The various types of contemporary structure are

  1. Matrix-Project Structure: In a matrix structure or matrix project structure, experts from diverse functional departments are assigned on one or more project. After the completion of one project, the experts return to their department where they are assigned the new project. In this system, two managers supervise the employee, one from the functional department and one from the project team. In the strong matrix, project team manager is given more authority over functional department manager to optimize the efficiency of the employee and to ascertain the timely completion of the project.
  2. Team Structure: In this structure, the whole organization is divided into teams or groups which are assigned jobs to perform. As every team is held responsible for the performance of their job, the efficiency tends to increase. Opinion conflicts may arise in this structure between team members.
  3. Learning Structure: There is no specific structure of such organizations, instead they have developed the capability to adapt and learn with every situation. Knowledge management is emphasized in these organizations to ease the decision making and performing their jobs. It becomes difficult to convince employees to share and apply their knowledge.
  4. Boundaryless Structure: In this design, all the boundaries which categorize the staff like geography, hierarchy, job function or even the external boundaries are abolished. All the boundaries are broken so that the employees and customers can work together to identify what is best for the organization. There are two types of boundaryless organization, network and virtual. 

Contemporary Structure - Matrix Project Structure

A matrix organization is a structure in which employees have two supervising managers. It is a complex structure but increases the productivity of the organization by increasing more flexibility. Each employee is managed by two managers, i.e., functional team manager and project team manager. The matrix structure is a blend of vertical and horizontal hierarchy as the authority of project team manager flows horizontally whereas the authority of functional team manager flows vertically. Hence, the knowledge, skills, and talent of personnel is shared and used in different projects and in different teams. As employees from diverse functions are working together on a single project, the efficiency of the project increases. Also, the employees have an opportunity to broaden their knowledge horizon. The communication between various teams increases. This structure is generally used by large companies with numerous projects which helps them to relocate the staff when and wherever required. This structure has a higher probability of conflicts between employees and managers because of more than one reporting line. It is inevitable that employees have a clear understanding of their work priorities, role and responsibilities to avoid any confusion. Also, the cost of operating the matrix is higher because of increased cost of coordination and retention of resources. The matrix project structure can be divided into three main categories

  1. Strong Matrix Organization Structure: In this matrix, project team manager has most of the authority over the employee. Project team manager is responsible for the management of project administration, project budget, and execution.
  2. Balanced Matrix Organization Structure: Authorities are shared between the functional team manager and project manager under this matrix. Both the managers are responsible for management of project administration and the budget.
  3. Weak Matrix Organization Structure: This structure resembles that of a functional organizational structure as the functional team manager has most of the authorities over the employee and project budget. Project team manager acts just as a coordinator in such structures. 

BHP Billiton is a world-renowned company which deals with extracting and processing of minerals, oil and natural gas with headquarters in Melbourne, Australia. More than 60,000 employees and contractors are working for the company in Australia and America (Billiton, 2017). They are among the world's major producers of commodities like iron ore, metallurgical coal, and copper, etc. The BHP Billiton Group consists of the BHP Billiton Plc Group and the BHP Billiton Limited Group as a combined initiative, following the accomplishment of the Dual Listed Company (DLC) merger in June 2001. BHP Billiton Limited and BHP Billiton Plc have each retained their distinct corporate identities and upheld separate stock exchange listings, but they are operated and managed as if they are a single unified economic entity, with their boards and senior executive management comprising the same people.  The company is a multinational, multi-project company with diverse commodities, geography, and market. The company follows a matrix project structure where employees of diverse functional teams are assigned to a project at a particular geographical location.

The organization structure of BHP Billiton is as follows:

BHP Billiton's Organizational Structure

The employees from functional teams like petroleum, aluminum, base metals etc. are located at different projects (Jeston, 2014). The employees report to their project manager as well as their functional team manager. When a project is completed, the employees are required to report to their functional team and they are assigned a new project (BHP Billiton Plc 2017. Annual Report). The classification criterion is based upon the final products, i.e., Aluminum, Base Metals, Carbon Steel etc. The projects are carried out at projects carried out in US, Canada, Australia, Chile, Peru, Algeria, Brazil, Singapore, and Columbia. The functioning model of the company aims to share exactly the same structure, with the same set of responsibilities and accountabilities for every job and every operation in the company. 

BHP Billiton can share skilled and talented resources different projects and functional units as per requirement and circumstances. As the result, communication lines increase which tends to increased sharing of knowledge within the organization.  As the employees are allowed to communicate more across the boundaries, the organization develops a more cooperative and knowledgeable work environment which further strengthens the organization (Perrott, 2015). As the employees work on different projects at different locations, it gives them the opportunities to broaden their skill set and knowledge. Resources can be allocated from the pool of different functional units based upon the project budget and requirement. Also, BHP Billiton has achieved better employee retention because of this structure as it creates a sense of job security and therefore the efficiency of the company has increased.

In spite of all the advantages, employees have reported that they face confusion because of increased reporting lines and there have been instances of lack of close cooperation between functional team manager and project team manager. The employees get confused about their priorities because of information from different sources and the workload has also increased which results in exhausted employees and reduced efficiency. This lack of cooperation and differences in their authorities has also given rise to an increased number of conflicts between them. Increased number of managers has increased the operational cost of the company to an extent and the BHP Billiton has to pay extra for retention of resources even when there is a gap between handover and allotment of projects. There are some resources which are required for a project for a very short duration but still, the company pays the resource even when any project is not allotted. Conflicts have also been reported among project sites at instances of a shortage of resources which has affected their operations in the past.

Advantages of BHP Billiton's Matrix Project Structure

Every employee should be clear of the reporting lines and responsibilities which must be documented and shared with them to avoid any confusion. The company should adopt strong matrix structure or weak matrix structure to optimize the distribution of authorities between the project manager and the functional manager gives rise to avoid any conflict between them (Habib, 2015).  In case of any conflict, it should be resolved privately at the earliest so that operation of the company are not impacted. Communication and cooperation should be emphasized between both the managers and even in the employees. Both the managers should be well informed about the tasks assigned to the resource to prioritize the work accordingly and avoid the over-burden on employees. Every employee should be clear about the vision, goals and short & long term objectives of the company. The tasks for which selected resources are required for very short duration of time, the company should outsource the tasks or should hire freelancers to reduce the cost of the matrix.

Conclusion

It can be inhered from the report that organizations develop a structure for themselves to define the distribution of authorities and reporting lines. Companies adopt different structures for their departments based upon the requirement. There are two types of organization structures, traditional structures, and contemporary structures. Several types of contemporary structures are matrix-project structure, team structure, learning structure and boundaryless structure. In a matrix project structure, experts from various functional divisions are assigned on one or more project. After the completion of one project, the experts return to their department where they are assigned the new project. In this system, two managers supervise the employee, one from the functional department and one from the project team. BHP Billiton Group has adopted matrix structure for their organization. Resources are allocated to different projects at diverse geographical locations from their functional units based upon the final product. BHP Billiton has become more flexible because of the structure and has achieved increased efficiency due to quick decisions. The company also has conflicts between their project manager and functional managers due to authorities shared with them. Employees also get confused because of their dual reporting lines and no clear priorities. Some of these disadvantages can be overcome by the increasing the communication and cooperation between both the managers. The BHP Billiton should optimize the authorities given to both the managers to avoid any conflicts. The employees should be well informed about their reporting lines and responsibilities. 

References

Albers, S., Wohlgezogen, F., & Zajac, E. J. (2016). Strategic alliance structures: An organization design perspective. Journal of Management, 42(3), 582-614.

Billiton, B. H. P. (2007). Annual report 2007.

Bolman, L. G., & Deal, T. E. (2017). Reframing organizations: Artistry, choice, and leadership. John Wiley & Sons.

Carley, K. M., & Prietula, M. J. (2014). The" virtual design team": Simulating how organization structure and information processing tools affect team performance. In Computational organization theory (pp. 19-36). Psychology Press.

Daft, R. L. (2015). Organization theory and design. Cengage learning.

Habib, K. A. (2015). Making the matrix work: how can conflict be managed when introducing the matrix organization structure in growth markets; a case study in the Middle East (Doctoral dissertation, Heriot-Watt University).

Hubbard, G., Rice, J., & Galvin, P. (2014). Strategic management. Pearson Australia

Jeston, J. (2014). Business process management. Routledge.

Kude?ko, J. (2016). Structurization of mining companies. Gospodarka Surowcami Mineralnymi, 32(4), 157-180.

Perrott, B. E. (2015). Building the sustainable organization: an integrated approach. Journal of Business Strategy, 36(1), 41-51.

Robbins, Stephen P., and Mary Coulter. Management. Pearson Education, 2010.

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