The previous section of the IB Business Management syllabus considers different types of organizational structures. However, organizational structures are not static due to the dynamic nature of the global business environment. Hence, in reality, organizational structures are more flexible and adaptable to change. Two examples of flexible organizational structures are:

• project-based organization, and

• the Shamrock organization.

Both internal and external factors may cause changes in a firm’s organizational structure. For example, inorganic growth such as mergers and acquisitions are likely to cause a restructuring of the organization. Other examples include decisions to outsource, offshore, reshore, or insource (see Unit 5.4).

Project teams are used in project-based organizational structures

Project-based organization is a flexible organizational structure based on the specific needs of a particular project or business venture. It is suitable for getting experts together for short-term or temporary projects, such as construction projects or teams of suitably experienced employees to work on a new business venture or product. The teams are then disbanded after the completion of the project. It is suitable for highly critical projects, especially when time is of the essence, such as marketing campaigns for an upcoming blockbuster movie.

Each project is run by a project manager (PM), who is in charge of the team involved in the particular project, such as construction projects or innovative organizations working on a new project or product. Unlike a departmental manager who has responsibility over a specific functional area of the business, a project manager is someone who holds responsibility for an entire project. Hence, decision making is centralized in project-based organization, although the dedicated team works on the designated project to achieve a common goal.

The team members may come from any part of the overall organization, such as accountants from the finance department, operations managers, quality controllers, and marketing experts. These team members are often self-selected volunteers who express an interest in certain assignments, although it is quite common for workers to be working between several engagements in addition to their functional work (in designated departments or functional areas).

Once the project is completed, the team members disband and reassemble to begin another project or revert back to their own departments or functional areas of the organization. It is not uncommon for the project manager to create an appraisal of each member of the project as part of the firm's human resource management. Typically, several teams operate at the same time as the organization has numerous projects happening at the same time.

In the example below, there are three concurrent projects in the organization, led by three different project managers. Each project manager is in charge of eight different team members, who have been temporarily redeployed from other departments in the organization. The project-based organizational structure enables senior managers to put together teams of individuals with the specialist expertise to focus on each assignment or task in hand, such as opening a new production facility overseas, acquiring a competitor, in the market, and liquidating an unprofitable division of the organization.

Example of project-based organization

This type of organizational structure is designed to allow firms to be responsive to changes in market demand for goods and services. As a temporary and flexible organizational structure, it can be used by any type of business. Using experts from across the organization in a matrix structure can help to generate new and creative ideas, as well as improve productivity. The dynamics of the team mean that an effective person must be chosen as the project manager.

As with matrix structures, project-based structures can isolate group members who work outside of their normal functional areas. Cultural differences may exist between the various members of the project who have been put together from other sections of the organization. This can be unsettling for some members of the project team, especially if they have to handle the uncertainties and potential conflicts associated with prioritising different tasks and deadline for different project managers.

Similarly, some members of the project team may feel demotivated due to the increased workload and pressures linked to project-based structure, especially if they are involved in numerous projects occurring at the same time.

Charles Handy's Shamrock organization

Professor Charles Handy’s Shamrock organization (1991) is another type of flexible organizational structure. Handy argued that organizations must adapt to changes in the business environment in order to survive and thrive. Being Irish, Handy chose to use a shamrock (three-leafed clover) to illustrate this. The Shamrock organization consists of three components:

• The professional core (or core workers)

• The contingent workforce (or peripheral workers), and

• outsourced vendors (or outsourced workers).

1.  The professional core

The professional core (also known as core workers) consists of full-time experts who are vital for the organization’s operations and survival, such as professional technicians, senior managers, and other professionals. They are essential for the business to meet their organizational objectives, mission and vision. For example, schools need to rely on their full-time teachers to deliver the curriculum and to support the students of the school.

Hence, the professional core is considered as the most significant group of workers in an organization. The pay and remuneration of these workers in private sector for-profit organizations is closely related to the success of the business. Charles Handy predicted that improvements in information and communications technology (ICT) would lead to downsizing and delayering in organizations, as they become reliant on fewer core workers.

2.  The contingent workforce

The contingent workforce (also known as peripheral workers) consists of temporary staff hired by the organization. It is made up of portfolio workers, part-time staff, seasonal workers, and those on flexitime or flexible hours. Contingent workers perform routine jobs. For example, school might hire supply/cover/substitute teachers in the event of full-time teachers being ill or absent (perhaps to attend a workshop or off-the-job training course).

Supermarkets, fast-food restaurants, and many other retailers hire a significant proportion of part-time workers. However, this often causes a lack of job security and lower staff morale as there is less scope for career development within the organization.

3.  Outsourced vendors

Outsourced vendors (also referred to as outsourced workers or the contractual fringe) are individuals or other organizations hired on a contract basis to carry out a specific but non-core role, such as security, catering, accounting, or marketing. They mainly consist of self-employed professionals and contractors who are hired on flexible and project-based terms.

As outsources workers are not managed directly by the business, they have far greater autonomy and are more flexible with their work. Their pay is negotiated and often based on performance rather than time commitments. However, hiring outsourced vendors can be costly, especially as they are experts in their industry. For the workers, the nature of their roles often lacks any form of job security.

Schools often outsource their catering services

Handy’s Shamrock organization suggests that organizations can be competitive by reducing unnecessary costs and be more responsive to market changes. It allows firms to have greater flexibility and ability to change the number of employees as and when the organization’s needs change.For example, by using a contractual fringe and peripheral workers, the organization can avoid the stresses and costs of staff redundancies when there are adverse changes in the market.

Retaining only a multiskilled group of core workers enables the workforce to concentrate on their core activities, i.e. what the business does best. Non-core functions can/should be outsourced to specialists and to gain cost advantages. This also helps to cut costs further as only full-time workers are entitled to fringe benefits (perks).

However, flexible structures like the Shamrock organization can create uncertainties and therefore anxieties for workers. Also, flexible contracts can be a legal minefield in some countries or regions of the world where labour laws are particular stringent.

• The contingent workforce (or peripheral workers) in Charles Handy’s Shamrock organization consists of temporary staff hired by the organization.

• Outsourced vendors (also referred to as outsourced workers or the contractual fringe) in Charles Handy’s Shamrock organization are individuals or other organizations hired on a contract basis to carry out a specific but non-core role.

• The professional core (core workers) in Charles Handy’s Shamrock organization consists of full-time experts who are vital for the organization’s operations and survival.

• Project-based organization is a flexible organizational structure based on the specific needs of a particular project or business venture.

• The Shamrock organization is Charles Handy’s model of a flexible organizational structure, consisting of the professional core, the contingent workforce, and outsourced vendors or workers.