ORGANISATIONAL STRUCTURE AND DESIGN Class


Key elements of organizational structure:
v  Formalization:    involves putting rules and procedures in writing.
v  Span of Control: the number of employees that individual managers have control over. An organization can have a wide span or narrow span of control.
v  Hierarchy of Authority: refers to the way authority is distributed in an organization from top to bottom.
v  Division of Labor: it refers to division of tasks into manageable units and assigning of the work units to people who are suitable to perform.
v  Specialization: whereby employees have areas of expertise in which they focus on doing as a specialty.
v  Standardization: refers to the use of measures such as procedures to ensure quality is maintained in an organization.
v  Centralization: whereby authority is concentration of authority in the top management in an organization.
Good organizational structure indicates the following:
ü  It should lay down a reporting structure from the lowest level to the highest.
ü  Identical activities under one department for efficient utilization of resources.
ü  Coordination of various activities be laid down and coordinating authority specified.
ü  Individual, group and departmental goals should be laid down with specific time frame and monitoring also involved.
ü  Horizontal and vertical relationships of power should be defined.
ü  Procedures, regulations and rules reduce operational problems.
ORGANISATIONAL CHARTS
Organizational structure is formed and displayed by various ways. Organizational charts are generally used for providing a picture of organization at a glance. They are indicative of level of authority, relationship (as it is related to each other’s duties and responsibilities)
Span of Management
It refers to the number of employees a manager can be able to handle effectively. It has been said that at high levels of management a superior can handle fewer employees than at the lower management levels.
Wide Span:
It refers to a situation whereby the superior supervises many subordinates. It is suitable for employees who are well trained since it is characterized by delegation. The superiors might lose control of the delegation. Superiors can be overworked, there is no close supervision and democratic style of leadership is applied.
Narrow Span:
Refers to a situation whereby each superior has few employees under them. It is characterized by close supervision; the superiors tend to issue many instructions to the subordinates.
The superiors might be underutilized; it is too costly since it also leads to an increase in the number of employees.
Steps in Formation of Organizational Structure
ü  Determination of organizational goals and identification of related activities.
ü  Grouping of activities
ü  Delegation of authority:
FORMS OF ORGANIZATION STRUCTURE
Mechanistic Organizational Structure
Organizational structures can be categorized as mechanistic or organic. A Mechanistic form of organizational structure: This refers to organizational structure based on a rigid formalized system.
A mechanistic organization is characterized by the following structural factors:
ü  High degree of specialization
ü  Managerial hierarchy has many layers.
ü  Narrow span of control
ü  Centralized decision making
ü  Rigid hierarchy of authority
ü  Characterized by orders and written instructions.
ü  Centralized authority
ü  Long chain of command
ü  Suitable for relatively stable organizations which are not influenced by technological, product and market changes. 
An organic organization is characterized by the following factors:
ü  Degree of work specialization is low.
ü  Departmentalization is loose.
ü  Managerial hierarchy has few layers.
ü  Span of control is wide.
ü  Decision making is decentralized.
ü  Chain of command is short.
ü  Organizational structure is flat.
ü  Suitable for organizations experiencing changes such as technological, market and product changes.
ü  Delegation of authority,
ü  There is decentralized decision making
ü  Jobs fairly defined with few orders and instructions
ü  May consist of work groups working independently but reporting to the top management. In this case there is freedom to make decisions.
ü  There is a loose structure which is subjected to changes frequently
Bureaucracy
This is a form of structure introduced by Max Weber, a German Sociologist. He came up with bureaucracy as an ideal form of organizational structure. This system is characterized by detailed policy, rules and regulations. It is dysfunctional for the following reasons:
ü  The model is highly rigid, that creates inflexibility in the organization. In the present scenario situational aspects has a higher chance of success.
ü  Weber’s model emphasises on rules and regulations that tend to become an end in itself. This promotes delays and has a tendency to promote red tapism.
ü  Bureaucracy promotes politics in an organization. This system tends to serve interests of few elite personalities.
ü  Specialisation has been recommended in the bureaucracy model. Specialists have self-serving tendencies. This at times overlooks the general interests of the common employee in the organization.
ü  The model is detrimental to personal growth due to high demands on an individual to conform to the system, which is rigid.
ü  It is impersonal in nature
ü   It is suitable only to large organization where changes are slow
ü   There is no consideration for inter personal and mutual relations. It is highly bureaucratic.
FUNCTIONAL DESIGN
  • Most common. Employees are grouped together according to similarity of tasks, skills or activities E.g. sales personnel allocated in the marketing department, engineers in the research and development department, accountants in the finance department etc.
  • Commonly used in small to middle sized organizations with few products or where there is need of a high level of work specialization.
Merits of Functional Design
  1. It leads to efficient utilization of resources. by grouping common tasks together economies of scale are possible.
  2. In depth skill development more intensive training of members is possible within departments due to the similarity of knowledge.
  3. Clear career path; employees have a clear understanding of job requirements and paths that will lead to promotion.
  4. Strategic decisions made at the top. A centralized decision structure facilitates unity of direction as top management provides coordination and control to the organization.
  5. Enhance coordination within functional units:-common backgrounds of members within a department facilitate communication and coordination.
Demerits
  1. Slow decision-making. Centralized decision making delays decision making process in the organization.
  2. Less innovative;
Members may become less innovative because they forecast mainly on departmental goals rather than the overall organizational goals.
  1. Poor coordination across functions-members of each department may feel isolated and even hostile to those in other departments.
  2. Limited management training:
While functional departments excel at training members to save problems related to specific skills they do poorly at developing broader.
  1. Management skills:
Top management is required to have an understanding of how departments can be linked together effectively. Training and experience in one department does not provide this.
DIVISIONAL DESIGN
Should be implemented when the organization growth is accompanied by expanded production lines, more customers or geographic expansion, production, customer or geographic divisions may be created to improve coordination of organizations activities.
a)      Product Division.
In a product division each unit is responsible for single product and a group of related products. Division by product is usually created where products or group of products is a production process and marketing methods that are different from the other products in the organization.
b)      Customer Division.
When the organization sells products to diverse group of customers, customers division may be the appropriate design. a single product may have diverse customers or managers may believe there are group of customers with special needs to be met. By instituting a customer division a close relationship can be established between a division and its customers.
c)       Geographic Division.
Large organizations that distribute their outputs nationally or internationally often develop divisions based on geography e.g. multinational corporations.
Geographic division is advantageous when it’s necessary to locate facilities close to customers who may have differences in regional tastes and needs.
By creating geographic division the organization can facilitate coordination of activities in each reg

Merits of divisional design
  1. Easy adaptation to unstable environment. Since each division is relatively small it can adapt more easily to changes in product development; customers or geographic regions. The decision to change a product for example does not have to be applied across the divisions.
  2. High customer’s satisfaction-customers receive more attention under a divisional design because there are a greater tailing the product to customer needs and wants.
  3. High task coordination:
Employees tend to identify more with a product than with the specific developments to which they are assigned as a result there is more communication and team work across the department in the division.
  1. Clear performance responsibility:
Each division can be made a profit centre thus permitting assignment of land specific objectives to be achieved.
Top management can access performance of each division separately to determine where success or failure has occurred.
  1. General management training:
Divisional managers learn how to control and coordinate activities among several departments within the division hence top manager can be trained through job rotation to head various divisions. This exposes them to broader managerial experiences required at the top level management.
  1. Facilitates decision making at divisional level.
Demerits of divisional design.
  1. Inefficient use of resources:-
This is because there is dispersion/duplication of resources across divisions.
  1. Focus on divisional objectives:-
Members of the division may focus on divisional objectives rather than broad goals of the organizations. This makes coordination across divisions difficult.
  1. Loss of control by the top management:-
The top management may loose control of divisions the division may become radically different in their operations such that to impose a rule or regulation by the headquarters may be difficult.
HYBRID DESIGN.
This type of structural design has both divisional units and functional departments.
The functional departments are centralized and located at the cooperate headquarters
E.g. a company may have the human resource department located at the headquarters.
The department will service all other divisions/branches by carrying out recruitment, training and maintenance of employee’s files. In doing so the organization is able to eliminate the need of entire human resource staff.
This type of design work best where each division or branch of the organization has departments similar to those of other branches. Banks are examples of organizations that frequently use hybrid design.

Merits of hybrid design.
  1. Simultaneous coordination across and within divisions can be achieved. Centralized functions enable coordination’s across divisions by establishing                                          activities which directs each division towards a common purpose.
  2. Integration of goals with objectives:-
 Hybrid structures provide autonomy for division/branches to modify their objectives based on unique situations or circumstances they face. However, a centralized function serves to generate awareness of the corporate goals among the divisions/branches.

  1. Adaptability and efficiency of branches:-
The divisional units/branches are able to adapt to the opportunities and constraints of their environments.
Demerits of hybrid design.
  1. Leads to slow response to exceptional situations when a branch is confronted with a situation which is unique the resolution must be obtained from the headquarters. This can result in delays and inefficiencies as the branch could be better equipped to handle the problem.

  1. Conflict between headquarters and divisions/branches functional departments at the headquarters often does not have supervisory authority over divisional/branches activities. This may lead to conflicts between divisional and functional managers at the headquarters.

  1. Administrative overheads of functional departments at the headquarters have the tendency to grow as staff is added to assist in the control of divisions/branches. This may lead to excessive costs to the organization.

MATRIX STRUCTURE
Matrix is a unique structural design because it implements functional and divisional structures simultaneously in each department. The result is a system characterized by employees in each department being supervised by two bosses i.e. a system characterized by employees in each department being supervised by two bosses i.e. a system of dual authority. One basis is the functional manager located at the corporate headquarters while the other boss is divisional manager. The functional and divisional manager has equal authority within the organization.

Where technological and product changes occur at a fast rate and co-ordination between functional and product department become critical, matrix system is recommended. In matrix system attention is paid towards co-ordination of various functional activities including product innovation.
President heads the operation balancing dual chain of command. The functional and product managers, who have equal authority and status, have the same subordinates reporting to them. Finally the lower level managers and skilled specialists report to both functional and product managers.
A unique characteristic of the matrix structure is the dual reporting system due to dual hierarchy that often creates problems and tensions for employees. The violation of unity of command principle is a weakness of this system.
Projects of specific periods also function under the matrix system. The project managers are generally responsible for overall direction and integration of activities and resources related to the project. They are responsible for completing the project within time frame and resources. They are also responsible for integrating the efforts of the functional managers to accomplish the project and directing and evaluating project activities.
Hybrid Structure
It combines both the functional and product based structure, functions that are critical to each product are decentralized while other functions are centralized. Command is exercised while there is also freedom in the organization. This enhances productivity.
TECHNOLOGY IN ORGANISATIONS AND EMERGING TRENDS
Some of the emerging trends include the following:
v  Globalisation- It refers to the elevation of local concepts to the global plane so that organizations are influenced by international concepts even when they are operating locally. The influence is in the areas of strategy, workforce, production among others among others.  In other words it leads to formation of a learning organisation, which is characterized by creating, gaining and transferring the knowledge, and thus constantly modifying the organizational behaviour.
“Globalization occurs when an organization extends its activities to other parts of the
world, actively participates in other markets, and competes against organizations located in other countries.”
v  Telecommunting/ teleworking- this refers to the concept of working from home usually through a computer connection to the office. As a result of this there is need to evaluate employees on another basis and not on the amount of time they are physically present in the organization. It increases employee flexibility and also reduces costs for employees.
v  Business ethics- organizations have to adopt ethics in their dealings. This is reflected in how the organization deals with the various stakeholders such as employees and the customers.
v  Emerging employment relationships – the management now needs to consider that employees are not mechanical. It is important to maintain a working relationship with employees whereby there is motivation, freedom and delegation of authority. It is no longer workable for the management to ignore these needs of employees if it has to get the most out of them.

v  Changing workforce-the workforce today has been influenced by a number of factors, chiefly demographic factors such as age, gender, location and other new factors. Today organizations are experiencing a changing workforce and the management has to adopt workable strategies to get the most out of such workforce. Immigration rules have become relaxed and now it is easier for employees to travel to another country to work. Employers therefore have to deal with varied cultures in the organization and the integration of such to avoid dysfunctional effects. Employees today also have preferences like the need to stay closer home and employers have to make a provision even to have some employees work from home.

Furthermore, there is also a shortage of employees in certain sectors, increased unemployment hence many potential candidates. Where necessary, the employers are also outsourcing services even abroad and this is a new trend that the management ought to know about.
Aspects of workforce diversity in organizations include the following:
Religion, occupation, marital status, first language, parental status, working style, education background, experience, personality, race, tribe, etc. diversity presents both benefits and challenges within an organization. It can lead to better customer service,can be a competitive advantage in handling complex issues since there is a large pool of ideas and human resources. Negative effects include perception issues, organizational politics, can be a potential source of conflicts in an organization and also women face challenges in seniors position as a result of cultural beliefs.
v  Knowledge Management
Knowledge management is a structured activity that improves an organization’s capacity to acquire, share, and utilize knowledge for its survival and success. Organizations rely on knowledge in making decisions and it is important to have proper mechanisms for knowledge management. Organizational culture has been mentioned as being associated in a way to knowledge management. There are key concepts on knowledge management that should be noted:
There are three basic elements of knowledge management: Knowledge acquisition, through methods such as experiences shared in various instances;  Knowledge sharing which refers to the process of sharing such knowledge with the community, friends or family; knowledge dissemination which refers to increasing awareness of the available knowledge.

v  Information technology and OB
It has changed many aspects of organizations today, having come with both functional and even at times dysfunctional effects on the organization.
ü  Effect on the nature of work
ü  Effect on employee culture
ü  Methods of working
ü  Communication
ü  Decision making can now be aided by technology
ü  Impact on employee relationships
ü  Effect on the productivity- leads to increased productivity.
ü  Technology provides the physical and economic resources with which people work.
ü  It has also led to creation of virtual teams whereby people have teams that work online and not meeting physically. However, these miss the opportunity of socializing in an organization setting.
MANAGING TECHNOLOGICAL INNOVATIONS:
v  Creating a dedicated team
v  Managing conflict
v  Developing business strategy
v  Developing a system of getting feedback
v  Encouraging innovation and creativity from employees
Managing Organizational Conflicts
Meaning of conflict
Organizational conflict can be defined between two or more organizational units (individuals or groups) resulting from perceived or real efforts by another party to interfere with the achievement of a goal. Thus organizational conflict can be defined as disagreements in the organizational settings i.e. between individual employees, work groups or departments.
Views on Conflicts
  1. Traditional/ classical view
  2. Modern/ current view
There are two views on conflicts as above.
1. Traditional/classical view
This view holds that conflict is harmful and unnecessary. Early managers and classical management theorists generally thought that the appearance of conflict was a clear sign that there was something wrong in the organization they believed that conflict would develop only if management failed to apply sound principles in directing organizational activities.
2. Modern/current view
This view holds that conflicts in organizations are inevitable no matter how organizations are managed or operated. This view still holds that too much conflict is however dysfunctional i.e. it can harm individuals and impede the attainment of organizational goals. But some conflicts can be functional because they make managers to operate more effectively. Conflicts can lead to search of solutions thus they are often an instrument of organizational innovation of change. From this perspective the task of managers is not to suppress all conflicts but to manage them so as to minimize their harmful aspects and maximize their beneficial aspects.
Types of organization conflicts
Conflict within individuals
This type of conflict occurs when an individual is uncertain of what work he/she is supposed to do or because of certain pressure of work on the individuals.
This type of conflict influences the way individuals react to other conflicts e.g. an individual experiencing deep inner conflict may react to routine organizational conflict in a disruptive manner.
Conflict between individuals
This type of conflict may arise due to personality differences or professional backgrounds as influenced by individuals’ values and beliefs.
Conflict between individuals and groups
Frequently this type of conflict relates the way in which individuals’ deals with pressure of conformity imposed on them by the group members. An individual’s deal with pressure of conformity imposed on them by the group members. An individual may be punished by the work group for failure to meet group productivity norms/goals e.g. failure to meet departmental goals.
Conflict between groups in the same organization
This type of conflict may arise due to differences in group goals e.g. differences between finance and staffing committee or differences between marketing and finance department.
Conflicts between organizations
This type of conflict has been considered an inherent and desirable in the economic system of a country. Such a conflict may lead to development of new products, new technologies, more efficient utilization of resources, lower prices etc.
INTERGROUP CONFLICTS
Intergroup conflicts refer to conflicts between groups in an organisation.
Stages in Intergroup Conflict
Organizational groups (intergroup) conflicts develop in stages namely:
v  Antecedent conditions- refer to the sources of conflicts which could be factors such as role ambiguities, competition for scarce resources among others.
v  Perceived conflict- at this point the interest groups become aware of the source of the conflict.
v  Felt conflict- the perceived affects the feelings hence causing some tension between concerned groups.
v  Manifest conflict- the felt conflict becomes expressed in some action by one or more of the involved parties.
v   Conflict resolution of suppression- the behaviour manifested gets controlled
v  Conflict aftermath- the consequences of the conflict.

Sources of Inter-Group Conflicts
The following are some of the major potential sources of conflicts in organizations:
a)      Aggressive Nature of Man
A man is aggressive in nature and seeks expression of his aggressive impulses. Some conflict in organizations stems from the normal need of some people to find outlets for their aggressive impulses.
b)      Competition for Limited Resources- such as money and manpower.
c)       Clashes of Values and Interests- due to differences in value and interests of various groups
d)      Antagonistic Roles- when different groups occupy different roles which are antagonistic to each other.
e)      Drives for Power (Political Manoeuvring)- may arise out of the desire of various groups to take charge of new responsibilities.
f)       Poorly Defined Responsibilities
When job responsibilities are for example ambiguous, conflict may arise from disagreements about which groups have got certain responsibilities over certain tasks.
g)      Introduction of Change
Major changes in the organisation such as mergers and acquisitions are likely to cause conflicts in the organisation.
h)      Distortion of communication.
i)        Attitude and value difference.
Causes of organizational conflict
  1. Communication problems; poor communication may lead to misinterpretation of information which results in a conflict.
  2. Resource sharing: The need to share scarce resources e.g. money, space, human resources, time etc. the relations between groups can be affected by the degree to which organizational units use a common pool of resources. Inadequate resources can also lead to strained relations between organizational units.
  3. Incompatible goals: Difference in goals between organizational units e.g. sales department may try to lower prices to attract customers while production department may want higher prices to meet manufacturing costs purchasing department may also want to hold large quantities to lower unit cost of procurement while finance department may want low inventory to have more capital left for investment.
  4. Task interdependence: Interdependence of work activities in the organization. This occurs when two or more units depend on each other to complete their tasks. Such interdependence may lead to tension between units involved e.g. when one unit delays or fails to perform as expected.
  5. Task ambiguity-
  6. Conflicting reward systems
  7. Differences in values  and work orientation among individuals
  8. Superiors autocratic leadership style
  9. Lack of effective communication by managers leading to wrong actions
  10. Differences in educational/ professional backgrounds etc.
Methods of managing conflicts
Conflicts management methods through interpersonal relationships
The following measures should be taken to prevent conflicts between individuals
a)    Use of force
The manager may compel one party to accept certain solutions. The party which is overruled may not accept or agree with the solutions but accept the decision of his boss. This type of conflict is likely to recur since its root causes are not addressed.
b)   Avoidance/withdrawal:
It involves withdrawing from or avoiding the person with whom the conflict exists. The conflict is reduced but the original cause’s remains. Such a conflict is likely to recur.
c)   Smoothing:
Used when a manager attempt to portray an image of being one big happy family.
When smoothing is used a manager attempts to provide peaceful cooperation by presenting an image “we are one big happy family”
With this approach problems are rarely permitted to come to the surface but the potential of conflicts remains. Problems are smoothed away but not really solved. The conflict is likely to recur.
d)  Comprise:
Under this method neither party gets all it wants. Each party gains only a portion of its demands. The manager uses the principle of give and take to solve a conflict.
e)   Mediation:
A third party comes in a dispute existing between two parties with the objective of helping them reach an agreement.
The mediator only recommends/ suggests and keeps the parties talking with the hope of reaching an agreement.
f)   Arbitration:
Is the process by which a dispute is submitted to a 3rd party to make a binding decision. The arbitrator is given authority to act as a judge and the decision he makes is final because the parties involved agreed in advance that it will be.
g)   Rules and regulations:
Rules can be used to change the behaviour of other managers may require that the conflicting parties go by the existing rules and regulations of the organization.
h)  Re-assignment:
An individual may be re-assigned to another organization unit to avoid inter-personal conflict.
i)   Using the person higher up with more power and authority
The conflicting parties may be referred to a senior manager with more part and authority to overrule them. 
Conflict management methods through structural changes
Re-structuring involves breaking up old work teams and departments and reorganizing them so that they have new members and responsibilities. This involves:
  1. Modifying and integrating objectives of the groups with different view points
  2. Changing organizational structure. Authorities and responsibilities should be clarified to conflicting parties.
  3. Rotating members between groups i.e. transferring members from one group to another or from one department to another.
  4. Bringing in new managers from outsider to bring a “shake-up” in the department or the organization. People with totally different backgrounds values and management styles may stimulate the work groups or departments through new changes
  5. Selecting appropriate managers who are not authoritarian and ready to accommodate the views of others.
Avoidance:
This strategy involves a general disregard for the causes of the conflict and the person might diplomatically sidestep a conflicting issue, postpone addressing it till later, or withdraw physically or psychologically from a threatening situation. Avoiding mode is used when the individual is both unassertive and uncooperative –that is, the person has a very low concern for his own and his opponent’s needs.  The individual follows the following three methods
a.       Non- attention: The manager totally avoids or ignores the dysfunctional situation. Individuals tend to “look the other way” or disregard hostile action in hopes that the situation will resolve itself in time
b.      Physical separation: It involves moving conflicting groups physically apart from each other. The rationale is that if the groups cannot interact, conflict will diminish.
c.       Limited interaction: Groups are allowed to interact only on formal situations.
Avoidance style can be very beneficial under the following conditions:
ü  When the issue involved in the conflict is trivial,
ü  When more pressing issues are to be handled by the individual with a limited time frame.
ü  When one’s power is very low and there is no chance of satisfying one’s concern
ü  When more information is needed to make a good decision
ü  When someone else can resolve the conflict more effectively
ü  When you require time to regain more strength and look into different perspective
Accommodation:
Accommodation is a negotiation style where one party is willing to oblige or adapt to meet the needs of the other party. That party that accommodates loses and the other party wins. Accommodation is useful for negotiation on minor matters. The negotiation parties may not look for creative, new solutions. Accommodation might take the form of selfless generosity, or obeying another’s order rather unwillingly or giving in to another person’s point of view. In all these cases, the individual neglects his or her own concern to satisfy the concerns of their other party. There is an element of self- sacrifice. Accommodating is useful in the following situations:
ü  Where the individual realizes that he or she is wrong
ü  By yielding, the person indicates to the other conflicting person that he is reasonable
ü  When an issue is much more important to the other person than to the individual
ü  By being accommodating, the person maintains good will and a cooperative relationship and also build social credits so that the other person gives in when a later issue becomes important to this individual.
ü  When preserving harmony and avoiding disruption are especially more important
ü  When continued competition would only damage one’s cause because one is outmatched and is losing.
Competition:
Competition occurs when one party negotiates to maximize its results at the expense of the other party’s needs. Competition leads to one party gaining the advantage over the other. One party wins while the other party loses. Although it is quick and can be used as counter against another person, this option usually produces a win - lose result. Competing is a power oriented mode of resolving tensions and one uses whatever power one has or can muster such skills, knowledge, abilities, rank being well- connected etc to win.
Competing is useful in the following situations:
ü  When the resources are limited and the system has to be pruned
ü  When quick and decisive action has to be taken during emergencies
ü  When one has to take unpopular decision such as enforcing discipline, unpopular rules, cost cutting measures
ü  When issues are vital to the survival of the company where one is aware of the right solutions.
Thus, while competing mode is useful in certain situations, people have to be careful not to surround themselves with yes- men and not to foster ignorance and duplicity in the system. People low on this mode can learn to use their power more and enhance their own as well as their organization’s effectiveness.
Compromising:
Compromise is the settlement of differences through concessions of one or both parties. One party tries to find some expedient, mutually acceptable solutions which partially satisfy both parties, though neither is fully satisfied. A compromising stance addresses the issue without avoiding it, but does not explore the alternative in a way that would be completely satisfying to both parties as in the case of collaboration.
Compromising involves “splitting the difference”, exchanging concessions and seeking quick middle- ground solutions.
Compromising is a useful mode in the following situations:
ü  When the goals pursued are important, but not so important that it is worth potential disruptions by taking very assertive or unyielding positions.
ü  When two parties with equal power are strongly committed to mutually exclusive goals such as in labor- management bargaining situations
ü  When interim solutions are required till a more thorough and permanent solutions to the problem can be found.
ü  When solutions have to be arrived at under extreme time pressures
ü  When both collaboration and competition fail to work effectively in resolving conflicts.
Thus, compromise as a conflict resolution mode might offer an easy way out, but is also likely to produce adverse overall effects for the organization if that is the main or only approach to conflict resolutions taken by managers in the organization.
Collaboration:
Collaboration occurs when people cooperate to produce a solution satisfactory to both.
Collaborating involves an attempt to work with the other person to find solutions that would be satisfying to both parties. Here, the underlying concerns of both parties are explored in depth, the disagreements examine in detail and resolutions arrived at by combining the insights of both the parties. A creative solution usually emerges because of the joint efforts of both the parties who are keen on both gaining from the situation without hurting the other.
Collaboration is useful in the following situations:
ü  When two goals of the two parties are both too important to be compromised
ü  When the commitment of both parties is essential for important projects to succeed
ü  When the objectives of the parties are
i)                    to learn
ii)                   to merge insights that different people bring to a problem because of their backgrounds, training, discipline or orientations
iii)                 to work through hard feelings which are interfering with a desired interpersonal relationship
Thus, in collaborating, the intention of the parties is to solve the problem by clarifying differences rather than by accommodating various points of view. Examples include attempting to find win- win solutions that allow both parties’ goal to be completely achieved and seeking a conclusion that incorporates the valid insights of both parties.
Consequences of Organization Conflicts
Organizational conflicts can be functional or dysfunctional to individuals and organizations.
Functional Consequences
Among the major functional results are:
  • May lead to unity between the conflicting parties
  • After conflict new leadership may be brought into the organization because the former leaders may be found unsuitable under the pressures of conflict.
  • May lead to modification of the goals and policies of an organisation so that the organisation adopts more relevant policies and goals.
  • May lead to established ways of handling future conflicts.
  • Motivation of energy available to complete tasks may be increased under the influence of intergroup conflicts.
  • May lead to increased innovation- out of the conflict the parties may come up with new ways of doing things.
  • Each of the parties may get an increased understanding of their position.
  • Groups may achieve awareness of their own identities, each group thereby becoming more limited. They may identify where they belong more clearly.

Dysfunctional Consequences
  • The mental health of some combatants may be adversely affected because of the emotional stress reactions precipitated in such people. Tolerance levels are different i.e. low and high.
  • Intergroup conflict of a high intense nature usually results in a misallocation of organizational resources i.e. time wanted to fight or combat one another, material and personnel are likely to be misused. People waste the organizations time, funds, materials and personnel in carrying out the warfare.
  • Sub-optimization of part of the system occurs when disputants push their own position to the extreme.
  • The distortion of goals may occur as people begin to concentrate their attention on petty issues or embark on fault finding, regarding their opponents instead of pursuing their assigned missions.