Networking Organization:

Features, Advantages and

Limitations

Introductory Observations of Networking Organization:

Desire to maintain dominance in the global market requires a flexible
organisational structure – to cope with the dynamic changes and
challenges of the global economy. Devising of a networking
organisation is to result of this desire of the entrepreneurs to be
fulfilled in a satisfactory manner.

This type of organisation is much popular in Japan, the U.S.A. and in

India also, where MarutiUdyog, Wipro, Larsen and Toubro etc. are
making use of a networking structure of organisation.

Definition and Chart of Networking Organization:

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Literally, the word networking means a system of trying to meet and

talk to other people, who may be useful to one in one’s work.

In the light of this concept of networking, a networking

organisation might be defined as follows:
A networking organisation is one that is created around a central
organisation (called the hub organisation) that has relationship and
arrangement with some other organisations, to perform functions like
designing, manufacturing, marketing etc. for the central organisation,
on a contractual basis.

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We can depict a networking organisation, by means of the

following chart:

Point of comment:
A networking organisation is called a boundary-less organization; as
the central organisation has relationships and arrangements with
many business partners beyond its own boundary lines. In an extreme
case of a networking organisation, the hub organisation has
arrangements with so large a number of business partners that it, on
its own, does only the co-ordination work.

A networking organisation is also called a virtual organisation, in that

it is nearly a complete organisation; and any slight difference in the
structure of organisation is not important.

Salient Features of a Networking Organization:

Following are some of the salient features of a networking
organisation:
(i) In the central (or hub) organisation of the networking structure,
usually there is an absence of horizontal and vertical boundaries
within the organisation. There is emphasis on cross hierarchical teams
and participative decision making.

(ii) A networking organisation rests on co-operative relationships with

suppliers, distributors and many other business partners. Co-
operation and co-ordination are the hallmarks of a networking
organisation.

(iii) In a networking organisation, the critical management decisions

are with whom to develop business relations, for what and on what
basis. The central organisation management is specially involved in
strategic decisions of developing new relations and abandoning some
old ‘less useful’ relations with business partners.

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(iv) Sharing of information among constituents of the networking

organisation is greatly facilitated by electronic technology, such as
computer, e-mail, fax etc.

(v) A networking organisation is a temporary arrangement between a

numbers of companies. It is created to exploit fast changing
opportunities; and may come to an end when such opportunities
disappear or cease to be profitable at all.
Advantages of Networking Organization:
Following are the important advantages of a networking
organisation:
(i) Motivated functioning in the hub organization:
Because of the absence of vertical and horizontal boundaries within
the hub organisation, there are minimum status and rank differentials.
Hence people work with a sense of enthusiasm; being motivated by the
organisational structural environment.

(ii) Utilisation of best capabilities:

A networking organisation allows different organisation engaged in
performing different tasks for the hub organisation to bring their best
capabilities together. Hence, at least in theory, the performance of a
networking organisation is at its peak.

(iii) Less environmental uncertainty:

Management of the hub organisation faces less environmental
uncertainty; because it has subcontracted many responsibilities to
partners, in the networking structure.

(iv) Flexibility of structure:

A networking organisation possesses the advantage of flexibility.
Depending on environmental conditions, new alliances can be made;
and old dropped out. In a way, a networking organisation quickens
response to changing environmental scenario; and helps in the best
exploitation of opportunities.
(v) Boon for small firms:
Small firms, who otherwise face problems of survival, can ensure their
survival by being a partner of a networking organisation. A networking
organisations is an umbrella protecting the small, who are efficient but
cannot face up to the challenges of the environment.

Limitations of Networking Organization:

A networking organisation suffers from the following
limitations:
(i) Co-ordination – The biggest problem:
Co-ordination among the functioning of business partners is perhaps,
the biggest problem for the management of the hub organisation, in
the networking structure. In fact, each partner has his own manner of
performing without regard to the nature of functioning of related
business partners.

(ii) Problem of reliability:

A networking structure is successful only to the extent that its business
partners are reliable. How to ensure reliability of business partners?
For this, there is no formula devised so far.

(iii) Lack of close control:

In a networking organisation, there is usually lack of close control over
manufacturing and marketing operations etc. by the management of
hub organisation. Hence, there may be poor operational performance
in the networking organisation, produced by the networking partners.

Concluding Observations:
There is no standard format of a networking organisation. There are
no guidelines for organisation and management, in the networking
structure. Critics call networking structure as a ‘hollow corporation’
i.e. a corporation without real value. Still, networking organisation is
getting very popular now-a-days, as a way to dominate international
markets.