The Advantages of Network-Based Organizations
The network-based organizational structure sees organizations making heavy use of outsourcing and IT services to achieve their goals. Network-based organizations also tend to use volunteer labor in an effort to keep costs down and make the organization as streamlined as possible. Using a network-based structure for your business can help you to create an agile and flexible company that is able to respond well to changes in the economy or marketplace.
The goal of the network-based organizational structure is to maintain a small and efficient company that has good relationships with a wide range of suppliers and service providers, rather than a huge corporation that owns and runs every aspect of its production and distribution. For example, a clothing company using the networking structure might only consist of office and sales staff, with the actual manufacture and shipping of its products outsourced to specialist third-party companies.
Outsourcing is usually cheaper than establishing a whole new business unit, as it does not entail any of the initial startup costs that, say, building a factory of your own would. Potential outsourcing partners will usually be in competition with other companies for your business, helping to drive costs down. Network-based organizations tend to make heavy use of free or inexpensive IT communication systems such as email and instant messaging. In addition, use of volunteer labor helps to reduce wage bills.
A network-based structure allows organizations to be flexible, maintaining the ability to change their products and company direction quickly if necessary. For example, a clothing company that ran its own production would need to either modify its existing factories or build new ones if it wanted to branch out into, say, jewelry. With a network-based structure, the company would be able to quickly outsource jewelry production to an existing jewelry manufacturing firm, allowing it to get its product on the shelves far quickly than would otherwise be the case.
Using external services and suppliers allows network-based organizations to draw on the expertise in their fields that those suppliers already have. For example, an established logistics company will likely already know how to ship large quantities of goods in a timely and efficient manner. By contrast, setting up a new logistics department in an existing company would require people with the right expertise to be either trained or hired, a process which would consume both time and money that could be spent elsewhere.