Organisational_Design_and_Structure__a_Survey_Approach_and_Analysis’

Organizational Design and Structure: A Survey Approach and Analysis Unit: Organizational Design Spring 2011 Abstract The purpose of this project was to evaluate the relationship of theory and practice and how one affects the other one. Moreover, this project aimed to investigate how theory suggestions about organizational design (OD) and organizational performance (OP) where as a real 10 companies have been explored and evaluated in order to confirm what literature suggest in regards to OD and OP and the current behaviors of interviewed companies. A constructed interview has been utilized for this project. In total 10 companies have participated in this real life research. It finds that different companies operating within the same sector utilize different organizational design and lead to different performance. This is because of the ability of each company to effectively their resources and manages them appropriately. Moreover, it finds that sometimes companies are aware of their OD weakness but fail to properly provide alternatives to their problems. In overall, companies appear to be very optimistic about their companies; this is a typical when higher level employees are interviewed. There are several recommendations drained from the literature review, which suggest how to improve some of the organizational practices that could lead to higher OP. Table of Contents Abstract 2 Introduction 4 Literature review 5 Discussion of findings 11 Part I - Organization Design 11 Part II - Organization Performance 15 Conclusion and Recommendation 17 References 19 Appendix A: 23 Introduction In total there have been interviewed 10 companies (SME national and international as well as large international companies). 70% of the interviewed companies are SME national, 20% are SME international and 10% large international. Names, sectors, size and life cycle of the interviewed companies are presented below: Table 1 – 10 interviewed respondents As we can see, 70% of the companies operate in the service sector, 20% manufacturing and 10% (or only one organization) is in the retailing. The size of the interviewed respondents fall in four categories, 30% are up to 50, 20% 51-100, 10% 101-200, and 40% of those are over 200 employees. Moreover, 60% of the interviewed age respondents fall from 30-39 years, 20% to 40-49 years and 20% of 50-59 years old. In regards to the interviewed respondents’ qualification, it shows that 40% have high school, 30% university, 20% postgraduate, and only 10% doctoral qualification. Out of 10 interviewed respondents, 20% of them are positioned as first-line employees, 10% middle managers, and 70% directors/CEO; as a result this interview is high qualitative answers. Please refer to Appendix A for detailed Company Profile of the 10 interviewed companies. Literature review Nowadays, sectors are facing rapid changes; those managing current dynamics are becoming a very high challenge for managers. The need for empowering is becoming very high due to dynamics and the complexity of the world’s business (Randolph and Sashkin, 2002). Moreover, organizations should be able to maintain stability while seeking for innovative organization structure to meet the changes of working environmental (Manimala, et al., 2005). As a result, resistance to change is seen as of the most source reducer of OP, which negatively impacts empowerment, for that reason change agents have been overused in order to reduce level of resistance (Chiung-Hui and Ing-Chung, 2009). Such barriers are considered to be very ineffective in SME’s because limits employee participation and as a result would affect the remaining members of the team by reducing their motivation abilities (Labianca, et al., 2000). Self-managed teams are one of the most used OD interventions as a practice to positively impact organization’s success, because of its features such as high self-motivated, less control over them, higher creativity and enable employees to feel part of the team as well as be part of the entire company (Svyantek, et al., 1999). In addition, organizations with high self-managed teams have higher chances for higher organizational performance (Elmuti and Kathawala, 1997). According to Svyantek, et al. (1999) failure to identify, put in place and recognize other OD practices would highly risk the overall organizational success. Further on, one huge problem with self-managed teams is that, once a key member has different opinion and his higher influence over the others would change the scope of the work done toward what is self-interest (Elmuti and Kathawala, 1997). According to Krishna and Akhilesh (2002) teams are a complex and it is better to brake in more parts in order to understand each concept. According to Ping (2010), it is the OD responsibly to promote high cross-functional teams because of their positive features that can affect any organizational performance, due to high diversification of the members their knowledge, functional working experience and ability to access wide range of information. On the other hand, Ainamo (2007) points out that lack of coordination between different functional departments of an organization would risk further more the sales and other desired outcomes by an organization. Moreover, Ping (2010) confirms that Failure to recognize cross-functional teams would decrease the value chain of an organization because of the high differences and expectations from input, conversional and output processes which failure to have effective experience would highly affect its sales, profits, and future market position. In short, value chain is the most complex issue for which failure to understand it would increase problems for an organization. OD is based on structure of an organization. Literature suggest that there are differences of flat and tall organizational structure by stating that flat structure are considered as more efficient because following features: * Less authority positions * More freedom * Easy communication * Less dictatorial * Fast and focused decision-making (Garzo and Yanouzas, 1999). This does not necessary mean that one has higher effects than the other one in regards to employee performance, further on, it showed that there is no major difference linking both organizational structures. On the other hand, Hummon (1970), states that flat and tall organizational structure do matter and there are several differences between the both structures, stating that flat structure enables easy access to information, enable face-to-face discussion, easy communication and faster in decision-making process, on the other hand, tall organization access of information takes longer, higher challenges between business units and departments, slower decision-making processes, qualification, access to more information, higher chances for attracting new skills (Hummon, 1970). According to Maxwell and Steele (2003), high commitment of staff toward higher involvement of employees in an ongoing project is relatively a challenging task, because it involves efforts, new experience, and diversified qualification, ability to work in groups, effective communication and so forth. Effective communication which plays a major role in organization design, because it leads to overall satisfaction of staff and clarify its organizational structure. On the other hand, sometimes organizations are not aware of the role of the communication on OD, communication is not just sharing of documents, conversations, meetings, and so forth, but communication has huge role on coordination between value chain in order to reach the targeted goals (Santra and Giri, 2008). More particularly, Smith (2001, p361), states that “effective communication is a primary requirement of effective implementation but it does not guarantee the effectiveness of implementation.” Meaning that, organizational structure must be well defined and clearly communicated. Moreover, clarifying a job description is not just to list several factors, but it is the ability to evaluate and identify any major problems that could be associated in a practice do to some tasks do not correlate with some others (Breaugh and Mann, 1984). OD is a complex issue, thus, failure to firstly identify job characteristics and match with the job description would reduce employee commitment in a task (Crispin, 2004). On the other hand, Hawthorne (2010) makes a distinction between identifying and implementing job description with employees, by stating that any identification should be an continues process by modifying, updating, evaluating and so forth. OP is measured through application of several impacts of major practices such as culture and impacts of the leadership styles used (Munley, 2011). Moreover, according to Kasper, et al. (2008), OP is mainly affected by the level of comparative advantages of an organization and its abilities to promote such advantage over other companies. On the other hand, Herrmann (2009) states the importance of having comparative advantages and ability to craft strategies based on such advantages would enable OP boost. Organization structures must be innovated and there are huge differences between radical innovation and incremental innovation, due to each ones features, which failure to recognize the right organizational structure change would impact OD (Manimala, et al., 2005). Moreover, building an attractive working environment, quick respond to employee needs, provide equity and tolerance would differentiate organizations from their main competitors and increase OP. (Beehr and Gupta, 1987; Philips, et al., 2003). Moreover, high brand name reputation encourages and improves employee belonging to the organization (organizational citizenship) leading to increased OP (Yaniv, et al., 2011). In the production site of an organization, it is very important that the organization keeps low defects, waste, and operation cost per unit, failure to do so negatively impacts organization performance (Sowards, 2005; Nash and Poling, 2007). On the other hand, it is organizational responsibility to maintain high productivity, efficiency, product quality, and high sales in order to generate high profits and be able to maintain a good market position leading to high organizational performance (Yamada, et al., 2008). Discussion of findings Part I - Organization Design Empowerment is important because of its major effects to organization structure especially in a very dynamic world. As we can see from the following Graph, 40% of the responding companies provide with an average authority to employees. 30% of companies showed that provide a lot of authority decision while 20% little and only 10% provide a great deal to empower its employees. Graph 1 - Empowerment Majority of companies do fall on “some” and “a lot” category, which means that some companies are aware of the empowering benefits but in the same time lack of full support. Some of the implication on why some companies resist to give authority to make decision is because of lacking trust, ineffective communication, culture and leadership style barriers (Randolph and Sashkin, 2002). Moreover, self-managed teams play a crucial role on OD because of their ability to act as a team with fewer resources and less managerial control. According to the respondents, it shows that 40% allow empowered employees to self-manage their teams, then 20% of interviewed do provide little and some assistance to empowered employees. Graph 2 - Self-managed teams Literature shows that empowered self-managed teams have higher contribution to organizational benefits, because such teams benefit due to efficiency use of resources and ability to increase productivity. It is important to point out that, in cross-functional team, organizations do experience several benefits due to such structure, because of the high diversification, skills, and so forth. The following graph shows that 60% of the respondents do provide a lot of support to cross-functional teams, because they are aware of the benefits of such practice. Graph 3 - Cross-functional teams However, there are companies which do not directly support this practice due to either lack of the resources and trust or not aware of major benefits of the cross-fictional teams. It seems that interviewed representatives are aware of the importance of the organizational structure. Based on Graph 4, 70% of them responded that have clearly defined their organizational structure. Graph 4 - Clearly defined Organizational structure Similarly, when it comes to clear job description and organizational chart, a similar percentage comes as to the above graph (Refer to Appendix A for Graph 5 and 6). Indirectly, this shows that companies once it is about a research, they try to promote their companies about such actions, where in reality they may have not practice to such extend those practices as they declare. It shows that majority of the interviewed representatives; appear to have a flat structure relatively to size of the organization. Referring to Pie Chart 1, 60% of the companies appear to have flat organizational structure; on the other hand, when asked if their companies have tall structure, results shows that there are companies with the tall structure, meaning that they tall structures have their own benefits when compared to the relative size. Pie Chart 1 – Flat Structure Pie Chart 2 – Tall Structure But, at the end of all, it is not what is about tall or small, it is all about how each company utilizes each structure, because structures are based on factors such as leadership style, culture of company and so forth. Part II - Organization Performance There is a tradeoff between product/service quality and operating costs per unit. There is a positive correlation between both variables, as higher quality as higher costs per unit. Referring to below graphs, it shows that 40% of the companies have high quality increase while 40% also point out that quality has been little increase. On the other hand, it is very interesting to see how costs per unit have not parallel increased. The justification to this is the waste and defects have been proportionally decreased (refer to Appendix A). Graph 6 – Operating costs per unit Graph 5 – Product/service quality Whereas, the relation between total sales and revenue/profits is positively correlated, as sales decrease profit automatically decreases, in most cases even thought this is not always the case. Referring to the interviewed results, it shows that currently companies are experiencing little decrease of their sales (50% of companies), which is normal because of the current financial crises, however it is very interesting to point out how the profit has been distributed differently. The implication to such distribution could be because of the sample operating sector varies, their financial mark-up goals, inability to cope with current trends. Graph 8 – Revenue and profits Graph 7 - Sales Besides all the results, the issues are more complicated when introduced more variables, because sales are affected from many reasons and not only from financial crises, but as well as from company’s ability to cope with competition strategic moves, price changes, sales tactics, new supplying sources, employee satisfaction and so forth. Conclusion and Recommendation Referring to the highlighted results, companies are facing various challenges such as inability to handle rapid external environmental changes, better use of their competitive advantages, and inability to motivate employees properly. Employees are one of the most important resources, thus empowering them would increase company’s chances for high success. Moreover, the empowerment is perfectly addressed if managers utilize the following issues: * Ability to effectively make clear information * Generate freedom through edges, and * change hierarchical judgment with self-managed groups Source: Randolph and Sashkin (2002) On the other hand, companies experience several challenges when it comes to self-managed teams. In a way, their teams have difficulties to match company’s objectives. Moreover, companies should consider the following four major elements of the OD process of self-managed teams: * teams structure * tactical objectives * job characteristics * situational limits (Krishna and Akhilesh, 2002) Another important suggestion is effective use of cross-functional teams. Because such teams are the best option because it involves members from the main departments of an organization. Such as sales and marketing members and their contribution toward identifying sales challenges, it involves production and processes team members which identify production challenges and be able to cope and produce according to sales demands (Ainamo, 2007). Furthermore, according to Chathoth and Olsen (2002) leadership of an organization plays a major role on OD, no matter if that is a flat or tall structure as well as irrelevant to functional or divisional structures. This means that besides each structure features it is the leadership responsibility to manage various resources irrelevant to the structure of the organization. It is important to maintain good culture and leadership, as well as high productivity and sales, but this is done only if an organization is able to maintain superior position of market shares and seeking for opportunities for investing in new market growth. References 1. Ainamo, A. 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(2005) Waste is everywhere but isn't inevitable. Contractor Magazine, Vol. 52, Issue 12, p50-50. 25. Yamada, T., Kitajima, S., Imaeda, K. (2008) Development of a new production management system for the co-elevation of humanity and productivity. International Journal of Production Research, Vol. 18, Issue 4, p427. 26. Yaniv, E., Lavi, O., and Siti, G. (2011) Person-Organisation Fit and its impact on organisational citizenship behaviour as related to social performance. Journal of General Management, Vol. 36, Issue 2, p81-89. Appendix A: Graph 9 - Clear Job Description Graph 10 - Organizational Chart Graph 9 Defects Graph 10 - Waste