Sherman_Computer_Repair

Sherman Computer Repair New Direction Cynthia Russell MMPBL/550 August 16, 2010 Kenneth Hadzinski Sherman Computer Repair New Direction Sherman Computer Repair (Sherman) is a small computer repair company that desires to move into computer assembly to fill the void left by a competitor called Synergetic.  Currently, Sherman has three locations where customers can bring broken hardware for repairs.  Each of the three locations employs a manager, three computer repair technicians, and a receptionist.  Sherman Computer Repair also offers in house repair service, employing 12 mobile technicians.  Sherman's impending move into the computer assembly industry is one that has far reaching implications for the company.  Sherman must hire a new professional workforce and acquire new technological expertise to make this move successful.  This paper will analyze Sherman's external environment, its impact on Sherman's new venture and what changes Sherman must make to its organization structure to make this change a success. Sherman Computer Repair Organizational Design Organizational structure is the division of labor and the patterns of coordination, communication, workflow, and formal power that guide organizational activities. An organization's structure reflects the company's culture and power relationships and can establish new communication patterns and align employee behavior with the company's mission, vision and goals. The organizational structure enables effective communication and smooth workflow (McShane & Von Glinow, 2004). Sherman's challenge is to redesign the work environment and organizational structure to move from the present departmental structure to the new team-based structure, developing new HR policies and programs to help employees make the transition. It is also necessary to improve current employee skill sets and/or hire new employees with relevant skills. A functional structure is a design that groups people because they have similar skills or use the same resources. Functional groups include finance, R&D, marketing, and engineering. All organizations including Sherman begin as functional structures. A functional structure has the advantage of being simple and straightforward, but it has a disadvantage when it comes to handling complex challenges. Sherman like other companies must adopt a more complex structure in order to deal with a new and complex need. Sherman needs a new organization structure because it needs to implement the production of its new product, assembled computers, in a way that satisfies market demand efficiently and profitably (Jones, 2004). Sherman's functional groups structure is a barrier to the acquisition of new technological expertise necessary to make this venture a success, but the company can mitigate this by considering its external environment and pinpointing Sherman's strengths and weaknesses. By employing its strengths and counteracting its weaknesses through better organizational design Sherman can ensure the success of the new venture. Sherman Computer Repair External Environment. Talent Recognition and Barriers to Change An organization's external environment has three components: the remote environment, the industry environment, and the operating environment.  The remote environment is made up of economic, political, social, technological, and ecological factors.  The industry environment is made up of entry barriers, supplier power, buyer power, substitute availability, and competitive rivalry.  The operating environment is made up of competitors, customers, labor, and suppliers (Pearce & Robinson, 2005).    The Remote environment for Sherman Computer is so far the economic, political, social, technological, and ecological factors in the US market. At the present moment the US economy is close to or already in a recession. This represents a weakness for Sherman Computer because economic downturns usually make it difficult to sell personal computers (PCs), the very segment of the technology industry that Sherman is attempting to enter. According to an article by Dan Keeler published in Global Finance magazine, sales of PCs dropped worldwide after the economic downturn that occurred in 2000 (2001). This is a weakness for Sherman which it can overcome through choosing to be a learning organization instead of a hierarchy. A learning organization is one that is agile enough to be able to come up with innovative ideas that can successfully overcome adverse economic conditions in the market (Ghoshal, & Moran, 1996). Another factor in Sherman's remote environment is that of technology. Computer technology is moving and shifting constantly. Newer operating systems such as Microsoft's Vista require computer hardware of ever increasing power to run properly. According to the U.S. Bureau of Labor Statistics, the demand to keep up with constant changes causes the computer manufacturing industry to require a lot more research and development than most other manufacturing operations. This is because innovative companies who are the first to market a new or better product are the ones that garner success for both the product and the firm. Many employees in the computer manufacturing industry are therefore research scientists, engineers, and technicians who constantly work to develop new products or to improve existing ones. Approximately 1 in every 3 jobs in the industry is in a professional with approximately 15 percent of those workers being engineers-primarily electrical and electronics engineers and computer hardware engineers, but there are also a significant number of industrial and mechanical engineers (2008-2009). Although claims about scarcity in all of science and engineering jobs do not appear to be consistent with objective data and analyses, prospective employers such as Sherman Computer should analyze their own internal data to be certain that the salaries and career paths that they plan to offer their scientific and engineering workforce are appealing enough to attract the most talented U.S. science and engineering students (Teitelbaum, 2008).  Sherman must become a learning organization where every employee is encouraged to learn and present innovative ideas using a team approach. This structure is best suited to dealing with Sherman's fast-changing technology environment. In the industry environment entry barriers can be a significant challenge to Sherman computer. As a new entrant the company will most likely face entry barriers because new entrants to a market can threaten the market share of competitors already in the market (Pearce & Robinson, 2005). Typically firms enter into unfamiliar product markets by internally developing a new business from the ground up, by acquiring an existing business, or by a blend of these two basic methods. Sherman has chosen to enter the computer assembly market by building the new business from the ground up. This is a good choice for Sherman because its chosen industry is similar to core existing business. Using the internal development entry approach will enable Sherman to efficiently leverage the company's existing resources into the new business and to lower total costs of the entry. This mode of entry is the ideal method in this situation because it enables the sharing of resources which can give Sherman a better competitive edge and higher post-entry performance (Sharma, 1998). Building a successful business from the ground up requires openness to learning and innovation and a team approach such as companies like Google and Dell have displayed. Sherman would be well advised to design its organization structure where everyone has the opportunity to learn more about technology and works in teams that feel free to present fresh ideas to the company that will improve its competitive position. The U.S. Bureau of Labor Statistics reports that computer and peripheral manufacturing is comprised of a broad array of companies that manufacture computers and computer-related products. There are numerous companies that build computers for home or business use which is indicative of a presence of a large number of competitors in the segment of the industry Sherman plans to enter (2008-2009). This indicates that a great deal of competitive rivalry exists in the industry and Sherman must work hard to produce innovative products that will help establish its brand and differentiate them from their competitors. Again becoming a learning organization with a flatter more team oriented structure can give Sherman the competitive edge because innovative ideas can rise to the top quickly without having to fight their way through multiple hierarchic levels. In Sherman's operating environment, the majority of computers are built by a small group of recognized brands; however there are also numerous small companies that sell their products locally or online (Bureau of Labor Statistics, 2008-2009). This means that a variety of product substitutes are available for customers to purchase giving computer buyers a great deal of power over which brands succeed in the market and which ones fail. Sherman must perform in-depth consumer and market research to learn exactly what customers want and in which price range. This will allow the company to position its product offerings for success in the overall computer market. Once again a flat, team oriented,  learning organization would allow all Sherman's employees to better understand and therefore better serve customers allowing the company to gain and retain a greater share of computer buyers. Computers are very complex products, and thus use a broad range of components, such as motherboards, central processing units, graphics cards, hard disk drives, and power supplies. A number of computer manufacturers make some of these products themselves, while others purchase many such products from other companies and assemble them as part of the computer (Bureau of Labor Statistics, 2008-2009). Since Sherman plans to assemble computers out of parts manufactured by others, its success will in part depend on building good relationships with parts suppliers. Quality parts that are reasonably priced will assure better quality products that will allow Sherman a healthy profit margin. As a computer repair business, Sherman should already have good relationships with a number of parts suppliers, but the company must take care to expand its supplier pool so as not to be too dependent on any one or even two suppliers. The more suppliers Sherman can access the less power each supplier has to negatively influence Sherman through higher prices or bad service. Having a learning organization with a flat team driven structure will allow Sherman to be able to spot supplier problems early so that they can be resolved before they harm the business. Sherman's Options There are several organizational structures that Sherman can choose to implement. These organization structures are from two different viewpoints, traditional and contemporary. The traditional models such as hierarchies and bureaucracies are founded on the assumption that organizations exist in a basically calm environment, with changes occurring only as the occasional disturbance. Contemporary organizational structures such as product team structures and multidivisional matrix structures, however, are based on the premise that considers change a natural state and managing change a continuous process. Modern contingency theory holds that to be successful an organization should design its structure and control systems to fit with its operating environment (Jones, 2004). To meet the challenges of Sherman's operating environment, the company's leaders must differentiate and divide tasks that the organization must perform and then hire workers matched to those tasks. Differentiation has both vertical and horizontal aspects. Vertical differentiation is the way an organization designs its hierarchy of authority. Horizontal differentiation is the way an organization clusters roles into subunits such as functions and divisions (Jones, 2004). Sherman can move from a functional structure to some kind of divisional structure: a product structure, a geographic structure, or a market structure. There are three kinds of product structure: product division structure, multidivisional structure, and product team structure. Product division structure is used when an organization produces broadly similar products that use the same set of support functions. Multidivisional structures are available to organizations that are growing rapidly and producing a wide variety of products or are entering totally different kinds of industries. In a multidivisional structure, each product division is a self-contained division with the operating structure that best suits its needs. A central headquarters staff is responsible for coordinating the activities of the divisions in the organization. When a lot of coordination between divisions is required, a company can use a multidivisional matrix structure (Jones, 2004). Product team structures put the focus on the product being produced. Teams of functional specialists are organized around the product to speed product development. Product team structure is the organization structure most suited for Sherman because the company must transform and grow quickly to deliver a product it has never produced before. Sherman must hire research scientists, engineers, and technicians including electrical and electronics engineers, computer hardware engineers, and industrial and mechanical engineers. These engineers can be the core of the new product team the company needs to deliver the new product (Jones, 2004). The team approach has many advantages. One is that lower level employees gain authority and responsibility, and as a result, decision-making becomes much quicker requiring fewer managers. Team members become much more motivated and participate in the change process more often. In addition cross departmental cooperation increases as department barriers come down. It also allows the organization to more quickly adapt to customer requests and environmental changes. The team approach has some disadvantages that Sherman must take into consideration. The team approach requires the expenditure of larger amounts of time and resources on meetings to coordinate goals rather than on the goals themselves and on productivity. If employees become members of more than one team timing conflicts can become an issue because of increased responsibilities. Because of an increase in decentralization in the team approach, teams may well lose sight of the big picture and commit to decisions that will help their teams but ultimately hurt the organization as a whole (Jones, 2004). These risks however can be mitigated through hiring competent managers with demonstrated experience in being effective and visionary change agents. Such managers will be innovative thinkers who are not only comfortable with fast-changing conditions but relish the opportunity to deal with the challenges that change brings. These change agents will know and exercise the secret of overcoming resistance to change, involving all employees in the change process. As the number of products and therefore the number of product teams increases, Sherman can evolve its organization structure into a multidivisional matrix to more effectively coordinate the efforts of the product teams. Matrix structures group activities by function and product. They are a special kind of structure that is available when an organization needs to deal with new or technically sophisticated products in rapidly changing markets (Jones, 2004).  Matrix structure will be a viable approach for Sherman because Sherman will need to rapidly develop and market new and technically sophisticated products in the rapidly changing and highly competitive IT market. The matrix structure can be advantageous because it enables total communication between all members of the team allowing for a creative cross-over of ideas and the development of a cohesive corporate culture. The focus is on the success of a particular project or product not the department or team. It is a creativity-based approach that works very well for responding to technological and market changes because it is especially effective at communicating the detail necessary for success in both of those arenas. One of its disadvantages is that the design of total communication may be limited to the senior management only. The matrix structure lacks control from the top and also formal bureaucracy which may become the target of resistance for managers (Jones, 2004). Sherman can mitigate these risks by spreading the total communication model across the organization instead of limiting it to management and hiring managers that understand the critical importance of innovation to Sherman's success in the highly competitive computer assembly industry. Conclusion Change is the norm for organizations competing in today's rapidly changing markets. Business leaders in such organizations must have a clear vision of the future, be innovative, be prepared to take risks, and look for new solutions. Sherman needs an innovation-friendly organization structure to foster continuous improvement, and will do well to involve current and future employees in the process of change. Although change including a bold new venture can be lead from the top, it needs to be carried through by employees to be truly effective. Sherman must put in place effective processes and capable employees if it wants to succeed in the computer assembly business. Strategy aligned organization structures such as the product team structure and the matrix structure allow the quick maturation of processes and the level of employee participation that Sherman needs to successfully respond to the frequent changes in its competitive environment and realize the opportunities that these changes represent. References Bureau of Labor Statistics. (2008-2009). Career Guide to Industries, Computer and Electronic Product Manufacturing. Retrieved August 15, 2010 from http://www.bls.gov/oco/cg/cgs010/htm Ghoshal, S& Moran, P. (1996, January). Bad for practice: A critique of the transaction cost theory. Academy of Management Review, 21(1), 13-47. Retrieved 2010 from EBSCO host database. Jones, G.R. (2004). Organizational theory, design, and change. Upper Saddle River, NJ: Prentice-Hall, Inc./ Pearson Education. McShane, S. L.,& Von Glinow, M. (2004). Organizational Behavior, Organizational Processes: Organizational Structure and Design. 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