Human Resource and Organizational Effectiveness - Case Study Example

HUMAN RESOURCE: ORGANIZATIONAL EFFECTIVENESS Introduction. The Phillips NV is reputed as one of the biggest companies that deal in the electronics products. Its products are largely categorized into three major groups which consist of lighting solutions, the electronics, various components, computers and other telecommunication products. Its main competitors include big companies such as Sony and Siemens. In the 1980s the company had a workforce of three hundred thousand workers and its presence was held in sixty national subsidiaries. However, in 1990s the company was faced with organizational problems and experienced huge losses. The company was surely being affected by the effects of globalization and we hereby study some of the issues in respect to organizational effectiveness. Environmental Change Organizational effectiveness continues to be used in the modern organizations with managers and the managements employing different models and other rules in creating effective organizations. Indeed, Morgan (1997, p.45) defines such model to be based on the structure and the functionality of an organization. Richard Scott’s (1987, p.120) Organizations: Rational, Natural, and Open Systems notes that between 1900 and 1930s organizations were closed and rationally oriented. Such organizations tend to have focus on internal controls on the organization where effectiveness in such instances is achieved by having specific objectives and goals being set by the company, having structured rules with various roles also being described and closely inspecting and monitoring of such system. In deed, it is worth noting that the management at this level is more inclined towards setting a bureaucratic system which was prevalent in early nineteen hundreds as it was more predictable in controlling the management of the organizations with a prescribed behavioral expectation. However, with advancement in time such rational programs became outdated and developed tendencies of being maladaptive which in turn resulted in incompetent and inefficient work force. As matter of fact, such system of internal control was further faulted and was instead recommended to organizations with low levels of complexity but not of organizations with complex systems. In addition, the system was more appropriate where the environment was certain and predictable which could translate to low levels of competition which calls for lesser flexibility. As a result the organizations structures do not adequately adapt to changes due to the rigidity of such systems. However, this rational system was later replaced by a natural system which was to seek ways in which the work force was to be exploited with respect to winning their minds. Such systems had an inclination towards a presence of an informal setting harboring informal relationships between the workers. Indeed, such systems deviated from formal structures and demonstrated that if the workers became more committed and loyal to organizations they were bound to be more fruitful than when they were subjected to prescribed and rational systems. The open systems that later followed the natural systems were of greater concern where organizations became more inclined towards having stable relationships with their environment. With the environment becoming more challenging the organizations are forced to adapt in interacting with the environment. However, during the 1960s there are variations of this system that existed with some organizations adopting the rational and formally structured system which was mostly suitable for stable environment with organizations having massive production volumes but of low complexity. On the other hand, there also existed the organic organizations which had to adapt to the uncertain environment and thus were forced to specialize in small scale production albeit the work being of high complexity. Philips traditional organization The Philips company was one organization that needed to adopt a design that should have enabled it execute policies and adapt to the unstable environment at the time. Instead the company continued to use systems such as organization being headed by two managers which proved to be disastrous. According to Galbraith (1973, p.60) the Philips Company should have adopted an organic system which not only encouraged innovation but would have been adaptive to environment. With the head office at the time being unable to perform its duties it became apparent that the subsidiaries of the company had to run independently. Competition is one aspect of the environment that should dictate to a company to change its structure to develop competitive advantage. The Philips NV after the liberalization of the European market should have adopted a more open market system void of bureaucracy from its management. Galbraith (1973, p.62) continues to note that such bureaucratic systems are only applicable where innovations are not necessary with no lateral mechanisms being required. However, in our case study the Philips Company was in a complex and innovative sector dealing with electronics and should have adapted to competition with the enactment of General Agreement on Tariffs and Trade (GATT) which brought the liberalization of markets. The environment was not conducive for the top management of the company to be exclusively from one country. In addition, the top management of the company should have been sourced from different countries to attract loyalty from the work force and ensure more commitment that is prevalent in such open systems. Organizational effectiveness becomes necessary when organizations have to adapt to a changing environment. As such organizations are forced to produce different products and different economies of scale and incorporate different managers in the top management of the company. The competing value model incorporates various aspects and the wealth of the different model. For instance, a company such as Philips Company should have reorganized its various national subsidiaries in an internal transformation process which is a prominent feature for an internal process model in organizations to allow it offer competitive prices as compared to what the other companies in Japan were offering. These processes should have included steps such as also adopting the open system model in acquiring output from the environment and restructuring its top management. In essence, the competing values model encompasses various models to help an organization to adapt in a better manner in a dynamic environment where a balance is necessary. In our case study, various competing values are evident. It is common knowledge that the electronics sector thrive on innovation. In adapting to competition and to innovate on products such as V200 recorders, the company required substantial amounts of capital and very great flexibility. At the same time control needed to be exercised as excessive production during the 1960s would have resulted to massive losses for the company. This called for the company to balance on its production to avoid making losses due to the reduced life cycle of its products but at the same time required to invest in R&D due to the technology evolution at the time. The organizations at the time were required to achieve the right balance in order to survive the global competition. The values are incorporated in the four models. The human relations model which requires the employee’s development, the workers participation and team work among the work force. In return, the organization reaps on the commitment and the result of more cohesive and developed human resource department. The adhocracy is also a model which values initiative and adaptation to different prevailing conditions. The end result of such structure is innovation and competitive products. On the other hand, the hierarchy in an internal process model entails values such as stability and rationalized structures which ensure more efficiency and standardization. Finally, an organization is required to have specific goals as well to have an aspect of direction and external positioning while ensuring on its productivity. At the time, the Philips Company was more inclined towards rolling out products in big volumes to recoup on the investment made in a more mechanistic nature in bureaucratic environment. Organizational and Strategic Change It is discouraging to note that the company took to long in reorganizing its structures. With stiff competition and the negative effect created by its mode of its leadership in its national subsidiaries the company took decisive action in 1980s and excised less flexibility. Indeed, a centralized control should also have been reestablished by then to oversee successful marketing of its brands such as V200 all over the world. Thomson (1967, p.35) indeed reconciles the different models in organizational effectiveness by categorizing the different functions in an organization in three levels. The functions were classified into technical, managerial and institutional levels which are fundamental in consolidating and harmonizing the various models. The writer observed that in instances where the production sector of a company is important with the technical level being rigid such a system needs to be rationalized. He also observed that the open systems are more suitable for institutional organizations where output from the external environment is an important ingredient in ensuring creativity. However, with the complexity of the organizations increasing specific models suited for various organizations are becoming necessary. According to the contingency theory by Lawrence and Lorsch (1967, p.49) there is no ideal manner in which the organizations are meant to respond to various issues in the environment. As a result, several models were developed. In the critical attribute model the most important attribute of the organization is developed. For instance in our case study innovation and creativity is the most important aspect of the Philips company. The other tailored model is called the cause and effect model and which entails identifying on those attributes of the company which are especially unique to that company. Further more, we also have the strategy model which tends to focus on the future of an organization. Such a strategy helps the organization to detail on the goals for the company and how best to achieve them. Indeed, developing such goals is one way the organization effectiveness can be measured. The human resource department is important in ensuring a productive work force in any company. As such, there should be harmony between various divisions in the company’s employees and various departments. In our case study it becomes common knowledge that the rivalry that was evident between the sales and productive department was not healthy for the good performance of the company. In dealing with the problem of the dual leadership arrangement Wisse Dekker brought the necessary change by trying to harmonize the two departments. Another action that the CEO should be applauded about is in ensuring the efficiency of lesser production plants while consolidating on some of the national subsidiaries into an international outfit. The Japanese were enjoying better economies of scale and thus could afford too offer less prices and this move allowed the company to be competitively viable. The management in organizations is calling for more integration and mergers in exploiting various economies of scale to offer innovative products at affordable prices; as such the bureaucratic control that existed in the 1960s has fast faded away with the bureaucratic control being replaced by networking and collaborations. The external positioning is also becoming imperative. In our case study the Eidnhoven bureaucracy was still evident in the influence and the control it created during the Van de Klugt era which impeded on any gains made in conforming to borderless-ness in beating global competition. However, a strategic alliance with Matsushita was a good venture to market on its Digital Cassette Disc to impact on the consumer awareness and resource sharing between the two companies. The Eidnhoven bureaucracy was created with the workers being forced to work within the rules in different national subsidiaries of Philips Company. Such companies as Philips did tend to shun a more team work oriented management style. This is the crisis that faces organizations during their mid life (Richard 2002, Para 8).As a matter of fact, in such instances if not corrected the managerial rigidity and bureaucracy can lead to the eventual death of the organization. This calls for rejuvenations and renewal through mergers and acquisitions not forgetting constant managerial overhaul. Richard (2002, Para 9) however argues that there can exist an ideal bureaucracy in an organization. He continues to define such an arrangement to have formal structures which is under rules and regulations. In addition, there is a hierarchy of administration where the lower offices are under subject to the authority of the higher offices. The writer continues to observe that such a system should have an efficient system of choosing the leadership and top management where they are appointed on the basis of qualification. This is where the Philips NV faulted by discriminating on the management selection where all the workers were not subject to formal equality of treatment. Where central organization is present the different subsidiaries should also be given autonomy but should essentially reflect the brand name of the parent company. Conclusion Companies all over the worlds have to restructure on their shortcomings by adopting diverse ways in organizational effectiveness. This calls for changes such as refreshing the management team, making partnerships with other companies and network formation. Indeed, this calls for such companies to have external positioning and also to balance on the competing values to effectively be able to compete in the global arena. This also calls for innovation oriented companies like Philips NV to deviate from bureaucratic leadership and hierarchical relationships and adopt a more fluid and a flexible system. In addition, motivation of the work force and more cohesive human resource Department is important in ensuring the company is geared towards more rationalization and clear specific goals outlined in the various national subsidiaries. Reference List Gailbraith, J.R (1973) Designing Complex Organizations Reading, MA: Addison-Wesley pp.56-76 Lawrence, P. & Jay, W (1967) Organization and Environment: Managing Differentiation and Integration. Boston, MA: Harvard University, Pp. 47-53 Morgan, G (1997) Images of Organization, 2nd ed Thousand Oaks, CA: Sage. Pp. 43-48 Richard, F (2002) Organizational Effectiveness, Structure, and Technology [online] accessed from [August 3, 2010] Scott, R (1987) Organizations: Rational, Natural, and Open Systems Englewood Cliffs, NJ: Prentice Hall, Pp.45-132 Thompson, J (1967) Organizations in Action New York: McGraw-Hill, Pp.32-37 . Read More