Organizational Design and Structure - Example

Running Head: ORGANIZATIONAL DESIGN and STRUCTURE Organizational Design and Structure Name Institution Acknowledgements I am indebted special thanks to many people who made it possible for me to finish this report in the face of my numerous responsibilities. My gratitude especially goes out to my family and friends. Letter of transmittal March 31, 2011 Lecturer’s name xxxxx University’s name xxxx University address xxxx Dear lecturer: I am submitting to you this report, due March 31, 2011, that you had requested. The report goes by the title Organizational Design and Structure. The report’s rationale is to analyze Training2Work’s organizational problems and to make a recommendation for its solution. The content of the report majors mostly on organizational design and structure. Incase of any queries pertaining to the report feel free to get in touch with Student name and phone number. Sincerely, Student name Executive summary Training2Work despite its installation of new business software is not able to increase the number of students who enroll for its courses. The problem lay entirely on its organizational design and structure. It is recommended that the organization adopts a matrix structure and does away with its functional structure. Table of Contents, List of Tables & Figures Acknowledgements Letter of Transmittal Executive summary Introduction Assumptions Main body Conclusion and recommendation Reference List Figure (i) Appendices Organizational Design and Structure Introduction Key problems in organizational design perspective A number of people equalize organization design with its organizational structure. Organizational design and structure maybe described as flat and lean. Organizational design entails more than an organization’s structure. It may be described as the process of the alignment of an organization’s mission with its structure. This may mean the observation of the complex relationships that exist between tasks, responsibility, authority and workflow while ensuring that the aforementioned factors meet and support business objectives. Training2Work has a functional structure. The organization is made up of the following functions; sales, marketing and training which are separate and each chaired by a senior manager who reports directly to the CEO. The functional structure has a number of advantages which include economies of scale and efficiency which has paramount functional skills. The main setback of the aforementioned structure is that the functional goals may result in overshadowing the organization’s overall goals. The following bottlenecks experienced by Training2Work that mostly revolve around its difficulty in coordination show that it has outgrown the functional structure on which it is based. Traing2Work has a number of problems among which culminate in their not being able to make course sales. The problems include; lack of proper coordination between divisions which are autonomous of each other and also have an attitude that they are superior to each other. Their lack of inter-divisional coordination has resulted in incomprehensive course information such as their exact dates and time which leads to the questioning whether products are formed to contemporary training courses which appeal to the general public and industry. Training2Work current organizational structure and why it doesn’t work Figure (i) The visual representation that show the underlying processes and activities that exist in an organization is referred to as an organization chart. The chart depicts the positions which exist in an organization, the manner in which they are bundled together and the chain of authority (Daft, 2010). The above organizational chart is a graphical representation of Training2Work organization. Training2Work’s current organizational structure does not work since it has become too large for it. The functions that form its general make up have become too autonomous such that they see themselves as totally different entities and therefore their coordination is strained. Although they have a common organizational goal they seem not to believe in each other’s strength. They end up blaming the inefficiency of a function than to carefully evaluate core organizational problems. Its installation of the new computer system should also be accounted for in the organization structure since it leads to the development of a new working dynamic. The installation of novel IT lays an impact on overall organizational design which includes; improved horizontal coordination, improved inter-organizational relationships, it leads to the development of smaller organizations and also in the development of decentralized organizational structures Solution on Organizational Structure Since Training2Work needs constant coordination to succeed in its functional activities; it should adopt lateral relations that do not avail sufficient integration. The matrix structure should then be adopted which would require the modification of its traditional management practices (Roberts, 2004). There are a number of types of organizational structures. They entail; vertical and horizontal. The vertical types are further divided into functional and hierarchical. This type lays emphasis on control and efficiency. The horizontal type of organization structure lay emphasis on learning. The types under this group include; customer led, flatter and professional. Organization structures have a number of uses some of which include: the allocation of responsibilities and tasks to departments and individuals, the designation of formal relationships that exist between employees, the design of organizational systems that ensure integration and effective coordination. Organizational design is related to learning outcomes and efficiency of an entire organization. The vertical organization structure is mostly designed for efficiency. It is characterized by the following traits; centralized decision making, specialized tasks, few teams and vertical reporting systems. On the other hand a horizontal organization system is designed for learning. It has a number of characteristics which include; shared empowerment, decentralized decision making, relaxed hierarchy, communication that is face to face and many task forces (Stark, 2000). The ‘form’ precedes ‘function’. The strategy of an organization dictates its structure. For instance a business strategy stipulates the organizational design that is made use of. Cost leadership strategy leads to vertical information linkage which has the following characteristics; high control level, effectiveness and cost reduction efficiency. On the other hand differentiation strategy leads to the formation of horizontal formation linkage. It is characterized by; innovation, the promotion of uniqueness and less control. Body Organizational Design Efficient organizational design has the goal of ensuring 3Cs; coordination between units, the creation of organizational outcomes which are desired and the facilitation of communication between units. It is noted that ‘good’ organization structures leads to the delivery of the following promises; effectiveness and efficiency. Organizational design is core to the ability of an enterprise to be adaptive, market driven and innovative. The design approach is guided by a number of core principles: first and foremost it is more than structure, people, processes, technology, culture and systems. Strategy is the genesis of an organization’s design and is therefore driven by and is supportive of overall strategy. Clarity and accountability is dependent on sound organizational design. It is argued that when good people are aware of what they are doing then they are held accountable and as such achieve results. Transitioning to a novel organization requires an integrated take to change management (Albers & Hayes, 2000). Strategic Organization Design The Need: Senior organizational leaders are normally faced with the want to restructure their companies. The need to reorganize is normally created by strategy shift, a change in leadership and changing organizational factors. Organization design is one of the most vital tools that are at a manager’s disposal that allow for their shaping to the right direction. It may be an important leverage point that allows for the directing of energy and attention to particular critical activities that make up an organization. Organizational leaders may lack the necessary tools that aid them in the shaping and structuring of their organizations. Restructuring efforts are normally uneven and unsystematic. Decisions that pertain to reorganization are usually made by the use of insufficient information. There is usually no clear process that it utilized in its guiding. As a consequence reorganization does not result into the desired effects which lead to more problems and confusion within a particular organization. The Process: The Strategic Organization design in made up of four participative processes that afford senior leaders with a well cut out step by step process for the examination of organization structure. The phases are as stipulated; preliminary analysis, strategic design, operational design and implementation. Preliminary analysis entails the collection of the necessary information that should be made use of in making decisions. Structured interviews are done by focusing on the strategy of an organization, they key tasks that are to be undertaken and the prevailing organizational strengths and weaknesses. Operational designs entail the structuring of information flows, supervisory roles and jobs that are operational within strategic decision making context. Implementation entails the transitional management from a current to a new design (Rantakari, 2008). Strategic Organizational Design The main restructuring decisions are formulated in the strategic design phase. The phase entails the following six steps; the identification of design criteria, generation of grouping alternatives, evaluation of group alternatives, and generation of linking mechanisms, impact analysis and new design selection. The strategic design phase is oriented in the development of linking and grouping combinations that support basic work and strategy of a given organization. Before the formulation of designs, decisions are generated by the identification of design criteria. The statements that depict the functions of new designs are formulated. The statements are a reflection of an organization’s strategy, its primary tasks and the current strengths which are normally identified in the preliminary analysis. The next step entails the formulation of alternative groups which are assessed beside design criteria. Coordinating or linking mechanisms for instance integrator departments, liaison roles and many others are duly generated for the grouping alternatives. The aforementioned step depends on the exchange of information between groups which are put in a particular design. The last step is the impact analysis which is conducted to determine the effect of a new design that an organization will have. At that particular instance a final design is selected by the use of ideas and information generated in each step. The final design is often hybrid and has a number of alternatives that should be considered in the process (Thomas, 2011). Who Should Be Involved? The entire process in very participative and involves senior leadership staff members which are the vice president and his direct reports. The process draws largely on organizational knowledge that its senior staff members have. Its success heavily depends on work related needs, sharing of ideas and concerns. The process completion requires a number of days usually one or two of the senior member’s staff participation. The process incorporates a large number of people and not only the people who need immediate restructure. The process can also be beneficial to leadership groups who want to facilitate slight organizational modification. The process can duly aid management in their strategic solidification and in ensuring consistent structure. The Outline of the Process of Strategic Organization Design Objective:    To afford a systematic participative practice that aids leaders structure an organization in a manner that helps realize the general business strategy in conjunction with the day-to-day work. Phase I: Preliminary Analysis            Perform structured interviews that facilitate:                v Strengths and weakness identification of an existing organization                v Clarification of issues that is related to organizational design and business strategy. Phase II: Strategic Organization Design v Design Criteria:  Assess information that emanate from preliminary analysis and hence     generates new design criteria. v Grouping:  Generation of several design options tallied against criteria - Grouping By Output – Product, Project or Service - Grouping By Activity –Work Process, Knowledge or Function - Grouping By Customer – Geography, Market Segment or Customer Need v  Linking: Identification of information flow requirements, selection of ways that     facilitate information flow to rally the requirements and also     evaluate criteria v  Impact Analysis: Analysis of each option to facilitate the feasibility accorded to the     existing leadership skills, work environment and power relationships. Phase III: Operational Design v  Performance of the essential operational homework required to put organization design     and decisions in place v  The design of work charters, information flows and reporting relationships among others. Phase IV: Implementation v Development of the strategic implementation of the new design v Assess the probable resistance to the novel organization v Determine the best way to manage the transition A functional organizational structure has the following advantages; it allows for the provision of economies of scale to exist in its functional departments, it functions very well with the utilization of one or a number of products, it facilitates in-depth skill and knowledge development and it enables organizations to obtain functional goals. They also have weaknesses which include; slow response to environmental changes, it leads to less innovation, it results in poor horizontal coordination between departments, it leads to the view of organizational goals in a restricted manner and it may result into decision overload (Daft, 2010). Divisional organization structure has a number of advantages and disadvantages. Among the advantages are; it is suited to very fast change that might exist in an unstable environment, decentralizes decision making, it allows units to be able to adapt to changes in products, clients and regions, it entails high coordination that transcend functions, it is best suited in large organizations which have numerous products and it ensures client satisfaction since product responsibility and points of contact are clear. It has a number of weaknesses which include; the elimination of economies of scale, poor coordination that transcend product lines, difficulty in standardization and integration across product lines and the elimination of technical specialization and in-depth competence (Daft, 2010). Matrix organizational structure has a number of strengths and weaknesses. The advantages include; the achievement of the necessary coordination that meets dual customer demands, it is suited for complicated decisions that are numerous in unstable environment and accords opportunity for product and functional skill development, it allows for the easy sharing of human resources that transcend products and it is best for use in medium-sized institutions that have numerous products (Daft, 2010). Among its weaknesses are; it needs a lot of effort to ensure power balance, the participants are required to have extensive training and good interpersonal skills, it does not have high working prospects if the people in the organization do not understand it and when they take up collegial than relationships of a vertical nature, it is time consuming since it entails frequent conflict resolution sessions, it needs great effort to ensure that the power balance is maintained and finally it makes participants experience dual authority in which case is confusing and frustrating. Horizontal organizational structure has a number of strengths and weaknesses. The strengths include; the employees in the organization have broad views that pertain to organizational goals, it promotes teamwork and collaboration, it directs people’s attention towards the delivery of customer’s product value, it accords rapid response and flexibility to the changes in customer needs and it improves employee life quality by according them the opportunity to take part in decision making, share responsibility and being accountable for outcomes. The weaknesses include; it may limit the development of in-depth skills, there is difficulty in the determination of core processes that allow people to organize themselves, traditional managers may shy away when they are faced with the decision that requires them to give up power and authority, it may lead to changes in job culture, design, reward systems and management philosophy. Lastly, it needs significant employee training so as to facilitate its use (Daft, 2010). Modular structure has a number of weaknesses and strengths. The strengths include; reduction of administrative overhead costs enables small organizations to gain access to resources and talent worldwide, it enables organizations to be very flexible and responsive to their changing needs and it accords the company economies of scale without large investments in equipment, distribution facilities and factories. Their weaknesses include; corporate culture and employee loyalty maybe weak since employees feel as though they maybe substituted by contract services, it requires a lot of time in the management of potential conflicts and relationships with contract partners, the organization may fail in the event a partner fails does not succeed in the delivery of goods and managers have no hands on control over numerous employees and activities (Daft, 2010). Assumption The adoption of the new organizational structure will immediately and efficiently solve the organizational problems. Conclusion and Recommendation Organizational design is related to learning outcomes and efficiency of an entire organization and strategic organizational design entails a series of steps. Since Training2Work needs constant coordination to succeed in its functional activities; it should adopt lateral relations that do not avail sufficient integration. The matrix structure should then be adopted which would require the modification of its traditional management practices. Reference List Joaquin Coleff (2000).Organizational Design of Multi-Product, Multi-Division Firms. Retrieved 19th March 2011 from http://dee.uib.es/digitalAssets/158/158549_coleff.pdf Roberts, J. (2004): The Modern Firm: Organizational Design for Performance and Growth. Oxford University Press, New York, NY, US. Rantakari, H. (2008): “Governing Adaptation”, Review of Economic Studies, 75, 1257-1285. (2010): “Organizational Design and Environmental Volatility,” Working Paper. Athey, S & Roberts, J (2001): “Organizational Design: Decision Rights and Incentive Contracts,” American Economic Review Papers and Proceedings.  Alonso, R., W Dessein & N. Matouschek (2008): “When Does Coordination Require Centralization?,” American Economic Review, 98, 145-179 Thomas, C. (2011): “Too Many Products: Decentralized Decision Making in Multi-national Firms,” American Economic Journal: Microeconomics, 3, 280-306. Holmstron, B. & P Milgrom (1991): “Multitask Principal Agent Analyses: Incentive Contracts, Asset Ownership and Job Design,” Journal of Law G.M Levchuk, Y Levchuk (2002). Normative Design of Organizations- Part I: Mission Planning, IEEE Transactions on Systems, Vol 32 F.Yu, G.M Levchuk, M. Candra (2004). Congruent Organizational Design Methodology Using Group Technology and a Nested Generic Algorithm D. Stark (2000). Heterarchy: Distributing Intelligence and Organizing Diversity, The Biology of Business. D.S. Albers, R.E Hayes (2000). Information Age Transformation Series: Power of the Edge, CCRP publication. A. Giret & V. Botti (2004). Holons and Agents. Journal of Intelligent Manufacturing. Appendix Figure (i) Read More