Organization Designing in a Nutshell - Case Study Example

Organisation Designing Course & Code Date Table of Contents Table of Contents 2 Executive Summary 3 Introduction 3 Literature review 4 Background 6 Design option used 6 The impact of the design on organization' effectiveness 7 Positive impacts 7 Negative impacts 9 Analysis and recommendation 10 Conclusion 12 Works Cited 13 Executive Summary The modern-day complexity of the business world has forced more and more businesses to adapt rapidly to the rising complexities in order to gain significant levels of survivability. Gore uses the lattice structure to further its vision and mission statement of increasing profitability and fun to stakeholders. The design also allows the employees teams to create new products and to come up with new projects. However, the company’s unique structure formalised the underground lattice, hence harnessing the benefits. However, it is problematic as policy enforcement also becomes a problem for Gore. Additionally, Gore cannot effectively respond rapidly to shifts in two or more of its divisions or geographic units. Gore needs an organisational structure that creates a dual command situation. Further, Gore needs a structure that is capable of creating divisional and functional partnership. Hence, the matrix structures, is suggested. Introduction Organisation design consists of structured and guided processes aimed at integrating the resources of an organisation, such as technology, people and information (Burkus 54-55). The key objective of the design is to increase an organisation’s potential for success, by seeking to align the structure and functions of the organisation to the corporate objectives or an organisation’s mission or goals (Weingarden 2). Overall, the design is made of three elements, namely structure, strategy and systems. Each of these elements has a level of influence on the organisation’s leadership (Burkus 54-55). This paper explores a case study and analysis of the implementation of a lattice organisation. It describes the matrix design deployed at W. L. Gore & Associates Inc. It further reviews how it was selected, created and implemented in the company. The effectiveness and impacts of lattice are further explored and suitable alternative recommended. Literature review The modern-day complexity of the business world is interpreted into the complexity of businesses’ organisation design. Hernaus submits that more and more businesses are being forced to adapt rapidly to the rising complexities, in order to gain significant levels of survivability (3). According to Hernaus, numerous factors such as increased technical change, competitiveness, operation cost and service quality have compelled businesses to seek into new ways of achieving their missions and objectives (3). Tran and Tian take the perspective that inefficient business structures -- mainly divisional and functional -- as well as the emergent business trends have stressed the need for process-based organisations as the critical solution (22-231). Hernaus defines process-based organisation as those run using process paradigm and which are focused on using horizontal perspective of business activities and aligning an organisation system to the processes of the business (3-4). The process-based organisation’s structural design options include pure process structure, matrix structure, functional structure, process structure based on functional overlays, and functional structure based on process overlays (Hernaus 8). Berkovitch recognises two key organisation structures, namely divisional and functional structure (56). In the divisional structure, an organisation is structured as a collection of divisions that are self-contained and where each department assumes full responsibility over projects. In functional structures, businesses are organised as sets of functional department where each department is specialised in one task that it performs on the projects. Weingarden observed that the ultimate goal of an organisation is to attain particular objective or mission (2). In his review, Weingarden concluded that the organisation design should aim to answer key questions such as how information flow should be facilitated within organisations and how organisational behaviour in different sections of the organisation should be coordinated (2) (Figure 1). Weingarden further indicated that an organisational design should be centred on the organisational needs and human resource needs to attain particular objectives (2) (Figure 1). Figure 1: Organisation design functions Weingarden identified several organisation structures to include vertical structure, matrix, lattice structure and open boundary structures (2). In using the lattice design (which this paper explores), Benko explains that business encourages its employees to communicate, interact and be directly accountable to each other (93-95). Additionally, practical product prototyping and innovation is emphasized. According to Burkus, the teams are essentially organised around particular product concepts and opportunities (55). In the process of a team’s evolution, leaders materialise based on the level of the followership they have gained. Background W. L. Gore & Associates, also known as Gore, is an American multinational corporation that deals in the manufacture and sale of fluoropolymers products. It is reputed for quality breathable, waterproof Gore-Tex fabrics. The company operates in the United States, Japan, Scotland, Germany and China (Burkus 55). Gore has also established a reputation for using the lattice organisational design, leading to its being included among the top three firms in the “100 Best Companies to Work For in America” each year, since 1984. The company has also been named severally as the “Most Innovative Company in America” due to its revolutionary lattice organisation structure. Design option used Gore uses the lattice structure, which was first used in the company by Wilbert Gore who had foreseen a situation where a large company could be structured using the same freewheeling design used for small development teams (Burkus 54-56). Much of the design’s management philosophy was anchored in McGregor’s theory Y, which postulated that humans tend to find meanings in their work and that they are self-motivating. The objective of deploying the design for Gore was to leverage the employees’ longing to find significance in their work through an organisational design with a unique structure, strategy and systems. Wilbert Gore was convinced that the lattice design could align the meaning the employees sought to find with the company’s vision. Hence, except for its four key business divisions, Gore does not use the conventional structural elements of organisational design. Rather than use the hierarchy design, it uses the lattice design, which consist of a flat structure where each individual worker in the organisation is networked to every other individual in the company (Burkus 54-56). Using this type of arrangement, all employees who are recruited into the company are treated equally and hence referred as ‘associate.’ Consequently, Gore has no bosses and in their place, employees are expected by the sponsors to constantly ask themselves whether they are working towards the company’s vision or mission statement and what should be their next move career-wise. Sponsors consist of veterans who help the employees to demystify the vision and mission statement, as well as guide them through the lattice. Within the initial few months into employment, the associates are integrated in various teams where they constantly interact with the sponsors. In the course of their training and orientation, the sponsors decide the best teams the associates should fit into. Afterwards, the associates are expected to commit to a certain team and project. Instead of bosses, the associates are in charge of the team they commit to. The impact of the design on organization' effectiveness Positive impacts Lattice method seeks to further Gore’s vision and mission statement to increase profitability and to have fun. Using the lattice organisation design, Gore’s leadership encourages innovation and offers the associates an opportunity to create new breakthrough products. The associates are at liberty to commit to the company’s projects they have a strong conviction they would enjoy, as well as positively contributed to. In this way, the company would make money while the stakeholders would have fun (Burkus 54-56). A range of the company’s products have resulted from the lattice structure. Additionally, the focus of the strategy to create fun projects has contributed to a portfolio of more than 1,000 products while at the same time allowed individuals to show commitment to projects that trust can best use their strengths. The loose structure that characterises the lattice design allows the associates to experiment various projects under the tutelage of their sponsors till they settles on a project their strengths can be optimised, as well as a team that can optimally use their strengths. This allows the employees to be all well-formed (Benko 98). The lattice structure affects Gore’s selection and recruitment strategy. In using the design, the company does not hire and promote leaders directly. Rather, leaders are self-determined through the size of followership. Hence, if the associates select to follow a certain associate, then the associate would be considered a leader (Benko 98-99). This process or creating leaders naturally allows the selected leaders to gain credibility from history of successes, unique knowledge as well as includes others in making vital decisions. Because of the lattice structure, employees who constantly contribute to great ideas are more likely to gain the top leadership positions in spite of whether they carry much decision-making power or not. Due to Gore’s format of becoming a leader, it is expected that only those associates who feel that they can be leaders are rewarded with the position. Similarly, individuals who do not aspire to become leaders are not denounced. The lattice structure the company uses also impacts its organisational systems. Each individual and department interacts directly with the next individual and department. In deploying the lattice organisation design, Bill Gore was convinced that the organisation would have underground lattice structure in spite of the company’s formal systems and structure used in getting information and executing projects. The underground lattice allowed the informal teams to create new products and to come up with new projects. However, the company’s unique structure formalised the underground lattice, hence harnessing the benefits. The lattice structure, which uses informal systems, permits the individual department, team and employees’ strengths to pursue and leverage the strengths of each other. At the same time, while Gore has not directly set up any formal strength-based leadership projects, its unique structure, strategy and design creates an organisation where strength-based leadership materialises and thrives. Overall, organisational design significantly contributes to employee satisfaction and retention. Negative impacts The use of lattice organisation design has some underlying entrepreneurial elements that are problematic to Gore’s vision and mission. For instance, recruiting and retention of valuable employees is an element of talent management that Gore approaches unconventionally, since the traditional elements of selecting and recruiting the workforce are overlooked. Hence, since there is no formal method of attracting and selecting competent workforce, Gore may not hire the best innovative candidates as associates. Instead, Gore bases its selection on groups with like-minded professionals who select collaboratively to work towards the company’s mission (Good and Campell 7). Due to the lattice design, Gore faces problems in establishing realistic compensation parameters that work within the company budget. This is since the lattice design has no capability to form compensation frameworks based on workers’ level or expertise and qualification. Additionally, the design lacks standardisation that can ensure salaries and perks which are externally and internally competitive. At the same time, the significance of performance and compensation bonuses is misplaced as there is difficulty in setting the compensation parameters. Policy enforcement also becomes a problem for Gore. The lattice design replaces the managers (or bosses) with mentors (or sponsors) whose roles are to guide the employees towards attaining the company mission. However, such a structure excludes policy enforcement as each individual is viewed to be accountable to himself. As a consequence, policies that shape traditional workplace are loosely created. Additionally, they become difficult to put into effect hence promoting a chaotic workplace. Gore cannot effectively respond rapidly to shifts in two or more of its divisions or geographic units (Good and Campell 5-7). This is since it cannot determine quickly whether it has the capital resources necessary to procure a licence and to develop a new area or whether it should capitalise on opportunities in another area. Analysis and recommendation From the case study, it is clear that Gore needs an organisational structure that creates a dual command situation. Further, Gore needs a structure that is capable of creating divisional and functional partnership. Gore’s structure should also be focused more on work than the associates or employees (Tran and Tian 22-231). Because of the complexity of managing the projects at Gore and in the businesses world, there is a need for a structure that provides strong technical assistance as well as motivation to innovate across the many areas. Lattice is more focused on innovation than providing technical assistance. To this end, the horizontal and vertical structure, or the matrix structures, is suggested. The matrix structure is selected since it aims to integrate effectiveness and efficiency of the functional and divisional dimensions, as a result creating a dual-command scenario (Kuprenas 51-52). The organisational structure also represents an efficient response to the conditions that Gore faces. In such a case, Gore would have to divide the workforce and employee by functions. Additionally, employees would have to be arranged to be accountable to geographical or divisional managers. In this situation, the senior leader for project A or product A and the employee specialised in project A or product A will be under one senior leader for the project A or product A (See Figure 2) Figure 2: typical matrix structure Additionally, the matrix structure can create the divisional and functional association or partnership that Gore has aimed to achieve. Since the matrix structure is more focused on work rather than the people, it offers a suitable structure capable of addressing the desire by Gore to focus on work than people (Kuprenas 51-52). Compared to the Lattice structure, the matrix structure is more mixed and creates a situation where a kind of lateral authority, communication and influence overlays the traditional hierarchy. The overlay in the structure presents two chains of command, in which, one is a long the project line while the other is a long the functional line. The matrix structure can also create a scenario where strong technical assistance is provided across a range of areas (Kuprenas 51-52). Matrix structure will also enable Gore to respond rapidly to shifts in two or more divisions (Kuprenas 51-52. For instance, in situations where the company shows extreme concern for unforeseen limited capital resources and geographic opportunities, departmentalising the company into financial function on a single partnership may benefit from a situation where the geographic units are integrated with Gore’s finance department. The matrix structure would this time round allow Gore to determine quickly whether it has the capital resources necessary to procure a licence and to develop a new area, as well as whether it should capitalise on opportunities in another area (Janićijevic and Aleksic 28-30). Conclusion The key objective of an organisation design is to increase an organisation’s potential for success by aligning the structure and functions of the organisation to the corporate mission or goals. Gore uses the lattices structure to further its vision and mission statement of increasing profitability and fun. Using the lattice organisation design, Gore’s leadership encourages innovation and offers the associates an opportunity to create new breakthrough products. Additionally, product prototyping and innovation is emphasized. In this way, the company makes profits while the stakeholders have fun. The design, however, has some underlying issues that are problematic to Gore’s vision and mission. Gore faces problems in establishing realistic compensation parameters that work within the company budget. Policy enforcement also becomes a problem for Gore. Gore cannot effectively respond rapidly to shifts in its divisions. It therefore needs an organisational structure that creates a dual command situation. Further, Gore needs a structure that is capable of creating divisional and functional partnership. Hence, the matrix structures, is suggested. Works Cited Good, Michael and Andrew Campell. "Nine tests of organisation design." Ashbridge Business School, 2002. 16 June 2014, < http://www.ashridge.com/website/IC.nsf/wFARATT/The%20Nine%20Tests%20of%20Organisation%20Design/$file/NineTestsOfOrganisationDesign.pdf> Benko, Cathy, Molly Anderson and Suzanne Vickberge. "The Corporate Lattice: A Strategic Response to the Changing World of Work." Deloitte Review 8.1 (2011): 92-106 Berkovitch, Elazar, Ronen Israel and Yossi Spiegel. "A Double Moral Hazard Model of Organization Design." Journal of Economics & Management Strategy 19.1 (2012): 55-85 Burkus, David. "Building the Strong Organization: Exploring the Role of Organizational Design in Strengths-Based Leadership." Journal of Strategic Leadership 3.1 (2011): 54-66 Hernaus, Tomislav. "Process-based Organization Design Model: Theoretical Review and Model Conceptualization." Working Paper Series Paper No. 08-06, 2008. Janićijevic, Nebojsa and Ana Aleksic. "Complexity Of Matrix Organisation And Problems Caused By Its Inadequate Implementation." Originalni Naučni Papiri 1.1 (2007): 28-44 Kuprenas, John. "Implementation and performance of a matrix organization structure." International Journal of Project Management 21.1 (2003)" 51–62 Tran, Quangyen and Yezhuang Tian. "Organizational Structure: Influencing Factors and Impact on a Firm." American Journal of Industrial and Business Management 3.1 (2013): 229-236 Weingarden, Steve."Building the Future: HR’s Role in Organizational Design." SHRM Academic Initiatives: Alexandria, VA Read More