Analysis of Airstar Organization Design and Structure - Case Study Example

Analysis of Airstar Organization Design and Structure Name Course Name and Code Instructor’s Name Date Table of Contents Table of Contents 2 Introduction 3 Key organizational design problems within the case 3 Current structure/strategy 5 Why the existing organizational structure does not work? 6 Recommended new organizational strategy/structure 8 Conclusion 11 Reference 12 Introduction This report aims to analyze organization structure and design at Airstar. It identifies current design problems at Airstar and identifies the structure being used by the firm. The report also discusses the reasons why the current structure is not effective. Finally, the report provides recommendation on the appropriate structure for the firm and reasons why the proposed structure will suit Airstar. Key organizational design problems within the case Organization design refers to the way roles, structures and processes of a firm are created to realize the goals of the firm (Hill and Jones, 2009). A good organizational design has a clear outline of authority and responsibility, can flexibly adjust to dynamic business environment, has effective communication channels, encourages cooperation and trust, and ensures cost efficiency. An effective organization design takes into consideration the leadership, decision making and structure, the people, the work processes and systems, and culture (Baligh, 2006). A firm with effective organization design has a leadership team, which is cohesive, and one that has clear priorities and vision (Kogut, Urso, and Walker, 2007). The decision-making and structure of an effective organization design are characterized by clear accountabilities and roles for decision-making (Triplett, 2007). Moreover, they have organizational structure that is in line with the firm’s objectives. People within firms with effective organizational design have the necessary talents for ensuring the success of the firm. In addition, such firms have performance incentives and measures that are aligned to the firms to objectives. The work systems and processes of a firm with effective organizational design are characterized by efficient and effectiveness and have work processes that are executed in a superior manner. Firms with effective organization design also have a culture that accommodates change and one that is characterized by high performance behaviours and values. Airstar seems to have problems of design in terms of leadership, decision making and structure, the people, the work processes and systems, and culture. Airstar lack leadership cohesion as witnessed by conflicts between the vice president of marketing and the controller over merger and acquisition. This is also illustrated by the fact that there are many case of duplication of work where corporate officer have been trying to outmanoeuvre each other (Baligh, 2006). Moreover, the lack of cohesion is illustrated by the fact that communications at the firm are ineffective as asserted by Morgan who says that, “communications are atrocious.” The decision-making and structure of Airstar is also ineffective since the firm seems to lack clear accountabilities and roles for decision-making. From what Morgan says employees at the firm seem to be working up their own job descriptions. Moreover, it is not clear how decisions are made at the firm as illustrated by Robinson question that “How did we ever decide who should handle mergers or acquisitions” and the answer from Morgan that “I guess it just occurred over time that the vice president of marketing should have the responsibility.” The design of Airstar also has problems in terms of performance measures and incentives as since Morgan asserts that his basis of evaluating and appraising corporate executive and goal accomplishment was becoming obsolete. Since the responsibility and authority of different employees at the firm are not well spelt out and written down, there are duplication of work and hence the processes at the firm are ineffective and inefficient. There are also problems with the culture of Airstar (Baligh, 2006). It seems change management at the firm is ineffective since changes and decisions at the firm are said to be made on t5he basis of expediency. It is imperative that from the analysis above, Airstar has design problems in almost all elements of organization design that determine effectiveness of organizational design. Current structure/strategy Organization structure is one of the key determinants of the shape that will be taken by the firm (Hill and Jones, 2009). Organization structure refers to how work teams and reporting relationships are organized. It allows the leadership of a firm to allocate responsibilities and tasks to departments and individuals. It is also essential for formal design of reporting relationship among employees. Moreover, organizational structures allow the leadership of a firm to group people into departments and departments into the ultimate organization. In addition, organization structure helps in the design of organization systems to allow effective integration and coordination (Hill and Jones, 2009). A good organization structure promotes efficiency and effectiveness. There are several organization structures including functional, divisional, vertical, and horizontal and matrix structures. The current structure at Airstar seems to be functional. Functional structure involves grouping together activities based on common function from the bottom of an organization to the top. Under this structure, different functional activities such as human resources, accounting and manufacturing are grouped into departments. From the case, there seems to be several departments at Airstar such as Marketing and manufacturing. This is illustrated by the existence of vice presidents in charge of these functions (Baligh, 2006). Evidence that the organization structure of Airstar is functional can be illustrated by the fact that Morgan says that business tasks at the firm are grouped into similar kinds of work characteristics and are arranged within the firm under a specified suitable executive. Moreover, corporate business tasks at Airstar are led by specified corporate officer. It is thus imperative that the current structure at Airstar is functional organization structure. Why the existing organizational structure does not work? There are several reasons why a functional organizational structure may not work. One such reason is when two functions work at counter purposes. This occurs when two functions have varying priorities and measures (Hill and Jones, 2009). This is one of the reasons that might be plaguing Airstar. As seen from the case, the Marketing vice president and the controller are at loggerhead on the existence of opportunities for acquisition and expansion of the firm. It seems that the marketing department and the controller have different priorities and this might be interfering with the need to expand the firm through acquisition of new firms (Daft, 2007). Functional structure may also not work in a firm when different function within the firm lays focus on their objectives without aligning them to the general goals of the firm (Sun and Zhang, 2011). This often occurs when channels of communication breaks down. At Airstar, functional organization structure is not working probably due to each department focusing on function rather than the general organization. This is illustrated by the fact that there have been many instances of corporate officer trying to outmanoeuvre one another (Baligh, 2006). This unhealthy interdepartmental competition probably arises from the focus of each department on its function rather than the overall good of the firm. Evidence for function focused accomplishment of duties is also augmented by poor communication channels at Airstar as alluded to by Morgan. Functional structure may also not work in cases where processes between and across departments break down and when individual are unaware of their roles. This implies that interdepartmental relationship breaks down and each department seems to strive to accomplish its own goals. Airstar suffers from unclear role and responsibility definition. This is the probable cause of the said duplication of work among different functions within Airstar. In addition, conflicts between different executives such as those seen among corporate officers striving to outmanoeuvre one another could be explained by the breakdown of cross-functional processes within the firm. The functional organizational structure at Airstar is not working probably because of its inability to respond faster to environmental changes (Baligh, 2006). The entry of competing firms such as General Electric and Pratt & Whitney in the market served by Airstar has greatly eaten up its market due to its inability to effect change faster. This has seen the firm take long time to decisively acquire, export, import, carry out more research and or set up additional repair lines that could increase its competitiveness. The less innovation taking place at Airstar could be another reason why the current functional organization structure at the firm is not working (Hill and Jones, 2009). The rapid change of the industry in which Airstar operates requires frequent innovations, which can be attained through research and development. . Innovation is the use of new ideas or current thinking applied in different ways that lead significant change. Innovation can be in the form of product and service innovation: operations innovation, business, and enterprise model innovation. From the case, it is evident that the firm is only contemplating on engaging in research. This implies that no research is being undertaken at the firm and hence no innovations that can make the firm to be competitive are being realized. Moreover, the leadership conflicts being experienced at the firm cannot allow the firm to come up with innovative ways of doing business that can enable it to rapidly adapt to the dynamic business environment in which the firm operates. Recommended new organizational strategy/structure The recommended organization structure that can drive Airstar to success is horizontal organization structure. The emphasis of horizontal organization structure is the reengineering of workflow processes to provide a link between the capabilities of a firm and the suppliers and customers of the firm (Hill and Jones, 2009). This structure will enable Airstar to dispense internal boundaries that are currently hampering cross-functional duties that have been identified hinder effective performance of Airstar business. Horizontal organization structure is touted to be appropriate for new product development. Since Airstar is contemplating on introducing new services at the firm such as additional repair lines, horizontal structure will allow it to do so effectively and efficiently. Some firms like Toyota Motor Corporation used this kind of structure when they were faced with similar problems like those being witnessed at Airstar (Galbraith, Downey and Kates, 2002). The structure enabled Toyota to create a cross functional team that allowed it handle all workflow for development and the launch of new models of automobiles. Thus, horizontally structure will enable Airstar to create a cross functional team that will be composed of experienced employees with distinguished research and engineering of products. In most firms such as Ford, these groups are usually separate and hence hinder cross-functional workflow. The creation of such a group will allow the firm to have two group leaders one with the expertise to develop products and the other with experience to launch new products for Airstar (Baligh, 2006). The team will able to invest more time in learning about customer needs during the product development phase through market research and through talking to customers who seek the firm’s services. The team will thus be in a better position to timely solve manufacturing problems that maybe encountered during product development. This implies that Airstar will be able to make decisions faster and on timely basis using such a team. Thus, the structure will enable Airstar to be organized around workflow processes instead of being organized around tasks. The horizontal structure will also allow Airstar to employ teams in managing everything and will in addition lead to flattening of the hierarchy. A flat hierarchy will resolve some of the conflicts like those being experienced at the firm between the vice president and the controller. Moreover, cases where corporate officers strive to outmanoeuvre each other will be resolved by creation of teams. The use of teams at the firm will also ensure that communication channels are improved at Airstar. The improved communication will reduce time needed to complete workflows. The structure will also allow Airstar management to appoint team leaders in charge of internal team processes. This will help the firm to align the firm’s strategy to its goals. It will also ensure efficiency in various processes being undertaken at the firm (Baligh, 2006). The resulting process efficiency will result in cost reduction and hence profitability of the firm. Moreover, the teams developed will allow different individuals to work together allowing them to be more flexible, take on empowered roles and broaden their perspectives. The structure moreover, will allow contact between the firm and its suppliers and customers to drive performance (Mahesh and Suresh, 2009). This implies that the structure will force Airstar to increase and improve its contact with its customers and suppliers. In case Airstar will be successful in increasing contact with its customers and suppliers, it will be in better position to know the needs of the customer and tailor its services to meet these needs (Hill and Jones, 2009). Thus, the structure will allow Airstar to be more responsive to the needs of the firm. In addition, contact with suppliers will ensure that the firm adopts new ways of carrying out its business (Braha and Bar-Yam, 2007). Horizontal structure will also facilitate rapid organizational learning that will foster innovation. This will ensure that the firm comes up with new products that will allow it to compete with its competitors such as General Electric that have led to deterioration of Airstar’s profitability. Horizontal structure will furthermore offer employees opportunity to share responsibility, to participate in decision-making and be accountable for their decisions. This will avoid cases such as people working up their own job description as what is currently happening at Airstar. This implies that Airstar’s employees are engaged and involved in the activities of the firm. Although horizontal organizational structure is likely to help Airstar to attain its objectives, the firm will have to deal diligently with several shortcoming of this structure (Jacobides, 2007). First, the firm will have to deal with the issue of establishing core processes that are often time consuming and difficult. However, with dedication the firm can overcome such impediment (Mahesh and Suresh, 2009). This could for instance be overcome by setting up a committee comprising of employees from different functions that currently exists at the firm. Another issue that the firm will have to deal with is change in culture, job design, and information and reward system and management philosophy. This could be alleviated by the firm empowering the human resources department to address these issues (Baligh, 2006). The firm may also face strong opposition from traditional managers who may need to cede some powers. This will require that management be involved actively in the process of change and made to understand the need to have such changes. The firm will also need to invest heavily in training its staff to effectively work in teams as advocated for by horizontal structure. For long-term benefits, the firm will be forced to undertake this step. Finally, the fact that employees will be working in teams and be involved in cross-functional workflow implies that employee in-depth skill development will be limited (Hill and Jones, 2009). It is worthy noting that issues that might arise when the structure is adopted can be reduced or alleviated altogether and they do not outweigh the advantages of adopting it at Airstar (Mahesh and Suresh, 2009). Conclusion This report has to analyzed organization structure and design at Airstar. The report has identified that Airstar seems to have problems of design in terms of leadership, decision making and structure, the people, the work processes and systems, and culture. The report has also established that Airstar currently uses functional organizational structure. The functional structure is not suited for the firm because it faces several problems such as varying priorities and measures in different departments; lack of alignment of functional objectives to the firm’s goals; cross functional processes breakdown; unclear role definition; inability to respond faster to environmental changes; and lack of innovation. Finally, the report recommended that Airstar need to adopt horizontal organization structure in order to overcome current problems facing it. Reference Baligh, H. 2006. Organization Structures: Theory and Design, Analysis and Prescription. New York: Birkhäuser Braha, D. and Bar-Yam, Y. 2007. The Statistical Mechanics of Complex Product Development: Empirical and Analytical Results. Management Science, vol. 53, no. 7, pp. 1127–1145. Daft, R. 2007. Organization Theory and Design, 9th Ed. Sydney: Cengage Learning Galbraith, J., Downey, D., and Kates, A. 2002. Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels. London: AMACOM Div American Mgmt Assn Hill, C., and Jones, G. (2009). Strategic Management Theory: An Integrated Approach, 9th Ed. London: Cengage Learning Jacobides., M. G. 2007. The inherent limits of organizational structure and the unfulfilled role of hierarchy: Lessons from a near-war. Organization Science, vol. 18, no. 3, pp. 455-477. Kogut, B., Urso, P., and Walker, G. 2007. Emergent Properties of a New Financial Market: American Venture Capital Syndication, 1960–2005. Management Science, vol. 53, no. 7, pp. 1181-1198. Mahesh, K., and Suresh, J. 2009. Knowledge criteria for organization design. Journal of Knowledge Management, vol. 13, no. 4, pp. 41 – 51 Sun, J., and Zhang, P. 2011. Owner organization design for mega industrial construction projects. International Journal of Project Management, vol. 29, no. 7, pp. 828-833 Triplett, J. 2007. Organizational Design: A Holistic View. London: Lulu.com Read More