Organization Structure simulation 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, but organizational culture is its underpinning.
Organizational culture is the basic pattern of shared assumptions, values and beliefs that govern behavior within a particular organization. Organizational culture is a deeply embedded form of social control. It is the social glue that bonds people together and makes them feel part of the organizational experience. The culture of an organization should be compatible with its structure to ensure organizational success. Many teams fail because the organizational structure does not support them. Teams work better when there are few layers of management and teams are given autonomy and responsibility for their work (McShane & Von Glinow, 2004).
Understanding and addressing the need for alignment of organizational structure and culture with a company’s mission, vision and goals will help business leaders to craft effective strategies for successful change management, enabling them to deal with resistance to change effectively thus increasing the productivity of their organizations. This paper will explore several structures in organization design and organization design choices with emphasis on those that will best suit Synergetic Solutions, the company in the Organization Structure simulation. Company Background
Synergetic Solutions is an information technology (IT) solutions company in the business of system integration—assembling and reselling leading computers brands. It has 300 employees most of whom are in the sales and service departments in five locations throughout the East Coast. Most of Synergetic’s employees have only basic computer assembling and troubleshooting skills, while a few higher-skilled individuals work as the specialists. Two years ago when the system integration market was suffering from stagnation Harold Redd, the Chief Executive Officer (CEO) of Synergetic pursued some ventures in the network solutions business of designing and implementing complex computing networks. He had four of Synergetic’s brightest engineers trained and certified on networking technologies, a tactic which proved very profitable for the company. Recently Synergetic won a contract worth $1. 2 million for designing a network, and contracts worth $5 million are already on the horizon. As a result, the networking solution business is now 20% of the total revenues of the company, which currently stand at $6 million.
Encouraged by the early success of this tactic, Harold Redd has made an important strategic decision to focus on the networking solutions business and raise its revenues to 80% of total sales, which are targeted at $12 million at the end of the next nine months. He has also set quarterly growth targets for revenue and measures of employee involvement such as productivity and absenteeism, based on industry benchmarks. Harold has given you a clear mandate— turn the business on its head and make Synergetic into a networking design ‘hothouse’ from just a computer trading organization within the next nine months.
The challenge of the simulation is to redesign the work environment and organizational structure at Synergetic 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 (Apollo Group, Inc. , 2003). Organization Structures In today’s turbulent business environment where most competitive advantages last eighteen months or less, change is the norm rather than the exception.
Businesses like Synergetic must focus on building learning organizations that are flexible, open, adaptable, and ready to act (Apollo Group, Inc. , 2003). In the simulation as in real life, sometimes structural changes are necessary to meet the needs of rapidly changing market environment. Making one time changes is no longer enough to meet these needs. Organizations must choose flexible structures that allow for continuous improvement even after they put new processes in place. When an organization is small, a sole proprietorship or partnership where face-to-face communication is frequent, formal structure may not be necessary.
As the organization grows larger into a corporation or limited liability company, a more defined structure becomes necessary to facilitate decision making in the delegation of various tasks. Business leaders respond to this need by creating and establishing management procedures and structure to assign responsibilities for essential functions. These decisions and procedures determine the organizational structure within the organization (Jones, 2004). There are several organizational structures that can be implemented by organizations.
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 (Apollo Group, Inc. 2003). 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 an organization’s operating environment, business leaders differentiate and divide workers to match them to tasks that the organization must perform. 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). 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 begin as functional structures. A functional has the advantage of being simple and straightforward, but it has a disadvantage when it comes to handling complex challenges.
An organization needs to adopt a more complex structure when it starts to produce many products or when it confronts special needs, such as the need to produce new products quickly, to deal with different customer groups, or to handle growth into new regions. Synergetic needs a new organization structure because it needs to implement the production of its new product, networking technologies quickly enough to satisfy customer demand. The move to a more complex structure is based on three design choices: increasing vertical differentiation, increasing horizontal differentiation, and increasing integration (Jones, 2004).
Most organizations 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 Synergetic because the company must transform quickly to deliver a product it has never produced before. The four Synergetic engineers recently trained and certified on networking technologies can be the core of the new product team the company needs to deliver the new product. As the number of products and therefore the number of product teams increases, Synergetic can evolve its organization structure into a multidivisional matrix to more effectively coordinate the efforts of the product teams (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 Synergetic 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).
Geographic structures are used when organizations expand into new areas or begin to manufacture in many different locations. Market structures are used when organizations wish to group activities to focus on the needs of distinct customer groups(Jones, 2004). 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 may also be a viable approach for Synergetic because Synergetic is attempting to become a ‘design hothouse’ meaning that the company will need to rapidly develop and market new and technically sophisticated products in the rapidly changing 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).
Network structures are formed when an organization forms agreements or contracts with other organizations to perform specific functional value creation activities. The network approach extends attempts to increase horizontal coordination and collaboration beyond the boundaries of the organization. To achieve this organization will create a network structure by means of subcontracting many of its major functions, such as design, transportation, manufacturing and distribution to other companies, and coordinate their activities from a entral headquarters hub. As a result, parts or a networked organization can be added or taken away at any time to meet changing needs (Jones, 2004). The network approach has many advantages. The greatest advantage of a network structure is that it allows an organization to be competitive on a truly global scale. It allows organizations to draw on resources worldwide and as a result achieving the best quality and price. It also allows products and services to be sold worldwide. It promotes flexibility in the work force.
Instead of paying a full staff at all times, it allows the company to hire staff as needed. As for the permanent workers, there are challenging opportunities and job varieties because the network approach creates a lean structure in which the organization needs less supervision, smaller teams and fewer administrators (Jones, 2004). The network approach has disadvantages as well. One is that because the company subcontracts some functions, managers do not have control over all operations. Managers must rely on contracts, coordination, negotiation and electronic links to keep operations in order.
Another disadvantage is that if one of the subcontracted parts of the organization fails to deliver what the company needs, the entire organization can suffer great losses and even go out of business. Lastly, there can also be a loss of employee loyalty because many employees may feel that they have lost their jobs to contracted companies and services (Jones, 2004). 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.
Synergetic needed mature processes and capable employees to foster continuous improvement, and chose well to involve the employees in the process of change. Company CEO Harold Redd, knows that although change can be lead from the top, it needs to be carried through by employees to be truly effective. He knows that only mature processes and capable employees will promote continuous improvement for Synergetic Solutions. Strategy aligned organization structures such as the product team structure and the matrix structure allow the quick maturation of processes and the level of mployee participation that Synergetic needs to successfully respond to the frequent changes in its environment and realize the opportunities that these changes represent. References Apollo Group, Inc. (2003). Organization structure. Simulation retrieved from class rEsource page April 7, 2008. 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. New York, NY: The McGraw-Hill Companies.