Review of The Modern Firm Organizational Design for Performance and growth
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Published: Mon, 5 Dec 2016
In modern firms, performance is influenced by knowledge. Ability to create and execute organizational processes that can adopt and change is also a key factor in performance. Performance that is knowledge driven depends on ability to retain, create, apply and transfer knowledge. Wastage, misappropriation and underutilization of knowledge leads to poor performance. Appropriation of knowledge resource by management and teams is important if output is to be delivered. Stiff competition and ever-changing business environment presents owners of business and management teams with unique and dynamic challenges in an ever changing global market. With these challenges in mind, John Roberts in his book “The Modern Firm: Organizational Design for Performance and Growth” attempts to give prescription which if well applied will deliver results for firms.
New organizational designs are being experimented on and used by businesses around the World. These designs help businesses to change their routines, processes, corporate culture, and their formal architecture. The aim is to improve growth prospects and performance. This has resulted in change in allocation of responsibility and decision making, redrafting of organization charts, renewing of motivation and reward systems, consideration of outsourced services, redrawing of information systems, seeking of alternative norms, values and shared beliefs. According to John Roberts, among these changes, predictable and necessary relationships that encourage growth and performance exist. He argues that successful organizations establish regular predictable pattern around external environment, competitive strategies and organizational designs in a holistic way. Further, the book informs that modern business firms develop strong analytical frameworks to interrogate interrelations that exist between competitive strategies, business environment and organizational designs (Giacomo, 2005).
Written in a simple language devoid of technicality, the book is structured around vivid evidence derived from past successful models and draws its strength from examples such as Nokia and BP .According to the book, Firm’s external context is its environment. How to tell people to move from one place to another is referred to as the strategy while organizational design is about configuring how to deal with routines, people, structure and culture in the firm. The book gives a summary of prominent organizational designs of the early 20th century. It also explores design innovations that have emerged since then. (e.g., outsourcing activities previously treated as core ones)
John tells the story of two corporations and their strategic choices as they tried to set themselves apart from stiff competition. The story is meant to illustrate a point that readers need to appreciate from these corporations. Chapter two of the book is 40 pages in size. In this chapter, the book explores understanding of “strategic choice and organizational designs that are, in principle immensely complex”. Three “key” concepts are expounded in this chapter. He refers to “Complementarity” as reinforcing mutual effects on progress or performance if change in one variable leads to change in another variable. He draws a vivid example where improved quality of a product or service on offer attracts a higher price without distorting the demand for the product or the service.
Chapter three of the book is centered on reasons why firms exist. John Roberts argues that firms “exists to coordinate and motivate people’s economic activity”. He gives more explanation and reasons behind certain economic activities being done via firms rather than market exchange. He observes that if replication of happenings in the market is done in the firm to enhance efficiency, huge centralization within the firm would result and dumbfound “even the ideologies of the old soviet union”.
Observing that motivation is hard to come by in modern firms, he asserts that “externalities.” That is, “when a person’s actions affect others “welfare” especially that of the person and the firm “does not have an incentive to recognize this impact in decision-making” and therefore does not “account for all the costs and benefits in selecting actions.” He cites an example of a worker who denies his/her employer benefits of his service because he or she is underpaid. Here, he contradicts himself .Indeed a worker recognizes clearly the consequences of his actions and plans for it. To give him credit, he tackles the topic on motivation in a way that when going through it, one feels as if he is studying a well known subject only that this time through completely new mind and eyes. He offers insight on objectives firms wish to achieve when they organize themselves to raise their performance on innovation as well as on growth. Noting that the two “can be compatible” as long as viability of firm’s initial business still exists. He ends the book by noting “developing a winning strategy and an effective organization” is not easy. It is a daunting task that should be done “holistically,” and encompasses leadership and management. I disagree with his conclusion because he underscores the role of management performing the work of “specifying reporting relationships,” “putting together budgeting processes,”. He treats management like a position instead of a process. He fails by far to at least recognize and give due credit to arguments that have been advanced for the “end of management”(John, 2008).
For people searching for greater knowledge and understanding of the modern firms, Robert writing style is catchy and engaging. He makes accessibility to new ideas easy to all. Especially so to the leaders in businesses and scholars of management. The concepts and ideas contained in the book are great and practical. They can be used widely to address many issues that modern firms are experiencing (Lewis, 2002). He champions a holistic approach to organizational design making it to compare with the thinking currently gaining currency in the corporate world. Availing his ideas in systematic fashion makes the book even more interesting and timely. It also integrates reasoning in economics with a rich grasp of how business firms operate .Sociologists, economists, and practicing managers who gain access to this book will learn a lot from penetrating insights contained in the book especially in the area of organizations. A readable and practical discussion devoid of mathematical notations makes the book interesting to read.
In modern times, talent management, technology use and integration, transparency, rising costs, environmental sustainability, convergence and globalization are issues facing modern business firms. According to Gobillot in his latest book, Leadership; reinventing leadership for the age of mass collaboration, he identifies four main patterns that are conspiring to make management of firms tricky. Multigenerational and multicultural demographic, expertise, attention of workers by organization, death of positional power and hierarchy, intellectual, social and informational capital (Christopher, 2011).These are elements that management must contend with daily.
Unwritten and written rules, philosophy, policies of organization or managers are to finally get a way into performance and attitudes of every person in an organization. It is critical to appreciate that when dealing with people, behavior that is rewarded is what they give. A culture that indirectly or directly rewards certain types of behavior and attitudes signals acceptability or rejection of such behavior or attitudes (Marcelo, 2006). To change behavior, evaluation of systems and processes presently in place is essential. Clarity and consistent communication of organization direction to employees is important. Timely communication of information, decision making process that guarantee results, feedback mechanisms that allow employees to know their performance are key management elements that modern managers must deal with on continuous basis as they discharge the responsibilities. John Robert book will offer tremendous help to such managers.
It is also important when somebody is reading the book, he or she should be open minded to configure how the book can help bearing in mind the issues that modern corporate organizations are facing(Steve,2005). Such major issues are accelerating and relentless change, few specifically experienced employees, consumer choice that is ever changing, employees rising stress levels, inconsistent ethical standards, expanding impact on use of technology, employees age groups that are distinct and greater cultural diversity(Gregory,2010). These issues are impacting on roles of supervisors, managers, executives and owners of business are changing at a terrific speed.
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