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Warren Bennis(2003), notices that good observation of the situations is the core competency of leadership and it is a important tool in developing successful organizations. Bolman and Deal (2007) highlights four major areas of organizational theory namely structure, people, political dynamics and culture. Each frame has its own logic, focus, assumptions and path to success of organization.
Structural frame views an organization as a factory or machine and gives more importance to goals, formal relationships and specific roles. It also emphasizes on policies, procedures, creating rules to merge the focus of diverse group towards achieving the organization goal.
The people frame perceives an organization as a unit with each individual having their own ideas, energy, needs, talent, limitations and feelings. Individuals in an organization should be given the liberty to operate on their own to display their talent but at the same care should be taken to get their job done.
As per the view of Thomas (2006), the political frame perceives an organization as an arena with competition, power, conflict and policies as core where beliefs, skills, values, conflicts and interests among the staff are evident organizational realities.
Finally, the cultural frame views organizational life as a festival where individuals join together to form culture, context and meaning as they engage themselves in their specific roles and bring creativity and inspiration into their work.
Each frame plays an important role in an organization, but any frame alone is deficient. Gallos(2008), views modern organizations as "complex beast" and the fast growing technology and competitive world only adds more to their complication.
The structural frame as discussed before is concerned with rules and goals of the organization. So, "the frame concentrates on the goal directions, structural clarity, and task accomplishment in an organization."(Harris & Nelson, 2008).The main values of this frame are:
The best approach is rational approach ;
Dividing labor based on their specialization leads to improved performance and individual expertise;
synchronization and control are best achieved through the authority and impersonal rules; and
Based on an organizations nature structures can be systematically designed and applied.
These principles suggest that problems in organization usually are signs of structural issues and it can be solved by streamlining and restructuring. But these are just one of the many problems that an organization is facing.
Rationality is another important concept that an organization deals with. As per the view of Brunsson (2009), organizations are intentional, in other words organization works towards a definite reason. In many companies, it is a hypothesis that behaviors are governed by decisions under a norm of rationality. Usually this norm is difficult to satisfy in reality.
Like two sides of coin, the concept of differentiation and integration are the reason for it being viewed as a rational approach. Differentiation in when tasks are done among individuals and integration is the link between the roles that make the interdependence. These roles and interdependencies are synchronized vertically by power and laterally by teams, meeting etc. There are six main assumptions in structural frame:
Existence of organization is to attain established objective and goals.
Efficiency of organization is increased and performance is enhanced through clear division of employees and specialization.
Proper co-ordination and control ensures that diverse effort of individuals and units engage.
For an organization to work at its best rationality should prevail over personal choice and external pressure.
The structure of an organization should be designed in such a way that it fits to the circumstance of the organization.
Structural deficiencies lead to performance gap and in this situation and can be solved through proper analysis and restructuring.
Two design issues are how to allocate work and how to coordinate roles between them or unit. A job prescription is in form of job description, procedures where it is clear document on what an employee should do and what he should not to accomplish a task. Once work is allocated to individuals the managers/leaders face next important decision as how they should group people into working units. There are several basic operations (Mintzberg, 1979):
Groups are partitioned on the basis of skill set and knowledge. For example - Java team, Visual Basic team and so on.
Groups based on working time, as by shift.
Units formed on basis of product. Telecommunication software, accounting software and so on.
Groups around client or customer.
Groups around place or geography. Say for example team in Australia, team in India
Groups by process. For example - development, testing and support.
In an IT firm like this, it is important to form groups and it can be best formed when they are grouped based on skill set, time, geography and process. The real problem here is problem of co-ordination. Units try to focus on their own priority rather than organizations. For an organization to be successful it has to employ an effective method of coordinating between the units to work towards the organizational goal. This can be achieved by either vertical coordination or lateral coordination.
Vertical Coordination: In vertical coordination higher management has the authority. They decide as what should happen through authority, policies, rules and control system.
Authority means designating a boss. He integrates the effort of individuals and units. They take control by resolving conflicts, making decisions, solving problems and distributing rewards. Rules and policies ensure informality among the employees. This helps to reduce "particularism" (Perrow, 1986) - reacting to a particular situation on personal bias or political forces rather than towards the goal of organization. In order to make sure that a level of quality is maintained, standards are set. So a measurement against standard helps in finding the performance and makes it possible to fix a problem. Standard operating procedures (SOPs) reduce difference in performance for tasks that requires high level of predictability and not allowing more margins for error. Standard operating procedures can fail how ever more often only in case of situations that is not foreseen. Mintzberg (1979) distinguishes performance control and action planning. Performance control imposes outcome objectives. For example increase the team's productivity by 5%. This is good way when the goals are clear but not successful when goals are hard to measure. Action planning specifies action as well as time frame. It works well when it is easier to access how the job is done.
Lateral Coordination: Sometimes vertical coordination cannot be effective. Behavior of people is usually untouched by rules and command. Lateral techniques such as meetings (both formal and informal), network organization, matrix structure, coordinating roles and task force helps in filling the void. In our organization in order to fill the void there will be continuous meeting. There will be wide range of meetings like project management meeting to make sure that project can be delivered on time as promised with high quality. In a high technology company that is under consideration, we will have task forces also. High-technology firms have high degree of reliance on project teams or task forces to synchronize development of new service or product. Being a high technology company it is important to have networks as knowledge will be spread all cross the organization and it can't be at a particular place. Ghoshal and Barlett (1990) argued that many organizations have evolved into inter organization network. Initiatives arise from many places as it is a multi centric structure.
Organizations architecture depends on following factors: size and age, core process, environment, strategy and goals, information technology and nature of the workforce. Let us see how these factors play a role in shaping an organization.
Size and age: An organizations size and age plays a key role in architecture. A small company can have informal structural arrangements. Whereas the same organization, as it grows, it will be difficult to get a hold of the process if things are not formalized. As a startup IT company it can be informal but since it is high technology organization it is very much essential to formalize process say for example documenting everything as the work done is not repetitive and knowledge needs to be shared.
Core Process: The core product is taxation software for tax agents. Henderson and Clark (1990) said that it is difficult to cope with the change in a technology for an established company than a startup firm. Being a startup firm there is an edge, in an aspect to get into the business with latest technology. Also care should be taken and structure should be in such as way that firm should be flexible enough to adapt to latest technology without much of hassle and complexity. If the start up organization fail to build a flexible structure then it will also fall in the same pit as other established company and the new comers will take over the lead.
Environment: Environment plays a major role. In a high technology industry there is always high degree of uncertainty. This demands sophisticated architecture. New roles and specialties are often required in order to cope up with the emerging problems. High level of adaptability and flexibility are required in an uncertain industry like high technology industry.
Strategy and goals: Strategic decisions are inclined towards long term goal and are concerned with the future (Chandler, 1962). Goals that are stated are the ones that an organization follows most of the time. We need to look beyond formal statement of purpose to understand the link that exists between strategy, goals and structure.
Information Technology: New technologies and computers continue to revolutionize the amount of information available and the speed at which it can be shared. Information is central structural determinant. Galbraith (1973) defines uncertainty as difference between what information is in hand and what information is needed. As the gap increases, the complexity of making a decision also increases. In this situation organization has two choices: Firstly, reduced the need for information. Secondly, increase the capacity to process it. In a high technology organization it is better to choose the second option as high technology organization need as much as information possible to stay in the race. Information technology plays an important role in high technology firms. Innovations in information technology make flatter structure unavoidable. Drucker (1989) pointed out that information-based organizations need fewer management levels when compared to other industries. Similarly, this applies to high technology firm and will follow more of flat structure than vertical structure.
Nature of workforce: In a high technology industry, even a lower level workforce need to have high knowledge. Sometimes lower level workforce has more technical knowledge than their supervisors. There is increasing need to specialization of areas. Drucker (1989), makes an observation that work will be moved to place where people are rather than moving people where work is. Similarly there is need to design the structure such that there are different centers based on availability of work force. This again increases dependency on network as work has to be coordinated between different geographic locations.
Boundary less organization: Prahalad and Lawrence (1995) insisted about the importance of boundary less organization. In a boundary less organization ideas flow through different layers easily and hence the productivity will be high. The organization as a whole functions far better. In the startup high technology organization the number of layers between top and bottom is less so that there is free flow of ideas. Care should be taken on diluting the number of layers as too much autonomy leads to chaos.
The following factors should be considered when designing a structure. They are gap versus overlap, underuse versus overload, lack of clarity versus lack of creativity, excessive autonomy versus excessive interdependence, too loose versus too tight, goalless versus goal bound, irresponsible versus unresponsive. In our organization care should be taken such that there is no inclination towards any of the character discussed above. Right balance should be maintained.
Structural design starting from scratch does not happen most of the times. Usually supervisors copy an existing structure from their experience or some existing popular theory. Let us look at Mintzberg's fives and see how it is applicable in our organization. Mintzberg model has five components. First component is operating core. Core consists of employees who make the product to the customer or clients. Layer above this is administrative. They are managers who provide and control resource for the operation. Above this is strategic apex. It comprises of top level management, who are responsible for strategic decisions. Usually they are board of directors and equivalent. Two more components in the sides are techno structure which comprises of specialists who measure and inspect the output of the process. Last component is support staff whose work is to facilitate other workers and ensure smooth running of office.
Mintzberg derived five structural configurations from this blueprint.
Simple structure: This structure has only two level, strategic apex and operating core. Usually it has direct supervision. It works well in family business. The positives of simple structure are adaptability and flexibility. It also has negative side as boss too close to day today operation lose focus and gets distracted easily and they don't take into account the long range strategic issues.
Machine bureaucracy: In machine bureaucracy, strategic apex makes all strategic decision, managers supervises all day today operation. And procedures are standardized. Machine bureaucracy has lots of support staff and few technostructures. Key issue is how to keep employees motivated as it is routine work.
Professional bureaucracy: In this structure, majority of people are from operating core and very less number of managers. Technostructre is comparatively very less. Professional bureaucracy stumbles when they try to get a greater control over operating core.
Divisionalized form: Work is done in the form of quasi-autonomous units. Each division serves different market. For example a MNC might have financial service, IT, manufacturing etc. It creates ample resource and responsiveness without much risk. But it has other tensions like cat and mouse game between the headquarters and the division. The other potential problem is the gap that widens between head quarters and the divisions.
Adhocracy: Adhocracy is loose, flexible structure mostly tied together by lateral means. This kind of structure is more often found in condition of turbulence and rapid change such as advertising industry.
After looking at these five structures its professional bureaucracy and divisionalized form that suits our organization. In high technology industry, there is need for more people with technical skill than managerial skill. Hence professional bureaucracy works well in high technology organization.
Every organization has to restructure at some point in time. Restructuring is time consuming and more over it does not even guarantee success. Restructuring happens due to various pressures such as environment shifts, technology change, organizational growth and leadership changes. Miller and Friesen(1984) found that companies in trouble usually fall in the following three categories.
Impulsive firm: It is a fast growing organization with rapid changes usually lead by one or very few managers. This will lead organization to run out of control. Many onetime successful owners fail to recover from this stage and they stumble.
Stagnant bureaucracy: These are organizations that follow old tradition. They often become too stagnant. They don't make up to market speed and lower level managers often feel left out.
Headless giants: These are loosely coupled organizations where the administration is weak. Most of the decisions are made by the division and does not have any real strategy at the top. Decision making is not proactive whereas it is reactive.
Organizations are reluctant to make changes in structure because it creates uncertainty and confusion.
Corporate Social Responsibility, Sustainability and Ethics:
Corporate Social Responsibility is the most accepted and credible form to prevent societies from social unrest and save the planet and environment from destruction through corporate behaviour. The relationship between corporation and the society is interdependent. Any organisation is largely dependent on social stability and economic condition. In case of international organisation like the high technology organization, it is important to operate in a responsible manner particularly in local community to avoid conflicts and avoid boycotts. However Multi National Companies face problem when respect for local community clash with core value. For example when a company has its core value as equal opportunity for all, this will collide with job for locals. Implementation of Corporate Social Responsibility strategies makes good business sense. Profit maximization is not the mantra of start up hight technology firm as it can equally hurt. Only a long-term rather than short term, balanced view on profit maximization will be reasonable, and responsible. This makes it evident that Corporate Social Responsibility can provide an opportunity for organisation to improve their long term profit and at the same time benefit wide range of people apart from managers and owners. This ensures sustainability.
Benefits of Corporate Social Responsibility, Sustainability and Ethics:
Corporate Social Responsibility is a major source of competitive advantage. One reason for doing good is to create a good opinion about the company among the society. This creates an intangible asset that is impossible for a competitor to reproduce. Thus we can say Corporate Social Responsibility is a major player in value creation. Another source of competitive advantage is by reducing operating cost. In high technology business, the costs associated with dumping of hardware can be avoided by giving it to the charity. Researchers have found that certain consumers are interested in buying product that adds value to the society. Also there are bunch of investors who prefer investing in companies that has high social responsibility. The High technology start up firm can tap this market by maintaining high level of Corporate Social Responsibility. 75% of consumers declare that they would not buy a product that doesn't have good ethical value or goods produced under bad circumstances. So it is important for the firm to act ethically as major customers consider ethical value. Research has found that certain consumers are even ready to pay a premium for sustainable products.
We have seen the benefits of Corporate Social Responsibility but the real problem is the implementation phase and the practical feasibility with such measures. Major decisions needs to be taken not only on what the corporation should engage in but also should measure whether the Corporate Social Responsibility initiative will fail or succeed. A prerequisite for corporate responsibility is availability of resource. This would explain why survey among 1000 companies have shown that 94% believe Corporate Social Responsibility will lead to profit but only 11% were able to implement it. So in the high technology firm that is discussed, care should be taken that we are not falling short of resource as this is a major road block in implementation phase. For a new firm it can be difficult implement CSR because there won't be well established formal structure. Further more they will be in a phase of survival. Corporate climate tells how things are and corporate culture tells as why things are as they are. Both climate and culture are key factors for corporate social responsibility.
Corporate Social Responsibility brings sustainability in business. This works well in long run. Also Corporate Social Responsibility provides competitive advantage over the competitors. For a start up high technology firm, structure plays an important role. Without structure, energy and time of resources are often misdirected. Often we fail to find the real cause if the problem. For example sometimes we spend more time and money on training but the real problem is with social architecture rather than peoples attitude and skill. There is no perfect structure. It depends on circumstances and factors like technology, goal, strategy and environment. A structural design might be apt for a particular time and circumstance but more often than not there will be need to change the structure depending on the changes in goal, strategy and environment. Restructuring is important but at the same time it is high risk. In short term it creates more confusion and anxiety. In long run it depends on how well it gels with the organisation goal, environment and strategy.