Cohesion is a precious asset of a group and strong forecaster of the group behavior (Harrison in Ensley et al., 2002). Cohesiveness in the teams, especially in Top Management Teams (TMT) is one of the most significant aspects that influence the Superior Performance (SP) and strategic competitive advantage of the organization. There are many factors that can influence the cohesiveness of teams and this essay is especially going to focus on an organizational factor, Top Management Style (TMS). Many researches proved that TMS is a crucial factor which influences the cohesiveness of the organizations, particularly new ventures. The literature review in this essay will explain how the TMT in new ventures can influence the cohesiveness and in turn the Superior Performance (SP) of the organization. Furthermore, this essay will analyze how practically TMT of my previous organization UST-Global successfully established a highly cohesive team and made cohesiveness as a strategic asset of the organization. The essay also analyzes how cohesiveness in TMT of UST-Global facilitates successful decision making and helped the firm to be a successful 'market challenger' in the IT services industry.
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Organisational structure is an essential feature of a firm and has a significant influence on effectiveness and efficiency of the firm (Rollinson, 2008). The matrix structure is a type of organizational structure and became very popular in 1970s and 1980s (Sy & D'Annunzio, 2005), because of its ability to solve complex issues with the coordination of multiple divisions and efficiently utilise the scarce resources (Rollinson, 2008). Many recent researches proved that, even though matrix structure served the firms to run effectively, some issues in matrix structure and current economic conditions made the organizations to adapt for an organizational design which could help the firms to achieve their common goals and customer orientation effectively. The literature review in this essay will explain the characteristics and issues of matrix structure and then it will explain how multidimensional design could be a better replacement for the firms by solving the issues in matrix structure. Furthermore the essay will analyse the practical issues encountered by my previous organization UST-Global with matrix structure design and finally suggests a customized multidimensional design for UST-Global to override the issues in following matrix structure.
My previous organization UST-Global is one of the most successful and young MNCs in the Information Technology (IT) services Industry. UST-Global was established on 1999 with only 14 members and currently spread across 5 regions (East US, West US, Central US, Europe, and AMEA) and 15 countries globally with the employee count of approximately 7000. Comparatively the organizations' growth rate in profitability, financial position and number of employees is phenomenal. The organization achieved $500 million yearly sales mark with 15-20% net margin in very few years after establishment and continues to growing better, which clearly shows the SP of the organization in the market.
In my observation, the TMT is the primary reason for this success. Established with strong culture and values, the organization is build with high cohesiveness and as a result showing superior performance in the industry. Furthermore, UST-Global is a democratic and organic structured organization. As a highly growing firm the management dynamically changed the organizational structure according to the complexity in the business and growth. Last few years the firm is following matrix structure and facing some issues with that structure. UST-Global is one of the best young companies in IT industry to study and analyse the cohesiveness and structure because of the growth rate, culture and values of the firm.
Part 1 (Work groups and Teams)
Cohesion can be defined as the measure of the ability of a group to exert a pull on its members and encourage them to remain as a part of the group (Rollinson, 2008). "In essence, cohesion would serve as a strong centripetal force binding a team together in the presence of strong centrifugal force like conflicts" (Ensley et al., 2002)
Relationship between Top Management Team (TMT) and Cohesion
There are many factors that can influence the cohesiveness. These factors have been classified by Rollinson (2008) as group factors, environmental factors and organizational factors. According to Homans (in Rollinson, 2008), there are many organizational factors like technology usage, management style and personal background of members are influencing the cohesiveness. Many researches show that especially the Top Management Style (TMS) can greatly contribute to the cohesiveness of the organizations. This section will explain how the TMT of an organization can influence the cohesiveness of the organization. TMT can be defined as a set of managers accountable for devising and executing the strategies of the firm. Power to organize the direction and performance of the organization possibly makes TMT as most crucial and prominent team in the firm (Michalisin et al., 2007). In particular, the new venture TMT includes the people identified as chief executives and critical functional and divisional managers (Ensley et al., 2002). By establishing appropriate culture, member criteria, technology usage and work environment and other important factors, TMT has the ability to influence on cohesiveness of the organization as whole. According to Michalisin et al. (2007) both task leadership and social leadership can provide positive contribution to the cohesiveness by keeping the team focused on the task and by maintaining good relationship and team harmony.
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In essence, effective leaders could maintain group harmony and cohesiveness of the organization by attending both to task specific outcomes and to the personal qualities of group members (Michalisin et al., 2007).
Relationship between Cohesiveness and Superior Performance (SP) of organization
The cited references and many theories show that cohesiveness is positively related to the SP of the organization. According to Resource Based View (RBV), resources are key drivers of sustainable competitive advantage. The most precious resources considered as strategic assets are concurrently valuable, rare, tougher to imitate and non substitutable. Hence, these resources help the firms to take advantage of opportunities defend the threats in external environment (Michalisin et al., 2007). Thus in relation to RBV logic, the cited references congregate to suggest that cohesion in teams especially in TMT should represent a precious strategic asset to the firm (Michalisin et al., 2007).
In essence, cohesiveness in teams, particularly Top Management Teams (TMT) is positively associated with Superior Performance (SP) of the firms (Michalisin et al., 2007).
Relationship between Cohesiveness in Top Management Team (TMT) and Superior Performance (SP) of the organizations
In new ventures, the complex and uncertainty nature of the TMT tasks made the Top Management Team Cohesiveness (TMTC) as a crucial factor in the performance of the firms (Ensley et al., 2002). This section will explain how cohesiveness in TMT associated with the conflicts experienced during decision making process and in turn relate with the SP of the firms. Theories show that the cohesiveness in the TMT is related to the conflicts experienced in the team during decision making. Recent research shows conflict to be multidimensional, the cognitive dimension of conflict is generally termed as purposeful, this occurs when the team members consider a number of alternatives from variety of diverse perspectives in decision making. Moreover, the affective dimension of conflict is generally dysfunctional and occurs when personal disagreements and interpersonal dislikes (Ensley et al., 2002).Generally the degree of cognitive conflict positively related to the cohesion and the degree of affective conflict negatively related to the conflicts experienced during decision making (Ensley et al., 2002). Thus Top Management Team Cohesion (TMTC) influence in reaching an accord on the higher level strategic plans and facilitates the coordination and commitment to shared firms' goals (Michalisin et al., 2007). Thus the cited references imply that, TMTC is positively related to superior firm performance of the firms.
Data and methods
The data in this topic is collected from the Company website, Personal observations (indicated wherever applicable in the essay) and personal interviews.
Personal Interviews - Three top management team members were interviewed individually through phone call by confirming the confidentiality. Each Interview lasted 5-10 minutes. The questions were asked based on the interviewee opinion about TMT contribution to the cohesiveness of the organization, composition of the TMT and Decision making process followed by TMT.
Analyzing how the Top Management Style (TMS) influenced the cohesiveness in UST-Global
From my observation, the following are the important factors established by the TMT which improved the cohesiveness of the firm significantly.
The TMT established values and culture in the company which offers dignity to every employee and enforced the employees to treat everyone in an unbiased manner. "We give respect to employees and form an environment where everyone will be encouraged to be innovative and know the effectiveness of teamwork which offers opportunity to attain their maximum potential" (Manager 1). Thus the social leadership perspective (Michalisin et al., 2007) of TMT in UST-global enhanced the cohesiveness in the organization by encouraging respect for team members and maintaining group harmony by clear behavioral norms and imposing these norms by rejecting deviant behavior (Fedman in Michalisin et al., 2007). Moreover, the TMT formed a harder membership criterion to improve the cohesiveness. The organization attracts best talents from all over the world. The knowledge workers are hired after three levels of interview processes. "Competent people working in harmony will produce the best results. Both 'competence' and 'harmony' are equally important" (Menon, 2009). Furthermore, the TMT improved the communication and cooperation between team members by introducing highly interactive communication technologies. This shows the effectiveness of the TMT's Social leadership (Michalisin et al., 2007). The TMT created a world class 'task tracker software tool' which improved the task management significantly throughout the firm and in turn shows the effectiveness of Task leadership (Michalisin et al., 2007). "We become an example to other firms in using the latest technologies for internal operations" (Manager 1). Furthermore, The TMT provide a working environment where people assist each other and able to perform in a team environment. This environment enables employees to deliver their best and at the same time get highest job satisfaction. "The software employees are knowledge workers. We formed a working environment which supports the idea generation and sharing knowledge with scientific freedom" (Manager 2).
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Thus the Top Management Style (TMS) in UST-Global facilitated the cohesiveness throughout the organization by establishing appropriate culture, member criteria, technology usage, work environment and other important factors, and bring the firm highly successful within a short span of time.
Analysing how cohesion in teams especially in TMT influenced the SP
In my observation, the Top Management Team (TMT) in UST-Global is highly cohesive and this fact was also accepted by my interviewee in TMT that, "career achievement is our key to attracting people and that is something the firm could able to accomplish because of the values and culture established .UST-Global TMT has even chief executives of many firms not only joined but also highly energized as a key member of the company" (Manager 1). Organization has formed a powerful higher level team to which includes former General Manager of Reebok IT department, former VP of Safeway and former VP of AIG Technology department" (Manager 2). In my observation, the unique composition and high cohesiveness of the TMT is a most important factor for UST-Global, where competitors lag behind a lot and especially harder for the competitors to imitate. Also, it was accepted by my interviewee that The TMTC is a crucial strategic asset for UST-Global.
Creation of conflicts during decision making is an obvious one. According to Ensley et al. (2002:369) "Those TMT are able to take advantage of the disagreements by keeping it task focused and constructive should outperform those for whom the disagreement becomes personally focused and destructive", this is accepted by the interviewee as "Inevitably some disagreement will happen in decision making but, all of our team members consider the conflicts as a alternative solution in decision making" (Manager 3). Most of the decisions made by the TMT were highly successful. For example, the decision of "fewer clients and higher attention" gave the organization a high strategic competitive advantage in the service market. "This was a conscious decision the management made while establishing the firm. Even the management team ignored the opportunities with short term relationship and revenue" (Manager 2). So it is evident that UST-Global TMT is able to take advantage of disagreements in decision making which leads to the SP of the organization. Thus cohesiveness in TMT can be considered as a strategic asset for new ventures which is highly important for successful decision making.
Part 2 (Organisational Structure)
Every organisation has to accomplish particular tasks to continue to exist in the business, and this accomplishment requires execution of certain time bounded tasks. The structure segregates the task of the entire organization into manageable sub-tasks and allocates them to organisational units that are responsible for the completion of task (Rollinson D). Hence the organisational structure represents the distribution of the resources and prototype of the flow of information and work.
Matrix is a grid-like organisational structure that allows a firm to handle multiple dimensions of the business using multiple authority structures (Sy & D'Annunzio, 2005). Matrix structure attempts to gain the advantage of both functional and divisional structures but minimize the potential drawbacks of each one. The matrix structure normally superimposes a divisional structure on to a conventional functional structure (Rollinson D). Generally in matrix structure employees in a permanent functional team will be allocated in to a cross-functional team to perform a work and they will be return back to their own permanent functional team once the work is completed.
Issues in Matrix structure
Research in the field of matrix structure and the cited references clearly show some issues in the matrix design. This section will explain the different issues in matrix structure. A primary issue in working with matrix structure is misalignment of goals. There is be a possibility of creation of compete and conflict in objective between the dimensions of matrix because of the misaligned goal (Sy & D'Annunzio, 2005). Moreover, Confusion over the actual roles and responsibility is an issue in matrix structure (Lawrence et al. in Sy & D'Annunzio, 2005). Constant shifting nature of matrix structure results unclear roles and responsibilities (Sy & D'Annunzio, 2005). Furthermore, a dual reporting system of matrix structure has all the elements to affect the performance of a firm. Finally, understanding employee behaviour is one of the most critical challenges in the matrix structured firms (Kilmann 1985; Goold&Campbell 2002 in Sy & D'Annunzio, 2005). As the membership and loyalty considerations make the employees belonging to a certain subunit of the firm, this behavior could result problem in achieving common goals of the firm as an integrated organization (Sy & D'Annunzio, 2005).
Characteristics of Multidimensional design
The multidimensional structure allows the firms to create and utilize synergies across their business units by organizing and controlling along multiple dimensions. As shown in the figure 1 the multidimensional design has three types of organisational units.
Functionally defined (input) units - the outputs of which are mainly used inside the firm, Product or service defined (output) units - the outputs of which are mainly consumed externally and all of the units are profit centers and finally, market or user defined units - defined by the markets they serve and operate as profit centers(Ackoff, 1999). The market defined units could sell the output of any other output units in the organisation that want to use their service, also free to sell their services directly to the market, "generally market defined units serve as advocates of the users in market in which they operate, they not only represent the company in market also represent the market in the company" (Ackoff, 1999).
The surface of each cube in the figure 1 represents the joint of two units of different types, each cube represents intersection of three units with one of each type, and all the units in this design not need to interact with each other (Ackoff, 1999). In multidimensional firms, reporting structure of multiple dimensions will include the different managers responsible for the contribution of their dimension to the whole organisation's performance (Strikwerda & Stoelhorst 2009). Especially, the resolution of analysing market conditions , allocating resources efficiently and corresponding transaction entries are a corporate issue rather than the business unit which is accessible to all in the firm (Strikwerda & Stoelhorst 2009). Thus the Multidimensional design differs from matrix in three important factors positively, which is explained in the table 1.
Data and methods
The data in this topic is collected from the Company website, Personal observations (indicated wherever applicable in the essay) and personal interviews.
Personal Interviews - Three managers and a sales team member were interviewed individually through phone call by confirming the confidentiality. Each Interview lasted 5 minutes. The questions were asked based on the interviewee view on the structure of the firm and issues faced by following the matrix structure.
Analyzing the issues faced by UST-Global because of the matrix structure
UST-Global is following customized and moderately complex matrix structure as shown in the figure 2, which is designed based on my own observations, company website infomation and the interviews with three managers. The firm has 5 primary functional departments which supports 3 primary divisions. Furthermore, Last year the firm established a Joint venture (JV) with GE, headquartered in Chile which is consider as an affiliate of the firm and shares the primary functional departments of UST-Global and forms an integrated matrix structure as shown in figure2. The employees in functional units are assigned to a cross-functional business unit to work for a particular project. For example, the Dell BU has around 6 running projects and each project will have one dedicated HR assigned from HR functional department who will be called as 'line HR' of that project.
From my observation, the following are the issues affected the organisational performance because of the matrix structure. As explained in the example above, the 'Line HR' will be assigned goals by his/her functional manager (Head HR) but will be working with the divisional BU and interact to the divisional manager. In this scenario, obviously there will be some conflict raise between the goal assigned and the actual work. This creates tension among employees on confusion over which command to follow and not knowing whom to contact for right information (Sy & D'Annunzio, 2005). This was accepted by a sales team member in the firm as 'At one situation, my Sales department directed me to increase the profit with promotional offers to new customers but this conflict with my BU policy of not reducing the billability rate'. Thus the 'two boss matrix system' leads to confusion over who has the final authority, Delay in decision making process and lack of clarity in areas of accountability(Sy & D'Annunzio, 2005).
Moreover, the matrix structure could also affect the behavioral characteristics of employees. For example, generally the employees will be working in the same BU for many years, because of bonded membership and loyalty, they behave in such a manner that will benefit the BU they belongs to rather than considering the organisation as whole, for example, in my observation, some of the business unit managers did not want to send their key functional employees to other business unit which could affect the organisational performance as whole.
The interviews by Strikwerda and Stoelhorst (2009) clearly show that the concept of a matrix structure has negative implications among the executives of many organisations. Moreover, all respondents accepted that a firm generally cannot be managed effectively with only one dimension (Strikwerda & Stoelhorst 2009). The issues explained above made a call for an organisational design along multiple dimensions which focus on the firms' joint goals and customer orientation. The multidimensional structure design could be a better solution to achieve this for UST-Global.
Designing an appropriate multidimensional design to UST-Global
The multidimensional design can be formed in UST-Global without many changes in existing matrix structure. The units in multidimensional design could be defined as follows, functionally defined (input) units - Finance, Marketing, Sales, Business Development and HR whose output will be consumed internally in both UST-Global and its joint venture (JV). Product or service defined (output) units - product (ERP and Testing) and Client based (NEA, Dell and Wellpoint ) Divisional BU's whose outputs will be consumed externally. Market or user defined units - Geographic (West, East, Central, Europe and AMEA BU's) based BU's who would be selling the output of other BU's who wants to use the service and also free to sell their services externally. The design will be as shown in diagram 3.
Adapted from (Ackoff, 1999)
The important change in this multidimensional design is, members of one unit whose service has been purchased by another unit are related to the head of the second unit as they are to an external customer. The head of the unit for which they are working is client and not their boss, for example in UST-Global if a business analyst from business development (input) unit works for Dell (output) unit then, his/her boss now will be considered as Dell client (Earlier in matrix structure it was BD head). As it is much easier for a dissatisfied client to dismiss an unsatisfactory server than a boss to dismiss an unsatisfactory subordinate.
Moreover in this design the server (employee) tends to be more responsive to the client by making server's compensation reflect the amount of their time that is billable to the client. This design could make the firm more integrated and customer oriented (Ackoff, 1999). Moreover, as a multidimensional MNC more power will be shifted to the marketing units in UST-Global because marketing units will now play an important role as an intermediate between the market and the organization and this design will also provide multi market positioning options to the firm. For example, in matrix structure the UST-Global Dell BU is an individual BU which serves only Dell-Malaysia but in multidimensional design the Dell BU could use the well established marketing units exist in the firm which has presence in all the regions of world with expertise to reach and convince the clients for new opportunities. For example Dell BU could use the Europe marketing unit to reach the clients of Dell-UK for new opportunities in UK. Furthermore, previously UST-Global transactions are recorded in the scope of BU's. As a multidimensional organisation transactions will be entered with a common definition and merged in to a single global ledger which makes the firm to operate as an integrated and truly customer oriented firm.
The essay implies that, effective top management in new ventures has the greater influence in creating highly cohesive organizational culture and environment. Moreover, the cohesiveness in Top Management Team relates positively to the cognitive conflicts which lead to successful decision making and in turn positively associated with the superior performance of the firm. This is evidently seen from performance of the organizations like UST-Global. Moreover, studies of group dynamics require a compilation of rich primary facts. Especially, data collection on Top Management Team behaviour and cohesiveness is hard to gather. This essay is written mostly based on personal observations and interview with only three managers. Moreover this essay assumes cohesion relates positively to the cognitive conflicts during decision making however, surprisingly another dimension of cohesion leads to shrink the level of cognitive conflicts in decision making process because of the concept of 'group think' which does not taken in to account for analysis. Finally, further study on new ventures (NV) and another dimension of cohesion (which could affect the organisational performance through the factors like group think and inter group conflict) could be a better way to understand the characteristics of Top Management Teams in more detail.
According to Drucker (in Strikwerda & Stoelhorst 2009) the managers in knowledge environment must practice to abandon everything which they are acquainted with. For most of the 20th century the principles and processes of matrix design served the firms well. However, the contemporary economic conditions and few issues in matrix design like dual reporting system, unclear responsibilities, political battle over resources, product oriented profit centers and units owned transaction data made the firms to adapt to multidimensional design which facilitate multiple dimensions to operate in a focus on firms common goal with emphasis on customer orientation. In UST-Global, even though the matrix structure is serving the firm effectively for several years, it is evident that some of the issues in matrix design are clearly experienced by the firm. The suggested multidimensional design could be consider by the firm to truly operate as an integrated and customer oriented firm. Moreover, The efficiency of multidimensional design can be determined only after observing the future financial and operational performance of the firms like ABN AMRO, Ahold, IBM and Microsoft (Strikwerda & Stoelhorst 2009) which are adapted to this design. The designed matrix structure is based on personal observations and interview with few managers. There could be some little variations in actual design and the design presented here which could in turn affect the design of multi dimensional structure. Finally, further study on adaption of multidimensional design form matrix design with statistics on financial performance, operational performance and market position over a period of time could be a better way to understand about the multidimensional design more deeply.