Designing A New Organizational Structure Commerce Essay

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1. Introduction

In good developing businesses, leaders frequently make the change. They must fight against stagnation and the traditional elements, and efforts to overcome barriers to change. To implement successfully, managers must have the desire to implement change. Without the support of senior managers, any reason to make the desired change will not happen. Finding a suitable structure for the company, the business is a difficult problem for all leaders. The issue becomes important when most businesses were small, due to the rapid development and changes in business environment, should change to adapt is essential.

In Vietnam, most businesses are small, but rapidly growing. Majority of leaders in the business do not realize major problems in your business. Not many leaders are enough capableness and courage to change the current structure because the current structures however, are working well. This is really difficulty to convince investors and employers. Therefore, when a crisis happens to businesses, the restructuring has become too late. Today many managers realized that the design of organizational structures must be continuous development of the firms, to meet and protect the objectives and interests of Stakeholders.

FPT Software Company is one of the company's largest software developments in Vietnam. After 10 years of continuous development, we have recognized several disadvantages in terms of organizational structure. Focusing on technology development and infrastructure makes many divisions become difficult to control, leading to inhibit the development and does not create the motivation and strength to overcome the crisis. Beginning in 2009, the leaders have recognized this problem and make changes the structure drastically. From the CEO to each division of the member companies must change to meet the new situation.

2. Concept of medium scale enterprises

a. Definition

Accordance with Vietnamese law, business type dependent factors: the number of employees, total capital investment, by then, a firm is considered medium enterprises have from 300 to 500 employees and capital investment under $ 1 million. However, if compared to other foreign enterprises, the resource is too small. FPT so even though much larger than the provisions of the law of Vietnam, but compared with companies like Microsoft, Google, Yahoo, and so on, FPT Software is only a tiny person. In the IT industry, due to investment in research and development, so the company must invest heavily on technology and training. FPT Software is also no exception, every year we have invested hundreds of billions of VND for the department of research and development as well as training engineers. In addition, if the scale is too small, you cannot get the trust of clients and major partners. Therefore, we see that FPT Software Company is an average company in IT industry in the world.

b. Role and influence of medium companies in IT field

In the IT industry, many companies such as FPT Software Company are competing against each other. This one promotes the development of technology for a backward country like Vietnam.  There are plenty of good engineers are currently working for several foreign organizations, understand the various technologies, is also a basis for developing type midsize companies as such. Advantage of these companies is the flexibility of manufacturing operations software, which can meet the largest orders, enough to invest in technology and quickly grasp new technologies. In Vietnam, the number of companies such as FPT Software is not much, so the Vietnam government always encourages investors to contribute in the dissemination of IT for the entire population. To the backward country, FPT Software has invested heavily to develop the foundation for the IT industry in Vietnam. Disadvantages of these companies have to spend a lot of capital for research and training, this one need more long-term investors.  Without abundant capital is more difficult for companies to grow and compete with the others.  In Vietnam today there is not many long-term risks investors, it is difficult to mass capital up for long-term plans.

c. Factors affect to companies structure

Customers

About 10 years ago, the FPT Software only focused on domestic customers, as small businesses, with simple technology, small volume of work.  They then focused search customers from U.S. and European markets.  Changes in customer make about changing corporate culture.  FPT Software's employees and engineers had to learn English, approach new customers in their culture.  FPT Software architecture at this began to change to fit the new situation.  Groups focused on new markets established.  The branch offices were opened in the host country.  In which the customer service department in the country remains. After November 09th 2001 crisis the orders becomes more difficult, narrow the investment of customers have led to a difficulty for FPT Software.  We move to new markets, such as Japan. The Japanese companies have high technology, research backgrounds, and lack of human resources drastically.  Moreover, the similarity of the Vietnamese culture is also an advantage.  FPT Software redesigned structure and change culture by opened Japanese class for employees, engineers were sent to Japan to study technology, established research and development divisions with Japanese customers.

Finance

Finance is one of the factors affecting the development of the business. Without abundant financial resources, enterprises will not be competitive in the market, as well as building a structure as desired by business managers. A tough of Vietnam companies is difficult to find stable and cheap financial resources. Because this country is in very fast development phase, so interest rate is very high and there is not much preference for technological development. The development of an organizational architecture to suit each stage of the business requires a clear financial strategy. This thing required staff development plans and training and research plans. Have a good financial resources are both of a promotion and a fulcrum for the development strategy.

Technology

For a technology company, technology is a competitive advantage as well as technology is also the survival of the IT business. Most companies have their IT department of technical research and development. Depending on the size of the company, that department will be more or less investment. The rapid technological change and short product life cycles make the investment in research and development increased. The outdated technology has led to rapid changes in many divisions are established or closed. IT companies which have the characteristics of architecture.

3. Problems of current structure

a. Problems in competition

Competition from other local companies

FPT Software, one of the largest companies in Vietnam, however, a large of newly established companies is increasing.  They have own markets and own ability in each specific field of technology. Due to lower management costs and smaller, the companies should provide cheaper services, flexible strategies. Small and medium companies in Vietnam tend to cooperate with foreign partners to sign quickly the medium contract. They also receive the support of technology and modern management methods from the home countries.  The foreign partners also wanted by the Vietnamese companies to access a cheaper and trained labor market.  Moreover, in globalization, foreign companies want to reduce the risk of dependence on traditional markets are changes in labor costs and the complex political relations.

Competition from foreign companies in Vietnam

When established, FPT Software has centralized architecture, the board of directors may decide on most of the activities of the company.  After many years of operation, by having huge competition from foreign companies operating in Vietnam as Paragon Solutions, TMA, CyberSoft, Gameloft, and so on, FPT Software forced to reconsider their activities.  Because the companies have their opponents Partners in home country to find work, especially outsourcing.  Moreover, they also have extensive experience in software development as well as knowledge of market demand.  In other words, FPT Software does not have enough experience and work force to compete with these companies.

Competitors from neighbor countries

Vietnam is located in southeastern Asia, between the two powers in technology that India and China as well as other countries like Singapore, Philippines, Malaysia, Thailand ... These countries have advantages such as English ( India, Malaysia, the Philippines ...), a development platform for a long time (Singapore, Malaysia, Thailand), has abundant labor resources (India, China ...).  Besides that, China and India have been known as the ideal destination for outsourcing not only in the IT industry but also many other industries.

b. Problems in development

The development of the Vietnam economy too overheated had influenced Vietnamese companies.  Skilled work force is becoming scarce.  Wage costs have been steadily increasing. The IT industry today is not the highly attractive sector because competent with many other industries.  The rapid development of technology makes IT companies must continually invest in training to avoid lagging.  Infrastructure in Vietnam is also a big problem, office rent, the value-added services increase too fast.  Cost of living in big cities has increased rapidly.

Apart from the objective causes of the Vietnam's market and economy in general, the rapid development of the company also lead to management problems.  Attracting high-level human resources is leading to high wage causes the wage fund deficit.  The professionalization of technology development requires many specialized divisions, and the management system becomes overloaded requires an appropriate structure. The managers also have not really prepared for changes in the new situation, so they embarrassed to find alternative solutions.  At present, Vietnam has not much excellent management consulters with knowledge in business cultural and obstacles in management.  Foreign consultants charge a too high cost or they are difficult to apply in practice management in Vietnam.

4. Suggests a structure adapt with Vietnamese companies situation

a. Choosing a structure

To satisfy many different customers and pursue multiple different technologies to make IT companies have set up many divisions. Each division is in charge of a separate special technology. Therefore, I choose Divisional structure solution. Specifically, it is a product division structure. "A divisional structure in which a centralized set of support functions services the need of a number of different product lines." The first special point is the independence. Each division has a right to make decisions on finance, strategy in development, human resource, and so on. A division is self-contained on management and takes responsibility about its result. Each division focuses on services, which are its advantages, of a set of centralized functions. When divisions are self-contained, each division can control and develop its own value-creation activities. For an IT company, different products are highest advantages in competition. The horizontal differentiation of organization increases as a expanding in producing operation in specialization. The second innovation in a multidivisional structure is a change in levels of management, this structure create a new level in organization, it is level of corporate managers, who take responsibilities for monitoring the activities of the division managers. Those managers are called a corporate headquarters staff, which is functionally organized. The main tasks of those managers are support and coordinate the division's activities. For example, in FPT Software, we have forty business objects (usually called BO) and branches in host countries, each of BO is independence and self-contained in customers relationship, technology, work force management, and so on. The BOM (board of managers) of headquarter makes plans and quota for divisions. We can share information and learn from others divisions result so that divisional innovation can be communicated smoothly throughout the headquarter management layer. In the other hands, top managers operate company in the way of performing a resource-integrating role. In addition, top managers can cut down or close some divisions when crisis is happen and promote the divisions when determine good signal from markets. The divisional managers, who link corporate headquarters and the divisions, are responsible for result of each division and conduct company strategies in details. Beside that, resource exchanging between divisions is easily executed due to making use of human resource department of corporate.

FPT Software

FPT Software Hanoi Branch

FPT Software Hochiminh City Branch

FPT Software Danang Branch

FPT Japan Co. Ltd.

FPT Asia Pacific Pte. Ltd.

FPT Software Malaysia Sdn.Bhd.

FPT USA Corp.

FPT Software Europe Ltd.

FPT Australasia Pty. Ltd.

FPT Software Engineering Co. Ltd.

FPT Software Direct Marketing Solution Co. Ltd.

FPT Software Research&Development Co. Ltd

FPT Software Worldwide Co. Ltd

FPT Software Enterprise Solution

Osaka Sales Representative Office

New York Office

Texas Office

b. Advantages

For developing company, a large and complex organization had several advantages. Top managers are responsible for long-term planning, such as planning, monitoring, and making decisions for the company in general and for tailoring the missions of the producing divisions to match the goals of the whole organization. Divisional managers are responsible for every day operations of their respective divisions and for tailoring divisional activities to needs of customers. This structure increases organizational effectiveness, that one creates a clear labour's division between divisional managers and corporate managers with detailed missions and targets. There is a new level of management in multidivisional structure increased control ability. The extra control, which is included between divisional managers and corporate managers, promotes company pursuing internal organizational efficiency. Being responsible of divisional managers make they have to report their status to corporate manager, so they must control size of personal staff and rein in cost closely. Each division has to be control its profit, so whole division compete to each other's. Corporate managers can identify which is good division, bad division and make decisions in investment of capital for each division. Base on result of each division, corporate managers can allocate capital resource on the best division for corporate growth. Beside that, company creates an internal labor market as well. High performance divisions will attract labor from other divisions and their divisional managers tend to be promoted to become corporate managers in the future as incentive prize.

c. Disadvantages

As other structures, during developing process of multidivisional structures have many problems over time. If the company determines the problems of structure, corporate managers can control them as well, but the disadvantages always exist beside the company development. The first problem is authority. The corporate managers have absolutely authority to centralize at the corporate level, but at the divisional level, corporate managers do not have authority to decentralize level. Independence and self-contained of divisions increase their managers authority but decrease headquarters right. The corporate managers need regulations on roles and responsibility of divisional managers. The second problem is coordination between divisions. Under pressure of competition between divisions, the divisional managers tend to keep their information for themselves. Beside that, each divisional manager wants to receive capital investment, so he will maintain division's performance as an advantage in comparing with other division. To solve this problem, corporate managers should to divide divisions into specialized targets to avoid similar role of the divisions. The thirst problem is internal communication. In the tall hierarchies, connections between corporate center and the divisions are huge. In the divisional side, the divisional managers may disguise low divisional performance to continue receiving capital allocations. If a company has too many level numbers in management, it takes along time for the top managers make decisions and transmit them to divisions that response. To solve this problem the structure should be decentralized and decrease level number of management. The last problem is bureaucratic costs. Each division has all functional departments such as human resource management, research and development, administration, and so on. Duplicate on activities of divisions lead cost of management of whole company become too high. Those cost and corporate operating cost will increase quickly if the company continually expands its operations to diversify its products. The company should reduce size of corporate headquarters by moving staff to divisions, number of divisions and customize its cost in support functions

5. Applies to FPT Software Company

a. About FPT Software Company

From 2004, FPT Software Company has applied multidivisional structure into company for expanding strategic in IT market. Today, FPT Software has about 20 branches and child companies around the world, and also has 40 BO (business objects) belong to child companies. Each branch is responsible for separate missions. For example, branches in host countries are responsible for spread FPT Software's images to companies in the world and find customers out, sign commercial contracts, branches in Vietnam are responsible for research and development, training, finding solutions, etc… The missions of the top managers are make planning, find and execute strategies, allocate resource between member companies. In case of very big project, headquarters will coordinate member companies together to deal with customers. Mission of child companies is trying to meet the given annual plan. Each company can deal directly with customers if its manager has relationship with those customers.

b. Long term target of FPT Software Company

Long-term target of FPT Software Company is becoming a biggest company in Vietnam on software exporting. Beside the main target, FPT Software wants to become a leading technology company in not only Vietnam market but also foreign market. FPT Software invests almost technical areas such as mobility software, embedded systems, applications, and so on. The company is becoming a partner of famous companies, group in the world like Microsoft, IBM, Canon, and Hitachi… The BOM of FPT Software decided a strategy named "Go MASS" to diversify products. The structure is developing quickly bigger. It requires abilities in management to face to many difficulties in the future. Applying only one type of structure cannot expand company continually, so the company applies some flexible structures in the same time. However, skeleton of them is multidivisional structure. To meet long-term target, from years, the BOM has been designing a company structure can adapt development for a long time. This structure has taken some success for the company. However, there are many existing problems cause difficulty for developing process.

c. Combination of structures

The main structure in FPT Software Company is divisional structure. Base on this structure, child companies can apply for themselves other appropriate structure. At FPT Research & Development Company (FRD belong to FPT Software Hanoi branch), main mission of the company is research on new technology, especially embedded system. There are 3 BO (business objects) in FRD, each BO is in charge a kind of embedded system, for example BO6 do mobility software such IPhone mobile, Android mobile, Symbian mobile, and so on. BO6 has applied functional structure for itself. This structure can solve problems of divisional structure. It promote skilled engineers contribute their abilities with highest productivity. They can learn from others and learn by themselves to become more productive and specialized. In training, new employees are given training from experience engineers and on the job training way. One more advantage is the same skilled engineers are grouped as a specialized team. Each team approaches new technology as the best ways they are able. In a team, team leader can supervise team members and control others behavior. Additional, functional managers can do peers review others result and monitor or supervise other managers. Peer supervision is important in complex environments, it detect mistakes of team, project. This one may reduce shortcoming of product before applied on devices. It also helps save cost for repair errors or problems in our product.

d. Multi-structure

For a multi-technique as FPT Software, it is difficult to apply only one structure. First, any structure exist some problems, which is not resolved immediately or potential disadvantages in development process. Second, IT market is always changing continually. Any technology will be obsolete when it is born. Product life is too short lead the company change to adapt new business environment.

6. Conclusion

Managing a business or an organization, whatever that is big as a government or small as a shop, must be organized, and structured accordingly. As a manager, we always have to put the boat steered business to overcome the difficulties and challenges.  To do so, apart from the business strategy, technological change, creating a competitive advantage, then the organizational structure to help businesses reduce management costs, improving using resource, impetus and opportunities for employees. Restructuring process takes place continuously and depends on many factors both within and outside the enterprise.  Selecting a suitable architecture and a costly one it requires management capabilities, leadership, and understanding deeply held.  By the prompt and sensible of leaders, FPT Software today has become one of the partner of big corporations like IBM, Microsoft, Google, HTC, ...

With 50% growth on personnel, 70% on revenues per year, FPT Software requires organizational strategies for each specific phase.  There is also need long-term development plan.  FPT Software has been successful with the establishment of many small companies have specialized functions for each technology sector reflected the determination of the leaders in the position and global orientation.  Through the establishment of small companies also found that FPT Software is sharing power and creating conditions for these companies to decide their future according to the general orientation of the parent company.

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