There are two types of forces which produce dynamism in any organization and bring change in it; one force is intentional in which managers or leaders formulate strategies, make decisions, and implement them. The purpose of this is to drive the organization towards their desired goal. Second type of forces is undesirable and unintentional but that can bring significant organizational change. These forces are sometimes the barrier of the desirable Strategic route. To response such forces in an effective and timely manner is the major challenge for the leaders or managers. This paper has highlighted both types of forces and their anticipated behavior
1. Organization Organism Behavior
Not identified as direct quoteGareth Morgan (1998) on Images of Organization, who identifies 7 metaphors describing contrasting styles of organization which might be adapted to understandings of a global brain (GB):
The modern management philosophers remark, The only constant is change (Kanter, Stein and Jick, 1992). The image of an organism seeking to adapt and survive in a changing environment offers a powerful perspective for managers who want to help their organizations flow with change. This idea that organization is more like organisms guided our attention toward the more general issues of survival, organization-environment relations and organizational effectiveness. This metaphor offers powerful ways of thinking about adaptation of right strategy congruence with the organization internal characteristics and strength as well as the type of environment where the organization operates. But at the same time it also discuss and point out those forces of organizational change which are independent of organizational strategy and may require some instant response or actions in order to survive the organization in the business. This article is discussing both adaptive or strategic forces and selective or non-strategic forces of organizational change.
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2. Strategic Forces
Strategy is seen as a grand plan with clear objectives and formal policies. The role of strategy is to allow the organization to achieve a fit with its environment. Many of top managements strategic choices affect organization design decisions. Strategic choices enable an organization to capitalize on its unique capabilities. According to Michael Porter, companies need to distinguish and position themselves differently from their competitors in order build and sustain a competitive advantage (Hellriegel, Slocum & Woodman, 9th ed).
2.1. Types of Strategy
At the corporate level there are two main approaches or school of thoughts that can help us achieve a strategic fit with the environment. Each approach has certain advantages and has proven to be effective under particular sets of circumstances.
2.1.1. Competence building (Inside-out) Approach
This approach emphasize on the process of identifying and building on core competencies, on a continuous basis. There, the emphasis is on designing products and services that capitalize on the competencies of the organization and on offering them to the appropriate market. Competence building approach begins with a deep understanding of the internal characteristics of the organization and of its members. The appropriate product/market are then searched that is compatible with the core competencies of the organization
2.1.2. Industry positioning (Outside in) Approach
The industry positioning approach undertakes local market analyses, which may reveal the presence of promising opportunities as well as threatening competitors. Contrary to the first approach this approach starts with the external analysis, selects a ready-made generic strategy and aligns its internal system accordingly (Saint-Macary, J. & B.Bazoge, strategic Thinking).
2.2.1. Case Study-Competence Building approach
Pfizer is a leading drug manufacture company, created enormous share holder wealth of 35 percent per year during 1992 to 1997. The reason for its tremendous success and remarkable achievement in the pharmaceuticals sector is to take the competence building approach on its traditional strengths in research and sales. Pfizer chief executive officer-William Steere, a former sales man who joined the company in 1959 and rose through it marketing ranks-has committed himself to building one of the industrys best sales force. He increased Pfizer US Sales force from 1500 to 3467 within seven years normally hired talented and most competent sales person from other companies. The Pfizer sales force uses leading edge information systems and technology to track the prescription histories of physicians. The companys information systems also allow top management to plan the expansion of the sales force, to track its performance and to link that performance with compensation. Besides strengthening its sales force the company also focused to escalate its Research competency. Pfizer had hired many of the industrys most experienced and talented scientists by offering them compensation and an unbeatable opportunity to conduct leading edge research. The research team developed efficient management processes integrated with the early marketing input to deliver the best practical results. Pfizer offers an excellent example of how executive can recognize what their companies do well and use that understanding to build superior strategies.
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2.2.2. Case Study-Industry positioning approach
Enron Energy is the most successful organization belonging to energy sector but unlike many other companies of energy sector has adopted the positioning approach. The organization always seeks to leap by availing market based opportunities and aims to change the game in the industry. It began as a US pipeline company. In the mid-1980s when other natural gas companies were trying to preserve regulatory protection, Enron took the opposite approach. Deregulation helped to create the wholesale gas-trading market in which Enron has won a dominant position. In the early 90s, the company uses the same strategy in the deregulating electric-trading market. More recently, it placed a big bet in the retail electricity business, investing aggressively in infrastructure and brand building. Enron has also expanded its business in Europe, India and Latin America. In the early 90s, Enron created new gas market outsides the United States by building pipelines and power plants in different countries. At the same time, the company entered the wholesale electric market, beat the largest electric utilities, and created a large and successful electric-trading business. In July 1998, Enrons leadership team, believing that there was an unmet need for water and sewer systems in the developing world. As a first step, Enron acquired Wessex Water PLC, a British water and water treatment company. The organization is going right on target and declared No. 1 for innovation among 431 companies in Fortune magazines in 1997 survey of corporate reputations. The selection and implementation of the right strategy has derived the organization towards its enormous success (Claudio, Aspesi and Vardhan, 2000).
The cases of Pfizer Pharmaceutical and Enron Energy of different industry show that both competence building approach and industrial positioning approach can yield outstanding results in any industry. It is also concluded from the two examples that the execution of the strategy compatible with the organization strength delivers better results than one that may be more elegant in principle but does not reflect organization strength.
3. Non-Strategic Forces
The adaptation perspective is normally focused in the literature on management. It stated that organizations are affected by their environments according to the ways in which managers or leaders formulate strategies, make decisions, and implement them (article-Organization and Environment: Adaptation or Selection). Infact change is not always planned, and it is not always desired. The internal and external ongoing forces can induce organizational change regardless of the strategies and intentions of the leaders or managers and no matter what action taken by individual organization.
HYPERLINK "http://books.google.com/books?id=KxWS967Hs7AC&pg=PA24&lpg=PA24&dq=%22three+clusters+of+forces+creating+motion+in+and+around+organization%22&source=bl&ots=ZL_v4ZW1-D&sig=GIhper-bkQBNS6hhs2Eo9nCBwq8&hl=en&ei=EXLkS_P5EYOglAfuqbzDAg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBQQ6AEwAA"Challenge of Organizational Change: How Companies Experience It ... - Google Books Result
There are three clusters of forces creating motion in and around organization that generates change. First is the relationship between organizations and their environments (population Ecology View of Organization). The second is organization growth through the life cycle. The third is political, the constant struggle for power. All three occur in a sense outside of strategic intention or official organizational goal. They pose unintended, unofficial, unwanted or underground pressures on organizations to change form or direction. In this paper I am going to discuss the first clusters of forces to change the organization. (Kanter, Stein and Jick, 1992)
3.1. Population Ecology View of Organization
Contrary to adaptation perspective, population ecologists focus on the dynamics of change at the level of whole population of the organization. They argue that the pattern of environmental change is such that selection pressures may favor or eliminate entire group of organizations. These inertial pressures arise from both internal structural arrangement and environmental constraints. It may prevent organizations from changing in response to their environment. The stronger the pressures, the lower the organizations adaptive flexibility and the more likely that the logic of environmental selection is appropriate. These inertial pressures include specialization of production plants and personnel; established ideas and mindsets of top managers; inadequate information; the difficulty of restructuring technology and personnel in unionized plant; the force of tradition; barriers to entry created by legal, fiscal, and other circumstances; and many other factors that make it impossible for organizations to engage in timely and efficient changes. This perspective of organizational change emphasize on the importance of environmental competition and resource scarcity. These are the two forces that actually select or eliminate specific types of organizations. As a consequence, populations of organizations can survive or fail as a result of natural evolutionary processes, regardless of the actions taken by individual organization. (Article-Organization and Environment: Adaptation or Selection, Morgan 2nd ed)
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The population ecology view is criticized to under estimate the importance of the choice of strategic decision for an organization. The importance of good strategic decision and management skills are undermined which is not exactly true for the long run. The adaptation theorists suggest that strategic decision can play their role effectively by organizing the environment against the inertial pressures. For instance, by engaging in collaborative actions with other major actors in the environment-potential competitors, firms in other industries, governments, unions etc they can even reshape or eliminate many potential threats. They can be proactive rather than reactive to encounter these threats (Morgan. 2nd ed)
4. Organizational Growth and Development
An organization developmental theory developed by Larry E. Greiner is helpful in change management when examining the problems associated with growth on organizations and developing a proactive framework to cope with such situations. It can be argued that growing organizations move through five relatively calm periods of evolution, each of which ends with a period of crisis and revolution. Each evolutionary period is characterized by the dominant management style used to achieve growth while each revolutionary period is characterized by the dominant management problem that must be solved before growth can continue. The fast
HYPERLINK "http://books.google.com/books?id=5OrJcH2_xJYC&pg=PA196&lpg=PA196&dq=%22organizations+move+through+five+relatively+calm+periods+of+evolution%22&source=bl&ots=4VqlNPEGpM&sig=h7SK_EpqZesVuMEgMUgTW7oWjco&hl=en&ei=pXPkS9yjI8KBlAfNn4GLAg&sa=X&oi=book_result&ct=result&resnum=3&ved=0CCAQ6AEwAg"Economic Planning And Restructuring - Google Books Result
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Figure (1) Organization growth model
growing company tends to experience all five phases rapidly while the moderate and slower growing organizations take longer time.
HYPERLINK "http://www.accel-team.com/techniques/orgGrowth.html"Organizational growth phases that impact on management ...
As illustrated in Figure, the first stage of organizational growth is called creativity. This stage is dominated by the founders of the organization, and the emphasis is on creating both a product and a market. These founders are usually technically or entrepreneurially oriented, and they contempt management activities. They occupy multiple roles and making decision themselves. The organizational structure is simple and communication among the employees is frequent and informal.
But as the organization grows, management problem occurs that cannot be handled through informal communication. Thus the founders find themselves burdened with unwanted management responsibilities. They try to implement the same strategy and control as did previously to get the same result but fails to get the same result. And conflicts between the harried leaders grow more intense. At this point a crisis of leadership occurs, which is the first revolution of phase-1. Quite obviously, a strong manager is needed who has the necessary knowledge and skill to introduce new business technique.
HYPERLINK "http://www.accel-team.com/techniques/orgGrowth.html"Organizational growth phases that impact on management ... intense. ...www.accel-team.com/techniques/orgGrowth.html - HYPERLINK "http://webcache.googleusercontent.com/search?q=cache:XtUrB8c5VuIJ:www.accel-team.com/techniques/orgGrowth.html+%22harried+leaders+grow+more+intense%22&cd=1&hl=en&ct=clnk&gl=us"Cached - HYPERLINK "/search?hl=en&lr=&rlz=1W1DLUS_en&q=related:www.accel-team.com/techniques/orgGrowth.html+%22harried+leaders+grow+more+intense%22&tbo=p&sa=X&ei=73TkS9a9H4SKlweOkaiTAg&ved=0CBUQHzAA"Similar
Those companies that survive the first phase by appointing a capable business manager usually go ahead and get into the phase of Directive Leadership. During this phase the new manager and key staff take most of the responsibility for instituting direction, while lower level supervisors are treated more as functional specialists than autonomous decision-making managers. Organizational Structure is centralized; Communication becomes more formal; accounting systems for inventory and purchasing are introduced; and functional department and job assignments become more specialized in this phase.
Although the directive approach is effective for small or medium organization but when the organization grows to larger, more diverse and complex organization this approach is eventually becomes inappropriate for such type of organization. Thus the second revolution is about to happen as a crisis develops from demands for greater autonomy on the part of lower-level managers. So the top management who were successful to adopt the top down approach in the directive phase is reluctant to give up responsibility and empower the lower-level manager.
Those organizations are come out of this crisis, which delegates the power to lower level managers and adopted bottom up approach.
When an organization gets to the growth stage of delegation, it usually begins to develop a decentralized organization structure. Much greater responsibility is given to the line managers. Direction, commands and Communications from top Executives become less frequent. They restrain themselves to managing by exception based on periodic reports from the functional managers.
HYPERLINK "http://www3.interscience.wiley.com/journal/119157405/articletext?DOI=10.1111%2Fj.1741-6248.1997.00397.x"Evolution and Revolution as Organizations Grow: A company's past ...
Yet, eventually the next crisis begins to evolve as the top managers realize that they are losing control over a highly diversified field operation. Hence the Phase 3 revolution is underway when top management seeks to regain control over the total company. Some top managements attempt a return to centralized management, which usually fails because of the vast scope of operations. Those companies that move ahead find a new solution in the use of special coordination techniques
During this phase the decentralized units are merged into product group, which are accountable for the proper utilization of investment parceled by the top management and its return. The structure is still decentralized but certain technical functions such as data processing are centralized. The line managers have daily operation decision power but they have to give careful justification of their action to the top management.
Yet most coordination systems eventually get carried away and result in the next revolutionary period the crises of red tape. This crisis has become too large and complex to be managed through formal programs and rigid systems.
If the crisis of red tape is to be overcome, the organization must move to the next evolutionary period-the phase of collaboration. While the coordination phase was managed through formal systems and procedures, the collaboration phase emphasizes spontaneity in management action through teams and the skillful confrontation of interpersonal differences. Social control and self-discipline take over from formal control. This evolution builds around a more flexible and behavioral approach to management. The problem solving process is carried out through team actions. The organization structure is matrix type forming appropriate team for the problems. Teams are combined across functions for task group activity.
Greiner is not certain what the next revolution will be, but he anticipates that it will center on the psychological saturation of employees who grow emotionally and physically exhausted by the intensity of team and the heavy pressure for innovative solutions. (Article-Organizational growth and development)
4.1. Case Study
4.1.1. Company overview ENAR Petrotech Services is a leading Engineering and Consultancy company, located in Karachi -Pakistan, providing services of Design, Engineering, Procurement Assistance, Planning/Development, Inspection, Site Supervision and Project Management to the Projects in the Petroleum Refining, Gas Processing, Cross Country Pipelines, Chemical, Fertilizer and other sectors of the Process Industry. The company has just completed its thirty (30) years of services. It started its business as a design unit of National Refinery Limited, the largest refining complex of the country till1990. After few years it was separated from NRL and was made a sister company of NRL with two other companies PRD and Petroman. All the four organizations had to report to their mother company PERAC. These organizations were performing different functions and rather autonomous organizations. Only high-level decisions were made at the PERAC level otherwise all the four organization were pretty much independent to make their own company decisions. ENAR was initially providing its consultant services to the government organizations and was limited to some specific consultant and Engineering Services including Designing, Detailing and Construction Supervision. The organization normally relied on Simple and small projects owing to two reasons. Firstly the newly organization was not capable enough to acquire and accomplish Large and complex Project. Secondly it was thought before that since the development and construction of large petroleum projects were very technical and complex task so the foreign reputed companies were only considered to be capable of doing such kind of projects. Thatswhy in the decade of 70s and 80s there was no pretty much attraction for the local consultant and engineering company especially in petroleum and energy sector. Infact the basic reason for the establishment of ENAR as a design unit of NRL was to save extra cost,
which the refinery had to pay foreign consultant and designer even for the small and simple modifications in the plant.
4.1.2. Strategy Implementation
In the end of 70s Dr. Shahid was appointed as a new CEO of the organization. First time in ENAR he started formulating and implementing the strategy. Initially he adopted the low cost strategy and trying to occupy the major market share of simple and less technical projects in various government organization of the petroleum sector. Meanwhile he also sowed the seed of his next approach. He started building the competency of the organization and personnel expertise. He mainly focused on the Design, Engineering and Construction supervision activities, which were the core functionality of the organization. For this, he bought some basic engineering and drafting software and converted the manual drawing work to computer drafting. He sent some senior and talented draftsmen on training to learn this new mode of drawing. He also hired some competent and experienced engineers and draftsmen on good salary to strengthen their technical unit. Dr. Shahid and the subsequent CEOs efforts showed the result just after few years and the company had acquired some big assignments in the sector. The major turning point was the development of Dhakni Gas processing Plant. The complete Project was carried out by ENAR in very low budget and acceptable Quality. The success of this complex and sophisticated project greatly elevated the reputation and goodwill of the organization and put it in front of the giant consultant companies. In that duration the organization keeps on escalating and widening its internal competency. Acquisition of highly advanced and sophisticated engineering software, electronic networking, electronic data base, Latest Engineering codes and design practices, technical books and engineering magazines etc are the results of adopting this competence building approach. By the starting of 90s ENAR was considered among the top most consultant companies of the country. Over the last ten years petroleum sector is one of the largest growing industries of the country. Due to rapid growing demand of energy in the country many local and foreign petroleum companies are investing in this sector. Lot of consultant and engineering companies have also entered into the market to avail business opportunities in energy sector. First time in the last forty years multinational petroleum companies are taking the services of local consultant instead of foreign consultant for their oil and gas fields in Pakistan to cut down their operational and project cost.
In that growing environment M/s ENAR decided to change the Strategy after successfully implementing the previous strategy to get more opportunity and benefit. Mahmood Ali, the current CEO, and other top managements decided to diversify their business to other consultant and engineering activities. They already had the good market share in Design, Detailing and Construction-supervision business. They decided to enter into project management and planning activities, cross-country pipeline designing, plant safety design, procurement assistance etc. Though initially they had to make some additional investment in terms of hiring new staff, purchasing software and design codes etc to implement this strategy but eventually they were getting the returns just after few years. Previously the biggest market of ENAR was the government Petroleum Company and refineries but due to adopting this new strategy the company is also doing projects for the big multinational petroleum companies in several activities.
4.1.3. Organizational Growth
As the Organization grows in size and age it passes through different evolution and crisis phases attempting to survive itself in the challenging situation. For instance, ENAR started its business with a few staff; most of them were engineers and draftsmen. Their main concern was how to stable the organization technically fit in the environment to get the economical stability of the organization. Though the organization is a government organization but the CEOs or leaders of the organization were given almost complete authority especially in the organizational routine operational matter. But as the organization grew in size and age, more functional activities were required and to manage these functional departments effective top managers were required. Therefore to come out of this crisis CEO formed and hired functional department, staff and their manager. Then the evolution of second phase began. During this phase the decisions were normally taken by senior Engineers and department Head. When the proposal and scope of work of any project was prepared or the selection of any suppliers was finalizing the team leader or line manager did not have the decision power or even they could not participate in that process. When the proposal was approved or the contract was signed the top management assigned the team leader or middle manager to carry out the task as per the contract requirement. Since the team leader or engineer is directly involved in the project so he needed some amendment in the contract or some changes regarding the schedule or project date constraint. He knew that some tasks required more time as it was mentioned in the scheduling of the project but he could not do anything because his top management had already approved that schedule. So when the organization further grew and expanded these frustrations of middle managers or engineers had taken the shape of internal crisis. But fortunately the company has taken the immediate steps to encounter this crisis. They delegated some power to middle manager or engineers. The team leader or the important team member is authorized to comment on the contract or even change or modify the contract or scope of work, if required, after notifying to the top managers and client. He also participates the client meeting and give some feed backs. One of the biggest advantages of this decentralized structure is that quality of work increases because direct dealing with client helps to better understand the exact requirement of clients. The draw back of this evolutionary phase as per top management perspective is that they are losing their control. Even some of the clients during the project directly communicate and discuss about the project matter with the team leader or Engineer instead of top managers or Senior Engineers. So some top managers are attempting a return to centralize management structure and currently ENAR is going through this crisis. So if the quick and effective response is not taken to move the organizational to next evolutionary phase a conflict between top management and middle manager might start which leads the organization towards decline despite having very good market and business.
The major reason of ENAR success is, no doubt, adopting the right strategy at the right time. But this is not the only reason because as the organization grows and passed through different phases; each of this phase ended with a management crises. To deal and response in this crisis effectively is basically the root of success otherwise if the organization was just relying on its strategy and instead of responded and grew towards subsequent evolutionary phase it would die after certain period of time no matter how remarkable and outstanding strategy the company was using.
Gareth Morgon. Images of Organization, 2nd Edition Kanter, Stein and Jick. The challenge of Organizational change, 1992 Hellriegel, Slocum & Woodman. Organizational Behavior,9th ed, 2001 Article: Organizational growth and development (An excerpt from Evolution and Revolution as Organization grows by Larry E. Greiner, 1972) Article: Organization and Environment: Adaptation or Selection (An excerpt from The population Ecology of Organizations by M.T.Hannan and J.H.Freeman, 1977) Saint-Macary, J. & B.Bazoge. strategic Thinking Article: Brilliant Strategy but can you execute by Claudio, Aspesi and Vardhan, 2000.