Organizational Design Paper
...ior VP of Human Resources reports to the CFO. The Senior VP of New Business Development is a staff position. Hence, there is no direct reporting relationship between that position and sales or marketing people in the Groups. As can be seen from the chart above, there are no specialized managers, like sales or manufacturing, reporting to the CEO (except the staff position mentioned). Also, one can see that the span of control is relatively narrow at this level, and that design philosophy permeates every Group and SBU. This does make for a “taller” organization, which would have a tendency to slow decision-making. However, in this case, only the most major decisions are slowed. This is due to a well-designed system of policies that govern “authority” levels. Every SBU president is granted high levels of authority for expenditures, contracts, and expansion. The authority and approval levels are delegated in decreasing amounts within the organization. The current structure is not designed around functional departments. Instead, the functions of sales, marketing, and production are decentralized, and delegated to the Groups. Each Group may have many Strategic Business Units (SBUs). Each SBU addresses either a vertical market sector (like State and Local Government, or Healthcare, or Manufacturing), or a horizontal service (like Seat Management, or IT Outsourcing). In that sense, the corporate organization is a hybrid, having been designed around both customers and products. In almost every characteristic, the Organic type of organization is exhibited. This is true with the exception of the span of control, which was discussed above. Regardless of its focus, every SBU, both horizontal and vertical, is a “revenue” center. In other words, every SBU President has goals that relate to the generation of new sales from which external revenue is derived. In addition, the SBU Presidents have pre-tax profit goals. Hence, SBUs, as the name implies, are mini-units within the larger corporate structure. Analysis In this section, the paper focuses on the key issues facing the corporation, and provides a foundation for the recommendations made later. This includes providing a short discussion on the benefits and difficulties associated with XYZ’ potential use of network-based, team-based, and boundary-less organizational structures. Issues and Observations 1. In only 11 years, XYZ has grown from a startup company to a corporation generating over $2 billion in annual revenue. 2. The company’s success is the result of employing a strategy of both acquisitions and intrinsic growth. The company has started to put in place a strategy to integrate processes and systems, and to centralize functions like Human Resources. It does not appear that acquisitions will slow, and the many prior acquisitions may have outpaced the ability to redesign organizational structure as frequently as needed. Consequently, the current structure may be too “tall”, as a new acquisition is simply packaged into the Group or SBU that made it. 3. XYZ operates in a dynamic and fiercely competitive industry. There are a number of differentiators, but nothing that a major competitor would not also claim. 4. The rapid pace at which the Internet and related commerce is changing the business landscape poses serious and frequent threats to the business. Keeping pace with these changes demands an agile organizational structure, and rapid decision-making both strategically and close to the customer. 5. Skilled human resources are expensive and difficult to find. This is true of both technical and managerial positions. The current organizational structure and SBU-revenue philosophy described above makes it difficult to share, or even “buy”, resources between SBUs. Consequently, SBUs, even within the same Group, have a tendency to duplicate services, resources, and reinvent processes and core competencies. There is a substantial cost in doing this. Organizational Design Alternatives The Dessler text states, “Increasingly today, steps such as empowering, widening spans, or establishing mini-units are no longer enough. Managers are therefore using teams, networks, and boundary-less structures to redesign their organizations so as to better manage change.” XYZ and the Team-based Structure It would be extremely difficult to imagine that work performed in most companies today is not team-based to some degree. In that sense, XYZ has numerous pockets of separate teams, which are focused on a single customer or a discrete job or product. However, most are teams only in the sense that people are working towards the same goals; the team is not the basic work unit within the overall corporate structure. Moreover, some of the fundamental philosophical mechanisms needed to support team-based structures are not present in the organization today. For instance, employees are not empowered to make decisions and change the nature of their work. There are clear and distinct lines of authority and responsibility even in the smallest of the “financial centers”, the Account. Another example is the many approval/authority levels in place. Since the span of control is so narrow, the approval/authority levels provide the necessary checks and balances. This is reflective of a lack of high employee involvement and trust – a fundamental requirement for teams to flourish. Without both fundamental and radical change in corporate culture, implementation of the team-based structure would not be possible. Also, the change would be an evolution, taking much time, in an industry that is experiencing rapid and substantive change. XYZ and the Network Structure Based on the analysis of issues, XYZ has the classic characteristics to benefit from the Network-based organization. It is a very large company with numerous mini-units, each with enough autonomy to introduce inefficiencies with market overlap and strategic operating decisions. Given the narrow span of control, top executives may not be able to provide the coordination and decision-making needed to keep the corporation’s assets and human capital at efficient levels. In the organic and mechanistic structures, coordination and cooperation are substantial challenges for the CEO (Seaman, 1995). Given the diverse markets in which XYZ operates, combined with its many service offerings and autonomous mini-units, the Network-based structure would provide needed cooperation, communication, and coordination between operating units. Further, the formal network matrix could be used to leverage the strengths of the individual units across corporate Groups. Internal issues with this direction may include a resistance to suggestions or decisions made by the Network-based Management Team. Also, Group and SBU Presidents that rose to their positions from the current structure may think that the Network-based Management Team would not understand their unique markets and customers. XYZ and the “Boundary-less” Organization The Boundary-less structure is sometimes a logical next step to the Network-based organization. Such a structure uses cross-functional teams and networks to remove the boundaries that typically separate a corporation’s assets and human resources. The uti...