Learning Function in Organization Design

Introduction

The key task of organization design activities is to guarantee that managers apply only the most effective structures to support relationships and interactions between units and departments with the focus on determining employees’ roles and responsibilities. It is important to analyze the experience of one of the leading companies in the oil and gas sector in terms of supporting organization design and implementing associated changes in the training function. The problem is that the company selected for this case did not achieve high results in developing its organization design. The purpose of this paper is to analyze organization design in the selected company, evaluate design options regarding the training function, analyze organizational culture, focus on the role of human resource management, and provide recommendations to improve organization design in the company.

The company selected for the analysis is one of the leaders in the oil and gas sector, and it is located in the Middle East. The company was founded in the 1970s in response to the development of oil production in the region. The company’s creation contributed to the economic development of the country where it is located. Currently, it produces 3 million barrels of oil a day, as well as petrochemicals and other petroleum products. The company is oriented to the constant progress and expansion of its operations. To change organization design according to modern norms and trends, in 2017, a new mission, vision, and strategic objectives were formulated till 2030 with the focus on applying new organizational paradigms and building an effective and lean organization. According to the company’s vision, it is oriented to promoting the nation and unlocking the potential of the country’s natural and human resources. According to its mission, the company is performance-driven, investing in people, and maximizing the value of resources.

The role of the human capital (HC) in the organization is high because human resources directly influence the effectiveness of its operations. Furthermore, there was the problem that the company has many subsidiaries, and communication between them and headquarters (HQ) needed to be well-organized. Managers lacked standardization in their operations and documentation, channels for communication, policies, and there were significant departmental barriers. The following HC objectives were formulated to address existing problems in organization design and improve the work of human resources: to drive effective workforce planning, deliver the best HC solutions, drive the digital agenda for working with HC, recruit the best candidates, provide effective training, invest in developing talents, and drive cultural changes.

Historical and Theoretical Basis of Organisation Design

Organizational design can be defined as a process of ensuring that a company can optimize its activities through the effective and flexible organization of its structure and communication. The focus of organization design should be on overcoming departmental barriers and improving interactions, collaboration, and teamwork to enhance performance and achieve strategic goals (Alvesson and Sveningsson 2015; Stanford 2013). The difference between organization design and organization development is in the fact that organization design is associated with forming a company according to its purpose, vision, and mission (Stanford 2013). On the contrary, organization development is associated with advancing the selected form or design to ensure that the purpose, vision, and mission will be achieved.

For this project, the organization design of the selected company has been chosen for further analysis because it is important to understand what aspects of design related to the training function can influence the company’s HC. The principles of organization design adopted in this project include the focus on alignment of all components, the reconfigurability of the structure, flexibility, and assessment (Stanford 2013). Furthermore, the criteria of organization design associated with this project include the focus on the appropriateness of the selected design for the company’s strategy, resources, HC, and the environment to lead to improvements in performance.

In the selected company, much attention was paid to accentuating hierarchy and the specialization according to the traditional theory and the impact of such contextual and environmental factors as the role of culture and tradition on business in the Middle East. Many companies in the Arab world remain to be focused on traditional patterns of organization design, emphasizing authority, and direction (Meidell and Kaarbøe 2017). Referring to the roles of the HC Directorate in the company, it is possible to state that this structure was ineffective. Thus, the structure of the company was changed significantly with the concentration on reorganizing departments and units and duplicating some roles and positions in the HQ and subsidiaries. The problem was that communication between persons performing the same roles in the HQ and subsidiaries was limited, there were no clear instructions on how to interact, proceed activities, and perform the same roles.

Two different models that are usually applied in organization design are the Star model and Nadler and Tushman’s input-output model. Thus, Nadler and Tushman’s model is based on the idea of open-systems organizations. This model includes such components as an informal organization (the behavioral aspect), formal organization (the structural aspect), work, leadership, people, inputs, and outputs (Chikere and Nwoka 2015; Stanford 2013). The model explains organizations as dynamic, open to interactions and change, and its success is predetermined by the environmental impact and the congruence between all the elements of this model (Král and Králová 2016; Stanford 2013). Still, this model is too complex to be followed easily because of a range of presented components, and some of its elements are often overestimated.

Galbraith’s Star model includes only such components as Strategy, Structure, Process, Rewards, and People. The key principle of using this model is that each element of this model influences another one, and changes in the structure can influence each component (Figure 1). A complex approach to designing the organization, not restructuring it, should be followed because simple changes in hierarchy affect the staff, process, and strategy. For the further analysis of organization design in the selected company, the Star model is chosen because it is efficient and easy to follow by those managers who are responsible for its use in the context of a certain firm to achieve corporate strategic goals (Gallos 2017; Stanford 2013). While being applied during the five phases of organization design, this model can help to achieve a balanced structure in the company.

 The Star model.
Figure 1: The Star model. (Source: The Star model n.d.).

Changes in organizational design are realized during five phases. Phase 1 is associated with understanding the need for change and preparing for it. The training function in the selected company was not realized appropriately because of unclear and mixed roles of HQ and the Corporate Training managers, the lack of communication, and clearly defined SLAs. Thus, leadership became concentrated on changes in the mission and values, the hierarchy, business processes, and structures. Still, the focus on duplicated teams and training functions during a year indicated weaknesses in forming an effective structure in the company. Moreover, leadership lacked focusing on people, and this aspect led to problems in organizing successful communication between training teams and units. At this phase, it was important to identify stakeholders (the HC Directorate, unit managers, sponsors) and set the objectives for the transformation.

At Phase 2, it was necessary to assess the current structure, collect data regarding the situation, and plan appropriate activities. Survey results and interviews demonstrated that managers and employees did not understand their roles and responsibilities in training. Phase 3 was devoted to creating a detailed plan for realizing the re-design project. The transition was realized in Phase 4. The review of the results was observed in Phase 5. There were problems in the management style because managers did not motivate employees to participate in and adopt changes in organization design and structures, employees were not provided with required information or manuals on how to handle observed changes, and specifics of the Middle Eastern culture and behavioral patterns seemed not to be taken into account to make changes smooth (Meidell and Kaarbøe 2017; Stanford 2013). The key drawbacks in implementing the change in organization design were associated with building complex structures with duplicated HQ and corporate teams and ignoring people’s needs.

Available Design Options

In the discussed company, from 2016 to 2017, much attention was paid to restructuring organizational activities to improve operations and the work with human capital. The training function of the Human Capital Department was centralized to be included in the larger Talent Capabilities Development Unit. The advantage of this approach according to the Star model is the possibility to influence the strategy, people, processes, and the structure, as well as rewards, concerning the balanced and highly controlled scheme. However, the associated design option adopted in the company was weak because several Training teams were created for the HQ and subsidiaries (corporate teams), resulting in the duplication of their roles. No effective communication and collaboration were observed. Therefore, in 2017, more attention became paid to the centralization of activities, and the organizational structure of the Human Capital Department was proposed by the analysis of required Full-Time Equivalent (FTE) to address the strategic goals till 2030.

To overcome the problem with organizing the training function when two different training teams for the HQ and subsidiaries operate in the company while being headed by different leaders and following different programs which lead to confusion, it is necessary to refer to the functional organization according to the Star model. The HQ training team was previously under the supervision of the Employee Relations department, and corporate teams reported to Human Capital and Administration Director. The situation led to the problems with communication, information exchange, implementation of training programs, and budgeting. As a result, the employees’ level of satisfaction with training decreased. During 2017, the duplication in functions of training teams existed causing problems for team leaders, and a new structure for the department was approved in July 2018 (Figure 2; Figure 3).

The Human Capital Department before transformations.
Figure 2: The Human Capital Department before transformations.
The Human Capital Department after transformations.
Figure 3: The Human Capital Department after transformations.

The new functional organization with the focus on centralization is appropriate to deliver new HC objectives. Placing the training function under the Talent Capabilities Development Unit, managers achieved improvements in communication between line managers and employees, improved the sharing of the strategy, determined clearer roles and responsibilities, and focused on more controlled training options while avoiding confusion in distributing duties and tasks. To demonstrate how the training function would be realized, a new high-level function manual for Training was designed to be applied in Talent Capabilities Development Unit and inform all managers regarding the function’s objectives and approaches to achieve them. Talent development activities were also proposed from the perspective of achieving the company’s strategy using affecting people, and the activity-based analysis was completed.

To ensure success and progress in training employees, as well as to measure, the results, the KPI, SLA, and RACI matrices were applied. In the context of the Star model, these steps could contribute to developing the idea of the organization design rather than the organizational structure or matrix. The changes in the design according to the Star model with the focus on the centralization contributed to developing a system for performing the controlled training function for the Group Companies, with the focus on group workforce planning and training. As a consequence, a unified operating model is proposed that adds value to the company’s achievement of strategic priorities.

Organisational Culture and Training Function

While following Henry Mintzberg’s types of organizations and cultures, it is important to identify an entrepreneurial (simple structure) form, machine bureaucracy, professional bureaucracy, a divisionalised form, and adhocracy (Parikh 2016; Stanford 2013). There are also matrix and differentiated types of organizations. All these types influence the culture adopted in this or that company, as well as associated norms and behaviors. Mintzberg identified four important categories that can influence organizational design and culture, and they are the coordination of efforts, employees’ functions, the extent of centralization, and a specific cultural and economic context (Parikh 2016). It is important to state that the major mechanism for coordinating efforts was chosen inappropriately as the training department previously assigned training without proper analysis of the company’s and employees’ needs. Thus, the efforts in conducting training did guarantee positive results because employees’ performance, feedback, and needs were not addressed effectively.

The lack of support and communication from management, as well as problems with focusing on decentralization or centralization as the best choice for the company, led to employees’ frustration and their resistance to change because they did not know how to handle with the change that was ineffectively implemented and inefficiently worked during a year. Thus, it was necessary to educate managers on how to select appropriate training for employees and use more suitable resources and programs. In the context of the Middle Eastern culture where people from their behavioral patterns with the focus on strict norms and policies and focus on honesty and mutual respect, the leaders of the discussed company failed to determine the functions of employees in HQ and corporate training teams and address the cultural context in which people need guidelines, support, and time to adapt to significant changes in organization design (Alvesson and Sveningsson 2015; Stanford 2013).

From the perspective of Mintzberg’s theory, the company did not successfully realize the training function in the context of culture. Thus, cultural norms and behaviors typical of the selected organization were not taken into account while motivating employees through communication and addressing their resistance to change. Employees’ behaviors and competencies required for effective transformations in the Human Capital Department were not identified and used to promote new values among employees and stimulate their participation. To improve this culture, managers need to be involved in culture-awareness sessions, receive guides, understand the new concept of Business Partners, and learn how to select training.

The Importance of the HR Role

The role of human resource (HR) managers in promoting and influencing organization design is significant because they analyze the strategies formulated by leaders and propose the most effective approaches and methodologies to implement the change and achieve the required transformation in organization design and processes (Stanford 2013). Although external consultants were invited to promote changes in organizational design and structure in the selected company, effective results were not achieved. This aspect can be explained concerning the fact that HR managers need to propose complex programs for realizing the determined changes, and they need to cooperate with consultants to reach the agreement. It is the task of an HR manager to analyze organization design models in terms of their applicability to the culture of a certain company.

Not all models, theories, and strategies can be equally applied to different organizational contexts despite leaders’ expectations. Thus, the role of HR managers in this situation is to analyze employees’ needs and expectations, adopt the proposed models to their interests, and promote the change with the focus on addressing their fears and resistance (Burton, Obel, and Håkonsson 2015). If HR managers cannot effectively contribute to implementing the change in an organization, employees’ resistance and frustration increase leading to problems with implementing the change.

Thus, HR managers need to focus on adapting organization design models to the realities of their firms to improve employees’ perceptions, behaviors, and performance. In this context, working much with employees, HR managers are responsible for manipulating job design and providing the staff with all required support and information regarding the experienced changes in hierarchy, roles, and duties. The example of the discussed company demonstrates that HR management did not use opportunities to contribute to transformation while supporting the change with the help of appropriate cultural change programs (Hatch 2018). The observed changes in organizational design and structures led to demotivating employees and their inability to effectively participate in training sessions. HR managers were expected to conduct capability assessments, inform employees regarding specifics of the new structure and design, and propose appropriate rewards to stimulate participating in the training.

Recommendations and Conclusion

The company operating in the oil and gas sector in the context of the Middle East has experienced significant changes in its organization design with the focus on centralizing the Human Capital functions. While focusing on the changes in the Training unit, it has been found that the company’s leaders and managers failed to apply the five phases of promoting the change and making the transformation process easy and effective. As a result, certain problems in management and organization design have been reported. It is important to state that organization theory provides many methodologies to be implemented in companies to improve structures and procedures. However, much attention should be paid to the realization of the project and the role of HR managers in these processes. The problem is that the management team in the discussed company did not achieve positive results in cooperating with employees to promote the change in organization design. Therefore, to contribute to completing the transformation process in the company effectively, it is necessary to formulate certain recommendations and propose an implementation plan.

The provided analysis of the organization design applied to the selected company from the oil and gas industry in the Middle East has indicated the areas for further improvement. Therefore, it is important to provide the recommendations to solve weaknesses in the change management process while following the principles of the Star model and Mintzberg’s model (Hatch 2018; Parikh 2016; Shafritz, Ott, and Jang 2015). The implementation plan for realizing these recommendations should include the following components: prioritized recommendations, activities, stakeholders, resources, costs, timeline, and success measures (Appendix A).

The first recommendation to propose to improve organization design in the discussed firm is the following one: the company needs to choose what approach to organization design and structure to follow regarding the hierarchy and coordination functions: centralization associated with machine bureaucracy or decentralization related to professional bureaucracy according to Mintzberg’s model (Hatch 2018; Král and Králová 2016; Parikh 2016). Activities include analyzing benefits of centralization and decentralization and modifications of the structure; involved stakeholders are the Human Capital and Administration Director, the Manager of the Talent Capabilities Development Unit, and managers and heads of subsections (Appendix A).

Also, the company needs to apply the selected approach to organizing the work of the Talent Capabilities Development Unit and its Training section with the focus on the whole organization and the Talent Capabilities Development Unit as a system, following the Star model. Thus, the company needs to pay more attention to Structure, Process, and People as the components of the transformation process with the focus on analyzing employees’ attitudes to changes, their capacities, motivation, interactions, and behavioral patterns (Hatch 2018; Král and Králová 2016). The change was implemented quickly, and employees did not receive enough information and training to support it, and team leaders were unable to provide effective services during a year because of weaknesses in the applied structure and communication (Appendix A). Employees needed to be informed regarding the changes in Phase 2 of the process. More in-depth interviews with managers needed to be conducted to receive feedback and understand how the change influenced the process of training. The involvement of sponsors at Phase 2 could also contribute to the re-design project development to avoid weaknesses at the final stage.

References

Alvesson, M and Sveningsson, S (2015) Changing organizational culture: cultural change work in progress. London: Routledge.

Burton, RM, Obel, B and Håkonsson, DD (2015) Organizational design: a step-by-step approach. London: Cambridge University Press.

Chikere, CC and Nwoka, J (2015) The systems theory of management in modern day organizations – a study of Aldgate congress resort limited Port Harcourt. International Journal of Scientific and Research Publications. [Online] 5 (9), 1-7. Web.

Gallos, JV (2017) Organization Development: A Jossey-Bass Reader. London: John Wiley & Sons.

Hatch, MJ (2018) Organization theory: modern, symbolic, and postmodern perspectives. Oxford: Oxford University Press.

Král, P and Králová, V (2016) Approaches to changing organizational structure: The effect of drivers and communication. Journal of Business Research [Online] 69 (11), 5169-5174. Web.

Meidell, A and Kaarbøe, K (2017) How the enterprise risk management function influences decision-making in the organization – a field study of a large, global oil and gas company. The British Accounting Review. [Online] 49 (1), 39-55. Web.

Parikh, M (2016) Move over Mintzberg, let adhocracy give way to ambidexterity. Management Decision. [Online] 54 (5), 1047-1058. Web.

Shafritz, JM, Ott, JS and Jang, YS (2015) Classics of organization theory. London: Cengage Learning.

Stanford, N (2013) Organization design: engaging with change. London: Routledge.

The Star model (n.d.). [Online] Web.

Appendix A

IMPLEMENTATION PLAN
Recommendations (prioritised) Actions/Activities Sponsors/Stakeholders Resources Costing Success Measures Timeline
1. To choose focusing on centralisation (machine bureaucracy) or decentralisation (professional bureaucracy). To analyse benefits of centralisation and decentralisation and modifications of the structure. Human Capital and Administration Director; the Manager of the Talent Capabilities Development Unit; managers and heads of subsections.
  1. Analytical assessment tools.
  2. Software programs.
7% of the department’s budget. Approval and implementation of the selected approach. 2 weeks
2. To improve the work with such components of the Star model as Structure, Process, and People. To analyse employees’ attitudes to changes, their capacities, motivation, interactions, and behavioural patterns. To provide employees with guidelines and consultation. To improve policies regarding the management style, ethical interactions, informal organisations, and communication in the company. Human Capital and Administration Director; the Manager of the Talent Capabilities Development Unit; managers and heads of subsections.
  1. Human resources.
  2. Analytical tools.
  3. Guidelines.
15% of the department’s budget. Adoption of the change and completion of successful training sessions. 3 months