Organization Design and Management Systems

Introduction

Several factors influence the success of an organization. These factors arise from various sources such as the firm’s history and its ownership. In addition, the effectiveness with which the firm’s activities are controlled also affects its success. For example, ownership and control of a firm may influence other aspects of the firm. Some of the organizational aspects which may be affected by ownership include organizational culture and organizational structure. Because a firm’s operation is interdependent, these aspects have the potential of affecting the firm’s long-term performance (Kakabadse, Bank and Vinnicombe, 2004, p.205). For example, a firm that is owned by a family is likely to be rigid in its operation. This happens because such a firm may be characterized by a high level of control over the firm’s resources and their distribution by the management team (Pride, Hughes & Kapoor, 2009, p. 197). In addition, decision-making may be centralized whereby only those in the management team have the capacity of making decisions. The resultant effect is that employees’ opinions are limited.

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On the other hand, organizations that have incorporated a decentralized management system are more successful compared to those with a centralized management system. This arises from the fact that they give their employees a considerable amount of freedom in executing their duties (Pride, Hughes & Kapoor, 2009, p. 197). One such example is the Johnson & Johnson Company which specializes in the development and marketing of various pharmaceutical and other consumer goods. By adopting a decentralized organizational design, the firm has been able to create a high level of employee motivation (Roberts, 2009, p.181). According to John Roberts who is an economist in the School of Global Business and Economy in the US,(2009, p.181), firms that have over the years operated on a traditional organizational design are considering changing their design model to respond to changes in the business environment.

The long term success of a firm as a going concern entity is also affected by employee management (Kakabadse, Bank & Vinnicombe, 2004, p.205). The management teams of firms in various economic sectors should ensure that the working environment created is conducive. This can be achieved through the incorporation of teamwork within the organization. As a result, employees will be able to interact with one another hence increasing their level of motivation. The third factor which has the potential of influencing employee motivation is the management style adopted (Kakabadse, Bank & Vinnicombe, 2004, p.205).

In undertaking this paper, I argue that the success of a firm is affected by several elements which include organizational design and structure, teams and team working, organizational leadership and management, and organizational culture. The resultant effect is that the overall organizational success is affected. To gain a comprehensive understanding of these concepts, the author sought to conduct a comparative analysis of two companies which include Watson Engine Components Company and H & M Consulting Company. H&M Consulting is a global management, engineering, and development consultancy firm (H & M Consulting, 2011, para. 1). On the other hand, Watson Engine Components deals with the manufacture of parts of car engines.

Analysis

Organizational design and structure

Different scholars have given different definitions of organizational design. Mats Alvesson who is a renowned business and economics professor defines an organizational structure as the patterns of relationships which exist between the various roles of a firm and its different units (2002. p.23). Alternatively, the organizational structure also includes the visible and invisible aspects that link the various organizational activities so that it can operate as a single dynamic entity. An organization structure enables a firm’s management team to allocate duties and responsibilities easily to achieve the firm’s goals (Alvesson, 2002, p.23). These authors further assert that an organizational structure enables a firm’s management team to execute the various managerial functions which include planning, directing, controlling, staffing, and organizing more effectively.

During the 20th century, most organizations such as those in the manufacturing sector adopted traditional organizational designs (Clayton, Fisher, Bateman, Brown & Harris, 2005, p.53). Their organizational structures were founded based on hierarchical designs about the various organizational functions. In this type of organizational design and structure, a firm has a leader who has a high level of control over the entire organization as illustrated by figure 1 below.

Hierarchical organizational structure.
Figure 1: Hierarchical organizational structure. Source: Personal creation.

In most cases, hierarchical organizational designs are adapted to maximize a firm’s operational efficiency. This is because a firm can integrate its human capital and technology (Glickman, Baggett, Krubert, Peterson & Schulman, 2007, p.344). The resultant effect is that the firm can maximize value by linking its corporate design and the firm’s overall strategy.

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Watson Engine Component operates as a family-owned company. Currently, the firm has a human resource base of 200 employees. In addition, Watson Engine Components has adopted a traditional and hierarchical organizational structure. The organization is designed based on the various functions which include the management, the technical staff, clerical workers, and the semiskilled production workers.

Despite the firm being successful in maintaining market share over the years, Watson Engine Components is faced with a new set of challenges. Some of these challenges arise from changes in the business environment. For example, the industry has become very competitive which poses a threat to the firm’s existence. This is because the hierarchical organizational structure limits the firm to adapt to changes in the environment which is a necessity for its survival.

According to Trent Robert, a supply chain management specialist, (2004, p.3), organizations that have adopted traditional organizational structures such as hierarchical structure are faced with numerous bureaucracies that limit their operational efficiency. This is well illustrated in the case of Watson Engines which has a small and old fashioned plant. Despite being in operation for some years, Watson Engine Component has not established its financial stability. This is evident in that the firm does not have sufficient capital to enable it to implement the state of the art technologies to improve its operational efficiency. In most cases, the firm is not able to meet the customers’ orders because order times are becoming short. This limits the firm’s efficiency in meeting customer orders.

On the other hand, H&M Consultancy has adopted a team organizational structure. Team structure refers to an organization that is composed of several teams. Joseph Olmstead, a research analyst at Vanguard Research Group, defines a team as a group of at least 2 individuals working towards the attainment of a common objective (2002, p.55). In a team, every member is assigned specific roles that should be completed within a given time frame. According to Barrick and Stewart (2000, p.135), organizations in different economic sectors are increasingly considering teams as their core building blocks. Various reports on employees’ satisfaction have supported the efficacy of teamwork. In addition, teams have been proved to play a significant role in increasing employee productivity. In most cases, organizations use cross-functional teams which are composed of employees from different departments (Brook, 2008, p.23). This is mainly common where a matrix organization structure has been adopted as illustrated in the chart below.

Chief Executive

In its operation, H&M Consulting Company has adopted the concept of project teams. The firm’s experts work on projects in various economic sectors such as transport, water, environment, building, energy, health, communication, and education. Because every project is unique, the firm has developed a networked structure which entails forming a team from a different department (Parker & Bradley, 2000, p.126). To achieve this, H & M Consulting identifies and selects employees who have relevant skills from different departments to form a team. After completing a particular project, the team is disbanded and a new team is formed based on the new project. This has significantly enhanced teamwork in the firm. Integration of team structure has contributed to the development of good employee relations within the firm. This has enhanced the firm’s ability to achieve its profit and wealth maximization objectives in addition to satisfying its customers.

Teamwork also enables employees to experience a high sense of identification and involvement. This culminates in a high level of enthusiasm towards the job. For example, teamwork enables employees to understand that the success of every project is dependent on their commitment (Schermerhorn, 2009, p.21). This is evident in H&M Consulting unlike in Watson Engine Components where there is a low level of employee commitment. Employee relationship in Watson Engine Component has also been limited by the fact that the level of employee interaction is minimal although the fulfillment of customer’s orders requires the interaction of employees in the various departments.

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The team structure has also enabled H&M Consulting to be effective in achieving its goals. This arises from the fact that the employees are highly motivated. According to renowned entrepreneurship specialists, Anand Agrawal and Nidhi Srivastava, teamwork empowers employees (2010, p.12). This arises from the fact that employees exchange their knowledge and skills which contributes towards employee development.

Over the years it has been in operation, H&M Consulting has managed to retain its employees due to its commitment towards ensuring employee satisfaction. On the other hand, the rate of employee turnover in Watson Engine Component compared to H&M Consulting is relatively high. One of the factors which lead to the high rate of employee turnover is lack of motivation which lacks in the Watson Engine Component (Agrawal & Srivastava, 2010, p.12). This has also led to a high rate of absenteeism which affects the firm’s productivity. Upon being recruited in a particular department in Watson Engine Components, it is not possible to move to other departments since the firm does not give the employees a chance to acquire the skills necessary to move to another job within the firm.

The high rate of turnover coupled with a shortage of employees in the labor market poses a threat to the firm. In addition, the firm also faces a threat from other firms in the industry who are headhunting employees from their competitors. This tends to increase the cost of operation. According to Vaiman (2008, p.23), a high rate of employee turnover leads a firm to incur high replacement costs.

Working on projects has significantly contributed to the effective management of tasks in H & M Consulting. For example, the projects are well designed to ensure that no employee is overworked. In the case of Watson Engine Components, the allocation of tasks is poor. Some employees are overworked while others are underworked. The resultant effect is that the quality of the output is negatively affected.

According to a renowned professor of management John Schermerhorn, team structure plays a significant role in enhancing decision making and communication in a firm (2009, p.163). For example, employees’ opinions on how to improve operational efficiency are taken into consideration. The hierarchical structure adapted by Watson Engine Components limits the employees from communicating their ideas to the top management. For example, the firm operates using traditional technologies despite Ahmed Khan who is in the management team advocating for a change. According to Schermerhorn (2009, p.163), teamwork structure enables a firm to breakdown barriers that limit the interaction of the various departments. Adoption of a hierarchical structure has limited decision making in Watson Engine Components since the opinions of the employees are not considered as worth.

Organizational culture and leadership style

According to Glickman et al (2007, p.343), organizational culture refers to the various beliefs, values, and assumptions shared by the employees. According to Schein a renowned management specialist (2010, p.3), culture enables the interaction of various individuals in an organization. Schein (2010, p.3) further asserts that there is a strong relationship between organizational culture and leadership. Through interaction, an individual’s behavior and values are influenced (Parry & Proctor-Thomson, 2003, p.376).

Culture is an important element in the success of a firm. This arises from the fact that it determines the effectiveness with which a firm can adjust to changes in the business environment (Bratton, Forshaw, Callinan Sawchuk & Corbett, 2010, p.75).

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In addition, culture also has a direct influence on the quality of a firm’s products and services and its performance (Schein, 1999, p.34). Findings of a survey conducted on executives of more than one hundred firms indicated that culture has more impact on employee’s leadership compared to any other organizational aspect.

H&M Consultants have managed to develop a strong corporate culture. According to Kanungo Prasad, a management professor, managing firms in different economic sectors can be challenging (2005, p.43). Therefore, the management teams need to institute effective corporate culture. In its operation, H&M Consulting has developed a strong corporate culture which is illustrated in the firm’s mission statement which integrates society, the business, and the customers. In addition, the firm’s strong culture is derived from the values which the firm has adapted. These include ensuring organizational and employee progress, respecting the cultures of the employees and country in which it operates, ensuring a high level of integrity by promoting ethical behavior, and adhering to corporate social responsibility (Kanungo, 2005, p.43). Additionally, the firm is committed to ensuring that both the employees and the customers attain a high level of satisfaction. The firm has also ensured that all the employees understand the importance of their role towards enabling the firm to excel in the future (Kanungo, 2005, p.43).

On the other hand, Watson Engine Components has not implemented strong organizational culture and values. This is evident in the attitude of the management team which is not ready to adjust to changes in the business environment. For example, the firm’s management attitude towards implementing new technologies is ‘if ain’t broke don’t fix it’. This illustrates the degree of rigidity that has the potential of affecting the employees negatively. According to Saxena (2009, p.560), one of the ways through which a firm can attain this is by ensuring a high level of satisfaction amongst the various stakeholders such as the customers, creditors, and employees. For example, the firm is not concerned with customer satisfaction which is evident in its lack of commitment to delivering customer orders in time.

About leadership, H&M Consulting has adopted a democratic style of leadership. According to Pride, Hughes, and Kapoor (2009, p.179), a democratic leadership entails delegating duties and tasks to the employees. However, the managers have to ensure that the tasks are executed satisfactorily. In its operation, H & M Consulting employees are given a certain degree of autonomy to execute their projects. This means that they are at liberty to make decisions that will contribute towards the completion of a particular project. In addition, the firms’ leaders act as role models by advising the employees on how to undertake the tasks. On the other hand, Watson Engine Group has adopted an authoritarian leadership style. Pride, Hughes, and Kapoor (2009, p.179) define authoritarian leadership as a leadership style whereby the employees’ ideas are not taken into consideration. In addition, the employees are not given a chance to participate in decision making. For example, the employees’ opinions on how the firm can improve its operational efficiency through the incorporation of new technology are not taken into consideration (Pride, Hughes & Kapoor, 2009, p.179).

Conclusion

From the above analysis, the author has illustrated the various aspects which can affect the success of a firm as a going entity. For example, effective implementation of an organization’s design and structure can affect the firm’s ability to make the relevant operational decision. For instance, because the business environment is characterized by a high degree of dynamism, a firm can respond to changes in the business environment if it has adopted an effective organizational structure such as a team or matrix organizational structure. Hierarchical organizational design limits a firm’s effectiveness in making decisions. This is due to the associated rigidity and bureaucracy which makes the management team disregard employees’ opinions. The resultant effect is that the firm’s competitiveness is limited and hence its ability to achieve its goals.

On the other hand, team organizational structure is more efficient in enabling a firm to attain its organizational goals. This arises from the fact that the high level of autonomy given to the employees in executing the assigned projects contributes to a high level of motivation. In addition, team structure enhances the level of motivation amongst the employees by enabling them to interact. As a result, an environment conducive to working is created. Team structure also enables employees to exchange knowledge and skills which contributes toward employee development.

Additionally, the incorporation of project teams in executing various tasks in an organization contributes towards the employees attaining a high level of job satisfaction. This is because the employees are challenged when executing their assignments. From the two cases, it is evident that H&M Consultancy has high employee retention compared to Watson Engine Components which has a high level of employee turnover.

The two case studies have also illustrated how a firm’s management team can affect organizational culture and hence the success of the firm. For a firm to succeed, it must instill certain attitudes, values, and beliefs in the employees. This will ensure that all the activities of the employees are guided by certain principles. As a result, the firm can develop a high competitive advantage. The principles instituted should be aimed at benefiting the firm’s stakeholders such as the customer. H& M Consulting has developed an effective organizational culture that ensures a high level of customer satisfaction. On the other hand, Watson Engine Components does not take into consideration the employees’ satisfaction. This is evident in that the firm is not concerned on whether the employees’ orders are late. The case studies have also illustrated the importance of adopting an effective leadership style.

Recommendations

For the two firms to attain a high competitive advantage, it is paramount to consider the following recommendation.

  1. The firms should ensure that they adopt a decentralized organizational structure. This will enhance communication within the firm. As a result, it will be possible for employees to share their opinions with the management team. The resultant effect will be a creation of a good working relationship.
  2. In addition, the firm needs to eliminate any form of bureaucracies that might limit the firm’s ability to adjust to changes in the business environment. This can be achieved by integrating an effective communication style. This can be attained by incorporating a bottom-up communication channel.
  3. Alternatively, the firm’s management teams should ensure that they adopt the most favorable leadership style. This will enable the firm to create an environment conducive to working. Additionally, the leadership style adopted should increase the level of employee motivation. Some of the leadership styles which they should consider include transformational and democratic leadership. Transformational leadership will contribute towards instilling positive change in the employees. On the other hand, democratic leadership will contribute towards the employees perceiving a certain degree of autonomy.
  4. Because a firm should contribute towards employee development, Watson Engine Components need to incorporate the concept of the project team. This will enable the firm’s employees to be challenged by undertaking diverse tasks. As a result, there is a high probability of the firm attaining a high level of employee retention.
  5. Both firms should consider formulating an employee training program. This will contribute towards the improvement of the employees’ skills and hence their productivity.
  6. Watson Engine Components should also incorporate the concept of group dynamics. This can be achieved by encouraging the formation of groups in the firm. This will ensure that there is a strong employee relationship. The relationship between the management and the unions should also be enhanced.

Reference List

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Vaiman, V., 2008. Retention management as a means of protecting tacit knowledge in an organization: a conceptual framework for professional services. International Journal of Learning and Intellectual Capital. Vol. 5, issue 2, pp. 172-185. Reykjavik: Reykjavik University.

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