Strategic Analysis of I Core Soft Company - Case Study Example

1. What elements of the internal environment is the organization aiming to change?What is the organisation hoping to achieve by this, what are the problems under investigation? Evaluate the steps that have been taken to resolve these matters. I-core Soft Ltd. company is located in London, and it is a vendor for software development projects. Starting in 1995 with just two people, Rob Natan and Paul Coleman, who were the co-founders of I-core Soft Ltd., it has now moved on to employ a team of 85, including over 10 senior Engineers, a pool of 45 junior Engineers, 10 creative visualizers and several administrative staff members. I-core Soft Ltd. has had a very humble beginning, starting as a co-operative project development with Rob and Paul, both software engineers, working overtime to meet project deadlines. As more local and regional businesses started stepping into online marketing or advertising, I-core Soft Ltd. saw a steady growth in terms of projects. Rob and Paul hired more engineers to assist them with the software development, and, started paying attention to obtaining more customers themselves. The organizational structure was kept to the basics, with the junior engineers divided into teams of 6-7 members. These teams were lead by a Senior Engineer each, who reported directly to either Rob or Paul. This was largely a semi-formal reporting system and was highly useful in early days when there were few people on board and the projects were simple and far between. With the development of highly complex web-development technology and increasing requirement of specialization for each new project, the earlier organization design and structure was not found to be appropriate. Rob and Paul found they were too busy with big clients and were unable to give as much time to the daily affairs of the company. They internal reporting system, which at one time had Rob having 32 direct reportees and Paul, 39, was not proving effective or beneficial for anybody. Another problem that I-core Soft Ltd. was facing was high turnover in terms of qualified Engineers leaving the company. The cause that was mainly realized for the above was that the employees didn’t see themselves growing within the company. Though they found themselves continuously working on interesting projects, and they were given good pay packages and incentives – but within a year or too they became restless. This was largely because I-core Soft Ltd. was seen as a tightly controlled organization, with almost all the managerial jobs concentrated with Paul and Rob. Paul and Rob realized that the culture that has set in within their organization was not conducive to encouraging long term commitment from employees. Also, the nature of job was such that an open and creative environment was desirable for excellence in performance – this again was inhibited by the management style of the duo. The top-down approach was not going down too well with the new generation of techies, and they wanted greater flexibility in terms of time and by way of freedom to make creative contributions. By the start of the Millennium, I-core Soft Ltd. was logging a turnover of around £10 million per year. With the boom in online marketing and online communication and advertising services, the founders of the organization knew that they can grow to capture a large share of the regional market, which was showing a growth rate 9% per year. However, they also realized that they need to bring about some changes, both structural and functional, so that the minimal market share of I-core Soft Ltd can be grown from a mere 1.5% to 5% over the next 5 years. Several changes that were sought included changing the organization structure, making a change in the Organizational Culture and changing the Management style. The first problem that they realized was of the Organization Structure. True, the structure of the organization was not rigid, but it was also not facilitative of adequate communication, decision-making and co-operation and team work. The segregation of the junior Engineers was done in random teams that were more or less fixed. It was therefore decided that in place of permanent teams, the Engineers will be pooled in to form teams as and when the project demanded. Though, this meant having a highly flexible organizational structure, the major advantage of the above was that, specialist skills can be combined as per the need. At any given time, I-core Soft Ltd. had enough projects at hand to keep all its 55 Engineers involved. Such a structure as proposed above will not only be conducive to team building, it will also expose the individual employees to diverse set of colleagues, team leads, and a variety of projects. The team leaders were to be chosen from among the junior Engineers themselves. The different team leaders were now required to report to one of the 8 Senior Engineers (now made technical managers), who presented their development reports to the 2 other senior Engineers (who were promoted to Technical Head positions.) These two Technical Heads worked in collaboration with an Administrative Head (who was manager for the staff including front desk and telecommunications ), and an HR Head, who was responsible for recruitment, assessing training and motivation needs, and performance appraisal functions. Rob and Paul also differentiated their functions – with the Administrative Head and the HR Manager directly reporting to Rob, and Technical Head to Paul. Paul also kept the Sales and Promotion function to himself. Such a structure was accompanied by a change in the line of Command, and made the organization more vertical. Though the trend has been towards having a flatter structure (Robbins, 1999), the addition of extra layers to I-core Soft Ltd. structure, was expected to serve to free Rob and Paul to concentrate more on developing long term strategy, in exploring new areas of growth while at the same time provide scope for the employees to grow to senior positions. The expected result therefore also include a tremendous growth in terms of personal and professional development for all employees, better coordination of work between eligible teams, development of a diverse set of skills, using specialization to its best, narrowing down the span of control to facilitate one on one interactions of managers with employees. Turnover /Motivation The basic changes to the organization structure were followed up by a reassessment of the factors that were leading to a high rate of turnovers in the organization. Turnovers, are not only loss of employees, they also mean that all the training and organizational resources spent on the employee go to waste. (Guest, Conway and Dewe, 2004) It was found that the confinement to specific teams, lack of flexibility in work schedules, and no apparent career development plans, were leading to a lack of motivation to continue within I-core Soft Ltd. (Delaney, Huselid and Mark, 1996) As such, provision was kept that some of the Engineers will be given the freedom to work on their personal projects, either on an individual basis or in teams of 2 or more. This worked on a rotation based , with not more than 10 Engineers on board at any time. A training group was also prepared per quarter, where some of the employees were selected and made to acquire additional training, either in-house or in collaboration with external agencies. More flexibility was accorded to the Engineers in terms of scheduling their individual work, and in terms of work timings. Complete freedom was given to the technical employees to keep whatever hours they found suitable, as long as the overall project was completed within the deadline. The HR manager was also expected to work closely with the employees to develop individual career program and chalk out training needs. The expected results for the above changes included lowering the rate of turnover, keeping the employees motivated to perform their best, and providing a sense of development and growth to all employees. Management style The management style followed by I-core Soft Ltd. was of Authority-Obedience, as per the Blake and Mouton Managerial Grid. (Blake and Moutan, 1961). This meant that the management (Paul and Rob) were intimately involved in almost all the functions of the organization – be it technical project development, hiring, sales, or communicating with customers. The duo maintained a top-down authority and exercised a close control over all the employees who had to obey all orders coming from them. The high rate of turnover and the desire to capture more market share made Paul and Rob change over to adopt a different style of management and leadership. As the structural changes were made, Rob and Paul began to relax their direct involvement in the day to day functioning of the organization. They also promoted an internal feedback system, where all employees were free to make suggestions and give their opinions on any aspect of the organization’s performance. Thus, they transitioned over to Team Management (Blake and Moutan, 1961), where they acknowledged that their people were committed and motivated and thus trusted and valued contribution from everybody. The expected result of the above change was that the management received creative inputs from employees, the organizational culture become more open and hence facilitative of creativity, and the employees were motivated and had more confidence in the organization. (Webb R.L. 1993). 2. Using appropriate analytical frameworks identify the key strategy (or strategies) this organisation has followed. Has the organisation taken appropriate account of the internal and external environment in adopting this (these) strategy (strategies)? I-core Soft Ltd., is a software development firm, currently placed in a market that is growing rapidly, almost at 9%. The industry has two major players and several Small-and-Medium (SME) competitors. I-core Soft Ltd. started 12 years earlier and has grown to have a £10 million turnover. The software market in the United Kingdom is expected to grow to £6.44bn by 2010. (Out-Law.com, 2006). Using the Boston Consulting Group Matrix, it can be seen that I-core Soft Ltd. is currently positioned as Question Mark, where the market is growing yet the company is not performing to its maximum potential. QuickMBA.com, 2006. The key strategy that I-core Soft Ltd. has been following since its inception can be classified as that of a Reactor (Miles and Snow, 1978). According to Miles and Snow, organizations that do not have an ability to adapt to external competition or to control any aspect of the external environment and also lack proper internal control mechanisms, always react to situations. Such organizations do not have a well thought out organizational design, structure or even strategy. (Miles and Snow, 1978). Such a stance has resulted in the current week market position of I-core Soft Ltd. It translated in the organization being in a relatively low competitive position even when the market is highly attractive. This is because, the organization lacked Management Strength, Human Resource Assets (Day, 1986). The founders of I-core Soft Ltd. now wanted to capture a larger share of the growing UK software market. As such, they carried out an exhaustive SWOT analysis to assess their present position and hence to formulate an appropriate strategy for the future. The SWOT analysis required I-core Soft Ltd. to evaluate its internal strengths and weakness, and external opportunities and threats. (Kotler, 2003).The internal assessment was done in terms of its Entrepreneurial orientation, dedication of its employees, capability of its leadership. The threats that the organization was facing was from competitors that were attracting and retaining better talent, new and aggressive entrants in the market and growing market share of the competitors. It was found that in order to reach the stated objective of acquiring a 5% market share over the next 5 years, I-core Soft has to adopt a strategy of aggressive growth. This could be brought about by attaining a credible competitive advantage in the industry. (Porters (1985). According to Barney (1991), organizations that use their internal resources like human resources, organizational structure and design, and management style, are better able to generate a competitive advantage and reduce external threats. The I-core Soft therefore transitioned from a reactor strategy to a combination of prospector analyzer strategy. (Miles and Snow, 1978). According to Slater and Narver (1993), a change in strategy is almost always followed by a change in the way resources and capabilities are utilized in an organization. Adopting these strategies required the organization to rethink and realign its resources, structure and management style. Research has also found that major competitive advantage of growing firms is brought about by making appropriate changes in their organizational structure and design (Feigenbaum and Karnani, 1991), and its Human Resource management policies. (Bacon et al. 1996) With the current changes that I-core Soft Ltd. made in its organization structure, management style, and culture are in concordance with their strategic orientation of a Prospector company. 1. Robbins S. P., 1999. Organization Behavior. ‘Foundations of Organization Structure’. Pretince-Hall of India: New Delhi. 2. Guest, D., Conway, N. and Dewe, P., 2004, “Using Sequential Tree Analysis to Search for Bundles of HR Practices.”, Human Resource Management Journal, 2004, Vol. 14 Issue 1, p79-96, 18p, 7 charts, 1 diagram; (AN 12647650). Available online at http://web14.epnet.com/citation.asp?tb=1&_ug=sid+9862AF62%2DB8F4%2D4605%2DAA18%2DDC78AB8907E1%40sessionmgr5+dbs+aph%2Cbuh%2Cbwh%2Cc1h+cp+1+D881&_us=sel+False+ss+SO+sl+%2D1+hd+False+hs+False+or+Date+fh+False+frn+1+sm+ES+mdbs+aph%2Cbuh%2Cbwh%2Cc1h+dstb+ES+mh+1+ri+KAAACBWB00070857+1360&_uso=tg%5B2+%2DAU+tg%5B1+%2DAU+tg%5B0+%2DTX+db%5B3+%2Dc1h+db%5B2+%2Dbwh+db%5B1+%2Dbuh+db%5B0+%2Daph+hd+False+clv%5B0+%2DY+op%5B2+%2DAnd+op%5B1+%2DAnd+op%5B0+%2D+cli%5B0+%2DFT+st%5B2+%2DDewe+st%5B1+%2DConway+st%5B0+%2DGuest+097D&cf=1&fn=1&rn=1, accessed on 21 Jan 2007. 3. 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