Creating an Organizational Paradigm - Essay Example

Organizational Paradigm Introduction: An organizational paradigm may be said to be the underlying model of operation adopted by an organization in order to effectively aid organizational development. One definition of organizational development offered by Beckhard (1969) states as follows: “Organizational development is an effort planned organization wide and managed from the top to increase organization effectiveness and health through planned interventions in the organization’s processes, using behavioral science knowledge.” (Beckherd, 1969:9) Hence, organizational development is the process that works to diagnose organizational problems and develop strategies to fix those problems. The underlying guiding principle which guides this organizational development becomes the organizational paradigm that is adopted by the Company in question. There are several paradigms which already exist, however in a world where there are rapid changes occurring within a globalized environment, especially within the context of technological tools which are now readily available, it may be necessary to develop a new organizational paradigm that is specifically relevant for an organization to adapt itself effectively in an electronic business environment. This study provides a brief discussion of existing organizational paradigms, before developing the new organizational paradigm. This paradigm is then applied in the case of the IKEA furniture Company, which has already proved itself to be very resilient and adaptable within a changing environment. This study will examine those elements which have made the company successful and how adopting the new paradigm can contribute to greater levels of efficiency and organizational responsiveness. Existing organizational models: There are three major organizational paradigms that currently exist. The traditional model which has been utilized by most companies in the past and is still in use by some companies is the rational organizational model. The rational organizational paradigm is centered upon the notion of rationality as the guiding force of the organization, with rationality being equated to efficiency in that efficiency “is often used as a virtual synonym for rationality.” (Simon et al, 1950:490). Under this model, a hierarchical decision making framework is adopted and the effectiveness of the model is largely measured in terms of how efficiently its operations can be tailored to achieve good financial outcomes. This organizational model thus adopts a hierarchical framework, with decision making confined to managers. While it was the most widely adopted organizational paradigm with the onset of the industrial age, this system is proving itself ineffective in the present day globalized age, where the hierarchical framework does not allow for the desired flexibility and speed in adapting to changes in the environment. The Open systems theory is based upon the premise that the organization is dynamic with a high level of interaction with the environment and is equated to living systems which are also open and exchange matter with the environment. (Von Bertalanfy, 1986). In such an open system, there are facilities for the exploration of non conventional revenue sources, with a high level of interaction and adaptation to the environment. Such an organizational system has a higher degree of flexibility and adjustment which becomes possible, with the added facility for self maintenance of the organization. This system is appropriate within the present day framework, which calls for a high degree of responsiveness to the environment and a less rigid organizational structure. The Contingency Theory perspective first developed through the views of Woodward (1958), and is becoming increasingly popular as the dominant paradigm in organizational analysis. In accounting for the differences between organizations, Woodward argued that it is in fact technology that is the factor determining differences between individual organizations. This underlying aspect brings about differences in the systems of control that exist within an organization, the types of formal rules and procedures that exist within the firm as well as the hierarchical system in aggregation of authority of its managers and leaders. This theory was very relevant in the 1970s, when it accounted for accounted for the developing new role of technology in organizational analysis.(Hickson et al, 1969). However, with the passage of time, the validity and applicability of the Contingency Theory has been challenged by other researchers like Carroll (1988) who offers the view that the Contingency Theory is dead and that other approaches need to be considered, such as transactions cost, interdependence of organizational resources or population ecology. The modern day global environment is a complex one, with the interplay of several kinds of factors. While communication undoubtedly plays a vital role within an organization, the type of communication systems have been changing from a strictly hierarchical framework to a more flexible, networking approach. While the focus on technology may be seen to be an advantage of the Contingency Theory, there has not been much consistency offered by researchers in the application of this theory and a fresh approach may be required. The development of a new organizational paradigm: The open systems organizational paradigm appears the best suited for the present day framework, although it is the Contingency Theory which takes into account the impact of technology on the functioning of the organization. In today’s world, it is the management of information and technology that has become the vital element contributing to organizational effectiveness and the creation of wealth, because it has completed altered the rules of the game for the creation of competitiveness.(Drucker, 1993). Many organizations are now functioning largely within an electronic environment, where one of the salient requirements that have arisen in implementing e-projects is the requirement for a redesigning of the work processes (Bellamy and Taylor, 1988). Since the use of technological devices may involve considerable expense for an organization, it is necessary that they be deployed only to execute those kinds of projects which are likely to create value. Certain tasks which may have been carried out in the past in a non electronic environment may no longer be as applicable within an electronic format. Optimizing the use of technology must be an important goal of the introduction and effective functioning of technology in an organization. As Caroll (1988) has pointed out, the use of technology needs to be cost driven, with costs being directed only into those ventures that are likely to be beneficial to the Company. Hence, the technological environment requires a part application of the rational model, i.e, the focus on cost outcomes, while also requiring the flexibility that is a part of the Open systems approach. Secondly, the modification of organizational models to take into account the optimum use of technology also requires simplification and streamlining of the work process. Earlier models of organizational operation have been directed towards the division of labor and the relegation of decision making into the province of managers. The division of labor was implemented in order to improve the mechanical efficiency of performance of jobs. The process of completion of the entire job became a complex operation, because it was divided into so many sub tasks, resulting in the waste of a great deal of time and energy in the coordination and control of employees. However, in an electronic environment, computers are able to perform many of the simple repetitive tasks that were once performed by human beings. Therefore, an electronic environment calls for the redesigning of the scope and patterns of individual jobs. With the automation of simple and repetitive tasks which can be done by computers, employees will be required to deal with more complicated tasks which cannot be easily automated (Reimnn, 1980). Organizations functioning within an electronic environment may need to include higher levels of training and support for employees in bringing them up to par in the performance of challenging tasks. The introduction of training programs becomes vital for organizations which are including technology within the scope of their operations; hence there is a greater demand for employees who can perform specialized tasks such as programming, research, planning, data analysis, etc. There is a greater need for skilled, qualified personnel as compared to the simple, mechanical skills that were required in organizational jobs in earlier decades. Today’s workers need to be skilled workers and use their brain power rather than the power of brawn; as a result education of employees is an important criterion in organizational selection of personnel. Today’s workers need to be thinking employees because they are knowledge workers (Stewart, 1997). The simplification of tasks in the electronic environment also requires the building of an information infrastructure through the use of multimedia information networks. Since information is the key factor that will determine organizational effectiveness and wealth, the free, smooth and efficient flow of information is necessary to ensure that employees are able to perform up to par and customers, employees and suppliers are also empowered with access to the information that they need to make informed decisions. In many organizations, this goal is being achieved through the introduction of intranets, which are communicative networks that can facilitate exchange of information among the various divisions and people within the organization. The provision of a good information network enables an organization to develop the collective intelligence of the organization, which will determine its success. The managerial role changes in such an interactive system. While earlier, the role of managers was to establish rules and the parameters of organizational functioning, management has a much more strategic role to play in an organization which has adopted the tools of technology. While managerial function in the former is limited to maintenance of the status quo within the organization, the managerial function under the new organizational paradigm will be directed towards providing effective support for employees to perform a greater level of value added services and functions, rather than purely repetitive functions that must be supervised. The management function becomes much less hands-on in an age of technology. The availability of a wide range of software packages enables the generation of reports that can keep track of progress and any difference between forecasted performances as compared to actual performances. Management then needs to intervene only in an emergency rather than providing continuous on-site supervision of activities. Application of the new organizational model to IKEA: Background: The IKEA company was founded by Ingvar Kamprad in 1943, when he first started off selling matches and miscellaneous products (Solomon, 1991). The IKEA stores are based upon the self-service model, where customers can walk around the store, inspect and touch the furniture before making a decision to purchase them. (Jeffreys 1992). Apart from its self service model, it also designs flat furniture products, which the customer can assemble at home. (www.ikea.com). This allows for better storage during transportation with less damage being caused to the furniture. The Company functions on an open organizational paradigm. It has a global network of suppliers, who bid competitively for projects because IKEA also buys in global quantities. The Company is thus able to select the suppliers who can provide the products at the most economical prices, thus offering quality goods at the lowest prices (Solomon, 1991). The Company has also taken several significant steps to enable it to keep up with the changes that are taking place in the global environment. It makes use of technology through an Intranet program, which all of its 65,000 employees have access to and this Intranet comprises a network of websites, both individual websites for each store location as well as regional websites for each country (Babock, 2003). The Intranet enables the Company to maintain high levels of connectivity and connection among its stores, employees and suppliers. The Intranet is also used to conduct surveys and provide training for employees, provide a forum for feedback and a storehouse of information for its suppliers. All of these measures result in a better system of supply chain management, with better trained and informed employees, which in turn produces a higher degree of customer satisfaction with their shopping experience at IKEA. The business of retailing which IKEA is involved has been further improved through the addition of kiosks. One example of such a kiosk which has been examined in a case study conducted by Rowley and Slack (2003) is that of allowing customers of IKEA to view the sofas that they are considering purchasing covered in various fabrics which are available in that range, thereby providing the customer a more educational and informative shopping experience that is likely to result in the selection of a product that meets the customer’s taste and requirements.(Rowley and Slack, 2003). Through its technology portals, the Company engages its customers directly in the product search, selection, assembly and delivery process and the automated services help the Company to keep its costs low.(Johnson and Selnes, 2005). However, in order to accommodate the increasing number of customers in IKEA’s portfolio without simultaneously increasing costs, the Company has developed an automated customer service representative named Anna, which provides responses to specific questions from customers about particular items or company policies by retrieving the relevant information from the various IKEA websites. In this way, the company is able to maximize customer potential for every customer without incurring additional costs to achieve that end (Johnson and Selnes, 2005). New Organizational model: The IKEA furniture retailer has already taken several steps to introduce technology within the functioning of the organization, as detailed above. The existence of the Intranet is aiding in the efficient exchange and networking of information throughout the company’s network of stores across the world. Moreover, the customer services automated system Anna, is also helping to make the customer shopping experience a much more pleasant one. However, one area where IKEA is falling behind is in the area of innovation, which is extremely important in a competitive environment. Its foldable furniture designs have enabled the Company to achieve an unprecedented level of success in this field; however the Company does not take any measures to tailor its furniture to adjust to local tastes in the various global areas where its furniture stores exist. The Company also emphasizes a centralized form of control and a standardization of the product due to the universal nature of furnishings, rather than differentiating the product to suit local tastes.(Magrath, 1990:38). This is a significant limitation that may need to be addressed in the new organizational model. The Anna software which already provides an interactive tool for customers can be further improved and developed, to allow for a system of potential customer feedback when IKEA plans to open a new store in a new location or to gather the views of customers in the areas where its stores already exist. The electronic kiosks already in existence at some stores can be used to gather the views of customers on the furniture, as well as feedback and suggestion on how it could be improved. The managerial decision making systems may also need to be refined in the IKEA organizational model. Although the Company has a global network of suppliers, major decisions about the variety, type and nature of furniture that is to be produced is limited to the Company’s management, thereby persisting with the old organizational model which incorporates some elements of the rational model. Decision making needs to be a collective process, including the feedback and opinions and views of suppliers and customers. Hence, although the IKEA organizational model is an open systems one, the degree of interaction with the environment may need to be enhanced by introducing a more hands-off approach from management, to allow scope for the influx of innovation and increase the degree of responsiveness to the market. On this basis, it is recommended that IKEA’s new organizational model adopt more of the flexibility of the e-organizational paradigm, through the improvement of the information infrastructure to allow greater feedback and input from customers and suppliers. There may also be a need to include a greater number of employees who are able to apply their brain power in the development of creative and innovative solutions to estimated future challenges. The need to allow scope for innovation and encourage the development of new and innovative ideas and strategies from suppliers, customers and members of the public could help IKEA to use informational tools to develop a solid database of information that could aid in its future development and organizational success and productivity. Benefits of the new model: The introduction of the new e-organizational model at IKEA could enable the furniture retailer to retain the thrust and momentum in sales that it has built up over the past years. While the organization currently enjoys a high level of success, it is operating within a competitive environment where there is a constant threat from other furniture suppliers. IKEA’s failure to adapt its products to suit local tastes could function against it, causing customers in other parts of the world where the Company plans to open stores to prefer other furniture retailers. Improving its existing database system and information network is thus in its interest, to ensure that it sustains profitability in the coming years and is responsive to changing customer tastes. The refinement of the customer service software package, Anna to also collect responses from customers on their suggestions for improvement, as well as their suggestions for new designs and lines in furniture that they would like to see, would help the Company to develop an accurate barometer of customer preferences. Information such as this collected from its stores all over the world could thus be very helpful to the Company in tailoring an approach that will take into account the need to make modifications and changes in the furniture as necessary, to continue to appeal to customers and increase levels of sales through responsiveness to customer demand. The customer kiosks which already exist could also function for the same purpose, in collection of information and feedback from customers who are the backbone of an organization’s business. Allowing for greater input from suppliers would also ensure that the kind of information is available which could contribute towards an enhancement of innovation in the organization, so that it remains competitive in the global environment. Conclusions: On the basis of the above, it may be noted that there are several organizational paradigms that exist, of which the rational model was the dominant one some decades ago, replaced by the Contingency Theory and the Open Systems Theory. Of all these models, the Open Systems Theory may be the most relevant in the present day global environment because it ensures that an organization is responsive to the changes taking place in the external environment. This model also ensures a high degree of interaction with elements in the environment and helps the organization to function as a dynamic entity.The Contingency Model took into account the importance of technology, which has now become a major factor that impacts the functioning of organizations. However, it fails to take into account the importance of assessment of cost outcomes in ensuring productivity and this defect is addressed within the open systems model. This is also the organizational paradigm prevalent at IKEA. A new organizational paradigm has been suggested in this study, which includes the importance of the technological environment for an organization. The new model includes suggestions whereby electronic capabilities within the organization may be improved. It may be noted that some important weaknesses have been identified in IKEA’s current policy, such as the standardization of furniture rather than adapting to suit local tastes. Furthermore, IKEA is also in a position to utilize already existing technological tools to improve its responsiveness to customers and make itself aware of changes in customer tastes in its early stages. Therefore, the application of the new organizational model which has been proposed in this study may help to enhance its receptivity to customers and maintain its leading position in the market. 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