IBM Organizational Structure - Report Example

IBM Organizational Structure Table of Contents Introduction 3 Organisational Structure 3 IBM 4 Organisational structure in IBM 5 Structural Changes 6 Conclusion 7 References 9 Introduction ‘Organisational Structure’ is one of the most important terms in the context of an organisation. It is very important to have proper organisational structure. Without an appropriate structure employees would be competing for individual rewards. As a result the working culture of the organisation would be affected and hence the quality of individual performance would decline. Moreover the structure of the organisation has great impact on the communication between the management and employees. Furthermore without proper organisational structure business processes are of no use and technologies cannot be used in the best possible way. These concepts are more relevant in case of a software development company irrespective of its size (Hamilton, 1999). IBM is one of the most successful software companies in the world. One of the main reasons behind the success of IBM is its properly designed organisational structure. This paper is all about the organisational structure of IBM. The report includes important theories regarding organisational structure and a brief overview of IBM. It also includes major structural changes that IBM has gone through over the past two decades. Organisational Structure Different researchers have defined the term differently. According to Stephen Robbins and Timothy Judge, organisational structure describes the way in which the job tasks are properly grouped, divided and coordinated. There are six major elements that are needed to be addressed by the managers at the time of designing the structure of their organisation. These are job specialisation, departmentalisation, span of control, chain of command, formalisation, centralisation and finally decentralisation. Job specialization is referred to the extent to which tasks are subdivided into different jobs. These jobs are grouped together on the basis of departmentalisation. Span of control can be defined as the number employees that can be effectively and efficiently directed by a manager. The chain of command is referred to the line or pattern of authority. It is extended from the top management to the lowest level. On the other hand centralisation is referred to the extent to which the process of decision making in the organisation is concerted at a single point. Three most common organisational structures are simple structure, matrix structure and bureaucracy. Simple structure is characterised by little formalisation, centralised authority, wide span of control and little degree of departmentalisation. Simple structure is generally found in small business organisations. Matrix structure, on the other hand, is found to be used in research and development firms, aerospace firms, advertising agencies, hospitals, construction companies, universities and government agencies. In matrix structure there are double lines of authority. In the third structure i.e. in bureaucracy high degree of formalisation and departmentalisation are found. In this structure authority is also found to be centralised (Robbins, Judge, 2007). IBM International Business Machines or IBM is one of the biggest information technology companies in the world. The incorporation of the company took place on June 16, 1911. IBM operates under five different segments. These are Global Technology Services segment, Software segment, Global Business Services segment, Global Financing segment and finally System and Technology segment. In 2009 total revenue of IBM was found to be almost 95759.0 million dollars (Reuters, n.d.). The company employs almost 330,000 people. It has its presence in almost 75 countries throughout the world. Its clients are located in 174 different countries. Almost 20,000 clients of IBM are found to be UK based. IBM is the market leader in consulting and IT services. It is also dominating the market of super computer. Organisational structure in IBM IBM generally deals with high end software technologies. In order to do that IBM employees must be innovative, creative and logical thinker. As a result they need such an organisational environment where they can think about new ideas. They need an organisational structure that provides more flexibility, less formalisation and opportunity of better coordination. Like any other research and development or technology firm IBM also has matrix structure. In this organisational structure coordination among different specialities is better than in any other structure. This coordination among different team as well as among different specialists is very important for a technology company like IBM. In any software company like IBM it is crucial that one employee is properly coordinating with the project leader as well as with its other team members. Generally most of the projects that are dealt by IBM are done by a team that consists of different specialists and project leaders. For example a team might include junior executives, software developers, business analysts and project leaders. In order to complete the project within the given time there must be excellent coordination among different specialists (analysts and developers). Matrix structure facilitates such coordination. Since in matrix structure extent of formalisation is less, frequent and direct contact takes place among different specialities and this results to better communication as well as more flexibility. This in turn results to better information sharing and proper information processing which are the key factors for the success of an information technology company like IBM. The matrix structure of IBM facilitates proper allocation of specialists. Moreover in such structure there is double chain of command. In most of the companies that are dealing with high end technology, employees are found to be having two bosses – one is product manager and another is functional department manager. Functional department is responsible for bringing specialists together; on the other hand product department is responsible for the coordination among the specialists. In IBM various functional departments are marketing, finance, human resource, operations etc. Product departments are software, IT infrastructure, outsourcing services etc. Structural Changes Over the past two decades IBM has gone through several structural changes. Most of these changes are made with the objective of staying ahead in the competition. In 1988 the top management of IBM decided to make significant changes in the structure of the company. These changes were led by the company’s new chairman who was appointed in 1985. Prior to 1988 degree of specialisation was very high among different functional departments. There was clear distinction between the manufacturing division, technical division and the marketing division. Moreover there was separate department that used to deal with software development. As a result of such structure internal conflicts were found to be a common problem. Furthermore implementation of new designs was used to be postponed and new models that were launched lacked software support. All these factors ultimately resulted to loss of market share. The company lagged behind its competitors. According to present management, company structure was ultra-conservative and highly bureaucratic. After 1988 this structure was decided to change by the management. They decided to implement decentralisation and divisionalisation. Five divisions were created. These were mini-computers, mainframes, new technology, telecommunications and personal computers (Cassidy, Holmes, February 1988). In 1991 the company decided to make Pennant System Company a wholly owned subsidiary. Pennant Systems was the manufacturer of advanced function printers for IBM. In the same year IBM decided to give more importance on those companies that were dealing with marketing and services. The company wanted to make these companies truly service oriented companies. In December, 2004 IBM decided to sell its personal computer business as the company was finding it difficult to compete with players like Dell and Hewlett-Packard. Dell was dominating the PC market with its made-to-orders computers which were getting sold online. IBM could not compete with such advanced concept and decided to focus more on software services to the business houses (Musgrove, December 8, 2004). Currently there are five segments where the company operates. These are Global Technology Services segment, Software segment, Global Business Services segment, Global Financing segment and finally System and Technology segment. Conclusion Organisational structure is one of most important factors that greatly influence the long term success of a company. Theoretically there are three common structures that are mostly found to be practiced by the companies. These are simple structure, matrix structure and bureaucracy. Each and every organisation must change its structure in order to cope up with the changing nature of competition. IBM, being the market leader in IT market, has also gone through several structural changes. For example in 2004 it decided to sell its personal computer business. Since matrix structure is most suitable for any company that deals with high end technology, IBM is also found to be practicing this structure. References Cassidy, J. Holmes, D. February 1988, IBM spreads workload for quicker pace, Sunday Times Hamilton, M. 1999, Software development: building reliable systems, Prentice Hall PTR Musgrove, M. December 8, 2004, IBM Sells PC Business to Chinese Firm in $1.75 Billion Deal, The Washington Post, [Online] Available at: http://www.washingtonpost.com/wp-dyn/articles/A45273-2004Dec7.html [Accessed on March 25, 2010]. Robbins, S. P. Judge, T. A. 2007, Organisational Behaviour, Pearson Education Reuters, No Date, Full Description, International Business Machines Corporation (IBM.N), [Online] Available at: http://www.reuters.com/finance/stocks/companyProfile?symbol=IBM.N [Accessed on March 25, 2010]. Read More