Basics of Marketing - Essay Example

Sur Supervisor Effective Management Structure of the Modern Enterprise Peter Drucker argued a way back in 1954, “A poor organization structure makes good performance impossible, no matter how good the individual managers may be” (226). This is more relevant even today – in the current-age of modern enterprises. Management structure is the basic architecture through which communication channels are established; authority is enforced and all relevant tasks are accomplished. The paper attempts to study the key principles that go in building effective management structure; the types of management structure that are in vogue today along with their merits and demerits and ways to design effective management structure for modern enterprises eliminating some of the key mistakes that people usually make. Management structure typically defines how employees will discharge their duties and exercise authority; communicate with others to achieve organizational goals and objectives. Effective management structure is that which does not impact negatively towards achieving its objectives. As such, a single kind of management structure is not suitable for different kinds of operations and tasks. It can be argued that organizational strategy takes its cue from the stated objectives and that, in turn, decides about its structure so that organizational effectiveness is not jeopardized. Before discussing about effective management structure in detail it is important to emphasize that environmental changes are inevitable. No organization has control on its external environment and all successful organizations keep on adapting to the new situations and needs of the market. Michael VanBruaene proposes following basic principles on which an effective management structure can be built. Alignment Management structure must align with the set objectives, goals, and strategy. Each sub unit should be organized in the same lines so as to have synergy in operations. This helps identify authority, responsibility and accountability within the organization. Common Activities Grouped Together When similar activities are grouped under one unit, it helps in sharing related expertise among group members with smooth information flow. Flexibility This is important in the sense that when structures are formed taking the shape of a pyramid it should not discourage the use of people horizontally across the departments. This is crucial for acquiring effectiveness in accomplishments of several tasks simultaneously. Matching Authority with Responsibility In a management structure, it is crucial to associate responsibility with matching authority because without having freedom for decision making, organizational effectiveness cannot be achieved. This will increase the chance of favorable outcome besides increasing job satisfaction among employees. Task Description and Interaction among People In a dynamic world, processes and technologies keep on evolving necessitating employees to learn new things and undergo suitable changes. Michael Vanbruaene argues that job details need not be briefed with elaborate description – to avoid rigidity among employees and for the purpose of mutual cooperation among staff members. Work Unit Expectations All work units within the organization must be clearly briefed with performance goals and objectives. Necessary flexibility to achieving performance objectives should be granted without specifying tasks much in detail. Association with Work Unit All employees must be associated with some department or work group and the department must have a position to guide employees professionally, if needs arise. Supervisor at Work Unit Effective organizational structure demands that each work unit or department is controlled by supervisor or manager because they work as a bridge between and within the work units. Understanding Management Structure Management structure is crucial for the effective functioning of an organization. For a new employee, it is necessary to understand the working relationships with their peer group, manager and subordinates. Management structure is a necessity for each and every kind of organization that includes private and public organizations, non-government organizations, sporting bodies, trusts or charities. Each organization has certain objectives to fulfill and therefore, it is essential to build appropriate management structure for meeting stakeholders’ aspirations. When appropriate management structure does not exist to facilitate smooth flow of the processes for all decision making then conflict between the departments is inevitable leading to unsatisfactory outcomes. If the situation persists for a long time, the organization may fail on performance. At this juncture, it will be appropriate to identify some of the key components of management structure that goes into the making of management structure (Bombaci). Communication Approach As such, communication takes place across the organization in the several directions. For example, communication may travel from top management to lower levels; or in both directions; or across peer groups horizontally. Task Allocation Allocation of tasks along with reporting system and interaction pattern among employees is another essential aspect of the management structure. Formalization Usually, procedures and jobs follow standard procedures to facilitate decision making, control and smooth communication. It could be either through in written forms or could be in an informal way. Ways of Influencing This pertains with the kind of influencing techniques employed by management to encourage and motivate staff so that the company can progress toward achieving its objectives. Usually, there are two kinds of influences: expertise-based influence that aims at using managers’ knowledge, and expertise to guide employees to accomplish the task in a precise manner. Contrast to this, authority-influence makes the use of positional authority to direct employees to complete the task. Centralized vs. Decentralized Decision Making Decision making in the organization could be either centralized within the powers of a few top management people or decentralized down the line for taking crucial decisions. Complexity Complexity of tasks has to do with how tasks or jobs are defined in a formal manner. They can be further divided into three types namely Vertical Differentiation, Horizontal differentiation and Spatial Differentiation. Vertical differentiation specifies the number of hierarchical separations between lowest level and top management. Horizontal differentiation takes into account how units are differentiated based on the nature of tasks, education and training of the employees. Coordination The process of coordination among different units of the organization is crucial to achieve organizational objectives. Having analyzed key components of the management structure, it will be most prudent to identify different types of management structure that are in vogue today. Each has its merits and demerits. At the beginning of industrial revolution mechanistic structure that characterizes vertical communication, authority-based influence, centralized control, rigid task definition, high degrees of formalization, complex differentiation, and high degree of co-ordination has been in forefront. Typical examples of the mechanistic structure are line and line and employee management structure (Bombaci). Advantages of Mechanistic Structures Mechanistic management structures are employed where the tasks undertaken by organization are complex. Building of the new Stonecutters Bridge in Hong Kong is a typical example falling in this category. People involved in building the bridge have specialized in a particular task and they contribute in their own way to complete the task. Other example is the daily operation of Mass Transit Railway (MTR) where each employee has a particular task to accomplish in coordination with others and there are hundreds of tasks to be accomplished for efficient operations of MTR. Disadvantages of Mechanistic Structures The biggest disadvantage of the Mechanistic Management structure is that it is highly rigid and carries a lot of inertia to adapt to change in environment. In a highly dynamic and turbulent business environments as found in case of electronic or telecommunication fields, Mechanistic Structure is not suitable. It is also not suitable when the majority of the employees are skilled professionals as is the case with accounting and auditing firms or large consultancy organization such as PwC or McKinsey. Organic Management Structure The Organic Management Structure aims at lateral communication, flexible task definition, low degrees of formalization, decentralized control, low degree of co-ordination, expertise-based influence and follows simple differentiation. The typical examples that characterize Organic Management Structure are Matrix and Divisional Organization Structure. Advantages of Organic Management Structure In an unstable, uncertain and turbulent environment, Organic Management Structure is beneficial because people can adapt to the situations quickly due to availability of the freedom to take decisions at lower levels. The Organic Structure is more capable of offering solution to the problems and resolving issues. Large consultancy firms, audit and accounting firms, service industries exemplify this kind of management structure. All communications are directed towards providing information rather than directing in a specific way. Disadvantages of Organic Management Structure For complex and large tasks, this kind of structure is not very suitable because it requires significant amount of coordination and integration among personnel to complete the job. There are other hybrid structures too that fall between organic and mechanistic structures. Small companies usually prefer simple management structure that essentially rests on defining the tasks by the top executive or owner and using their authority to influence employees. In contrast, large companies prefer matrix or divisional structures. The reason being they operate from multi locations and decentralized structure fits their needs. A set of goals and tasks are assigned to local units with considerable leeway to implement them. Only strategic goals are conveyed and controlled by a central corporate unit. Having understood management structure architect, the question still remains how to design management structure that transforms organization to success. Lex Sisney argues that organizational performance in the short and long-run will very much depend upon its management structure and he lists 5 classic mistakes that people usually make while creating management structure and they are worth mentioning as per the following. Strategy Changes but the Structure Remain Unchanged Often strategy changes due to change in external environment; however, management fails to make a suitable change in management structure. That means a new strategy is implemented within the same management structure. Any change in structure seems unnecessary due to existing expectations, interpersonal relationships, roles, and current functions. It is a fact that people do not accept change if there is a possibility of loss of authority and power. That is why no drastic structural changes are made while implementing new strategies; it is a natural resistance to change that comes in the way. Restructuring will specify new role and responsibility for the people challenging the status quo. Management needs to ensure that with each new strategic direction, existing structure must be overhauled so that responsibility and authority go hand in hand in a new setup. Balancing Act Needed between Autonomy and Control Lex is quite categorical in stating that meeting customer needs should always take precedence in the structure because it is the market and customers that provide continuous stream of revenues without which no organization can survive. More autonomy needs to be given to sales people that directly deal with the customers. At the same time, centralized control is necessary for the functions such as legal, accounting that may cause systematic risk to the organization. Lex raises a pertinent point here that autonomy must be provided to the sales people but it should not be at the cost of hurting organization. Lex points out that there is an inherent conflict between autonomy and control and they needs to be separated out in any management structure. Effectiveness Functions Reporting to Efficiency Functions Usually, efficiency overpowers effectiveness in any organization. Operations could be so efficient that they shed their effectiveness. Management structure should not be such that functions that establish effectiveness such as marketing, sales, innovation and development, account management within the organization are made to report to functions that focus largely on efficiency (administration, operations, quality control or customer service). Such set up will discourage customer focus and innovation that are necessary for the organization to become effective in the long-term. Long-term Development Functions Report to Short-term Results Functions As efficiency tends to cloud effectiveness, the long-term development functions are overshadowed by the functions focused on short-term results. Typical examples are branding, positioning and long-term marketing strategies that have a clear focus on the future buildup of the organization; however, if they are made to report into the sales function they will lose their main focus and will become a sales support function. The point is that both the functions needs to be kept separate as far as its reporting is concerned otherwise organization will cease to develop towards its long-term plans. Appointing the Wrong Person in the Right Function Due to resource constraints, especially during economic recession, the companies tend to save on costs. For example, a top performing Account Manager is given a dual responsibility to look after sales functions when the company's able Sales Manager has left the organization. The company has no inclination to hire a new Sales Manager hence this adjustment is made thinking that Account Manager will perform for offered additional sales incentives by the company. Accounts Manager, in all probability, is likely to fail because of mismatch between the existing role and his past experiences. Lex points out that putting a wrong person in the crucial and important function will not help the organization but it could be highly detrimental to the organization health. In order to get more insight, it will be most appropriate to apply the concept and find out how appropriately the below-mentioned management structure has been designed. The organization operates as a software service company and wants to expand into multiple industry verticals. The company is in the process of raising capital from the market and hiring new staff. As in a typical management structure, all functional heads such as sales and marketing, finance, community operations, QA, business development, general administration, and tech operations report directly to CEO. Source: http://organizationalphysics.com/2012/01/09/the-5-classic-mistakes-in-organizational-structure-or-how-to-design-your-organization-the-right-way/ It appears that the above structure has been created based on the traditional setup and not based on the core functions that the organization is trying to scale up. Without taking into account core functions while designing management structure, it is certain that new hires will struggle to make a clear headway in deciding their role and responsibility. The structure also exhibits some of the key mistakes as discussed in the above paragraphs. In the above structure, Account Management and R&D Functions report to community operations and Tech operations respectively that means functions supporting effectiveness report to functions that look for efficiency. In such situations, the company, in the long-run, will fail to develop effectiveness in its working. In other words, R&D will never flourish under Tech operation, which is mainly concerned with the current functioning of the organization. Functions that are responsible to develop effectiveness needs to be separated out from this traditional structure and needs to be provided extra attention. The given structure is more inclined towards efficiency function overshadowing effectiveness that is crucial for a long-term survival. Again, marketing thinks about long-run outcomes while sales function is concerned about immediate results. Marketing and sales have been kept under the same structure and that is sure to cripple branding and long-run positioning activities. It is more likely that marketing will become a sales support function and will lose its grip over formulating effective marketing strategies. Structure is incapable to deliver what is required for its long-term survival. In this structure, there is no provision to avert systemic risk. It is not clear how customer needs will be met with – without which it is impossible for the company to grow and expand. Structure implies that CEO will continue to perform day-to-day activities without having any time for a long term planning and execution. The structure cannot provide needed direction for the long-term growth and support to new verticals. The moot question is whether above management structure can be modified so that it serves short and long-term needs of the company. Lex proposes the following structure justifying its architecture in the following lines. Source: http://organizationalphysics.com/2012/01/09/the-5-classic-mistakes-in-organizational-structure-or-how-to-design-your-organization-the-right-way/ The above structure, for the same company, serves the dual purpose. On one side, it facilitates decentralized autonomy; while on the other, it enforces centralized control. Functions that are closer to the customer are provided with high degree of autonomy and at the same time, systemic risk control is also exercised through centralized decision making. Natural conflict that exists between centralized control and decentralized autonomy is taken care of with full understanding. The elaborate discussion on this new modified structure will explain how there are more chances of fulfilling the long-term and short-term objectives of the company. While designing an effective structure, Lex takes into account the four styles of forces that operate within everyone and they are Producing, Stabilizing, Innovating, and Unifying. Various functions in the organization, by their very nature, have one or two of them dominant and the remaining less dominant. Lex Sisney places a great importance in these forces necessary to accomplish the task successfully. The Producer (P) moves with fast pace keeping short-term view. Being a result-oriented, they always follow a structured approach. The Producer is a high-energy person, focused to his or her task. Moreover, the Producer likes people who have similar traits. The Stablizer (S) moves with a slower pace keeping short-term view. They follow structured approach and tend to work methodically. They are highly organized and take enough time in their actions. Accuracy and perfection are their strong points. The Innovator (I) is focused on the whole system and result-oriented but takes a long-term view. They operate in an unstructured way. They look out for better ways to do the things and search for new possibilities. They get excited by new ideas. They do not like status-quo and love the people who take plunge into new ideas. The Unifier (U) is focused on the whole system. They take an unstructured approach and believe in a long-term view. They are intuitive and want to go along with everyone. They look for harmony in the system. They dislike conflict situation and people who leads to such situations. Source: http://organizationalphysics.com/products/psiu/ Above understanding will be used to describe the nature of various functions and the reasons why the structure is designed in a particular way. Based on the PSUI factors, various functions in the organization can be described as per the following (Sisney). The CEO Function The CEO function exemplifies PsIU forces. That means the function needs to have quality of the Producer, the Innovator and Unifier. Stabilizing is the less dominant force needed for this function. Many activities are delegated to the other functional chiefs but not those that may cause systemic risk. The CEO delegates short-run Product Management and provides autonomy where needed – keeping legal, finance, general administration functions separate where more control is needed to safeguard from systemic risks. The General Manager (GM) Function In small organization GM function is usually controlled by owner or CEO but as the organization expands GM function is separated out as a separate business unit. This function is a revenue earner and requires more autonomy. In modern enterprises, several business units operate each with a profit center. The function exhibits PsIU traits, same as needed for the CEO function. Sales and Accounts Manager functions fall under the preview of the GM function. The Product Manager (PM) Function The Product Manager function exhibits pSiU traits dominant on stabilization and unifying activities and less dominant on production function and innovation. Several kinds of demands emanating from the various departments of the organization are satisfied by the Product Manager function. The profit and loss responsibility of the company first rests with the Product Management and then to the CEO Function. The PM function serves the purpose of short-term as well as long-term needs. Deliberately, the function is not allotted to GMs because in that case, long-term needs of the organization will be done away with putting entire focus on short-term goals. The Product Management function enjoys as much autonomy as enjoyed by the GMs. If the product does not perform well in the short-run, the Product Management realizes that the product does not have a good future in the long-run too unless reasons are entirely different but then the Product Manager takes their own decision whether to discard the product entirely or not. The Marketing Strategy Function Marketing Strategy Function exhibits psIu traits. That means innovation is a dominant trait and others are less dominant for this function. The Function focuses on creating long-term effectiveness of the organization through branding, and positioning strategies. Marketing Execution and R&D are made to report to the Marketing Strategy Function because they need advance and accomplish their tasks based on direction and guidance from the Marketing Strategy Function. New vertical or Business Development unit is also placed under the Marketing Strategy Function and not with any of the GM function because new business development requires tremendous amount of drive and innovation with a clear long-term focus and finds alignment with the Marketing Strategy Function to harness its full potential. The most discerning part is putting People Development under Marketing Strategy and not under HR as usually done in the traditional management structure. People Development is a long-term task to increase long-term effectiveness. If placed with HR, it is likely to turn into a short-term training activity and will lose long-term focus and effectiveness. Similarly, PR Function in any organization has a long-term view and should not be made to report to General Administration Function because that tends to control the activity with the intent of creating stabilizing effect in the organization. That is why the PR Function has been structured under the Marketing Strategy Function. The point is that all the functions with long-term view point must report to the long-term functional heads that in this case, it is termed as Marketing Strategy Function. The Finance and Admin Functions The Financial Strategic Function is separated out from the Controller Function because it needs a long-term view and vision as regards to deployment of financial resources. Controller Function is made to report to the Admin Function and not to the Financial Strategic Function because of their short-term focus and Stabilizing view point as a dominant activity. The Operations Function The Operations Function, Customer Services and Tech Information Services have one thing in common that they all work toward enhancing efficiency of main business verticles. Essentially, their focus is short-term with quick delivery (P) bringing stabilization (S). That is why customer service division is made to report to the operations Function. The Engineering Function Being a core function, it has been kept separate and not tied up with Operation Function though its focus is short-run establishing stabilization in the organization. The Engineering Function focuses on innovation and considerable efforts on day-to-day basis. Design & Development, QA report to the Engineering Function because they need coordination among the tasks for efficiency. Thus, it can be concluded that effective management structure is certainly an important necessity for success of any modern enterprise. Further, whenever there is any change in organizational strategy, management structure needs to be redesigned so that day-to-day operational efficiency and long-term effectiveness of the organization are not compromised. Moreover, management structure should strike a balance between decentralize autonomy and centralize control for establishing efficiency and effectiveness both in the organization. Works-Cited Bombaci, Sebastian. “Management Structures”. hkiaat.org. Web. 10 Oct. 2013. . Drucker, Peter. “The Practice of Management”. William Heinemann Ltd. UK. 2004. Print. Sisney, Lex. “The 5 Classic Mistakes in Organizational Structure: Or, How to Design Your Organization the Right Way”. organizationalphysics.com. 2013. Web. 11 Oct 2013. ---. “Taking the PSIU Style Assessment for Breakthrough Outcomes”.organizationalphysics.com 2013. Web. 11 Oct. 2013. VanBruaene, Michael. “Designing An Effective And Flexible Organization Structure - It's More Than The Structure Itself”. govloop.com. 2012. Web. 10 Oct 2013. . Read More