Organizational Design and Change Rondell Data Corporation - Essay Example

Organisational Design and Change – Rondell Data Corporation In today’s dynamic and intensely competitive business environment, the challenge of creating and sustaining a competitive advantage lies in how organisations manage their internal processes and operations. Therefore, ensuring a proper fit between internal structure and the business environment to which it caters is an essential aspect of business success. As components of business environment as customer needs, customer expectations and level and caliber of competitors are dynamic in nature and changes continuously, it is important that organisations too change their internal structure and process in line with the demanding conditions of the marketplace. With the intense competition, the customers’ alternative sources of supply increase along with the threshold level of acceptable quality in terms of product and service. Therefore, product quality, innovation, delivery reliability and shorter lead times have become prerequisites in business world rather than competitive advantages. Thus, the importance of streamlining internal processes and aligning the organisational structure to act as a combined force becomes a key necessity. Agility in organisational process in responding to market demands can only be achieved through organisational structures, which are well-integrated, less bureaucratic and collectively aligned towards achieving the organisational objectives (Thomson & Strickland 2003). The case study analyses the current issues being faced by Rondell Data Corporation, a well established manufacturer of Data Transmission units and electronic Testing Equipments, with regards to its internal business operations, especially pertaining to the interdepartmental conflicts leading to reduced productivity and profitability resulting from mismatch in its organisational design and structure with the required business process. The analysis will take in to account the current status of the operations with the use of contingency models and identify the problem areas being encountered by Rondell. The insight gained from the analysis will aid in explaining the past background and how the company has developed to its current stage as well as what the future may hold if the organisation proceed without interventions. Lastly the analysis will also provide suggestions and recommendations for intervention and creating change at Rondell Organisation Background – Rondell Data Corporation Rondell Data Corporation which has been incorporated in 1930 has grows steadily over the decades with a dedicated team of employees who are mainly from engineering background. The company has achieved a reputation for being a supplier of high quality products and being a forerunner in the industry with innovative product designs. By year 1988, the company offered a wide range of products and employed over 800 personnel in its workforce. Headed by Bill Hunt as its president, the company has achieved impressive growth and profitability over the past years and developed and maintained a highly loyal and committed team of employees. Profit-Sharing and stock option schemes of the company have rewarded the employees for such commitment and their contributions towards Rondell’s profitability. Although the company had very low staff turnover, the position of Director Engineering Services, which was one of the senior manager positions in the company had a very high staff turnover and has been occupied by three persons during a short period of two years. Even though Rondell has been known for its informal business culture and friendly atmosphere in the past, a marked increase in internal disputes and breakdown in cross functional relationships have been observed and has in fact led to the dismissal of two of the occupants of the Engineering Services Director position. The internal disputes have lead to disruptions in production process, reworks and delays in delivery and are mainly stemming from issues related to new products being developed. While the company is churning out a high level of innovative new products and prototypes, the actual commercialisation process has suffered with bugs and faults being uncovered at commercial production stage and also from delays in delivery affecting reputation of the company. The recent fiasco in launching the Model 802 wide band modulator is an example of the difficulties and disruptions being faced at Rondell. A need for reassessing the organisational design and its capability of meeting the organisational objective of being an innovative and quality supplier is therefore recognised by Rondell’s management in view of these negative affects of the current situation on its business Organisational Analysis In analysing a problem situation within an organisation, a “Jump-Start “ Analysis or a Diagnostic Contingency model can be applied. A Jump Start Analysis evaluates various organisational dimensions and systems at different levels to identify where the problem is located. Trigger questions are used to uncover the root cause of the issue, which may be stemming from or contained within the leadership level, individuals, or within departments or between departments (Wisss 2000). This process allows to identify the interrelated problems arising from root causes and the trigger effects creating a cycle of problems each related to the other within the organisation, affecting its performance. Figure 1 below illustrates the Organisational Analysis model discussed under the Jump Start Technique, which is used in assessing Rondell’s current problem situation. Examining the Rondell’s situation through the above organisational analysis model, the following trigger questions provide some insight in to the causes of the current problems. In assessing where’s the pain (tension) in the system is, it is evident that the focal point of the tension is the Engineering Services Department (ESD) which was headed by Frank Fobes until his dismissal in December. There is evidently a high level of coordination breakdown between ESD and Production. Sales too perceive ESD as a problem area while Product development, which falls under the purview of ESD, is also having issues with the ESD. As ESD is playing the liaison role between R&D, Production and Sales, this department is in effect becoming the scapegoat for issues belonging to other departments but coordinated through ESD. In identifying how related is the sub system experiencing the problem with other parts of the organisation is, there is a very high relationship between the four sub systems of R&D, ESD, Production and Sales. The case analysis reveals that Rondell has a strong point in having a highly dedicated and loyal workforce including its production floor staff. The problems prevailing are mainly located higher up the hierarchy and have affected the department head and deputy dead levels. The trigger question of Who (which system) is ready for change reveals that Rondell as a whole is not ready for a change in different degrees. The readiness may lack in the leadership level followed by production department while sales and R&D too need to redesign their processes. The locus of the problem lies in the entire system where the ad hoc nature of the business process and redundant functions being carried out by ESD is causing conflicts. The situation is further aggravated and allow to continue and grow as the leadership function is not performing its essential roles of mediator, negotiator and problem solver. The case cites several senior level employees commenting on the President Bill Hunt not acknowledging the organisational issues and this is further iterated by his resorting to blame individuals such as Kilmannn the previous ESD head and Frank Fobes his predecessor for the conflicts. The analysis indicate the lack of leadership involvement in identifying the root cause and streamlining the business process at Rondell Corporation . Figure 1 – Organisational Analysis Model – Jump Start technique Source: Cohen A. et al, 1992, Effective Behaviour in Organisations. 5th ed. Boston: Irwin. Organisational Design & Structure An organisation has to be designed to achieve its objectives and the process of organisational designing involves “identifying and configuring the organisational strategy and structure to achieve its mission and goals” (Weiss 2000). An organisational structure identifies and defines the duties, responsibilities and formal reporting hierarchy of an organisation. An effective structure aids the achievement of organisational objectives through clear indication of roles, responsibilities and authority of each position and department or work group in achieving the organisational targets. Currently this is an area, which is causing the backdrop to the Rondell’s issues. The current hierarchy is being bypassed by different departments and individuals and people such as Doc Reeves is placed in the wrong place in the hierarchy. In the same manner, the placement if Personnel function far down the structure in isolation reflects the lack of importance placed on formal Human Resource Management functions at Rondell. The division of accountability of the top two men of the organisation in to functional perspective is also a wrong approach. The President and vice president are expected to provide the strategic overview to the operation and should not be myopic as development or production oriented. Intervention of Engineering Services Division personnel in between the Product Development and Production departments take away the accountability of Product development has in providing proper designs, which are commercially viable for production. On the other hand, the inputs from production should be present at the very beginning during the development phase itself so that project does not have to shuttle back and forth between the departments with amendments. If the company is organised in teams or clusters to work on projects, the representation from R&D, Production and other essesntial business process will ensure the involvement of all parties from beginning to commercialization of the product. Such structures facilitate greater information sharing, better coordination and effective problem solving. Well developed, integrated and streamlined structures provide the basis for organisational effectiveness where people can work with more empowerment, sense of purpose and minimal disruptions in process of work. Stove Pipe Effect of Functional Structures In attaining internal coherence and agility, what is important is to dismantle the functional “stove pipe” perspectives at Rondell, which the traditional departmentalized organisation design has developed in to over the years. Such organisational thinking leads to loosing focus of the end result of meeting customer demand and limit itself to departmental operations. Nature of business also impacts upon the most suited organisational design and thus its important to assess the business process involved in delivering the customer needs. Techniques such as Value Chain Analysis provides a clear overview of how different departments of an organisation link up in achieving the final objective of the organisation. Such analysis will also allow an organisation to identify any redundant operational areas, which may not actually add value to the process but in effect cause unnecessary delays and additional costs to the process. In such situations, it is important that organisations redesign themselves to become lean and agile structures with internal coherence and coordination to maximise organisational effectiveness and efficiency. Mechanistic Vs. Organic Structures To meet the demands of the market effectively, organisations have to develop their internal structures to suit their industry features and characteristics. In industries, which the uncertainty is, high the organisational structures are decentralizes and decision making is less formalized and speed and agility is high. Such organisational structures are termed Organic. On the other hand, companies operating in low uncertainty industries, the organisational structures are more centralized, standadised and formalized and considered as Mechanistic ( Lawrance & Lorsch 1967). Thus, it is understood that organisations need to attain a right match between the internal structure and the business environment to which it caters. In the case of Rondell, its market is a highly uncertain filed of electronic devices and this industry requires a high level of product innovation, continuous development, differentiation and flexibility. Thus, the organisational structure suited for Rondell is more Organic than a Mechanistic one. The success of Rondell in the past years can be attributed to the Organic organisational structure, which has prevailed with less formalities and lot of mutual adjustments. However the company’s structure has been affected with the revamping of its production department with the recruitment of Dave Schweb who is currently the factory superintendent. With the realignment of the Purchasing and Quality control functions to different divisions from Production led to further formalisation of the business process. Figure 2 illustrates the distinction between Organic and Mechanistic structures, which needs to be considered in organisational designing process in keeping with the degree of perceived uncertainty in the environment. Figure 2 – Organic and Mechanistic Structures Source: Weiss, J.W. 2001, Organisational Behavior & Change, 2nd ed., South-Western Collage Publishing, Ohio. Compatibility of Business Process with Organisational Structure The key business processes of the Rondell’s operations are covered by four key functional departments, which are the Product Development, Engineering Services, Production and Sales. The disputes arising in the company can be observed to be stemming from the breakdown in coordination and communications between these four business processes. Even though the Rondell operations can be placed in a business process as illustrated in figure 3 below, the organisational structure of the company does not support this process. The ESD’s functions can be seen as redundant and the fact that most of its staff being located within other departments gives partial evidence to this. This redundancy needs to be addressed in a restructuring process of the company. Figure 3 – Required Value Chain vs. Current Business Process at Rondell Source – Authors Concept It is evident that the current business process of at Rondell is bypassing Engineering Services division, which production sees as incompetent in providing the required level of pre-production engineering expertise and R&D perceives as meddlesome interveners in their developmental process. Sales too perceive ESD as incompetent but the incompetency being allotted to ESD is the accumulated deficiencies of all departments, which accrues on to the coordinating point, which is ESD. The current bureaucratic structure is not able to support the highly differentiated production process and the level of innovation in the company, which is required to stay competitive in the industry and therefore necessary to redesign the firm in to a more fluid and flexible organisational structure. Opportunities and Issues of Bureaucracies and Adhocracies Organisations, which are bureaucratic, are most suited for catering to environments, which are stable and less uncertain. The benefits of such structures include the opportunity for realizing economies of scale, allowing for in-depth skill development , ability achieve functional goals and to specialize on one or few products. Problems associated with a bureaucracy which is evident in current situation at Rondell which includes slow response time to environmental changes and demands, Hierarchical overload, decision pile up at the top levels, poor horizontal coordination among departments and restricted view of organisational goals (Duncan 1979). In contrast, if an Adhocracy is considered where matrix or cluster structures replace the functional departments, the opportunities lie in being able to achieve coordination necessary to meet the dual demands from the environment; flexible sharing of human resources across products; facilitates complex decisions which has trigger impacts many aspects and allow for frequent changes within a highly unstable environment and allows to promote differentiation and innovation. While an adhocracy has its compatibility in meeting the needs of a dynamic environment as electronic industry, the problems lies in the cultural changes required and training needed in interpersonal skills (Duncan 1979). However, successful implementation of adhocracy with High performance work teams and clusters are the norm of today’s successful companies where the team members operate on highly flexible work agendas and multitask and adopt multiple roles for maximizing productivity whilst minimizing costs. Learning Organisation Analysing the current environment of Rondell, it can be noted that the company has good potential for creating a learning environment and becoming a learning organisation. Employee commitment and loyalty coupled with the high level of innovation prevailing in the company provides a good starting point in creating a learning culture. The R&D department is already collaborating with customers’ technical staff and innovation and creativity is allowed to flourish at Rondell. Organisational Learning identifies five essential activities which a learning organisation performs, including systematic problem solving; experimentation with new approaches; learning from own experiences; learning from others and transferring knowledge quickly and efficiently through out the organisation (Garvin 1993). In order to transform Rondell in to a truly learning organisation, systematic problem solving, collaborating, information sharing and knowledge implementation will have to be practiced. Recommendations for change Currently the company has progressed from its initial simple structure, which had a high level of mutual adjustment and direct supervision to a professional bureaucracy with functional departments. The need for a high level of mutual adjustment as an Organic structure indicates that Rondell needs to change itself in to an Adhocracy structure to surmount the current problems. By realigning the operations in to clusters and high performance work groups, the company can derive the benefits of an organic structure and be more compatible with the needs of its highly uncertain electronic component industry. Organisational change can be implemented as developmental change, transitional change or transformational change. The changes to be implemented at Rondell should be based on a transitional model where the change implemented is a known new state of management achieved over a controlled period of time. Appendix 1illustrates the differences in the above three Organisational Change models. In line with company’s business objectives of being a highly innovative business enterprise, it is also recommended that Rondell implement programs aiming at fostering a learning environment. These efforts should include promoting a learning culture, creating open channels of communication and information sharing, creating implicit and explicit information resources and encouraging staff to join the learning process across the organisation. The company should also foster an external orientation within the company by allowing the staff to work in collaboration with suppliers, customers’ technical staff and also with industry focus groups and peer associations. The current internal perspective where people tend to be defensive and negative towards outsiders and new entrants has to be avoided if the company is to truly benefit from the best human capital available in the market. During the restructuring process a HRM department should be designed with high level of authority and responsibility in further developing the Rondell’s team of innovative and dedicated employee carder as the human capital is the key asset of the company. Rondell, which operate with a significant number of knowledge workers should ensure that their needs for creativity and autonomy are addressed by job designs and appraisal schemes. It is also recommended that training programs for improving interpersonal skills of the employees. This is essential for the new organisational design’s success. People such as Schwep along with other key personnel needs to be trained in being assertive without being aggressive or submissive. Figure 4 provides suggested models, which can be utilised in such training. Figure 4 - Fight, Flight and Assertive Continuum Source: Weiss, J.W. 2001, Organisational Behavior & Change, 2nd ed., South-Western Collage Publishing, Ohio. In conclusion, it can be noted that while organisations may grow successfully over a period with its initial business processes and organisational design, the need arise at a certain point to assess the suitability and compatibility of its internal structures in catering to the business environment and restructure as per needs identified. When such changes are being implemented essential aspects of minimising negativities, keeping those affected well informed, gaining commitment and acceptance of the stakeholders and maximizing positive effects should be addressed to ensure a successful change. In choosing between different styles of business structures as simple, bureaucratic or adhocracy, the needs of the business environment should be considered. Each organisational design contains its own pros and cons and should therefore the degree of mechanistic or organic status of the organisational structure has to be decided in accordance to company’s unique needs. Lastly as observed in the case of Rondell Data Corporation, leadership plays a crucial role in organisational change and therefore senior management should provide the commitment and leadership in implementing organisational change. References Weiss, J.W. (2001) Organisational Behavior & Change, 2nd ed. Ohio: South-Western Collage Publishing. Garvin, D. A. (1993) Building A Learning Organisation. Harvard Business Review, July - Aug, p. 78 -91. Lawrence, P. & Lorsch, J. (1967) Differentiations and Integrations in Complex Organisations. Administrative Science Quarterly, June p.1-47. Cohen A., Fink, S., Gordon, H.Willits, R. & Josefawitz, N. (1992) Effective Behaviour in Organisations. 5th ed. Boston: Irwin.p. 424-426. Duncan, R. (1979) What is the Right Organisation Structure? Decision Tree Analysis Provides the Answer. Organisational Dynamics, winter. P. 429. Thomson, A. A. Jr. & Strickland, A. J.(2003) Strategic Management Concepts and Cases. 13th ed. New York: McGraw-Hill Publishing Company Ltd. Appendix 1 Three Perspectives on Change Read More