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Managing Organizations - Organizational Structure

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					1     INTRODUCTION
This individual assignment is for the Postgraduate Institute of Management, University of Sri
Jayewardenepura. The purpose of this report is to critically examine and discuss on how the core
management function “Organizing” is implemented in the company named Ceylon Business
Appliances (Pvt.) Ltd,. In this effort, the assignment provides the introduction about the
organization and the existing state related to the key factors affecting the organizing function of a
business. The assignment also analyzes and highlights the key issues that are deterring the
improvements of the business and provides the necessary recommendations with the relevant
outputs and outcomes.


2     OVERVIEW OF THE ORGANIZATION

2.1   Company brief

Ceylon Business Appliance (Pvt.) Ltd. is established in March 1970, and now CBA has a well
established reputation as the number one quality supplier of office equipment to the Sri Lankan
market (CBA). The company started as a small family business, initially marketing a few
banking machines. Today, the company's reputation is very strong in the high value and high
profile banking sector in Sri Lanka. Today, CBA blessed with a solid and ever increasing
customer base due to its dedication and responsibility towards fulfilling the requirements of its
valued customers.

CBA has three main divisions namely technical, operations and finance which oversee by three
executive directors. The technical division further divided in to two divisions namely,
Engineering & Manufacturing Division (EMD) and Technical Services Division (TSD) which
are overlooked by engineering and technical mangers respectively. EMD deals with
manufacturing products such as office machinery and furniture. The TSD is responsible to
installing and maintaining all technical products that CBA sells.




                                                 1
2.1.1     Vision

   To be the No. 1 supplier and service provider of Office Automation in Sri Lanka

2.1.2     Mission

   Maintaining and further nurturing our solidarity with our valued customers and
   providing highly personalized and customized service in a customer friendly atmosphere
   with total dedication and commitment with a sense of responsibility in achieving all set
   objectives of the both partners in business.

2.1.3     Product and Services


With the experience of 42 years in the Sri Lankan Market, CBA has a wide variety of products to
meet various customer requirements. CBA enjoys a well-deserved reputation in Sri Lanka as a
leading Manufacturer / Supplier of a broad range of products and services including Office
Machines, Office and School Furniture, Plastic Identity cards, prepaid cards and Electronic
assembly for export. The company’s reputation is especially strong in the high end Banking
sector.

CBA has a renowned reputation in products and services involved high security. Some of them
are credit card manufacturing and printing, Credit/Debit POS terminals, Automatic Teller
machines, mobile phone recharge cards printing.

2.1.4     Level of competition


Since CBA has a vast range of product variety, the number of competitors against CBA is higher.
In order to obtain a better market share CBA has chosen the approach of providing a quality
product and the best customer service to get the lead in the competition. From the inception itself
CBA is popular for providing a customer oriented service to keep the customer satisfaction at
high levels. CBA has designed their logo as “Reliable People, Reliable Machines, Reliable
Service” to represent its customer service.




                                                  2
3     ORGANIZING
Organizing is a function of management that can be defined as the deployment of organizational
resources to achieve strategic goals (Daft, 2009);285). The deployment of resources is reflected
in the organization’s division of labour into specific departments and jobs, formal lines of
authority and mechanisms for coordinating diverse organization tasks (Daft, 2009);285).

3.1   Introduction to organization structure
Organization structure is defined as a set of formal reporting relationships, including lines of
authority, decision responsibility, number of hierarchical levels and span of manager’s control
(Daft, 2009);286). It is the framework to organize the employees of a business to achieve goals.
The chain of command in the organization structure is represented graphically in an organization
chart. Thus the specific decisions that manager’s make in implementing an organizational
structure is called the organizational design. A proper organizational structure will coordinate
activities by clearly identifying who is responsible for which tasks. Thus reaching goals by
minimizing the confusions

Depending on the structure there are seven different approaches. They are known as functional
structure, divisional structure, matrix structure, team structure and virtual network. Basic
definitions of the structures are as follows.

Functional Structure: In a functional structure functional activity represents specific resources
that perform organization’s main tasks. Each functional department is responsible for the role
for the whole organization

Divisional Structure: Divisional structure occurs when departments are grouped together based
on organizational outputs. Each division has the same types of subdivisions. The main difference
compared to functions structure is that the chain of command joins lower in the hierarchy.

Matrix Structure: Matrix structure combines both functional and divisional structures
simultaneously in the same part of the organization. This type has the dual line authority as
functional and operational. Both managers should have a similar purpose to reduce confusions.




                                                3
Hybrid Structure: Hybrid structures are formed in organizations with divisional structures where
each manager can select the best structure for the particular division. This offers a great
flexibility for managers to manage the organization.

3.2   Organizational structure of Ceylon Business Appliances

The organizational structure of Ceylon Business Appliances (CBA) is attached in the Appendix
1. CBA operates with a functional structure focusing on efficiency. When analyzing the
structure, it is evident that critical functions of the organization have been administered by the
Chairman/the Board of Directors. This could eventually cause demotivation among the theory Y
managers who are willing to take responsibilities. However, the organization comprises of cross
functional teams that works on projects. Nevertheless they all have a single reporting line. A top
down vertical communication method is implemented at CBA with clearly defined rules &
regulations in place.

The top down approach will put CBA in a position of being proactive in response to customer
activity. With this capability short termism behavior can be avoided and key issues that are being
faced can be easily dealt with. For example CBA faces intense competition from the new low
cost players entering to the market.

As the strategy is formally communicated to all management levels the chances of sub
optimization would reduce. The strategy will usually outline different areas of responsibility of
different functions bringing about goal congruence. The stakeholder perception of a well-planned
organization is high. Investors feel confident that the business is sustainable and suppliers are
assured of continued business and customers have the guarantee of a long term relationship.

On the contrary the entire process is too infrequent and exposes CBA to the risk of being out of
date to the latest technology developments. The formal approach does not encourage radical and
creative thinking at lower levels in the organizations. Junior managers have no opportunity to
display their capabilities resulting in a loss of talent and entrepreneur spirit.




                                                   4
3.3   Factors Shaping the organizing structure of CBA
There are several aspects managers need to consider when selecting the appropriate
organizational structure for their business. These are namely chain of command, Span of
management, centralization, departmentalization, Task Forces teams and program management,
environment, strategy, division and specialization of labor, technology, and human resources.
The effect of the above factors to the organizational structure of CBA is discussed below.

3.3.1 Chain of command
The chain of command in CBA follows the scalar principle where there is a clearly defined line
of authority in the organization. The authority given to the employee’s follows the principle of
authority flows down the vertical hierarchy (Daft, 2009); 287). Being a family business with the
autocratic structural approach the positions at the top of the hierarchy are assigned with more
formal authority. CBA also follows the line authority where management positions have the
formal authority to direct and control immediate subordinates.

The responsibility of the duty performed is clearly defined in the organizational structure of CBA
as illustrated in the appendix 1. CBA employees are provided with a clearly defined task list and
their responsibilities at their orientation. However autocratic approach has provided the managers
with less authority and more responsibility which makes performing tasks possible but difficult.

Accountability is a mechanism that balances responsibility and authority. CBA has consigned
clear levels of accountability throughout the hierarchy of the structure. For example the
supervisors can sign gate passes for their subordinates and they are accountable for the
whereabouts. Managers have a budgetary allocation which they are accountable for.

3.3.2 Span of Management
Span of management is the number of employees reporting to a supervisor in an organization. As
shown in the below Figure 3-1, CBA is current employing 330 employees. They have 150
employees under technical manager, 70 under engineering manager, and 30 under operations
manager, 20 under business development manager, 10 under HR manager and 20 under finance
director.




                                                5
Figure 3-1 - Span of Management of CBA

      Technical               Operations            Financial
  Executive Director       Executive director   Executive Director
   (250 Employees)          (30 Employees)       (20 Employees)

                                  Business
          Engineering
                                Development
           Manager                                   Accountants
                                  Manager
        (70 Employees)
                               (20 Employees)


           Technical          Human Resource
            Manager              Manager
        (150 Employees)       (10 Employees)


          Operations
           Manager
        (30 Employees)



Source: Author’s Concept

Technical, engineering and operations managers are further divided with sub departments
(photocopy, electronics, computer etc.). Supervisors are assigned for each department to report to
the corresponding manager. Six sub departments report to the technical manager and four sub
departments to the engineering manager to provide smooth management operations.




3.3.3    Centralization


CBA still has its initial management roots which are more skewed towards more autocratic, and
top to bottom decision making and communication approach. It is evident that the strategically
important decisions are made by the top level leadership whereas the functional and operational
managers are given a considerable amount of autonomy to make decisions with regard to day to
day operations. Through its centralization approach the head office acts as a central hub of
operations in decision making. Tighter control over operations is evident and economies of scale
are achieved through the centralized purchasing mechanism of CBA. Slower response to change
and inflexibility are key disadvantages in this context.

For example annual targets for each department are decided by the top management. And other
managers and subordinates only have the operational autonomy in meetings the targets.

                                                 6
3.3.4   Task forces, teams and project management


Task force is a temporary team designed to solve a short term problem involving several
departments (Daft, 2009); 305). In a functional organizational structure like in CBA there are
occasions when task forces are necessary to enhance cross functional coordination to achieve a
specific goal.

For example CBA have recently commissioned a new ATM (Automatic Teller Machine) to local
bank. It was necessary for technical, operational, sales, finance functions to work together to
complete the project. Since CBA is following the autocratic structure it was easy for the board of
directors to assign a task force to that specific task with a project manager.

As a result of the functional structure CBA management has implemented several other measures
to improve inter functional coordination. There are supervisor meetings, manager’s meetings
and intranet communication to enhance the cross functional activates.

In addition to the typical activities there are special research projects that operates within CBA
which are not within the scope of the existing departmental structure. In these occasion CBA top
management assign a special project team to manage the project. For example CBA is currently
involved in a research project of building a device that scans brain waves and play console video
games according to their concentration level. This particular project does not belong to any
existing department but have a special team within CBA.




3.3.5   Environment
Environmental aspects are the external factors that will affect an organization, for example; the
PESTLE factors comprising, political, economic, social, technological, legal & environmental
changes. In analyzing the macro-environment, it is important to identify the factors that might in
turn affect a number of vital variables that are likely to influence the organization’s supply and
demand levels and its costs.




                                                  7
Figure 3-2 Relationship between Environment and Structure

                                                               Structure
                                            Vertical                                Horizontal


                             Incorrect Fit:                            Correct Fit:


    Uncertain (Unstable)     Vertical structure is uncertain           Horizontal       structure    is
                             environment                               uncertain environment
Environment                  Mechanistic structure too tight


                             Correct Fit:                              Incorrect Fit:
          Certain (Stable)
                             Vertical   structure       in   certain   Horizontal structure in certain
                             environment                               environment
                                                                       Organic structure too loose



Source: Daft 2009: 311




As explained in above section 3.2, organizational structure of Ceylon Business Appliances has
characteristics of a mechanistic system. Their structural implementation in environmental factors
complies with the aspects explained in above Figure 3-2, in the top left corner of the gird,
operating as a vertical structure in an uncertain environment. The present environment is
dynamic & subject to significant changes whereas the mechanistic structure adopted by CBA
could to too tight for its ongoing operations.

The quicker the environment changes the more problems are faced by managers. During an
uncertain environment it is rather easy for CBA to adapt to the changes if a more horizontal
structure is implemented. In the industry in which CBA operates technology push is rather
critical for market share expansion. If CBA takes too long to introduce a technology push it
could be exposed to the risk of market share erosion. Therefore in a volatile market flexibility is
required where staff could have more authority & responsibility to solve issues and introduce
innovations enabling CBA to effectively response to the ever changing environment.


                                                    8
 3.3.6   Strategy
 There are several strategies that business firms can adopt. Two strategies proposed by Porter are
 differentiation and cost leadership (Daft, 2009); 309). Differentiation is when the organizations
 deliver differentiated products and services to a broader target market. Their focus is not the
 price but the specific product quality. Cost leadership is when an organization tries to win the
 market share by appealing price-sensitive customers. This is achieved by having the lowest
 prices in the target market. Figure 3-3 below shows the different structural approaches required
 when strategizing the organization.


 Figure 3-3 - Relationship of Strategic Goals to Structural Approach




Source: Daft 2009: 310



 According to the above Figure 3-3 cost leadership is more possible in pure functional structure
 while horizontal teams are appropriate in differentiation.

 Ceylon Business Appliances follows the differentiation strategy throughout its operations. Their
 mission states that they want to win the market by “Maintaining and further nurturing solidarity
 with valued customers and providing highly personalized and customized service in a customer
 friendly atmosphere with total dedication and commitment with a sense of responsibility in
 achieving all set objectives of the both partners in business”. Thus innovation plays a big role in
 their organization.

 It differentiates their products & services based on high quality and customer support
 compromising the low cost factor. Furthermore their Intellectual Property (IP), unique technical

                                                      9
expertise, innovative processes brings about an added advantage. CBA targets the consumer
segments that need fast, reliable, quality service, and highly standardized quality products. In
addition CBAs’ portfolio of products comprising low Price Elasticity of demand for its corporate
customer base would rather be an added advantage. However it is said that firms pursuing a
differentiation strategy may be able to pass higher costs on to the customers due to their unique
products and customer loyalty levels.

Corporate strategy as the determination of long-term goals and objectives, the adoption of
courses of action and associated allocation of resources is required in achieving goals; structure
as the design of the organization is through which strategy is administered. Changes in an
organization's strategy led to new administrative problems which, in turn, required a new or
refashioned structure for the successful implementation of the new strategy. As per the above
Figure 3-3, differentiation strategy should coincide with a more flexible structure than a
functional structure in order for CBA to succeed in differentiation strategy.




3.3.7   Division & specialization of labor
As far as CBA is concerned, at production level, work processes are piecemeal activities on a
line. Organizational tasks are subdivided in to separate jobs. Activities are integrated at stages to
complete manufacturing a product at the end of the process. Division of labor is the underlying
concept of this work flow. A rigid job description is provided where each employee specializes
in the assigned task.

For instance the technicians of the photocopying section are trained specially to service and
maintain photocopying machines. Due to extensive specialization, employees of CBA specialize
in a single task, such as running a particular machine in the assembly line. Jobs tend to be small,
but technical workers can perform them efficiently. By contrast, if a single assembly line
employee engaged in the entire operation for a longer time monotony will result in low quality of
work.




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3.3.8   Technology


Ceylon Business Appliances is a combination of a manufacturing and a service organization.
CBA in manufacturing produce small batches of products that are specific to customer
requirements. The manufacturing organizations that produce small batches for specific customer
needs should have an organic structure (Woodward, 1965). As discussed in 3.2 CBA’s vertical
and mechanistic (non-organic) organizational structure does not comply with the use of
technology in manufacturing at CBA.



In services CBA is mainly focused on after sales services of products that have direct
involvement with customers. Those firms who have a direct involvement with the customers
should have an organizational structure which is flexible, informal and decentralized (Daft,
2009); 314). CBA has a vertical and centralized structure which has to be changed in order to
adopt service technology to their structure.



In digital technology CBA use them to communicate with clients, staff and manufactures. CBA
effectively use email communications, internet, video conferencing, virtual assistance
technologies to solve issues especially technical issues with the customer as well as with the
manufacturers. Organizations based on digital technology should be flexible and decentralized
(Daft, 2009); 315). But since CBA is using technology in a narrow scope the existing
organizational structure will suffice.




3.3.9   Human Resources


“Human Resource Function Auditing” analyzes the current situation of the organization and
helps the senior management to change the organization structure if necessary to meet the
strategic goals of the company. Autocratic approach is when the organizations’ high
management has more power in decision making. The bottom up approach is when the whole
staff supports in decision making process that enables innovation, high employee motivation.

                                               11
Ceylon Business Appliances being private limited organization traditionally follows with top
down (autocratic) approach. Good leadership and quick decision making helped them to become
success in the local market. But employee demotivation and lack of support for quick innovation
hinder the development of CBA into a very successful organization. Limited trust and decisions
imposed with a little involvement of subordinates’ compromise their key strategy, differentiation
and critical success factors such as innovation and quality of products which thrive only in
democratic structure. More trust, involvement with employees, two-way communication with
participative decision making would rather attract effective workforce for potential employment
opportunities and retain the competent which would eventually improve quality, innovation and
customer service. This could provide room for the top management of CBA to spend more time
on their key strategic issues.


Motivation is the driving force within individuals by which they attempt to achieve some goal in
order to fulfill some need or expectation. Therefore motivation of people through fair &
consistent financial & non-financial rewarding is critical. With a performance related pay CBA
aligns the behaviors needed to help the organization to achieve its strategic goals. Therefore the
employees have the incentive to make the organization more profitable because if the prescribed
goals are not met, no incentives will be given. But its present performance appraisal scheme is
only related to financial targets ignoring other key aspects that contribute for the well-being of
the organization as a whole.




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4     RECOMMENDATIONS
With the analysis discussed in section 3.3 following recommendations are derived that will
improve the organizing management function at CBA.

Table 4-1 - Recommendations to improve the Organizing Structure at CBA




    Issue                 Recommendation                Output                  Outcome
    Autocratic (Top       Implement democratic          High employee           High quality of
    Down) structure       (bottom up) approach          motivation. Backing     service &
                                                        Innovation.             reliability


    Lack of structural    Change the functional         Competitive             More
    support for           structure to more flexible    Advantage               innovations for
    Differentiation       structure                                             the customer
    Strategy                                                                    base & goodwill



    Lack of effective     Decentralizing                Goal congruence &       Maximize
    coordination &        Operations, empowering        improved quality of     shareholder
    communication         people and promoting          decision making         wealth through
    among departments     network & lateral                                     improved
                          communication                                         decision making
                                                                                & motivate
                                                                                employees
    Decisions concerted   Increase subordinate          Fast response to the    High performing
    at the top of the     involvement &                 unstable environment    culture and
    hierarchy             participation in decision                             motivated
                          making                                                employees



    Slow response to      Customization of the          Increase market share   Maximize
    external changes      procedures based on the       backing innovation.     shareholder
    (e.g. technology      dynamic market &                                      through
    improvements)         competition                                           achieving
                                                                                business goals &
                                                                                increase
                                                                                customer
                                                                                satisfaction




                                                 13
Issue                    Recommendation               Output                   Outcome
Lack of clear            Develop a more objective     Depersonalized           High performing
accountability           performance evaluation       performance              culture and
among non-               process which can            management process       motivated
executive level staff    measure performance          with more quantifiable   employees
backed by a              based on deliverables        descriptions
subjective               (e.g. Balanced score
performance              card)
management system
Lack of multi-           Enlarging jobs to provide    Multi tasked             Motivated
tasked employees         greater challenges &         employees providing      employees &
due to too much          enhance teamwork in          quality output           smooth flow of
specialization &         order to practice job                                 operations
division of labor        rotation

Lack of flexibility in   Improve the organization     Improved coordination    Customer
using technology in      structure to be horizontal   between employees        satisfaction
manufacturing.           and organic.                 when manufacturing       through high
                                                      to customer              quality products
                                                      requirement

Difficulty in            Change the organization      Customer support staff Improved
adopting service         structure to be more         will be motivated with customer
technology in being      flexible and                 more flexibility in    satisfaction.
supportive in            decentralized.               customer servicing
customer services

Managers given less      Change the chain of          Managers will be         Better
authority and more       command and balance          motivated in             management to
responsibility.          the authority and            performing tasks         meet more
                         responsibility               smoothly.                customer
                                                                               requirements.




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5   CONCLUSION
Ceylon Business Appliances is a local business entity with functional organizational structure.
CBA is led by the chairman and the board of directors. The chain of command is a top down
approach and also follows line authority principle. Managers have assigned with less authority
and more responsibilities. Accountability is clearly defined within the organization.

The span of management is smoothly distributed by assigning supervisors to main and sub
departments. CBA’s structure is centralized but functional managers have a considerable level of
autonomy and with a centralized purchasing mechanism. CBA is capable of implementing task
forces to management short term goals with their autocratic structure.

The environment of CBA is unstable and required a more horizontal and flexible structure to
improve. CBA cannot handle the volatile market environment with the current vertical structure.
CBA follows a differentiation strategy where it is a must to have a more flexible structure than
the functional structure in order to survive in the evolving business. CBA employees specialize
in a single task due work specialization and comply with the functional structure.

CBA use technology for both manufacturing and services. Considering the small batch
production technique, and direct customer involvement in services the structure should be
organic and horizontal. Employee motivation and skilled employees are some factors CBA
should consider in human resources.

The above report have provided an analysis on positive and negative aspects about the
Organizing management function in Ceylon Business Appliances and provided with
recommendations to improve the negatives.


6   LIST OF REFERENCES


                                                15
[1]   Ceylon Business Appliances (Pvt.) Ltd,. (n.d.). About us. Retrieved 02 28, 2012, from
      Web Site of CBA: http://www.cba.lk

[2]   Daft, R. L. (2009). Principles of Management. New Delhi: Cengage Learning.

[3]   Woodward, J. (1965). Industrial Organizations: Theory nd Practice. London: Oxford
      University Press.

APPENDIX 1

Organizational Structure - CBA




                                             16
Figure 6-1 Organization structure of CBA




                                                               Chairman




                                                               Managing
                                                               Director



                       Technical                                       Operations           Financial
                       Executive                                       Executive            Executive
                        Director                                        director             Director


                                                               Business          Human
   Engineering         Technical           Operations
                                                              Development       Resource    Accountant
    Manager            Manager              Manager
                                                               Manager          Manager


                       Assistant                                                 Human
    Assistent                              Operations          Marketing                    Account
                       Technical                                                Resource
    Engineer                               Executive           Executives                   Associate
                       Manager                                                 Executives



    Technical                              Minor Staff
      Staff           Supervisor




                       Technical
                         Staff




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