Foundations for Business Successes PDF

Chapter 7: Organisational Structure and Change Organisational structure - how individual and team work are coordinated within an organisation. Structure helps achieve coordination by specifying: ​ reporting relationships. ​ formal communication channels. ​ how individual actions are lin...

Chapter 7: Organisational Structure and Change Organisational structure - how individual and team work are coordinated within an organisation. Structure helps achieve coordination by specifying: ​ reporting relationships. ​ formal communication channels. ​ how individual actions are linked together. Organisational design - the task of creating or enhancing the structure of an organisation, is a key management function. Centralization - the degree to which decision-making authority is concentrated at higher levels in an organisation. ​ Centralised companies: Decisions are made at higher levels of the hierarchy. ​ Decentralised companies: Decisions are made and problems are solved at lower levels by employees closer to the issue. ​ Centralization can lead to more efficient operations in stable environments. ​ Decentralisation can lead to greater employee empowerment and faster decision-making. Formalization - the extent to which an organisation’s policies, procedures, job descriptions, and rules are written and explicitly articulated ​ Formalised structures: Many written rules and regulations control employee behaviour. Hierarchical Levels ​ Tall structure -​ Several layers of management between frontline employees and the top level -​ Greater supervision and monitoring of employees but limit opportunities for advancement ​ Flat structure -​ Few layers of management -​ Greater need satisfaction and self-actualization but can lead to role ambiguity Departmentalization ​ Functional structures: Group jobs based on similarity in functions -​ Effective for organisations with a limited number of products and services operating in stable environments ​ Divisional structures: Departments represent unique products, services, customers, or geographic locations -​ More agile and better suited for organisations with diverse product lines operating in turbulent environments Two Configurations: Mechanistic structures are highly formalised and centralised. ​ There are many written rules and regulations. ​ Communication tends to follow formal channels. ​ Employees have specific job descriptions with clearly defined roles and responsibilities. Advantages of Mechanistic Structures ​ Efficiency: Mechanistic structures excel in stable environments where efficiency and minimising costs are paramount. For example, McDonald's uses this structure to produce a uniform product globally at a low cost. ​ Suitable for New Businesses: The clear structure, roles, and lines of communication can benefit new businesses that may initially lack these elements. Disadvantages of Mechanistic Structures ​ Rigidity and Resistance to Change: This can make them unsuitable for dynamic environments that require innovation and quick adaptation. ​ Inhibition of Entrepreneurial Action and Individual Initiative: This can lead to lower levels of intrinsic motivation among employees. Organic structures are flexible and decentralised with low levels of formalisation. ​ Communication lines are fluid and flexible. ​ Job descriptions are broader, and employees are encouraged to perform duties based on the organisation's needs and their expertise. Advantages of Organic Structures ​ Conducive to Innovation and Entrepreneurship: The flexibility and employee empowerment fostered by organic structures make them well-suited to dynamic environments that demand innovation. For instance, the technology company 3M successfully uses a decentralised organic structure. ​ Higher Job Satisfaction: The autonomy and flexibility enjoyed by employees in organic structures can contribute to higher job satisfaction. Matrix organisations - combine elements of traditional functional structures with product structures. This means that employees report to both a functional manager (e.g., marketing manager, finance manager) and a project or product manager. This dual reporting structure aims to balance the benefits of both functional specialisation and product focus. Advantages of Matrix Structures ​ Enhanced Information Flow and Collaboration: The matrix structure fosters communication and cooperation among departments because project managers need to coordinate their work with functional managers. Research indicates that this structure increases both formal and informal communication within the organisation. ​ Faster Response Times: The presence of a dedicated project manager helps ensure a focus on customer demands and allows for quick responses to technical problems. Disadvantages of Matrix Structures ​ Potential for Conflict: The dual reporting lines can create power struggles and conflict between functional managers and project managers. ​ Role Ambiguity and Conflict for Employees: Reporting to multiple managers can create confusion and conflicting expectations for employees. They might receive conflicting instructions or face challenges in prioritising tasks. ​ Increased Interpersonal and Task Conflict: The need to work with team members from different functional backgrounds can increase the likelihood of both interpersonal and task-related conflict. Boundaryless Organisations - describes an organisation that aims to eliminate traditional barriers between departments as well as barriers between the organisation and its external environment. ​ Modular Organisation: All nonessential functions are outsourced, with the focus remaining on core, value-generating, and strategic functions. The sources provide the example of Toyota, which manages relationships with numerous suppliers to achieve efficiency and quality. ​ Strategic Alliances: Two or more companies collaborate and combine their efforts to create a mutually beneficial partnership. This can blur the lines between competitors and foster innovation. Starbucks' partnership with PepsiCo to market Frappuccino drinks is one example of such an alliance. ​ Breaking Down Internal Barriers: Eliminating hierarchical layers and physical barriers like walls between departments can create a more collaborative and flexible work environment. Self-managing teams are an example of this approach, where employees coordinate their efforts and adjust their roles to meet the demands of the situation. Learning organisations - those that continuously seek to acquire knowledge and adapt their behaviour based on this new knowledge ​ Embrace Experimentation: Encouraging employees to experiment with new ideas and methods, even if they might fail, fosters a culture of innovation and continuous  improvement. The sources mention 3M's practice of allowing engineers to dedicate one day a week to personal projects. ​ Learn from Experience: Analysing past successes and failures, both within the organisation and by observing competitors, allows for ongoing learning and improvement. Holding retrospective meetings to analyse challenges and identify areas for improvement is one way to foster this practice. ​ Study Customer Habits: Understanding how customers use products and services can generate valuable insights for innovation. For example, Xerox employs anthropologists to observe how customers use their products. Drivers of Organisational Change ​ Shifting Workplace Demographics: Changes in the age, composition, and expectations of the workforce can necessitate adjustments in organisational practices and policies. For example, an ageing workforce may require organisations to adapt benefit packages, work arrangements, and strategies to retain older employees and transfer their knowledge to younger generations.​ ​ Rapid Technological Advancements: As technology evolves at an accelerating pace, organisations must continually adapt to remain competitive. Failure to do so can lead to significant challenges, as exemplified by the music industry's struggle to cope with the disruptive innovation of peer-to-peer file sharing.​ ​ Globalisation: Organisations operating in a globalised marketplace face both opportunities and threats. The ability to outsource manufacturing and services to countries with lower labour costs requires organisations to navigate a complex and diverse institutional environment. Managing a global workforce, addressing employee concerns about outsourcing, and adapting to different cultural contexts are crucial aspects of managing change in a globalised world.​ ​ Fluctuations in Market Conditions: Changes in market demand, competition, and economic conditions can force organisations to adjust their strategies and operations. For example, the airline industry has faced significant challenges due to increased competition, fluctuating fuel prices, and reduced demand following events like the September 11 attacks.​ ​ Organisational Growth: Successful start-ups often experience rapid growth, necessitating changes in organisational structure and processes to accommodate the expanding scale of operations. The sources offer the example of Widmer Brothers Brewing Company, which evolved from a small garage operation to a major brewery,  requiring significant adaptations to meet the growing demand.​ ​ Poor Performance: Underperformance can also act as a catalyst for change. While successful companies may resist change due to inertia and overconfidence, the pressure to improve can lead to organisational transformations. Polaroid's failure to adapt to the rise of digital photography serves as a cautionary tale of the consequences of resisting change in the face of market shifts.​ Understanding Resistance to Change ​ Disrupted Habits: Change often disrupts established routines and practices, leading to discomfort and a sense of unease.​ ​ Personality Differences: Some individuals are more open to change than others. Personality traits such as Openness to Experience, self-concept, and risk tolerance can influence how people perceive and react to change.​ ​ Uncertainty and Fear of the Unknown: Change often brings feelings of uncertainty about the future, job security, and roles and responsibilities, leading to anxiety and resistance.​ ​ Fear of Failure: Individuals may worry that their skills and performance will be negatively affected by the change, leading to reluctance to embrace new systems or processes.​ ​ Personal Impact: People are more likely to resist changes that they perceive as negatively affecting them personally, such as a loss of power, status, or control over their work.​ ​ Change Fatigue: Frequent or poorly managed changes can lead to exhaustion and cynicism among employees, making them less receptive to future change initiatives.​ ​ Perceived Loss of Power: Change can alter power dynamics within an organisation, leading to resistance from those who fear a reduction in their influence or authority.​ Embracing Resistance as Feedback ​ Listen to Naysayers: Instead of dismissing those who resist, it is important to actively listen to their perspectives. They may raise valid concerns or offer insights that can  improve the change process.​ ​ Understand the Reasons for Resistance: Taking the time to understand the root causes of resistance allows for more targeted and effective strategies to address those concerns. Open communication and empathy are essential in this process.​ ​ Involve Employees in Planning: Engaging employees in the planning and design of change initiatives fosters a sense of ownership and reduces resistance. When employees have a voice in shaping the change, they are more likely to support its implementation. Lewin's Three-Stage Model of Planned Change ​ Developed by psychologist Kurt Lewin in the 1950s. ​ Assumes resistance to change. ​ Starts with unfreezing, ensuring readiness and receptiveness. ​ Executes planned changes. ​ Refreezes, ensuring permanent change and normization of new habits, rules, or procedures. Unfreezing ​ Communicating a plan for change: When employees know what is going to happen, when, and why, they may feel more comfortable. It is important for leaders to communicate not only a plan, but also an overall vision for the change. ​ Developing a sense of urgency: People are more likely to accept change if they feel that there is a need for it. Leaders need to make the case that there is a threat to the organisation, and that failure to act will have undesirable consequences. ​ Building a coalition: To convince people that change is needed, a leader doesn't need to convince every person individually, but can instead focus on convincing opinion leaders, who have a strong influence over the behaviours and attitudes of others. ​ Providing support: Management can prepare employees for change by providing emotional and instrumental support. ​ Allowing employees to participate: Employees who participate in planning change efforts tend to have more positive opinions about the change. This is because they have the opportunity to voice their concerns, shape the change effort so that their concerns are addressed, will be more knowledgeable about the change, and will feel a sense of ownership of the planned change. Executing Change ​ Continuing to provide support: Management has an important role in helping employees cope with the stress of change, by displaying support, patience, and continuing to provide support to employees even after the change is complete. ​ Creating small wins: If the organisation can create a history of small wins during a change effort, change acceptance will be more likely. ​ Eliminating obstacles: Management's job is to identify, understand, and remove obstacles. Refreezing ​ Publicise success: by sharing the results of the change effort with employees. ​ Reward change adoption: Rewarding those who embrace the change effort can help to ensure that the change becomes permanent. ​ Embracing continuous change: by setting up a dynamic feedback loop, so that learning can become a regular part of daily operations. Overcoming Resistance ​ Listen to those who disagree with you. Even if you think your idea is great, those who resist may have valuable insights as to why it may not work, and how to design it more effectively.​ ​ Make incremental changes rather than revolutionary changes. Drastic changes are more likely to be met with resistance. If you make small changes to gradually make things better, you may encounter less resistance.​ ​ Involve others in the planning stage. Instead of presenting solutions, make the people you are hoping to convince a part of the solution. If they recognise the problem and participate in finding a way out, you will need to do less convincing when it is time to implement the change.​ ​ Build your credibility. When you are trying to persuade people to change their ways, it is helpful to have a history of suggesting changes that have been implemented. If you don't, people may be suspicious of your idea, or ignore it. You need to establish trust and a history of keeping promises before you propose a major change.​ ​ Back up your ideas with evidence. Be prepared to provide evidence that your proposal is likely to work, and defend the technical aspects of your ideas.​  ​ Focus on the long-term goals. Frame your proposal around the big picture. Will your idea lead to happier clients, or a better reputation for the company? Identify the long-term goals you are hoping to achieve that people will want to be a part of.​ ​ Understand why people are resisting. Do they fear change? Does your proposal mean more work for them? Does it affect them negatively? Understanding the consequences of your proposal for those involved will help you to tailor your pitch to your audience.​ Why People Resist Change ​ Disrupted Habits: Change disrupts habits. If people have to change the way they routinely do things, they may feel clumsy and incompetent, and they may resist these feelings by resisting the change.​ ​ Personality: Some people are more resistant to change than others. People who are not open to new experiences are less likely to accept change readily. People with a negative self-concept or low self-esteem are less likely to believe they can adapt and be successful under a new system, and they may resist change as a result. Risk-averse people are also more likely to resist change.​ ​ Feelings of Uncertainty: Change can create a sense of lost control and feelings of uncertainty, leading to stress and resistance.​ ​ Fear of Failure: People may be unsure if they will be able to perform well under a new system, leading them to resist change.​ ​ Personal Impact of Change: People are more likely to accept change that benefits them, such as giving them more power or improving their quality of life. They are more resistant to change that negatively affects them.​ ​ Prevalence of Change: People are more likely to resist change if their workplace has a history of making a lot of changes. Frequent change can lead to fatigue and cynicism in employees.​ ​ Perceived Loss of Power: People are more likely to resist change if it reduces their power and influence in the organisation.​