Improving Organizational Performance
Improving organizational performance often
involves aligning structure, roles and responsibilities, process, and culture
with new strategic goals.
Competency Connection
An organization is pursuing a growth strategy through
merger and acquisition (M&A). HR has been actively involved in performing
due diligence for a proposed M&A target. Senior management is very
committed to acquiring the operation because it would advance their planned
vertical strategy.
The chief human resources officer (CHRO) is reviewing
data gathered by an HR task force. This analysis is supported by a variety of
Behavioral Competencies. Much of the data is financial, assessing the financial
implications of the target's workforce demographics and existing contracts. Business
Acumen and Analytical Aptitude help there. Global Mindset helps the CHRO note
some characteristics of the target company's culture that might cause problems.
A few lines in a report suggest that the CHRO's organization differs in its
approach to employee relations from the organization targeted for acquisition.
The CHRO's organization has implemented many processes designed to promote
individual initiative and innovation. The target organization, however, is very
hierarchical. This is reflected in the many layers of approvals that must be
obtained to make decisions, the intricate dispute resolution path, and the
formal communication channels its employees must follow. The differences
suggest entirely different employee relations strategies, probably different
cultures, and possibly different employee skill sets, which could have
strategic implications.
Using the Consultation competency, the CHRO presents HR's
complete findings to senior management, emphasizing the cultural and strategic challenges
that this merger poses.
Organizational
Interventions
Organizational interventions look at how the structure of
the organization is helping or hindering the organization's strategic progress.
Organizational structure refers to the way in which work groups are related.
Organizational interventions are required when an
organization:
·
Is failing to meet its strategic objectives because its structure is
inefficient and/ or ineffective. The organization's structure no longer meets
its needs. A common example of this situation is the progression of an
organization through its early stages of growth. The organization's design must
be aligned with its new realities.
·
Has changed its competitive strategies and needs to develop new skills
and traits-for example, skills needed to respond to market changes quickly. The
organizational design must be focused in a new direction.
Redesigning the
Organization
Organizational design refers to elements that support an
organization's functioning. These elements include structure but other factors
as well, including:
·
The organization's mission and vision and the strategies it is pursuing
to achieve its goals.
·
The way decisions are made.
·
The way information is communicated.
·
The processes used to perform work and the degree to which those
processes connect parts of the organization's structure and the way in which
those linkages are managed.
·
The systems used to align the organization's needs with the resources
required to fill those needs. This, of course, includes human resources and all
the systems HR uses to fulfill its responsibilities, from recruitment through
talent management and exit. It can also include physical and financial assets
(for example, equipment, facilities, budgets) and organizational knowledge and expertise.
All of these elements create the integrated system that
is the organization. Any OED solution must acknowledge the integrated nature of
the organization's design.
HR's Role in
Organizational Design
HR's roles and responsibilities in organizational design
should include:
·
Providing leaders with a structural diagnosis by identifying the root
causes of organizational performance issues.
·
Helping leaders evaluate a range of clear design options.
·
Ensuring that leaders align organizational design decisions with short-
and long-term strategic goals by identifying critical activities, strengths, and
weaknesses.
·
Helping leaders understand their roles and responsibilities that ensure
that the structure is properly implemented.
·
Continually monitoring the structure for alignment with the organization's
business strategy and highlighting challenges as needed.
· Planning for internal or external resources to deliver appropriate short- or long-term development interventions and activities and ensuring that those resources have the appropriate subject matter expertise and credibility to be effective or have the appropriate background, relationship-building skills, and cultural familiarity to quickly build credibility.
Structural
Characteristics in Organizational Design
Organizational structures share certain characteristics
that must be aligned with the organization's strategic goals, competitive
environment, and culture.
Work specialization refers to the degree to which tasks
are performed as separate jobs. While work specialization is seen as increasing
efficiency and quality, it can also result in boredom and lack of quality. And
in complex and technology-driven enterprises, specialization can also hamper
collaboration and innovation.
Decision-Making
Authority
This principle describes how decisions are made within
the organization. Authority relates to the scope of responsibilities that
define the area in which a manager or supervisor is empowered to make
decisions. The organization determines which decisions can be made at each
level of the organization and within each function in order to ensure that the
best decisions are made in the most timely manner. In a global organization,
decisions may be made at headquarters (centralized) or delegated to other parts
of the organization (decentralized).
The hierarchical layers of an organization range from the
chief executive officer to the employee in a function. The trend in
organizational structure has been to reduce the number of layers and waste
within organizations. The result is flatter and, leaders hope, more efficient
organizations with fewer staff support positions. The ratio of direct to
indirect employees (people doing the work as opposed to people supporting those
doing the work) is a key metric of organizational efficiency. Global
organizations often value nimbleness or agility since their interconnectedness
and global exposure may call for rapid organizational response.
There are two important concepts when determining the
layers of hierarchy: chain of command and span of control.
Span of control
refers to the
number of individuals who report to a supervisor. Executives, managers,
supervisors, and subordinates are hierarchically connected. Organizations in
which many subordinates report to a few supervisors are referred to as
"flat." There are many factors that drive an organization toward a
wider span of control, including the desire for subordinates to communicate
directly with their ultimate supervisor and decision maker. However, spans of
control that are too large can slow an organization, making it difficult for
supervisors to make decisions quickly. Many decisions must flow to the top, and
the decision queue can become crowded. Flat organizations can be nimbler. When
decisions are made, they can be communicated and implemented quickly.
Chain of command
refers to the line
of authority in an organization. Traditionally, a subordinate reported to only
one superior. This eliminated the confusion, loss of productivity, and stress
that could result from an employee trying to follow the directions of two
separate managers. Today the chain of command is growing less distinct in many
organizations. As organizations push decision-making authority downward or
become matrixed, and as ad hoc or permanent work teams become more common, the
line of authority can appear lateral or web-like.
Formalization refers to the extent to which rules, policies, and
procedures govern the behavior of employees in the organization. The more
formal the organization, the greater the written documentation, rules, and
regulations. Some organizations are more loosely structured than others.
Formalization may serve an organization well when uniformity is an
imperative-for example, when there is low tolerance for variations in parts or
when it is critical that, for reasons of compliance, a process be conducted in a
precise manner. It can, however, restrict employees' abilities to respond to
unusual situations or customer needs as well as stifle creativity and
innovation.
Over time, formalization becomes ingrained in an
organization's culture and can be difficult to change. This may be a challenge
when an organization merges with or acquires an entity with a dissimilar
approach to formalization. Similarly, when an organization expands into a
country or region where different culturally defined tastes for formalization
prevail, it has to decide how to manage the differences to achieve global
cohesion.
Departmentalization
and Types of Structures
Departmentalization refers to the way an organization
groups its jobs and aligns effort. Four commonly seen structures are discussed
here (functional, product, geographic, and matrix), but you may encounter
other, less common types of structures in your work. New business models may
require different structural approaches.
In a functional structure, departments are defined by the
services they contribute to the organization's overall mission, such as
marketing and sales, operations, and HR. Traditionally, this has been the most
common organizational structure.
A related method is departmentalization by process. If
the organization's work is divided according to a linear process, the
organization might be divided into departments like design, supplies
procurement, manufacturing, sales and marketing, distribution, and customer
service.
Some units are considered line units while others are
considered staff units. Line units are work groups that conduct the major
business of the organization, such as the production or marketing functions.
Staff units assist the line units by performing specialized services for the
organization, such as accounting or HR.
In an organization with a product
structure, functional departments are grouped under major product divisions. A
consumer electronics company, for example, may have separate divisions for home
appliances, mobile devices, and televisions. Each division will have its own
marketing, sales, manufacturing, and finance functions. More employees are
required to staff this type of organization, but presumably this is offset by
accumulated experience and expertise.
The customer structure is
similar, with each division focusing on a group of customers with distinct needs.
For example, a financial service business may have commercial, residential, and
institutional customer divisions.
A geographic structure is very similar to a product structure, with the exception
that geographic regions or countries-rather than products define the organizational
chart. A purely domestic organization may be stncture4 aroun4 regions within
the country. Global organizations may bs organized by, for example, continents
or countries, Each region or country has its own complete and self-sufficient
set of functions. More employees are required to staff this type of organization
than in a purely functional enterprise, but value is achieved because each
division can be more responsive to local markets.
A matrix structure combines
departmentalization by division or program and function to gain the benefits of
both. An organization may use a matrix structure when the vertical hierarchy
begins to obstruct value activities-when silos get in the way of collaboration.
A matrix structure includes cross-functional teams who may work together to
design, develop, and market products.
The matrix structure creates a
dual rather than single chain of command. As a result, some employees report to
two managers rather than one, with neither manager assuming a superior role.
The project or program manager interacts with the employee about project work; the
functional manager may be responsible for regular performance reviews and
career development. This structure requires good communication and
collaboration between the managers. Without it, employees may become overworked
and stressed.
An example of a matrix structure
would be an aeronautics manufacturer who maintains the usual functions but
structures work around contracts that it has received or programs dedicated to
developing new models or technologies. As contracts and programs end, employees
return to their functions and wait for reassignment to new projects.
There are advantages and
disadvantages to each type of organizational structure, as shown in Exhibit 13.
Exhibit 13: Advantages and
Disadvantages of Organizational Structures
|
Type of Structure |
Advantages |
Disadvantages |
|
Functional |
Easy to
understand, Specializations develop Economies of scale, Easier communication within
functions, Clear career paths |
Weaker
customer or product Focus potentially weak communication among Functions: Weak
grasp of broader organizational
issues |
|
Product |
Economies of
scale Product team culture Product expertise, Cross-functional communication |
Regional or
local focus Weak customer focus |
|
Geographic |
Proximity to
customer, Adapted to local practices, Quicker response time Cross-functional
communication |
Fewer
economies of scale Potential issues with consistency across regions (for
example, practices, values, strategic focus) |
|
Matrix |
Combination
of cross-disciplinary capabilities and perspectives Availability
of best global talent Flexibility and agility |
Complex
reporting structures Potential for conflicts between functions and projects over
resources Potential cultural conflicts on teams |
Aligning Roles and Responsibilities in New Organizational
Structures
Lack of clarity about authority
and coordination of communication can cause highly integrated structures, such
as matrix structures, to fail. This is often addressed simply by better
defining the roles and responsibilities of each member in the structure.
For example, one of the
activities in a software development function may be to track and record
changes to software programs. In this instance:
·
A responsible member will perform the activity.
In our example, John is responsible for updating documentation of every change
made to the software issued by the function. For a large and/or complex
activity, multiple people may be assigned responsibility for a single activity
and must coordinate performance with each other.
·
The accountable member is in charge of the
activity and answers to management for the activity's performance. This
individual approves and allocates resources. In our example, the accountable
person would probably be the head of the software development function, Mary.
To avoid confusion, there should be only one accountable role. An accountable
member, however, may also be involved in performing the activity or providing
guidance and expertise.
·
A consulted member provides advice or
information necessary to perform the task. For example, the leaders of the
different software application teams or the coders/designers themselves may be
tasked with providing this information to John.
·
Members to be informed receive communication
about activities but do not perform or consult. For example, George needs to
know when changes are being made because his responsibility is to contact all
the users in the organization about changes that may affect them.
A RACI chart helps an
organization establish clarity around its critical activities by assigning
responsibility and describing communication needs. These charts can be a
helpful exercise when an organization is restructuring or introducing new
activities or processes.
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