PROJECT ON STRUCTURAL CONSIDERATION AND ORGANIZATIONAL DESIGN Submitted for Partial fulfillment for the award of the degree

of MASTERS OF BUSINESS ADMINISTRATION (MBA 2010-12)

Submitted by

Rashi Oberoi - 01419103910 Ankita Goenka - 07819103910 Harshit S. Mahey - 09419103910 Shakti Bhatia - 13719103910

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

(Affiliated to GURU GOBIND SINGH INDRAPRASTHA) UNIVERSITY ROHINI, NEW DELHI-110085

STRUCTURAL CONSIDERATIONS AND ORGANIZATIONAL DESIGN The concept of an organization
The term organization has been defined in several ways. Leavitt (1962) defines it as a specific configuration of structure, people, task and techniques. Structure describes the form of departments, hierarchy and committees. It influences the organization's efficiency and effectiveness. People refer to the skills, attitudes and social interaction of the members of the organization. Task refers to the goals of the individual and the organization. Techniques refer to the methodical approach used to perform tasks. Organizational structure thus refers to the institutional arrangements and mechanisms for mobilizing human, physical, financial and information resources at all levels of the system (Sachdeva, 1990). Organization is also defined as a system incorporating a set of sub-systems (Katz and Kahn, 1978). These sub-systems are related group of activities which are performed to meet the objectives of the organization. Organization has been viewed differently by numerous theorists. However, all definitions usually contain five common features: Composed of individuals and groups of individuals; Oriented towards achieving common goals; Differential functions; Intended rational coordination; and Continuity through time.

"...organization is a particular pattern of structure, people, tasks and techniques.. " "... a system which is composed of a set of subsystems..." "... institutional arrangements and mechanisms for mobilizing human, physical, financial and information resources at all levels of the system..."

Features of an organization
1. Composed of individuals and groups of individuals 2. Oriented towards achievement of common goals 3. Differential functions 4. Intended rational coordination 5. Continuity through time Structure is thus an integral component of the organization. Nystrom and Starbuck (1981) have defined structure as the arrangement and interrelationship of component parts and positions in an organization. It provides guidelines on: Division of work into activities; Linkage between different functions; Hierarchy; Authority structure; Authority relationships; and Coordination with the environment. Organizational structure may differ within the same organization according to the particular requirements. Structure in an organization has three components (Robbins, 1989):

1. Complexity refers to the degree to which activities within the organization are

differentiated. This differentiation has three dimensions:

horizontal differentiation refers to the degree of differentiation between units based on the orientation of members, the nature of tasks they perform and their education and training

vertical differentiation is characterized by the number of hierarchical levels in the organization

spatial differentiation is the degree to which the location of the organization's offices, facilities and personnel are geographically distributed;

1. Formalization refers to the extent to which jobs within the organization are

specialized. The degree of formalization can vary widely between and within organizations;
2. Centralization refers to the degree to which decision making is concentrated at

one point in the organization. The structure of an organization is the manner in which various sub-units are arranged and inter-related. Complexity is the degree to which activities within the organization are differentiated. Such differentiations may be horizontal, vertical or spatial. In designing an organization due consideration has to be given to ensure clarity, understanding, decentralization, stability and adaptability.

Principles of organization structure: Modern organizational structures have

evolved from several organizational theories, which have identified certain principles as basic to any organization. Specialization: Specialization facilitates division of work into units for efficient performance. According to the classical approach, work can be performed much better if it is divided into components and people are encouraged to specialize by components. Work can be specialized both horizontally and vertically (Anderson, 1988). Vertical specialization in a research organization refers to different kinds of work at different levels, such as project leader, scientist, researcher, field staff, etc. Horizontally, work is divided into departments like genetics, plant pathology, administration, accounts, etc. Specialization enables application of specialized knowledge which betters the quality of work and improves organizational efficiency. At the same time, it can also influence fundamental work attitudes, relationships and communication. This may make coordination difficult and obstruct the functioning of the organization. There are four main causal factors which could unfavourably affect attitudes and work styles. Coordination: Coordination refers to integrating the objectives and activities of specialized departments to realize broad strategic objectives of the organization. It includes two basic decisions pertaining to: (i) Which units or groups should be placed together; and (ii) The patterns of relationships, information networks and communication

In agricultural research institutions, where most of the research is multidisciplinary but involves specialization, coordination of different activities is important to achieve strategic objectives. Efficient coordination can also help in resolving conflicts and disputes between scientists in a research organization.
1. Hierarchy facilitates vertical coordination of various departments and their

activities. Organizational theorists have over the years developed several principles relating to the hierarchy of authority for coordinating various activities. Some of the important principles are discussed below.
2. Unity of Command Every person in an organization should be responsible to

one superior and receive orders from that person only. Fayol (1949) considered this to be the most important principle for efficient working and increased productivity in an organization.
3. The Scalar Principle Decision making authority and the chain of command in

an organization should flow in a straight line from the highest level to the lowest. The principle evolves from the principle of unity of command. However, this may not always be possible, particularly in large organizations or in research institutions. Therefore Fayol (1949) felt that members in such organizations could also communicate directly at the same level of hierarchy, with prior intimation to their superiors.
4. The Responsibility and Authority Principle For successfully performing

certain tasks, responsibility must be accompanied by proper authority. Those responsible for performance of tasks should also have the appropriate level of influence on decision making.

5. Span of Control This refers to the number of specialized activities or

individuals supervised by one person. Deciding the span of control is important for coordinating different types of activities effectively. According to Barkdull (1963), some of the important situational factors which affect the span of control of a manager are: similarity of functions; proximity of the functions to each other and to the supervisor; complexity of functions; direction and control needed by subordinates; coordination required within a unit and between units; extent of planning required; and Organizational help available for making decisions.

Departmentalization: Departmentalization is a process of horizontal clustering of different types of functions and activities on any one level of the hierarchy. It is closely related to the classical bureaucratic principle of specialization (Luthans, 1986). Departmentalization is conventionally based on purpose, product, process, function, personal things and place (Gullick and Urwick, 1937). Functional Departmentalization is the basic form of departmentalization. It refers to the grouping of activities or jobs involving common functions. In a research organization the groupings could be research, production, agricultural engineering, extension, rural marketing and administration.

Product Departmentalization refers to the grouping of jobs and activities that are associated with a specific product. As organizations increase in size and diversify, functional departmentalization may not be very effective. The organization has to be further divided into separate units to limit the span of control of a manager to a manageable level (Luthans, 1986). In an agricultural research institution, functional departments can be further differentiated by products and purpose or type of research. Departmentalization by Users is grouping of both activities and positions to make them compatible with the special needs of some specific groups of users. Departmentalization by Territory or Geography involves grouping of activities and positions at a given location to take advantage of local participation in decision making. The territorial units are under the control of a manager who is responsible for operations of the organization at that location. In agricultural research institutions, regional research stations are set up to take advantage of specific agro-ecological environments. Such departmentalization usually offers economic advantage. Departmentalization by Process or Equipment refers to jobs and activities which require a specific type of technology, machine or production process. Other common bases for departmentalization can be time of duty, number of employees, market, distribution channel or services. De-centralization and Centralization: De-centralization refers to decision making at lower levels in the hierarchy of authority. In contrast, decision making in a centralized type of organizational structure is at higher levels. The degree of centralization and de-centralization depends on the number of levels of hierarchy, degree of coordination, specialization and span of control.

According to Luthens (1986), centralization and de-centralization could be according to:

1. Geographical or territorial concentration or dispersion of operations; 2. Functions; or 3. Extent of concentration or delegation of decision making powers.

Every organizational structure contains both centralization and de-centralization, but to varying degrees. The extent of this can be determined by identifying how much of the decision making is concentrated at the top and how much is delegated to lower levels. Modern organizational structures show a strong tendency towards decentralization. Line and Staff Relationships : Line authority refers to the scalar chain, or to the superior-subordinate linkages, that extend throughout the hierarchy (Koontz, O'Donnell and Weihrich, 1980). Line employees are responsible for achieving the basic or strategic objectives of the organization, while staff plays a supporting role to line employees and provides services. The relationship between line and staff is crucial in organizational structure, design and efficiency. It is also an important aid to information processing and coordination. In an agricultural research organization, scientists and researchers form the line. Administrative employees are considered staff, and their main function is to support and provide help to scientists to achieve organizational goals It is the responsibility of the manager to make proper and effective use of staff through their supportive functions. The staff may be specialized, general or organizational (Anderson, 1988). Specialized staff conduct technical work that is

beyond the time or knowledge capacity of top management, such as conducting market research and forecasting. General staff consists of staff assistants to whom managers assign work. Organization staff (such as centralized personnel, accounting and public relations staff) provide services to the organization as a whole. Their role is to integrate different operations across departments. Line and staff personnel have different functions, goals, cultures and backgrounds. Consequently, they could frequently face conflict situations. A manager has to use his skills in resolving such conflicts. One of the principles of management discussed during is 'departmentalization.' This principle is concerned with sectioning an institute into administrative units to enhance the probability of the institute achieving its goals by implementing its plans within the limits of its capabilities. There are two rationales used for assembling, or sectioning, institutional units. These are concerned with (1) Grouping of the institute's staff into administrative units, and (2) The flow of authority and responsibility within an institute.

Types of Organizational Structures: An important issue in organizational

structuring is whether the structure of an organization should be dynamic and change according to changes in the environment or remain stable in the face of such changes. Since an organization exists in an external environment, it cannot remain indifferent to changes in its external milieu. However, the extent of changes would depend upon the degree of influence the changing environment exerts on the efficient functioning of the organization and sub-units.

Organizations can have simple to complex structures, depending upon organizational strategies, strategic decisions within the organization and environmental complexities. The structure of the organization can be traditional (bureaucratic) or modern (organic), according to needs.

TYPES OF ORGANIZATION STRUCTURE

The classical organizational structure includes simple centralized design, bureaucratic organization and divisionalized organization. The simple centralized organizational structure, power, decision making authority and responsibility for goal setting are vested in one person at the top. This structure is usually found in small and single-person-owned organizations. The basic requirement of a simple centralized structure is that it has only one or two functions, and a few people who are specialists in critical functions. The manager is generally an expert in all related areas of functions and is responsible for coordination. Thus, the organization has only two hierarchical levels. However, this structure has to become more complex for growth, diversification or other reasons. The Bureaucratic Organization: In large organizations and under well defined conditions, organization structure may be bureaucratic. The essential elements of a bureaucratic organization are:
1. The use of standard methods and procedures for performing work; and 2. A high degree of control to ensure standard performance.

A BUREAUCRATIC ORGANIZATIONAL STRUCTURE

Mintzberg (1981) has identified two types of bureaucracies. They are standard and professional bureaucracy. Standard bureaucracy is based on efficient performance of standardized routine work. Professional bureaucracy depends upon efficient performance of standardized but complex work. Thus, it requires a higher level of specialized skills. The structure of standard bureaucracy is based on functions, large technical staff and many mid-level managers. In contrast, professional bureaucracy has few mid-level managers. The Divisionalized Organization: Divisionalized organizational design refers to a multiproduct or service design that separates different products or services to facilitate management planning and control. Different divisions in the organization can further have simple centralized or functional designs, depending upon their size and activities. This type of organizational design is favoured when different kinds of products or services require different kinds of management. The simple centralized design is suited for smaller organizations, where power, decision making authority and responsibility for goal setting are vested in one or two persons. The bureaucratic structure is suited where standard methods and procedures

are employed for ensuring work performance. The divisionalized organization refers to a multiproduct or service design. The Modern Organization structure includes line-discipline organization, project organization, matrix organizations and line-commodities and

production areas organization. Project design Organization: Project design is also called the team or task force type. It is used to coordinate across departments for temporary, specific and complex problems which cannot be handled by a single department. This design facilitates inputs from different areas. Members from different departments and functional areas constitute a team, in which every member provides expertise in their area of specialization. Such a structure generally coexists with the more traditional functional designs.

A Project-type organization

Matrix Organization: The matrix design blends two different types of designs, namely project and functional organizational designs (Kolodny, 1979). Since the project type of organizational design is not considered stable, the matrix design attempts to provide permanent management structures by combining project and functional structures. The main advantage of this combination is that the matrix design balances both technical and project goals and allocates specific responsibilities to both. Technical goals refer to how well work is done, while project goals relate to issues such as type of work to be done and its costs. Functional specialists are assigned to given projects (horizontal structure). These assignments are made at the beginning of each project through collaboration between appropriate functional and project managers. Problems associated with Matrix Organizations are as follows:-

 Responsibility and jurisdiction are not clearly defined in matrix organizations. Bosses are also not clearly identified. Consequently, matrix organizations could lean towards chaos and disorder, and even lead to power struggles unless power between line and project manager is skilfully balanced. Within the organization, matrix organizations may encourage the formation of cliques since all decisions are made in a group. This could reinforce group loyalties and create inter-group conflicts. Matrix organizations need more human resources, particularly during initial periods. This means higher overheads and increased expenditure. Matrix organization forms are usually found at the lower level of the organization.

STRUCTURE OF MATRIX ORGANIZATION

Matrix organizations have been found to be best for complex activities in uncertain environments Benefits Effective use of specialists Job security for specialists Friendly environment for specialists Equipment and facilities: more and better

Disadvantages Stress Specialists with several bosses Project managers requiring several specialists or shared specialists Functional managers providing shared specialists Sacrifice of territorial incentive

Exhibit 1: Responsibilities and interests of matrix research organisations

Adhocracy: Adhocratic structures are also called 'free form' or organic organization structures. They stress managerial styles which do not depend upon formal structures. They are well suited for complex and non-standard work and rely on informal structures. An adhocratic structure is flexible, adaptive and organized around special

problems to be solved by a group consisting of experts with diverse professional skills (Robbins, 1989). These experts have decision making authority and other powers. The adhocratic Structure is usually small, with an ill-defined hierarchy. Such a design is suitable for high technology and high growth organizations where an arranged and inflexible structure may be a handicap.

ADHOCRATIC ORGANIZATIONAL STRUCTURE

Designing organizational structures: Some important considerations in

designing an effective organizational structure are: Clarity: The structure of the organization should be such that there is no confusion about people's goals, tasks, style of functioning, reporting relationship and sources of information.

Understanding: The structure of an organization should provide people with a clear picture of how their work fits into the organization. De-centralization: The design of an organization should compel discussions and decisions at the lowest possible level. Stability and adaptability: while the organizational structure should be adaptable to environmental changes, it should remain steady during unfavourable conditions.

Choosing the organizational structure: Organization design is a continuous

process. While a simple design is needed for simple strategies, complex designs are necessary when organizational strategies involve complex interactions. The choice of any type of organizational design should be in consonance with the organizational requirements, strategy and environment. The simple centralized and bureaucratic organizational design based on functional departmentation focuses on work and is thus better suited for getting work done efficiently. The team or project type of organizational design is appropriate where inputs from several functional areas are required. The divisional structure is appropriate if performance and results are to be assessed. Matrix and adhocratic designs focus on coordination and relationship.

Organizational Design: We tend to view organizing a matter of decision-making:

we decide to arrange the people, jobs, and positions that we have available to meet managements needs. But, there are real constraints on the forms of organization available to us. Hospitals tend not to be structured like fast food restaurants, and banks are not organized like a manufacturing plant. The task (or type of work to be done), the technology (the way we know how to do something), and our knowledge of what

has worked and what does not work influence and limit our choice of organizational design. The classic theorists, Taylor, Fayol, and Weber contributed to the architectural perspective on organizations by focusing on their structural attributes: Size - Number of personnel, outputs (customers, sales), resources (wealth), or capacity provide measures of an organizations size. But, organizations grow and the structure changes with increases in size. As organizations grow there is a greater need to regain the coordination that could be accomplished informally in a small group, and there is a tendency for division of labor with more and more specialists and departments. To achieve greater coordination, layers of management may be added to create hierarchy. As hierarchy increases power becomes difficult to concentrate at the top and there can be a distribution of power to lower managers. Decentralization can occur as lower level managers assume decision-making, but to retain some degree of standard operational procedures, the organization increasing relies on written policies and procedures. This formalization of organizational rules helps to maintain order across the growing organization and ensures conformity and continuity in practices. Also, with growth organizations begin to divide the work into ordered units that perform specialized work. Increased specialization of work into departments is termed differentiation. The extent to which an organization is departmentalized, divisionalized, and hierarchically layered characterizes the organizations complexity. Increased organizational size has important implications for management: it can limit the flexibility of individual work, affect how much authority can be delegated, and

lead to an emphasis on results rather than how the work is actually performed (because results are easier to monitor). Span of Control How many employees can or should a manager oversee? That is the issue of span of control. Span of control has interesting implications for work, how work is performed, and the organizational structure. A narrow span of control describes a low number of workers under a manager. The structure that is created is tall, or mechanistic. The tall pyramid structure is created by the hierarchical layering required to maintain a low manager-toemployee ratio. The tight supervision inherent in the mechanistic structure is characteristic of bureaucracy. Work is performed under tight controls, little variability of tasks is permitted, and there is high specialization or departmentalization. When a manager oversees a large number of employees, the high span of control

produces a flat organization, called organic structure. The flat pyramid is characteristic of organizations with low hierarchy. Less hierarchy with a larger number of employees per manager means that workers have more autonomy or freedom to perform their tasks. Control is sacrificed for creativity. Technology/Task The knowledge or technology of how work is to be performed affects how we organize. Consider: If the work requires tight controls and can tolerate few mistakes, such as the processing of checks at a bank, the repetitive and mechanical work requires high formalization,

specialization, and division of labor. If the work is creative, such as Research and Development, creativity is required and the organization is not formalized, division of labor is not clear, and decision-making is highly decentralized. Joan Woodward in the 1950s first demonstrated that organizational structure is associated with the type of technology employed. Woodwards classified technology as:

Custom (small batch or job order) Production is in small quantities or

one of a kind. Because the product is novel or designed for a specific buyer or use, there is no standard way for manufacturer. Custom technology relies on the skill, craftsmanship and ability of the worker, therefore work supervision is not helpful and there is no economy of scale. Examples include: tailored suits, private yachts, artistic creations. Mass Production (large batch) The manufacture of products for a mass

market requires controls to insure a standardize product. The assembly line production can make plant costs (fixed costs) high which are spread over large production to achieve low unit costs. The skill level of a large labor force is low to keep variable costs low, but this requires tight supervision. Management controls are important to ensure no variations in the making of the standardized product. Examples include: Ford car factories in 1920s, meat and poultry processing. Continuous (process) Production This technology is controlled by the

manufacturing process itself and requires little worker involvement. For example, oil refining intakes continuous crude oil for transformation into petroleum products.

Custom, mass production, and process technologies are in Woodwards work ideal types, but are typical of certain industries. Successful firms, she found, matched their technology base with the structural type illustrated at the right. Other researchers have found similar results to conclude that there is an inverted U relationship between use of technology and structural complexity. Low level technology (Custom) requires an organic structure; mass production that combines labor resources with machines requires mechanistic structures; and, high level technology (production is dependent upon machines) is matched with an organic structure. Strategy For most of Americas business history firms produced a single product for a local market. The organizational structure to support this business strategy is the functional form. This simple form is organized around a division of labor into specialized functions (or departments) that interrelate to create, deliver and manage a product. This form is often characterized as organizing inputs for transformation into a single output.

By the turn of the century a new organizational form had begun to emerge. As businesses expanded into new markets and new products, the functional form failed to be efficient for managing a diversification strategy. By the 1950s nearly all of the diversified firms listed in the Fortune 500 organized using the Multi-Divisional form (MDF). The MDF structure organized businesses under a headquarters that functions as banker, strategist, and coordinator for multiple business units (sometime termed strategic business units or SBUs). This form is often characterized as organizing by outputs (products).

The theoretical (if not practical) problem with MDF is that once functional resources are decentralized to strategic business units, they are controlled and managed by division managers, not by corporate headquarters. Therefore, a diversified corporation may manage businesses as decentralized under the MDF organization. To retain direct control of each business units functions (human resources, finance, and production), the matrix form has been suggested by some theorists and has been embraced by a few corporations. It will be apparent (from the picture to the right) that there is a

problem with the matrix: a manager located within a division has two lines of reporting, two bosses. A first line manager reports to the corporate product (market) manager and to the corporate functional manager.

Consider: how would you as a human resources manager like to report both to the Vice President in charge of your product and to a Vice President in change of corporate-wide human resources? Suppose each had different ideas about policies, which boss would you follow? In theory, the Product and Functional managers reach agreement on conflictive policies at headquarters, but this does not always happen. Research has shown that it take about five years for a first-line manager to learn how to work under the matrix. Most firms are not willing to invest this kind of time in training, and the matrix is not often adopted by businesses. The exception is international businesses. For a global firm the ability to organize around geographical markets and also around products is an advantage. The matrix form serves companies like Nestle quite well. Nestle has a manager in charge of a product line, but each product line is also coordinated with a manager in charge of a specific geographical area Environment The environment represents factors outside the organization to which management reacts, rather than manage. In the early 1960s the Scottish researchers Burns and Stalker showed that there is a simple correlation between environments and structure: organic structures are found in changing or dynamic environments; mechanistic structures are found in static or stable

environments. The interpretation of this relationship is that in dynamic environments, such as in the software development industry, organizations needs to promote creativity and interpersonal communications for problem solving. Industries, such as textile manufacturing, have static environments, not much innovation and not many changes to the way the product is made, and have mechanistic structures. Tall, hierarchical structures afford the controls necessary to manufacture a product that is well understood. The mechanism that connects the organization to its environment is important as it helps us understand why and how organizational structures change as external forces change. The environment structure linkage is modeled by different theories: Natural Selection or Ecology Theory. Ecology theories draw on Darwins theory of natural selection to explain the persistence of certain organizational forms. Organizations whose structures are not fitted to the environment will not perform well and will die-out. Indeed, most new organizations fail within the first few years. Successful organizations provide models to other organizations as to what a survival form looks like. Therefore, successful forms are imitated and become the dominant structural type. Structures, then, are hard to change. There is a structural inertia to change that maintains the existence of structural types and limits the successful adaptation of a new form. Resource Dependency Theory.- A problem with the ecology theory is that it may explain why existing firms tend to all look like one another they imitate the form of successful firms but, it offers little insight as to how a successful structure arises. The resource dependency view is that organizations adapt to environmental resources. Organizations develop a capability or competency to do something: 3-M makes

innovative uses of adhesives and Disney is a top entertainment firm. To develop a competency the organization not only must develop internal resources, but it is dependent upon external resources. These include labor markets, customers, suppliers, financial markets, and other stakeholders and economic factors. This dependency has implications for how organizational structure. Most resource dependency theorists link structure to environmental factors. For example, under conditions of scarcity, organizations try to conserve resources by implementing greater controls through hierarchy, centralization, and formalization. These controls are relaxed in a prosperous environment. Mintzberg has developed an alternative resource dependency theory based on power distributions of stakeholders. In this scheme the organizational form is the product of competing political claimants. Organizations change as the political environment changes. Contingency Theory.- The contribution of contingency theory on our understanding how structure relates to environment is that structure is dependent upon environmental influences, and that there is no one way to organize a business. Structure should, however, match the environment in which it is situated. Understanding which structures fit which environments become the research objective. Burns and Stalkers association of organic structures with dynamic environments, and mechanistic structures with stable environments falls into this kind of approach. Institutional Theory.- In the research literature this approach is now in vogue. In many ways the institutional approach accommodates the other process theories with current interest in culture and ideational systems (the way we think about and understand the outside world). Organizations are social inventions we make them up. The models available for this are based on our experience and what we teach and

write about organizations. Banks look the way they do because there is a dominant, accepted view of what a bank ought to look like. Although higher learning could be configured in alternative forms, universities have historically come to pretty much look like one another we have a cultural and institutional agreement on what they ought to look like. And, if I saw Sams University operating from an e-mail address and website, I would know that this is not a real university - maybe some form of distance learning, which today is not as valued culturally as a higher education. Institutions do change. An entrepreneur or innovator tries some new form. The new form competes with old forms for acceptance. Usually with success, and sometimes simply through perseverance, novel forms of organization do become

institutionalized. Consider the way we organize to deliver movies: the historical institution is derived from traditional theater; but, in the 1950s people would see movies seated in their cars at a drive-in movie. Today, movies are delivered to homes via pay-per-view. The institutional perspective suggests that there may be many ways to organize but some forms are accepted, others are not. Why forms are rejected and others are accepted can be explained by social values and by the economics of organizational forms. I suspect that we see few drive-ins today because movies are made to exploit the technologies available through the theater experience (which we value) and because it is simply more efficient (less costly) to show multiple screenings in small rooms than to bear the costs of land to construct a large drive-in a city. People stopped going to drive-ins, business stopped building drive-ins, and the dominant way to correctly organize a movie today is the theater. The same logic applies to other forms of institutions and organizations.

ORGANIZATIONAL CHANGE and LEARNING ORGANIZATION Organization theory provides insight into the importance of design considerations and the factors that affect structure. Practitioners rarely have the opportunity to redesign whole organizations or create new structures, we are more often interested in making the organization or organizational unit that we have inherited work more effectively or reorder organizational resources (within the larger organizational models available) to implement strategies. Changing organizations in this context is organizational development or OD. OD is the purposeful and systematic application of what we know about organizations and people to facilitate management. The theory in this area of management is less well developed into accepted systems of thought and language, but for us (as practitioners) OD is of most interest. Because OD can be eclectic in content, there are a variety of academic and commercial approaches available that focus on diverse management issues including leadership development, team building, sensitivity training (diversity issues), specialty training, career development, and conflict management. Most approaches build on the early work of Kurt Lewin, and the currently popular approach among practitioners is the learning organization. This approach to organizational development has been popularized by Peter M. Senge, Director of the Center for Organizational Learning at MIT's Sloan School of Management and author of The Fifth Discipline: The Art and Practice of the Learning Organization. This approach views the organization as interrelated systems of people and directs our attention to the possibilities of improvement through a commitment to shared learning as a process, rather than a engineering or design approach.

The roots of the learning organization approach are in Kurt Lewins early work in organizational change, called force field theory. Lewis viewed the organization as a system of interrelated parts and competing forces or opposing transient groups. System change engages forces resistant to and in favor of change. The change process has three distinct stages:

Unfreezing, at this stage a sense that change is needed must be developed Changing, organizational change is implemented Re-freezing, the new order is institutionalized, presenting the new equilibrium

Lewins framework is helpful in that it allows us to think about a staged approach to changing things. There is a stable starting point that requires change, change is executed, and a new stable order emerges. The limitation of Lewins work is that organizations may always be undergoing some change and period of stability are hard to identify. Certainly an organization in serious trouble is already unfrozen. A few organizations may even to be out of equilibrium for an extended period of time-- for example, a business in search of a new strategy. Lewin recognized that even when we attempt a change, the outcome may not coincide with our intent. Organizational change depends upon the ability for organizational members to accept and make a change that is beneficial to the organization, the individual and the collective membership. This is where organizational learning begins to contribute to our understanding of OD. The key elements of Senges theory are:

Systems Thinking our decision, actions, and plans impact throughout

the organization in ways that we may not think about, especially if we view our

solutions to problems as isolated from the way the rest of the organization works.

Mental Models our decisions, actions, and plans come from models

that we have in our head; these models can be incomplete, inaccurate, and unrelated to the issues that we now confront.

Personal Mastery the organization is what we call a number of

individuals trying to do something together; there is no perfection of the whole without the improvement of the individual.

Shared Vision the emphasis here is on shared; organizational

members understand and agree to work towards a common objective.

Team Learning and Dialogue its a messy process; we will learn

and share what we learn, one to another as we try to improve. In organizational learning the closest concept to OD is metanoia, meaning a shift of the collective mindset. Both learning and metanoia (a Greek work meaning above or beyond the mind) emphasize the cognitive basis of the theory. At the root of organization is the fact that we act individually and together on the basis of what we know. And, this is the rub. We dont always have a good understanding of the problem, much less the solution. A learning organization is one that creates an environment conducive to learning and problem-solving. Our understanding of organizational events is framed by our culture. Culture is defined as shared beliefs, values and norms. Culture provides the cognitive scheme by which we assign meaning, order, and value to our experiences. Culture orders our perceptions and provides prescriptions about what to do when things happen , how to

behave under certain circumstances, and what to value. Culture is reinforced by the stories we tell, by myths, symbols, rituals, and heroes. As we share a larger culture, we convey similar meanings to events, for example, how markets ought to work, how management ought to behave, and what products are valued. This is not to say that culture can be disjoint with reality, rather culture, our shared understanding of things, in a sense, creates reality-- by providing an interpretation of what we see or experience. Culture affects organizations at several levels. The larger culture values business, provides its legal context, and, importantly, provides the broad meanings by which we interpret business events. Although we share this larger culture, we also belong to socially defined groups that have common experiences that further filter our interpretation of events. These groups include ethnic, racial, religious, political, geographical, occupational, age, and gender groupings. The prevalence of multiple groups (multiple individual identities) provides diversity to values and understanding. American organizations will have certain characteristics that are drawn from the larger American culture, but also take on the characteristics of its unique membership. Organizations have their own culture. Organizational culture is maintained in a fashion similar to the larger culture. At Hampton University we have a culture that is reinforced by myths, stories, and symbols: the Hampton way is loosely linked to freedom tree, the founding story rooted in Reconstruction, Dont walk on the grass in front of Ogden Hall until you graduate!, the story of Booker T. Washingtons education and his statute, the art of Biggers and Tanner, Wigwam, and head, heart and hands. Within the institutional culture at Hampton we can identify sub-culture

groups of students, even faculty and administration transient cliques that bring opposing values and interpretations to events. The creation of a learning organization is the creation of an organizational culture that is open to possibilities of what the organization can be uniquely identified by its history, but continually reinvigorating itself to the needs of the time. It is creating as a way of thinking and opening up the organization to an on-going discussion about change. In this process of creating a learning organization the idea of leader or manager is different from that typically conceived. The traditional view of leader as director, someone who knows what to do and leads others in the right direction, is antithetical to the learning organization. Leaders are designers, stewards, and teachers responsible for building the learning organization. Building the organization involves creating a common mindset based on traditional structural characteristics of decentralization and a lack of hierarchy; it also requires a culture that supports the well-being and growth of members, as well as organizational success. The learning organization acknowledges that we are in all in this together and we need to work together to find and invent our destiny. There may be no definitive textbook solutions, only us struggling together.

CASE EXAMPLES
Reliance Industries in 2006, formulated its growth strategy to suit the changing business environment. It created such a structure that was less bureaucratic and enabled decisions to be made faster. It was flexible to adapt to the needs of the employees and hence Reliance went for a multidivisional structure with the operational and day to day decisions taken by the business units independently function wise i.e. manufacturing, HR, etc. Also, the coordination of these divisions was done by an Executive Committee while the top management had to take all strategic decisions. Zee Telefilms Limited has a flat organizational structure with few levels of hierarchy. It provides ample opportunities for vertical as well as cross functional growth to its

performers. According to the companys growth policy, a management trainee can reach the level of Executive Vice President within a span of 12-15 years. In Sony Corporation each network company is delegated with authority from the corporate headquarters, and pursues the management of their respective business domains as self-contained, autonomous business units. To enable each network company to operate autonomously, essential support functions and R&D laboratories are transferred from the corporate headquarters to each unit. In addition, companies and divisional companies were formed under the network company structure. The organizational structure at Tata Power is as follows:

Infosys Technologies Limited has adopted a free form organization devoid of hierarchies. Everyone is known as associates irrespective of his position in the company. Software development is undertaken through teams and the constitution of teams is based on the principle of flexibility. A member who might have been team leader in one project may be replaced by another member of the same team for another project. This system not only helps in creating the feeling of equality but also helps in developing project leaders.

Unilever's new organization provides single point accountability and has fewer management layers to deliver faster decisions and faster execution. HUL and group have about 15,000 employees with a total of 1200 managers. The Apex body consist of a Non-executive Chairman (Unilever), 4 Executive Directors and 5 Independent non-executive Directors. The functional distribution is as follows: Sales and Marketing Human resources Commercial Information Technology Research Technical

The category distribution is as follows: Soaps and Detergents Exports Processed foods Beverages Personal products Ice-creams Others For Wipro Technologies, the hierarchical structure is as follows:
CHAIRMAN

MODULE LEADER VERTICAL DELIVERY MANAGER CEO PROJECT ENGINEER MANAGER MANAGER PROJECT

NTPC i.e. the National Thermal Power Corporation has a complex structure with many levels of management. ITC has a 3-tier management structure with the Chairman and the board of Directors at the top for strategic supervision followed by a Corporate Management Committee for strategic management and the SBU CEO is in the third tier for executive management.

CHANGING GENERAL MOTORS

As Japanese auto producers continue to take more and more sales away from General Motors, the worlds largest automaker has realized that a major change within the company is essential if it is to successfully meet the Japanese competition. Such change at General Motors (BM) must begin with new relations with its union, the United Automobile Workers (UAW). In the past, the relationship has been adversarial, and GM recognized that the relationship must be changed to one of trust and cooperation.

General Motors and the UAW agreed to mutually fund and support a Human Resources Centre dedicated to task of maximizing their human resources while creating a new spirit of cooperation. The Human Resource Centre hopes to meet its change challenge through eight ongoing programs: 1. Health and Safety Program a five-day program of both classroom and hands-on workshops aimed at eliminating job related injuries and deaths. 2. Quality of Work Life Program-A program designed to democratize the workplace by encouraging all employees to participate in the decision making process. 3. Attendance Procedure Program-A program designed to reduce absenteeism through a process of awarding bonuses for good attendance. 4. Tuition Assistance Plan-a plan providing from $50 to $5.000 for workers who wish to go to school to improve their skills. 5. Paid Education Leave-a plan to pay union leaders who take leave to study the problems facing the auto industry. 6. Preretirement Program-a program to aid workers deal with the problems of retirement planning. 7. Joint Skill Development and Training-a plan that charges committees at the plant level with the task of developing comprehensive training programs based on the actual needs of the workforce. 8. Area Centres for Skill Development and Training-provides needed training for the workforce. The funding level contributed by both GM and the UAW and

the personal support given to individual programs indicate that the overall plan is off to a good start with both sides predicting a new era of mutual cooperation. (Source: UAW-G Human Resource Center Booklet, 1986). EXERCISE: FORCES FOR CHANGE The purpose of this exercise is to help the reader gain a better understanding of the forces of change. This exercise may be completed by a single reader, but greater insight may be gained by completing the exercise as part of a group. Time Required 45 Minutes Step 1: Individual activity (completed prior to exercise) Step 2: Small-group activity (completed prior to exercise) Step 3: Discussion-45 minutes

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