A firm’s organizational structure is not static and changes can be expected as the business grows and matures and more people, activities and external relationships are added to the business model. This report discusses the path that the organizational structure will take as it evolves.
When an organization has just been launched and only a small number of persons are involved there is generally ample opportunity for face-to-face communication among the members of the group and the need for a formal organizational structure is generally low provided that sufficient attention is paid to strategic planning and setting mutually agreed goals and objectives. As organizations grow from very small (i.e., less than 20 employees) to relatively large (i.e., 80 or more employees), one notes significant changes in the management of workflow and structure becomes an important managerial challenge. At some point the range of activities and tasks that need to be performed within the organization expands to the point where the founders no longer have the time and skill to personally oversee all of them and a key challenge for the firm is the manner in which the founder delegate responsibilities and decision making authority to lower-level managers and new executives who join the founders as organizational leaders. This report discusses some of the steps that should be taken for an orderly transition.
Growth is a key goal and objective for emerging companies and management must carefully determine the best way to combine the core competencies within a firm’s functional departments to provide the firm with the best opportunity for achieving and sustaining a competitive advantage in its chosen environment. This report focuses on the process of setting business level-strategy, which includes (1) selecting the domain(s) in which the firm will be competing for scarce resources (e.g., capital, personnel, technology, inputs and customers) and (2) positioning the firm in each chosen domain so that its function-based core competencies are most effectively leveraged to establish a competitive advantage. The overall goal of business-level strategy is to protect the firm’s position in its current domain and, if possible, enlarge the domain in which the firm can operate with a competitive advantage.
Undoubtedly the primary obsession of investors and the managers of the companies in which they have invested has been maximization of returns on invested capital and this has long driven the decisions of managers as they have developed their strategic plans and objectives. There are, however, other ideas that are quite intriguing. Bryan and Joyce, for example, have argued that managers should expand their traditional strategic focus on maximizing returns on capital to maximizing returns on “people” and that this requires recognition of the important role of organizational design in strategic planning and execution. This report provides an introduction to some of the arguments made by Bryan and Joyce, as well as their suggestions for redesigning organizational structures and human resources policies to take into account the dynamic changes that have occurred in technology that now allow for collaboration and sharing of knowledge.
The role, size and organizational structure of the finance function will change dramatically as the company evolves and expands it operations into multiple business units and launches activities in new geographical areas. Learn more about the evolution of the finance function in this report.
Sales activities are obviously an essential, if not the primary, concern of senior management and great care must be taken in designing the appropriate organizational structure to support the activities of the sales group. In this report I explore some of the key management and organizational issues that may arise in the sales area.
In December of this year, Thomson West will be publishing the first volume of my new publication--Organizational Management & Administration: A Guide for Managers and Professionals. The publication is intended to be a comprehensive guide to management and administration of organizations, particularly emerging companies, and will draw on many of the issues covered in this Blog. Please click here to review the Preface for the publication, which provides an overview of the content of the first volume.
Lateral processes are an important element of organizational design and the impact of lateral relations strategies increases significantly as the business activities of the organization growth and additional business units are created.As such, senior managers and other involved in the organizational design process need to be mindful of the conditions that must be satisfied in order for formal organizational groups to openly share information, debate alternatives and arrive at decisions that are appropriate for the organization and perceived as fair and legitimate by members of each of the groups that are relevant to the particular activity, issue or problem.In this post I provide a summary of some basic rules to follow in order to establish effective lateral processes in your organization.
In my last few posts I've been including checklists that can be used when considering the best way to design the organizational structure for a growing business. Today I'm passing along a checklist of key issues that should be considered whenever an organization is contemplating a redesign of its organizational structure to improve the manner in which the organization interacts with its customers, markets, suppliers and other business partners. The focus of the questions in this checklist is ensuring that the information regarding the requirements of customers and other business partners is properly collected and disseminated throughout the organization so that each business unit is best positioned to cooperate and deliver products and services to the marketplace in the most efficient manner. The goal should be to select possible structures that mirror the way in which information flows through the organization and to vest responsibility for decisions in those organization roles that have the best access to the necessary information. Decisions regarding structure should be supported by clear policies regarding lateral processes and rewards. I welcome your comments.
Happy 2009! Let's hope it's a better year than the last.
It is important to periodically analyze a firm's organizational structure to determine whether it is properly aligned with the overall strategies and goals established by senior management. Such an evaluation is an obviously a complex process and the firm's organizational structure generally does not fit easily into any particular model. Nonetheless, it may be useful to have a checklist of certain issues that need to be considered when determining which of four basic dimensions—functions, products, geography or customers—should be used as the basic for the organizational structure model. A functional structure is most useful and appropriate when an organization has a single product line that is relatively stable and which has long development and product life cycles. In that situation a functional structure is the best way to achieve standardization, specialization and economies of scale. A functional structure becomes outmoded, however, when organizations begin to diversify and expand their products and markets. If the organization is moving toward multiple product lines a product structure can accelerate product development cycles, develop and maintain specialized expertise in innovative product areas and reduce the challenges that arise when it is necessary to coordinate with multiple functional departments. A geographic dimension for the organizational structure becomes important when opportunities in the domestic market begin to slow down; however, the challenge is determining just what changes in product design and sales/marketing strategy are needed in order to be successful in foreign countries. Finally, customer-focused divisions are important when the organization has identified important customers that want a single point of contact for reviewing and purchasing the offerings of the various product- and market-focused divisions. The questions in this checklist have been adapted from Kates, A. and Galbraith, J.R. Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges. San Francisco: Jossey-Bass, 2007.