Though it is obvious why understanding organizations is critical to business success, nevertheless it is worthwhile to review these reasons. The structure of a firm either enhances or hinders efficiency and productivity. In other words, how information flows and to whom, whether and how many parts of the work process is redundant, how clear and precise is the reporting structure, if and how new ideas and products are promoted - these and many more issues are obvious consequences of structure and profoundly affect the success of the business.
What may not be as obvious but is clearly as influential is how organizational structure either supports or blocks employee behavior. There is many an employee who was terminated from one company to become a star in another similar position in a different enterprise. Why? In many cases organizational structure makes it impossible for such a worker to blossom and produce. For example, a dedicated but independent-minded employee will feel demoralized if she has to work with poor tools or machinery that frequently break. A repetitive simple-minded work assignment will dull the instincts of many good workers. The creative employee who doesn't find a fertile field in a company for his ideas will find more challenging opportunities elsewhere. The list of examples can go on and on.
There are four basis elements or categories in the analysis of the structure of an organization. They include:
The firm's vision and strategy (whether explicit or not)
The flow of information and work (including all systems, from vendor relations to customer service and everything inbetween) The culture of the organization
Its people (their selection, qualification, compensation, promotion, career pathing, their succession) We will touch on the important highlights of the first three categories. The fourth element, a firm's people, will not be covered in this program.
HOW STRATEGY AFFECTS STRUCTURE
There are innumerable ways at looking at strategy and its components. Our focus here is not on strategy per se, but rather on how strategy is translated into a supporting and supportive organizational structure. A very useful way of viewing business strategy is to outline how businesses deliver customer value, which, after all, is the goal of every business. A recent Harvard Business Review article (January/February, 1993) by Michael Treacy and Fred Wiersma suggest three ways:
(1). Being "customer intimate", i.e. being able to anticipate customer needs and reacting accordingly.
(2). Providing product leadership, i.e. creating products and services that satisfy customer needs.
(3). Exhibiting operational excellence, i.e. continually improving how product and services are provided customers.
Each strategic aim requires a different structural focus. The strategies themselves overlap and, in fact, no one strategy is or can be pursued entirely in isolation from the other. To be successful requires a firm to actively seek excellence in at least one of the three strategies and to be good in the other two. The strategy that becomes prime for a company, however, has implications for its organizational structure.
"Customer intimacy" entails precisely segmenting and targeting markets, acquiring detailed customer knowledge, developing an operational flexibility that allows for immediate response to customer need, and securing tremendous customer loyalty. The value added component of this strategy is knowing the customer so well that what he/she needs is immediately provided.
For a business to pursue this strategy, what is demanded is a very responsive customer service department and a very active marketing and sales department geared to relationship selling. In fact, these departments drive the company. They are the firm's...