With social and economic development, the importance of the organizational context is increasingly recognized by people. The context of an organization is represented in or shaped by the structure of the organization (Glushko, 2008). Organizational structure is used to describe the order of various parts of organization, contact information and the interrelationships between the various elements (Robbins, 1990). Simply speaking, organizational context and structure show how the organization is organized.
This essay will analyze a case which concerns the organizational context and structure of Innovative Electronics, and give recommendations to change their current situation. Firstly, this essay will describe some background information on Innovative Electronics, and explain the organization of this company. Secondly, it will analyze the problems which should be solved by Innovative Electronics from its external and internal parts. At the same time, some causes which are significant in leading to these problems will be discussed.
The following third section regards change and the relevant solutions. Finally, this essay will use a summary to provide some recommendations. 2. Background and Situation Innovative Electronics is a high- technology company located in Europe which is a major subsidiary of an American well-known Fortune 500 company. The parent company involves a number of related areas in many countries and Innovative Electronics plays a key role in its parent company’s core business. Innovative Electronics’ competitive advantages are market-leading core products and high treatment of employees.
However, because their core products lost their competitiveness in the market, the performance of this company showed a failing trend over the last five years. There are two reasons, on the one hand, the socio-economic environment is becoming more competitive, and on the other hand, Innovative Electronics and its parent company have a lot of their own problems in strategies and organizational structure. The following will describe the company’s current strategy and organizational structure. From the perspective of corporate culture, the strategy of the parent company is consistency.
From the perspective of management, the parent company insisted Innovative Electronics use the centralized management and research methods. As a US parent company, it maintains the integrity and consistency of the company but ignores the regional differences. In this case, a traditional bureaucratic system was applied to the organizational structure of the parent company and subsidiaries. In other words, subsidiary companies in different regions have to replicate US parent company’s functional structure which is not suitable for specific geographical areas and local culture.
Because each department in a company has their respective tasks, thereby, organizational structure is used to distribute appropriate work to different departments (Castledine, 2010). The organizational structure of Innovative Electronics is a functional structure. According to Carnall (1995), this form of organization is designed to set different functions and activities into different departments. To some extent, effective internal coordination and cooperation could be achieved through functional structure. However, it is not conducive to product development.
Form another point of view, Innovative Electronics is a rational organization. According to Paton and McCalman (2008), rational organization is defined as an organization in which goals are consistent, decision process is rational, power and control centralized, and information is communicated systematically. Most of the commercial companies belong to this type for it is efficient and effective. Siebert (2010) stated that power and control centralized is the most important feature of rational organization, and this is used to distinguish it from other forms of organization, in other words, the power is always in the top.
The problems caused by Innovative Electronics’ organizational structure and strategies will be analyzed in the next section. 3. Problems and Causes 4. 1 External problems and causes The external problems refer to the strategy of the parent company which includes the requirement for consistent corporate culture and organizational structure, and the limitation of funds and resource allocation. For the U. S. parent company, maintaining consistency is beneficial to group management and corporate image (Boddy, 2005).
Because of this strategy, Innovative Electronics has to follow the corporation’s requirements for designing products which are always unsuitable to the mainly European markets. This strategy meant that the subsidiary lost the direction of production and development. Under the guidance of the consistency strategy, the parent company constrains the support of funds and urges them to strengthen cost control and develop centralized research; this also to some extent hampers the research of Localization.
Innovative Electronics can not follow the requirements of the local market and the company’s own ideas so that they have lost the basic conditions for market share. They do not have new products for the market, for consumers, and this means Innovative Electronics are not continuously attractive. Coupled with the emergence of new competitors, the subsidiary losing their competitiveness is then inevitable. Both the requirements for consistency and lacking of funds and resources support from the parent company are important reasons for the downturn of Innovative Electronics.
The parent company’s strategy was permeated with a kind of authoritarian consciousness fundamentally. This point is closely related to the internal problems of Innovative Electronics which will be discussed in the following section. 4. 2 Internal problems and causes Internal problems and causes regard the own problems of Innovative Electronics itself, and this section attempts to find the reasons from the internal structure of this company. The most significant problem is the issue of the organizational structure within Innovative Electronics.
In this case, as the bureaucratic form of organization, Innovative Electronics is expected to duplicate the functional structure of its US parent company. Hence, the subsidiary’s organizational structure reflects the dictatorial and authoritarian ethos almost everywhere. The functional structure of Innovative Electronics is Machine bureaucracy. According to Galbraith and Mintzberg (1993, cited in Martin, 2006), organizational structure could be changed with the change of market environment.
Before the recession of Innovative Electronics, the stable environment and limited environmental interaction promoted bureaucratically based structure and centralized decision making, machine bureaucracy and standardization of work processes, which were sufficient to handle the simple and stable market. However, economic development is fast, market competition is fierce, and the market is in a kind of changeable, complex, dynamic situation. The biggest problem is that Innovative Electronics did not realize the organizational structure needed to change, according to the environmental demands of the market.
The subsidiary has always maintained bureaucratic organizational structure which exposed it to so many strategic problems. The serious bureaucratic awareness leads to deviation in the development strategy of this company. Initially, maintaining maximum employee benefits is no longer suitable after the beginning of recession. If the labor costs can not be effectively controlled from the perspective of strategy, it is impossible to ensure new technology research and development of products fundamentally.
In addition, layoffs occurred in the areas of technical staff and engineers who are responsible for the core business of the company: new product research and development. In this strategy, core competence is weakened dramatically. Furthermore, many problems arise in the Continuous Improvement (CI) program because of deep-rooted bureaucratic organizational structure. The problems CI concerned are not the core issues of this company. The organizational structure which is the most important problem has been neglected. In the process of implementation of CI, change is implemented on the surface. Bureaucracy is still not shaken or changed.
For this reason, CI is meaningless. The purpose of CI is to train a group of promising middle- level managers to give some recommendations for the development of the company. However, most of the proposals were not accepted or implemented. The decisions of this company are still made by the powerful CEO. Meanwhile, the senior manager team has too many controls and restrictions over the workings of the CI team, which means CI can not exert its due function. As a result of the resource constraints by the parent company, there also are some problems associated with the allocation of resources between different departments.
The working group has not been given incentives in CI, which lead to negative attitudes of team members for this program. It is not difficult to see that the root cause of failure of change is the bureaucratic organizational structure. In addition to this, other problems which related to leadership and staff relations were caused by the bureaucratic organizational context. Firstly, according to Gandz and Murray (1980), when faced with change, people would try to make rational decisions to protect their own self-interest. The new CEO, John Fox realized that the organizational structure of bureaucracy is the biggest reason and problem.
However, he chose to avoid the important and dwell on the trivial. He implemented the CI program to seek suggestions widely and to avoid the authoritarian appearance on the surface. However, what he is doing is different from what he has said in the real implementation process. Uncertain and changeable situations provide the greatest scope for political behavior (Siebert, 2010). Senior managers refuse to change, which shows that over-confidence. When the recession occurs, they do not recognize the marketing changes and do not respond promptly.
They thought the situation will get better, even if they do nothing. However, the situation is getting worse. Secondly, increasing the value of resources and effective use of available resources require good cooperation and communication between different departments (Boddy, 2005). However, authoritarian decision making leads to mutual distrust between the senior management team and CI working group. Conflicts are aroused because of the allocation of resources among the working group. Communication problems enable employees to take a negative attitude to CI program.
Lacking of team camaraderie has become a potential problem. All of these issues create a vicious circle because of the bureaucratic organizational structure. It is time to change it. 4. Change According to Lewin’s 3 Stage Model (1951, cited in Beaumont and Stewart, 2010), organisational change involves a movement from the old situation to a new state through “Unfreeze, Change and Refreeze” which means the change process is started by identifying the problems and motivating to change, then move to the change process, and finally the process will be completed when the organization return to stability. . 3 Unfreeze Paton (2010) stated that change needs to challenge the beliefs and old assumptions to break down the existing current situation, and to prevent the problems from continuing to develop. First of all, Innovative Electronics should recognize the reality that changing the bureaucratic organizational structure is essential. Change requires holistic thinking from the strategy’s point of view, because the basic strategy will influence and be implemented in every aspect of the company (ibid, 2010).
Therefore, to change the settings of the organizational structure must be based on changes in bureaucratic awareness. “Think global at local (Paton, 2010). ” In other words, the parent company needs globalization; the subsidiary needs to localize their development. When the parent company implements the global strategy, the characteristics of different markets in different regions can not be ignored. In terms of the overall strategy, the parent company should abandon the bureaucratic sense of thinking and focus on the global, at the same time, guiding the subsidiary towards localization development direction.
It is vital to change completely change the bureaucratic, authoritarian, autocratic structure rather than creating a meaningless project which could not have impacts on core problems. However, the first part of the change process is usually the most difficult and stressful, because the company may evoke strong reactions in employees (Petranker and Purser, 2005). Innovative Electronics needs to create the appropriate conditions such as making good communications with parent company, sister companies and internal employees of the company in order to prepare for change. . 4 Change and Refreeze Into the stage of change, Innovative Electronics should start to believe and act in the way that supports the new direction. For maintaining market share and core competence, companies should pay attention to their own strengths and core products; Organizational structure should be changed from rigid, simple and centralized to flexible, complex and decentralized with the changes of economic environment. Change from maximizing the benefits for employees to maximizing the benefits for customers.
Appoint a new manager who has courage and insight, and who practices what they preach; it could use the pattern of decentralization and empowerment opportunely to ensure there is no dictatorship. There are two methods to complete these changes. The first one is Organizational Development (OD). When the nature of the company is leading to a failure to achieve the company’s goals, it is time to implement OD (Siebert, 2010). According to French (1969), one of the aims of OD is “finding synergistic solutions to problems”.
Likert (1967, cited in Siebert, 2010) explained that one model of OD designs is participative organization. Contrast with exploitative-authoritative model, leadership in participative organizational structure has confidence in their employees, everyone at all levels has responsibility for organizational goals, high standards of performance, strong communication and a substantial amount of effective teamwork will be reflected in this design. The OD process has three levels: individual, group and organizational levels (Siebert, 2010). Innovative
Electronics could change their organizational structure from the organizational level to achieve participative organizational structure which is the optimum solution for this company such as appropriate decentralization and empowerment; re-setting department functions; formulating regulations which are related to decision making; adjusting the style and approach of leadership. It is worth noting that Beaumont and Stewart (2010) argued that the OD model is historically the most people-centered, which means the main point of the OD model is changing attitudes and behavior of people.
Therefore, the main changes required are at the organizational level, for the real implementation process for this case. The second method uses a Change Agent. It can be seen that the essence of the CI program in this case is an internal change agent. According to Paton and McCalman (2008), the reasons why a company needs a change agent are managers do not know how to identify and solve problems or how to implement solutions. In this case, because of the internal bureaucratic organizational structure of strategy, CI program failed. An external agent could give a more objective and professional point of view to help them complete the change.
At the same time, Innovative Electronics needs to pay attention to the expenses of an external change agent. An important issue at this stage is resistance to change. Some employees would be concerned about their own interests or have restless feelings when facing uncertainty, particularly those people who benefit strongly from the original organizational context. Employee participation could reduce the resistance to change (Beaumont and Stewart, 2010). Good leadership, training, coordination or psychological support may be needed in this stage (Hendry, 1996). The final stage of change process is to achieve “refreeze”.
After the establishment of a new organizational structure and context, the company will move to a new stable situation by bring employees back into their familiar and safe environment (Hendry, 1996). For Innovative Electronics, the ongoing support and training is essential. 5. Conclusion This essay attempted to analyze some management problems which are associated with the organizational contexts, organizational structure and strategies of Innovative Electronics. Bureaucratic organizational context and structure is the main problem and also the main reason which causes many problems within the company.
Organizational development model and an external change agent may be able to provide solutions for changing the old structure from bureaucratically based structure and centralized decision making to divisional structure and decentralized decision making. Innovative Electronics should implement effective management on their organizational context and structure, in order to guarantee a good foundation for development in the future.