Organizational factors prompting structural change and design

It has been argued that when a company makes drastic changes in its goals, strategy or scope of operations, it will usually also need a change in organizational structure. However, other, less obvious indications of organizational inefficiency also signal a need for structural changes. Warning signals include:

· Change in size of the corporation – due to growth, consolidation or reduction

· Change in key individuals – which may alter management objectives, interests and abilities

· Failure to meet goals, capitalize on opportunities or to be innovative

· Inability to get things done on time

· Consistently overworked top managers who spend excessive hours on the job

· Belief that costs are extravagant or that budgets are not being met

· Morale problems

· Tall hierarchies that inhibit strategic control

· Planning that has become increasingly staff-driven and thus divorced from line management

· Innovation that is stifled by too much administration and monitoring of details

· Uniform solutions applied to unique situations.

The following are a few specific indicators of international organizational malaise:

· Shifts in operational scope – perhaps from directing export activities to controlling overseas manufacturing and marketing units; or change in si/e of operations on a country, regional or worldwide basis: or failure of foreign operations to grow in accordance with plans and expectations

· Clashes among divisions, subsidiaries or individuals over territories or customers in the field

· Divisive conflicts between overseas units and domestic dh ision staff or corporate staff

· Centralization leading to a flood of detailed data that are neither fully understood nor properly used by headquarters

· Duplication of administrative personnel and services

· Underutilization of overseas manufacturing or distribution facilities

· Duplication of sales offices and specialized sales account executives

· Proliferation of relatively small legal entities or operating units within a country or geographic area

· Increase in overseas customer service complaints

· Breakdowns in communications within and among organizations

· Unclear lines of reporting and dotted-line relationships, and ill-defined executive responsibilities.

At persistent signs of ineffective work, managers analyze organizational design, systems and work (low for possible causes of the problems. The nature and extent of any design change reflect the magnitude of the problem. When managers choose a new design, or modify an existing structure, they establish also an appropriate system of communication and control. They localize decisions while integrating widely dispersed and disparate global operations on both macro and micro levels.

No company is either totally centralized or decentralized – the matter is one of degree. In general, centralized decisions are common for some functions (such as finance, research and development) because these are organized for the entire corporation. Other functions (such as production, marketing, sales) are more appropriately decentralized.

Two key issues are the speed with which the decisions have to be made, and whether they primarily affect only a certain subsidiary or other parts of the company as well.

Organizational cultures – and awareness of local cultures – affect decisions on how much lo decentralize, how to organize work flow and the various relationships of authority and responsibility. For example, delegating a high level of authority to employees in a country whose culture is high in power distance is not likely to work well.

In summary, no one way to organize is best. Contingency theory applies to design as much as to any other aspect of management. The best structure is the one that fits with the firm’s goals and is appropriate to its industry, size, technology and competitive environment. Structure should be fluid and dynamic – and highly adaptable to the changing needs of the company. It cannot afford to get bogged down in administrative heritages of ‘the way we do things around here' or 'what we’ve always done'. Probably the future for multinational structures lies in a global web of networked companies.