Reengineering , High-Performance Organizations

Reengineering

Reengineering involves the complete redesign of a firm’s structures and processes. It is done in the hope of increasing a firm’s operational efficiency and effectiveness by controlling costs, improving quality, improving customer service, and increasing the speed at which business is conducted. Once a firm has examined itself in light of the five factors of organizational structure, it can better understand where it can make changes to align its structure with the firm’s goals and objectives.

High-Performance Organizations

The goal of the high-performance organization is to effectively and efficiently utilize intellectual capital. High-performance organizations focus on employee involvement, teamwork, organizational learning, total quality management (TQM), and integrated production techniques. Employee involvement is accomplished through worker empowerment or participative management. Teamwork is accomplished though self-directed groups. Organizational learning involves gathering, communicating, and storing organizational information in order to anticipate changes and challenges and make more informed decisions about the future. TQM focuses on high quality, continuous improvement, and customer satisfaction. Integrated production techniques implement flexibility in manufacturing and services and involve job design and information systems to more effectively and efficiently utilize the resources, knowledge, and techniques that a business uses to create goods or services. It stresses the use of just-in-time production and service systems and relies heavily on computers to assist, control, and integrate different organizational functions. Implementing integrated production techniques requires speeding up communication and decision making within the organizational structure.

The process of transforming an organization into a high-performance organization begins by actively seeking to understand an organization’s work site problems and opportunities and its purpose, mission, strategy, and vision. These elements must be tied together into a new mission statement and vision for the firm that is aligned with the organization’s core values. In order to be successful, this process requires the active involvement of individuals from various levels and groups within the organization. The broad level of participation will also ensure a greater level of acceptance in the organization. Once these initial steps have been taken, the factors of employee involvement, teamwork, organizational learning, total quality management, and integrated production techniques can result in organizational, individual, and community benefits. The organization will be more effective in achieving its goals, job satisfaction and employee motivation will increase, and the organization will be better able to contribute to the community as a whole.

Although there are numerous benefits associated with high-performance organizations, establishing and maintaining them is a difficult task. One of the most daunting elements is successfully integrating employee involvement, teamwork, organizational learning, total quality management, and integrated production techniques. These are not separate functions; teamwork must contain elements of employee involvement, organizational learning, and total quality management. This can be especially challenging for managers who, in addition to their regular functions, are asked to implement these changes. Managers can experience many kinds of resistance. Employees may feel that the changes could put them out of a job. They may be resistant to participating in group decision making or in team-based activities. Managers may also experience obstacles related to cultural differences regarding hierarchy and participation. In light of these challenges, some firms succeed in implementing only some of the elements associated with high-performance organizations.

Successfully creating a high-performance organization requires a high degree of cooperation and a strong level of commitment and acceptance from all employees. It is a challenging and difficult process, but it offers significant rewards throughout the organization.

Mechanistic and Organic Organizational Structures, Informal Organizations, Line and Staff Organizations

Mechanistic and Organic Organizational Structures

The five structural factors just discussed give rise to numerous organizational possibilities. Mechanistic and organic structures are two possibilities at opposite ends of the organizational spectrum. They give shape to the concept of the factors of organizational structure. A mechanistic organization is characterized by the following structural factors:

. Degree of work specialization is high.

. Departmentalization is rigid.

. Managerial hierarchy has many layers.

. Span of control is narrow.

. Decision making is centralized.

. Chain of command is long.

. Organizational structure is very tall.

An organic organization is characterized by the following factors:

. Degree of work specialization is low.

. Departmentalization is loose.

. Managerial hierarchy has few layers.

. Span of control is wide.

. Decision making is decentralized.

. Chain of command is short.

. Organizational structure is flat.

Informal Organizations

A formal organizational structure, represented by an organizational chart or written job descriptions, is not the only structure that exists within an organization. Between different departments and levels of hierarchy, various informal organizations exist within an organizational structure. An informal organization consists of a network of channels of communication based on informal relationships between individuals within a firm. These networks are often based on friendships and social contacts. In addition to providing information and a sense of control over the work environment, they can also be a source of recognition and status. Informal organizations can be examined more closely through social network analysis. This process maps the social relationships between individuals within an organization. Once they are recognized and understood, informal organizations can be utilized within an existing organizational structure in order to increase communication and overall effectiveness and efficiency.

Line and Staff Organizations

The factors related to organizational structures also help describe different positions for individuals within a firm. Two examples of this are line positions and staff positions. Organizational structures often involve the interrelation between these two types of positions.

Line positions are directly related to the production of goods and services. They are common in firms that involve production, manufacturing, or providing financial services.

Staff positions are supportive in nature, helping those in line positions and top management more effectively achieve the firm’s goals and objectives. Staff positions provide, for example, legal, public relations, human resources, and technology support services.

Five Structural Factors

Whether you are in the beginning stages of starting your own business or you are looking for ways to improve an existing business, it is important to think about the firm’s organizational structure. Examining organizational structure will help answer questions about the ways in which a firm conducts business. Who is responsible for accomplishing various tasks within the firm? How are these individuals grouped? Who manages these individuals or groups? How do they manage them?

Five Structural Factors

In essence, the primary goal of an organizational structure is to coordinate and allocate a firm’s resources so that the firm can carry out its plans and achieve its goals and objectives. The fundamentals of organizational structure revolve around five factors: the division of labor, departmentalization, the nature of the managerial hierarchy, the managerial span of control, and the amount of centralization or decentralization in the organization.

Division of Labor. The division of labor involves two steps: dividing work into separate tasks and assigning these tasks to workers. What are the different tasks carried out by your firm? Who is responsible for accomplishing these tasks?


Departmentalization. Departmentalization is the process of grouping similar types of jobs together so that they can be accomplished more efficiently and effectively. There are five different ways in which to departmentalize business activities. Different types of departmentalization can exist to varying degrees within a business. What types of departmentalization exist within your firm? Could your firm be departmentalized differently?

1. Function. An example of functional departmentalization would be a firm that has a marketing and finance department. It involves grouping tasks based on the function that the organizational unit accomplishes within a firm.
2. Product. A consumer electronics firm that has separate departments for camera and MP3 players is using product-based departmentalization. In this case departments are based on the
goods or services that an organizational unit sells or provides.
3. Process. A manufacturing firm that includes separate departments for assembly and shipping is an example of a firm with process-based departmentalization. In this case departmentalization revolves around the production process used by the organizational unit.
4. Customer. A bank with separate departments for its business
customers and individual customers is using customer-based departmentalization. Its departmentalization is based on the type of customer served.
5. Geographic. An example of a firm using geographic departmentalization is an automobile manufacturing company that has different departments for each country in which it sells cars. In this case departmentalization is based on the geographic segmentation of organizational units.

Managerial hierarchy relates to the way in which management is layered. It usually includes three levels—upper or top management, middle management, and supervisory roles. The higher levels of management generally have fewer employees, but more power.


Span of Control. Span of control is closely related to managerial hierarchy. At each level of management within a firm an individual is responsible for a different number of employees. Span of control relates to the number of employees that a manager directly supervises. Span of control is determined by a number of factors, including the type of activity, the location of the workers, a manager’s ability to delegate tasks, the amount and nature of communication between the manager and the individuals being supervised, and the skill level and motivation of the individuals being supervised.

Centralization versus Decentralization. Centralization is the degree to which formal authority is centralized within a unit or level of an organization. Decentralization is the process of actively shifting authority lower in a firm’s hierarchical structure. This effectively gives more decision-making power and responsibility to those in supervisory roles. Centralization and decentralization have their benefits and costs. While centralization provides top-level managers with a better overview of operations and allows for tighter fiscal control, it can result in slower decision making and limit innovation and motivation. Decentralization, by contrast, can speed up decision making and increase motivation and innovation, but this is done at the expense of a top manager’s view of the firm and financial control.