Introduction McShane and Von Glinow state that “the best organizational structure depends on the organization’s external environment, size, technology, and strategy” (409). To identify the best organizational structure for Protege Engineering, I will first determine what ‘Organizational Structure’ means. In a second step I will analyze its elements and carve out the important components for the considered organization. Finally I will provide a conclusion and recommendation.
Organizational Structures In general, organizational structure is related to the way that an organization organizes employees and jobs, so that its work can be performed and its goals can be met. McShane and Von Glinow define ‘Organizational Structure’ in more detail; they state that organizational structure “refers to the division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities” (386).
To understand what this means we will have a look at each component. The division of labor is related to the “subdivision of work into separate jobs assigned to different people” (McShane and Von Glinow 386). The patterns of coordination refer to the coordinating of work activities between the employees where they divide work among themselves. This process requires coordinating mechanism to ensure the workflow, which means that everyone works in concert (McShane and Von Glinow 386).
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The primary means of coordination are informal communication which involves “sharing information on mutual tasks and forming common mental models to synchronize work activities”, Formal hierarchy which refers to the “assigning legitimate power to individuals, who then use this power to direct work processes and allocate resources”, and Standardization which involves the “creating routine patterns of behavior or output” (McShane and Von Glinow 387).
We can admit that informal communication is necessary in no routine and ambiguous situations because employees can exchange large volume of information through face-to-face communication and other media-rich channels. Therefore informal communication is important for Protege Engineering because their work involve new and novel situations when developing specific solutions for each client. Even if informal communication is difficult in large firms it can be possible when keeping each production site small (McShane and Von Glinow 388).
Now, that we identified what organizational structure means, and that informal communication is necessary for Protege Engineering, we need some more information of how structures differ from each other. McShane and Von Glinow state that “every company is configured in terms of four basic elements of organizational structure”; namely: p of control, centralization, formalization, and departmentalization (390). Further on, I will explain these four elements and carve out what this means for Protege Engineering.
The p of control “refers to the number of people directly reporting to the next level hierarchy” (McShane and Von Glinow 390). Today’s research found out that a wider p of control (many employee directly reporting to the management) is more appropriate especially for companies with staff members that coordinate their work mainly through standardized skills and do not require close supervision - like the highly skilled employees of Protege Engineering (McShane and Von Glinow 390-391).
However, McShane and Von Glinow also state that a wider p of control is possible when employees have routine jobs and a narrow p of control when people perform novel jobs. This statement is based on the need for frequent direction and supervision. Another influence on the p of control is the degree of interdependence among employees. Employees that perform highly interdependent work with one another need a narrow p of control because they tend to have more conflicts with one another.
I assume that the employees working for Protege Engineering do not require close supervision because they are highly educated - have university degrees in these fields and a few have doctorates; therefore, a wider p of control allows the employees to work in self-directed teams that coordinate mainly through informal communication and formal hierarchy plays a minor role (McShane and Von Glinow 390-391). Centralization “occurs when formal decision authority is held by a small group of people” (McShane and Von Glinow 393).
Companies often decentralize when they become larger and their environment more complex; however, “different degrees of decentralization can occur simultaneously in different party of the organization”. In my opinion, the power of decision-making should be decentralized in the considered company because the mentioned projects demand highly specialized knowledge, which cannot be provided by the head of the organization. Formalization “is the degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanism” (McShane and Von Glinow 393).
Usually larger organizations tend to have more formalization because “direct supervision and informal communication among employees do not operate easily when larger numbers of people are involved”. Notwithstanding that Protege Engineering employs about 600 individuals, I assume that a high degree of formalization is not appropriate because their jobs cannot be standardized, every project is customized to the client and has therefore novel and new components.
Another evidence against formalization is, that formalization tends to “reduce organizational flexibility, organizational learning, creativity and job satisfaction”, which the employees of Protege Engineering definitely need (McShane and Von Glinow 409). Regarding the first three elements of organizational structure we can admit that Protege Engineering should have an organic structure because organizations with “organic structures operate with a wide p of control, decentralized decision making, and little formalization” (McShane and Von Glinow 395).
This structure works well in dynamic environments because they are very flexible to change, more compatible with organizational learning, high performance workplaces, and “quality management because they emphasize information sharing and an empowered workforce rather than hierarchy and status” (McShane and Von Glinow 395). Departmentalization “specifies how employees and their activities are grouped together” like presented in an organizational chart of the organization (McShane and Von Glinow 395).
A functional structure organizes organizational members around specific knowledge or other resources, which enhances specialization and direct supervision; however, functional structure weakens the focus on the client or product (McShane and Von Glinow 396-397). A functional structure would not support Protege Engineering because the success of this company highly depends on especially developed products for its clients; therefore, this organization should focus on the satisfaction of its clients rather than focusing on organizing employees around specific resources.
A divisional structure organizes groups of employees around geographic areas, clients or products in very flat team-based structures with low formalization. This structure seems to be very appropriate for Protege Engineering because it focuses employee’s attention on products or clients and self-directed teams with low formalization. However, there are some disadvantages that need to be considered, like duplicating resources and creating silos of knowledge. Conclusion and Recommendation In the introduction I stated that the best organizational structure depends on the organization’s external environment, size, technology, and strategy.
We found out that Protege Engineering should have an organic organizational structure because a wide p of control, decentralized decision-making, and little formalization will organizes employees and jobs so that Protege Engineering work can best be performed and its goals can best be met. Furthermore, McShane and Von Glinow give the advice that “corporate leader should formulate and implement strategies that shape both characteristics of the contingencies as well as the organization’s resulting structure” (409). This advice is very valuable because the structure of an organization should follow its strategy and not vice versa. . Many organizations think that they integrate organizational cultures when merging or acquiring other companies. Explain what does integrating organizational cultures means? Under what conditions is this strategy most likely to succeed? Case 6: Merging Organizational Cultures Introduction Every organization has its own culture. According to McShane and Von Glinow organizational culture stands for “the values and assumptions shared within an organization” (416). When companies are merging with, or acquiring, other companies the likelihood is very high that the organizational cultures differ from each other.
To avoid that the new company ends up with two different cultures, there need to be any kind of integrating organizational cultures. First I will explain what integrating organizational cultures means and second I will present the conditions under which this strategy is most likely to succeed. Finally, I will provide a conclusion and recommendation. Merging Organizational Culture The necessity of merging organizational cultures becomes clear when regarding that failures to coordinate activity, based on cultural conflict, contribute to the widespread failure of corporate mergers (Weber and Camerer 412).
Differences in culture in an organization lead to consistent decreased performance for both employees after the merger, and there is an evidence of conflict from the differences in culture, which could be a possible source for the high turnover rate following mergers (Weber and Camerer 412). McShane and Von Glinow also state that “most mergers and acquisitions fail in terms of subsequent performance of the merged organization” and that this happens because leaders fail “to conduct due-diligence of the corporate cultures” (426).
At this point, we can admit that some forms of integration may allow companies with different cultures to merge successfully. One strategy in avoiding cultural collisions is to conduct a bicultural audit. A bicultural audit is “a process of diagnosing cultural relations between companies and determining the extent to which cultural clashes will likely occur” (McShane and Von Glinow 427). The bicultural audit identifies cultural differences and determines those that possibly result in conflict. In addition, it also identifies values that provide a common ground on which cultural foundations can be built.
Finally, it identifies strategies and prepares action plans to bring the two merging cultures together (McShane and Von Glinow 427). In some cases the bicultural audit may identify that the two cultures are too different to merge effectively; however, the companies can still form a workable union, if appropriate merger strategies are applied (McShane and Von Glinow 427). Like the following illustration shows, McShane and von Glinow provide four main strategies to merge different corporate cultures successfully. Figure 4: Strategies for Merging
Different Organizational Cultures Source: McShane and Von Glinow 428. The first strategy is Assimilation, which “occurs when employees at the acquired company willingly embrace the cultural values of the acquiring organization” (McShane and Von Glinow 427). This strategy is most likely to succeed when the employees of the acquired company are looking for improvement because they have a weak, dysfunctional culture and the acquiring company has a strong culture, which is aligned with the external environment (McShane and Von Glinow 427).
The second strategy is Deculturation, which means that the acquiring company is “imposing their culture and business practices on the acquired organization” (McShane and von Glinow 428). However, this strategy rarely works because employees usually resist organizational change, especially regarding personal and cultural values. Sometimes deculturation may be necessary; for example, when the culture of the acquired company does not work effectively (McShane and von Glinow 428). The third strategy – and the strategy which the given case is asking for - is the Integration Strategy.
This strategy is a combination of “the two or more cultures into a new composite culture that preserves the best features of the previous cultures” (McShane and Von Glinow 428). That sounds like a good compromise, but the integration strategy is “slow and potentially risky because there are many forces preserving the existing cultures” (McShane and Von Glinow 428). McShane and Von Glinow also state that “mergers typically suffer when organizations with significantly divergent corporate cultures merge into a single entity with a high degree of integration” (McShane and Von Glinow 427).
This strategy works best when both sides can benefit from an integration strategy; for example, when the existing cultures of both companies are not optimal and could use some improvements. The negative aspects of the integration strategy - for example being very time-consuming – result from the employees being resistant to changes, or ambiguous rules which are also a source of conflict and often occur during mergers and acquisitions (McShane and Von Glinow 335).
However, the integration strategy, which is the most effective combination of all existing cultures, is most likely to succeed when the “existing cultures can be improved” and members of the organization “are motivated to adopt a new set of dominant values” (McShane and Von Glinow 428). The fourth strategy is separation, which “occurs when the merging companies agree to remain distinct entities with minimal exchange of culture or organizational practices” (McShane and Von Glinow 428).
This strategy is most suitable when the merging organizations operate in different industries or countries because cultures differ between industries and countries (McShane and Von Glinow 428). Conclusion and Recommendation The integration process of merging companies is a combination of the existing cultures into a new culture that maintains the best features of the previous cultures, and it is most likely to succeed when existing cultures already need improvement so that employees are motivated to accept change.
This strategy is particularly challenging when the members of the organization are satisfied with their previous culture because they will be resistant to change. Another very important factor for the success of mergers is the level of commitments made by the employees. Therefore, employees should be brought into the process as early as possible (Badrtalei and Bates 314).
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