What is the best organizational structure, keeping in mind the current complexity of the Indian business environment and the changing aspirations and mindset of new-generation young employees?
For many years, Organisational Behaviour researchers have been emphasizing the importance of organization structure and its impact on organizational performance. Perhaps, Burns and Stalker from the Tavistock Institute were the first ones to conclude that if an organization needs to achieve maximum performance, then its structure must match the rate of change of the environment in which it exists. So, structure is an important determinant of organization performance and therefore it deserves to be studied at length.
What is organization structure? I would like to define the organization structure as the pattern of relationships between the roles in an organization and its different parts, and I would believe that the purpose of the organization structure is to facilitate allocation of work and responsibilities in order to direct activities and achieve organizational goals. Structure thus serves as tools for managers to plan, direct, organize and control their functions. However, inherent in this belief, is that an organization requires a hierarchical command and control structure for its effective functioning. Is this assumption valid in today’s environment?
My experience as an HR practitioner while building start-ups as well as steering through mergers and acquisitions of two dozen organizations in the last two decades has reinforced my belief that we must re-examine this long-held assumption. I have seen organizations moving away from the old metrics of organization structure that were characterized by size, role clarity, specialization and control to a newer set of metrics like speed, flexibility, integration and innovation. I have also seen that the ability to design such organization structures lies in our ability to think as simply and practically as possible with an unwavering focus on the commitments to different stakeholders. In order to do so, we should be both artists and analysts, who are flexible and versatile enough to reframe our experience, as well as constantly seek new issues and discover possibilities by establishing order and finding simplicity.
I would like to talk about three major factors that I noticed in the hi-tech domain, which I have been associated with for the last decade and a half, that are impacting the process of designing organizational structure. These three broad trends are:
– The type of employees that constitute an organization.
– The values and purpose that guide the organization.
– The processes that help individuals in an organization learn.
Let me try to elaborate.
The first is about different kinds of employees that constitute today’s organization. It’s not only the permanent employees on the rolls but a huge chunk of contractors and outsourced employees, especially in hi-tech organizations, that impact its structure.
Charles Handy was the first to use the metaphor of shamrock, a three-leafed white clover (a symbol of Ireland) in describing the modern day organization as the “Shamrock Organization”, consisting of three parts.
First, there is a small core of permanent key employees who keep the company operating and developing; second is the “contractual fringe”, i.e. subcontractors who are engaged as needed and paid by results; and third, the flexible workforce, often casual and/ or part-time employees who are taken on as and when needed.
In today’s world, we need to take these facts into consideration before designing an organization. Outsourcing is a reality today, but which function will be outsourced and which will remain core will impact the structure of the organization and in turn its growth and business performance.
The second major factor that impacts the organization structure is the foundation of core values and purpose of an organization. A case in point will be St Luke, the award-winning advertising and communication firm based out of London that has been built on values and moral principles of employees who work there. My experience as an HR practitioner reinforced the fact that the values and the purpose of an organization explicitly impact its final design. In my recent experience, organizational leaders, especially in hi-tech domain, who singlehandedly kept their focus on retaining the values and purpose even at the time of rapid growth, tend to move away from linear, hierarchical, controlling, inflexible, uniform and centralized ways to more non-linear, non-hierarchical, flexible, participative and networked ways of designing their organization.
Needless to say, these new forms of organization structures resemble one another in one basic aspect and that is their endeavour to break free from the traditional command-control-oriented, predominantly hierarchical and bureaucratic form. They are certainly using more cross-functional teams, lateral communications, coupled with optimizing the hierarchical levels and the sparse use of set rules with informality and collaboration.
This reflection will be incomplete if I do not mention a very important factor that needs to be kept in mind while creating the appropriate organization structure. This is about the processes required to support the structure that can facilitate transforming individual learning to organizational learning.
These individual learnings, if institutionalized through an apt processes, will enable organizations to systematically collect, analyze, store, disseminate and use information relevant to the performance of the organization and its members. In today’s context, where innovation is fast becoming the tool to achieve unbelievable growth rates, which is often attributed as the biggest financial performance indicator (Apple’s market cap reached $737.41 billion on March 6), organizational processes that can facilitate individual learning assumes a far greater significance.
In conclusion, the question I want to leave for my readers to mull over is “What is the best structure, keeping in mind the current complexity of the Indian business environment and changing aspirations and mindset of new-generation young employees?” Do I have the exact answer?
My readers might have that and the trends that I have seen through my reflective practice might come handy in their process of exploration and experimentation to find the right answer.
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