Problems of organizational development and their solutions Essay
In the process of development of each organization, there are moments when it is necessary to move to a new, qualitatively different from previous methods and management tools. On the early stages of development of the company, the quality of management depends entirely on the personalities of its founders, their inherent managerial talent or acquired skills.
But the use of certain formal management techniques and sophisticated management tools can not provide significant advantages or even stop development of the organization. At the initial stage personal experience and intuition of the business owner helped him to make right management decisions, but with the development of business the organizational structure became more complicated, and the volume of information that should be managed was rapidly increasing. It became more difficult for owners and managers to process and analyze information, the accuracy and timeliness of management decisions became unsatisfactory. That is, company’s management gradually realized that they were losing control over the business development and understanding of the mechanisms of its functioning. This situation is typical for most rapidly growing organizations.
The purpose of this paper is to examine problems facing the “Ashley Furniture” company, wherein organizational structure is not aligned with business strategy, and to consider organizational structure improvement options.
First the “Ashley Furniture” company was divided into separate functional units, which due to the low volume of activity and specialization were managed by an individual – the heads of departments. This approach was entirely justified in terms of unsaturated market, as the basic requirements for business in such circumstances is to achieve the highest possible level of use of resources, and as a consequence, achieving the highest possible level of output. Unsaturated market can absorb any amount of product (service), if the quality of products (services) meet the minimum required level (here the quality of products, we understand the extent of its compliance with the requirements of customers). The main problem in this case is to find additional resources: money, personnel, equipment, etc. Disadvantages of this approach are revealed only under conditions of saturated market, which changes rapidly.
Functionally organized organization loses important coordination between departments, when each functional unit operates separately with its own goals and plans, which are often contrary to the objectives and plans of the other functional units of the organization. A typical example of the conflict between the functional units is a conflict between transport and warehousing division. Since both of these units often get the same goal from the leadership of the organization, namely, to minimize the cost of operation, the conflict of interests is inevitable, because the lower cost of transport increases the cost of warehouse and vice versa. And if company’s management was aware of the need to manage not individual functions, but the whole process, it sought to minimize the costs of the process as a whole rather than individual functional units. In addition, the functional organization is inflexible in a dynamic market, and at sharp changes in market conditions the company continues to operate under the old rules and traditions. So it is necessary to find a better solution of the problem of organizational development of the company.
Thus, with further growth of the organization became very important its further functional segmentation, since for the development of the company its organizational structure is one important means to implement the strategy. So it is important to define whether the organizational structure contributes to the achievement of organizational goals. Therefore, the process of choosing or changing the organizational structure is based on the following scheme:
– Understand which of the tasks and functions performed by the organization are critical for the implementation of the strategy, and how these tasks and functions realization requires a new and specific approach;
– To define a connection between the strategic objectives and the routine functions performed by the organization. The challenge is not to establish communication between departments, but to establish links between different parts of the strategy;
– To determine the degree of independence of each structural unit in making decisions, and levels in the hierarchy, on which the decision;
– To decide on the activities of structural units of the organization;
– To establish institutional links between business units, which involves the fixation of their places in the organizational hierarchy, the definition of forms and methods of communication between leaders and representatives of business units, as well as the extent and form of participation in the formulation of corporate strategy.
The process of development of the organizational structure of the company “B” includes:
– Systematic analysis of the functioning of the organization and its environment in order to identify problem areas. The analysis can be based on a comparison of competing or related organizations, representing different spheres of economic activity;
– Development of a master plan to improve the organizational structure;
– Consistent implementation of the planned changes;
– Promotion of awareness of employees, enabling them to better appreciate their involvement and, consequently, increase their responsibility for the planned changes.
The acceptable model for the company “Ashley Furniture” could become the organizational structure with separate strategic business units. Application of this model will help to:
1. To create a modern organizational structure of management, which can adequately and promptly respond to changes in the environment.
2. Implement a system of strategic management, facilitating organizational effectiveness in the long run.
3. To transfer the daily routine work related to the operational management of research and production complex from top management to the heads of separate business units.
4. Increase the efficiency of decision making.
5. To engage in business activities all units that can increase flexibility and competitiveness of the company.
As the transition to a new management structure, significantly changes the function of top management. Gradually, top management goes away from rutine operational management of divisions and focuses on issues of strategic, economic and financial management. Improvement of the management structure takes the form of finding an alternative solution between centralization and decentralization of management functions. The desire to find an acceptable agreement between the centralized and decentralized management leads to the need to create a system of governance, which is characterized by a centralized development and improvement of the economic policy of the enterprise with a decentralized operational management.
An important feature of this organizational structure is selection within the organization strategic business unit. These units represent the direction or directions of a group of scientific, industrial and economic activities with a clear specialization. Each independent unit should have its own purpose, relatively independent from others. Through these centers is implemented the operational management of production.
The proposed improvements in the organizational management structure will allow “Ashley Furniture” to increase management flexibility, to respond rapidly to changing market demand and other environmental factors, to increase the interest of employees to the business, to retain jobs. This structure will gradually lead to the transition of control from top management to specialists of independent business units, and transfer of a number of management functions from senior managers to lower levels.
While improving the organizational structure of “Ashley Furniture” it is important to establish a right balance of powers and responsibilities, clear regulation of the activities of managers and executives. It is important to properly allocate managerial decisions on the levels, because it is the most important and critical part of improving the organizational structure.
It is necessary to conclude that one way of improving the management structure of “Ashley Furniture” and solving the problems of organizational development was proposed the model of a diversified organization, focused on strategic management.
