Organisation and Organizational Behavior. Part 3

 

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Organisation and Organizational Behavior. Part 2

 

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Organisation and Organizational Behavior. Part 1

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LESSON 2 - HOW TO MANAGE AND ORGANIZE YOUR DEPARTMENT TO MEET THE GOALS - 7S Model Management

The 7-S Model and how it can help improve your organization

The 7-S model is a useful way to look at the many interrelated aspects of a complex organization and it's a great way to help you understand your organization and leverage it to maximum efficiency and profitability.  It was developed by Tom Peters and Robert Waterman while working at McKinsey & Company.

The basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful.  It is the seven key elements of an organization that are critical to understand its effectiveness.  These seven elements are:  Strategy, Structure, Systems, Shared Values, Style, Staff, and Skills.  The beauty of the 7-S model is that it can be used in a wide variety of situations such as:

• A diagnostic tool for an ineffective organization.
• Improve the performance of a company.
• Guides organizational changes.
• Align departments and processes during a merger or acquisition.
• Determine how best to implement a proposed strategy.
• Combines rational and hard elements with emotional and soft elements.

Managers must act on all S’s in parallel as all S’s are interrelated.  All elements must align equally: 

The seven elements are distinguished in so called hard S’s and soft S’s.  The hard elements (consisting with Strategy, Structure, and Systems) are feasible and easy to identify.  They are easier to change than the others.  They can be found in strategy statements, corporate plans, organizational charts and other documentations.

The four soft S’s (consisting of Skills, Staff, Style, and Shared Values) are not as feasible.  They are harder to change directly, and typically take longer to do so.  They are harder to describe since capabilities, values and elements of corporate culture are continuously developing and changing.  They are highly determined by the people at work in the organization.  Effective companies, however, tend to pay as much attention to these factors as to the hard S’s.

Essentially, you'll want to run through each of the seven points and analyze how they fit in with your business. The concepts remain fairly similar, with some minor changes:

1. Strategy:  Refers to the plan or route-map to maintain competitive advantage.  What is your plan for the future?  How do you intend to achieve the objectives?  When was the last time you looked at your business plan?  What were the actions you took after looking at it?  When was the last time you updated your business plan?  How do you deal with competitive pressure?   What are the sources of sustainable competitive advantage such as cost, quality, service and technical leadership?   What are the key strategic priorities such as improved customer service?  How are changes in customer demand dealt with?  How do you deliver greater value to customers?
2. Structure:  Refers to the framework in which the activities of the organization’s members are coordinated.  A key function of structure is to focus employees’ attention on what needs to get done by defining the work they do and whom they should be working with.  How is the organizational structure designed right now?  How is the team divided?  How do the various departments coordinate activities?  How do the team members organize and align themselves?  Is decision making and controlling centralized or decentralized?  Is this as it should be, given what you’re doing?  Where are the lines of communication?  If you had to suddenly hire another 6 employees tomorrow, what would it look like?  What changes would you have to make?   If your customer has a complaint, or if there is some kind of emergency, how are problems escalated?  Is there a stated hierarchy and an "in-practice" hierarchy?
3. Systems:  Refers to the day-to-day processes and procedures.  Having effective systems helps reduce redundancy and streamlines process.  How do you gather business intelligence?  Do you have a unified database?  Does the organization have the systems it needs to run your department such as monitoring for customer satisfaction?  If you have to put together a report on something, could you do it quickly?  What happens if one of your staff leaves; will they take with them a key part of your business intelligence?  What are the main systems that run the organization?  Where are the controls and how are they monitored and evaluated?  What internal rules and processes does the team use to keep on track?
4. Shared Values: (also known as Superordinate goals):  Refers to the guiding principles of the organization.  These are the core values of the company and your department.  What are your core and stated values?  What do you measure and reward?  Are they the same thing?  How can you make minor changes to bring them in line with each other?  What are your stated values supposed to contribute to your business?  Do they contribute what you want them to contribute?  Does your employees have a shared understanding of why the company exists?  Do they share the same company and departmental vision?  How do they described the ways in which the company is distinctive?  Is the focus on quality, emphasis on people, etc?
5. Style:  Refers to the leadership approach and the organizations overall operating approach.  How would you describe your department?  How would your employees describe your department?  How would your competitors describe your department?  How would your customers describe your department?  How would your vendors describe your department?  If all five would say the same thing then you're on the right track; if they say different things then it could indicate a potential problem.  Is this same style and culture going to carry you through the next few years?  What will have to change for you to grow?  How participative is your management and leadership style?  How effective is your leadership?  How good are you at making decisions?  Where do you focus most of your time and attention?  Do your employees tend to be competitive or cooperative?  Are there real teams functioning within the organization, or are they just nominal groups?
6. Staff:  Refers to the staff levels and how people are hired, developed, trained, socialized, integrated, and ultimately how their careers are managed.  Are you staffed to serve customers adequately?  Will the addition or deletion of one or two staff members change anything?  How do you train and mentor employees?   Is your training methods effective?  Are your staff members trained to do their jobs?  Can you give them any other skills or resources to do their job better?  What's holding them back from helping you grow your business?  Are they "bought in" to seeing your business develop?  What positions or specializations are represented within the team?  What positions need to be filled?  Are there gaps in required competencies?
7. Skills:  Refers to the distinctive competencies of people within the organization.  What skills have you been hiring for?  What skills do you need?  What skills will you need in 1 or 2 years from now?  Does someone in your organization have those skills and are you grooming them for an important role in the next 1 or 2 years?  What skills will you need to possess in two years that are different than the skills you possess today?  What are the strongest skills represented within the team?  Are there any skills gaps?  What is the team known for doing well?  Do the current employees have the ability to do the job?  How are skills monitored and assessed?

An example of the 7-S model in action, for an improvement opportunity, would be if the department was misaligned resulting in poor performance. 

Five Basic Options for Organizational Structure

This blog post relates to a number of other recent posts on organizational design frameworks (e.g. Star Framework; People Management Pyramid; Purpose, People, Process). The five basic options for organizational structure is one of those things where most people will say “of course, I knew this.” But I would bet that even experienced strategists may leave out one or two options. And a thorough review of what the options are, as well as a good understanding of their advantages and disadvantages, is always helpful if you embark on a project related to organizational design.

Functional Structure:

• Advantages: Strong transfer of ideas and knowledge between employees of a certain background. Allows for greater scale and specialization.
• Disadvantages: May create barrier between functions, “silos.” Can be overwhelming if there is a large number of products, channels or customers.
• Well suited for the following strategic situations: Small firm, single product line, undifferentiated market, long product development cycle, etc.

Product Structure:

• Advantages: Can be helpful to speed up the product development cycle and make product development very responsive to market needs.
• Disadvantages: Risk of “reinventing the wheel” and duplicating resources. Loss of economies of scale. Can create confusion if customers buy from more than one division.
• Well suited for the following strategic situations: A company sells multiple different product lines to distinct customers or customer segments. Short product development cycles.

Market or Customer Segment Structure:

• Advantages: Intimate knowledge and understanding of a market segment can lead to competitive advantage. Can be particularly appropriate in service businesses.
• Disadvantages: Same tendency to reinvent the wheel and duplicate resources. May be difficult to share common products or services.
• Well suited for the following strategic situations: Products and services are unique to specific market/customer segments. Strong buyers, Customer knowledge provides a comnpetitive advantage.

Geographical Structure:

• Advantages: Minimize costs of travel and distribution. Helpful if an organization needs to be located near a source of supply.
• Disadvantages: Local “fiefdoms” may develop.
• Well suited for the following strategic situations: Low value-to-transport cost ratio. Service delivery or support has to be on site. Perception of the organization as a local player provides a competitive advantage.

Process Structure:

• Advantages: Allows for efficient definition and optimization of end-to-end processes (and accordingly tracking of clear metrics). Scale advantages, reduced working capital.
• Disadvantages: Can create barriers and hand-offs between various process groups.
• Well suited for the following strategic situations: Ability to fundamentally re-invent and optimize processes can provide a competitive advantage.

Organisational Structure

What is organisational structure?


Organisational structure refers to the levels of management and division of responsibilities within a business, which could be presented in an organisational chart.


For simpler businesses in which the owner employs only himself, there is no need for an organisational structure. However, if the business expands and employs other people, an organisational structure is needed. When employing people, everybody needs a job description. These are its main advantages:

• People who apply can see what they are expected to do.
• People who are already employed will know exactly what to do.

Here is an example of a Job Description taken from the book:

When there are more than one person in a small business and they all do different things, it means that they are specialising in different jobs.

Delegation

Delegation refers to giving a subordinate the responsibility and authority to do a given task. However, the final responsibility still lies with the person who delegated the job to the subordinate. Here are the advantages of delegation for managers and employees, as well as why some managers choose not to delegate.

Pros for the manager:

• By letting subordinate do smaller tasks, managers have more time to do more important tasks.
• Managers are less likely to make mistakes if tasks are done byspecialist employees.
• Managers can measure the success of their task more easily.

Pros for the subordinates:

• Work becomes more interesting and rewarding.
• Employees feel important and trusted.
• Helps train workers, giving them better career opportunities.

Why some managers don't want to delegate:

• Managers are afraid that their employees will fail.
• Managers want total control.
• Managers are scared that the subordinate will do tasks better than them, making them feel insecure.

Delegation must mean:

• A reduction in direct control by managers or supervisors.
• An increase in trust of workers by managers or supervisors.

Organisational charts

Eventually, when a business grows larger and employs many people, they will have to create an organisational chart to work out a clear structure for their company. Here is another example of an organisational chart from the book:

Here are the most important features of the chart:

• It is a hierarchy. There are different levels in the business which has different degrees of authority. People on the same level have the same degree of authority.
• It is organised into departments, which has their own function.
• It shows the chain of command, which is how power and authority is passed down from the top of the hierarchy, and span of control, meaning how many subordinates one person controls, of the business.

Advantages of an organisational chart:

• The charts shows how everybody is linked together. Makes employees aware of the communication channel that will be used for messages to reach them.
• Employees can see their position and power, and who they take orders from.
• It shows the relationship between departments.
• Gives people a sense of belonging since they are always in one particular department.

Chain of command and span of control:

Here are two organisations, one having a long chain of command and the other a wide span of control. Therefore, the longer the chain of command, the taller the business hierarchy and the narrower the span of control.  When it is short, the business will have a wider span of control. 


In recent years, people have began to prefer to have their business have a wider span of control and shorter chain of command. In some cases, whole levels of management were removed. This is called de-layering. This is because short chains of commands have these advantages:

• Communication is faster and more accurate. The message has to pass through less people.
• Managers are closer to all employees so that they can understand the business better.
• Spans of control will be wider, meaning that the manager would have to take care of more subordinates, this makes:
• The manager delegate more, and we already know the advantages of delegation.
• Workers gain more job satisfaction and feel trustedbecause of delegation.

However, if the span of control is too wide, managers could lose control. If the subordinates are poorly trained, many mistakes would be made.

Functional departments

Here is an example of an organisational chart from a larger business from the book:

Here are they key features of this graph:

• The business is divided into functional departments. They usespecialists for each job and this creates more efficiency. However, workers are more loyal to their department than to the organisation as a whole. Therefore, conflict can occur between different departments. Managers working in these departments are called line managers, who have direct authority and the power to put their decisions into effect over their department.
• Not only are there departments, there are also other regional divisionsthat take care of outlets that are situated in other countries. They use the local knowledge to their advantage.
• There are some departments which do not have a distinctive function but still employs specialists and report directly to the CEO/Board of Directors. These departments are the IT department, and theEconomic Forecasting department. Some say the HR department fits in this category. These departments give specialist advice andsupport to the board of Directors and line managers, and the managers of these departments are called staff managers. They are often very highly qualified personnel who specialises in only their area. 

Here are the pros and cons of employing staff managers:

Pros:

• Staff managers help and provide advice for line managers on things such as computer systems.
• Helps line managers concentrate on their main tasks.

Cons:

• There may be conflict between the two groups on important decisions and views.
• Line employees may be confused and do not know who to take orders form, line or staff managers.

Decentralisation

Decentralisation refers to a business delegating important decisions to lower divisions in the business. In a centralised structure important decisions are taken at the centre, or higher levels of management.

Advantages of a decentralised structure:

• Decisions are made by managers who are "closer to the action".
• Managers feel more trusted and get more job satisfaction due todelegation.
• Decisions can be made much more quickly.
• The business can adapt to change much more quickly.

Decentralisation means that:

• Less central control.
• More delegation.
• Decisions taken "lower down" in the organisation.
• Authority given to departments/regions

Different forms of decentralisation:

• Functional decentralisation: Specialist departments are given the authority to make decisions. The most common of these are:
• Human Resources.
• Marketing.
• Finance.
• Production.
• Federal decentralisation: Authority is divided between differentproduct lines. e.g separate truck/car/bus divisions.
• Regional decentralisation: In multinationals, each base in each country has authority to make its own decisions.
• Decentralisation by project means: For a certain project, decision-making authority is given to a team chosen from all functional departments.

Is complete decentralisation a good idea?

It is dangerous to let the lower-level management make all the decisions. Therefore, it is wise for the central management to decide on major issues, long-term decisions, growth and business objectives. If these issues are notcentralised then there would be a lack of purpose or direction in the business.