In order to assess effectiveness, managers can use three types of indicators: outcomes, processes, and structures. The first type shows if the result of an activity performed by the organization corresponds to expectancies. The second kind is oriented towards effort rather than effect and its core goal is to determine if a certain process evolves according to the established standards. The third type – structure – is considered to be a surrogate indicator for final outcomes. Thus, the latter are forecasted on the basis of equipment type or age, the participants’ characteristics – degrees obtained, skills etc. (http://faculty.babson.edu/krollag/org_site/scott_org/chap13.html).
After summarizing the theoretical information above, one could say that the three representatives of company X have chosen different indicators for measuring effectiveness. The CEO has opted for an outcome measurement (stock price), while the other two have focused on the production process. Thus, the Marketing Vice President is interested in accelerating the manufacturing process for timely bringing products to consumers while the Manufacturing Vice President aims at reducing costs. Consequently, both of them are preoccupied with reducing efforts for achieving a higher efficiency.
In order to ensure an appropriate evaluation, each department should establish specific objectives subordinated to the organization’s general goal. The results obtained after measurements will be compared with the standards that have been established from the very beginning and each department will report to what extent it has succeeded in achieving the organization’s scope.
2) Talking about ethics in a business context is a very delicate issue as the manners in which these two entities act may often collide. The dilemma becomes even more delicate when considering the healthcare sector. The case of managers being pressured by stakeholders to increase profits is somehow typical in the business environment. Thus, the manager of the radiology firm is ready to act according to Machiavelli’s principle stating that objectives excuse the means used for achieving them. Consequently, he is ready to overlook moral principles by contracting a supplier who provides non-qualitative components whose only advantage is their low price. Implicitly, the manager will jeopardize people’ health by ignoring medical standards and by exclusively focusing on financial objectives. Moreover, such behavior is reprobate because the radiology firm exploits people’s impossibility to go to another hospital as the respective clinic is the only one in their rural area. In conclusion, I would tell my friend to look for other ways of increasing profits if he doesn’t want to bare the burden of lost lives. I would also advise him to talk to shareholders and explain the juridical implications of the low-quality technology if these prove to be insensitive to the moral ones.
3) Transaction costs can be described as the costs of “negotiating, monitoring and governing exchanges between people” (road.uww.edu/road/dragow/Building%20Effective%20Organizations/Chapter%203new.ppt). The transaction cost theory aims at reducing costs with regard to internal and external operations, at the same time. This objective can be achieved by resorting to the formal linkage mechanisms that the has chosen. Still, the case tells us that he hasn’t managed to cut off costs.
One reason for this failure may be the increased uncertainty that has occurred after the merger or joint venture. Thus, the hypotheses established at the beginning of the partnership have been altered by the changeable environment and this has resulted in higher costs claimed by the partners’ initiative to remediate things (road.uww.edu/road/dragow/Building%20Effective%20Organizations/Chapter%203new.ppt).
Secondly, formal linkage mechanisms bring along bureaucratic costs. These may induce higher overall costs especially in the first few months until a coherent strategy is set by the two partners (road.uww.edu/road/dragow/Building%20Effective%20Organizations/Chapter%203new.ppt).
Thirdly, problems may occur because of the lack of coordinated planning. In other words, a partnership is similar to the human body which functions as a whole. Any change or reaction developed by a certain organ impacts on the other organs and physiological processes, altering the initial equilibrium. Thus, a partner cannot act without coordinating his moves according to the other partner. Both of them must fight for the same goal according to a plan consensually drawn out (Peterson, Gallen, Eponou, Wuyts-Fivawo, Wilks, 2002).
Additionally, the lack of communication between merged organizations may lead to disruption. By not changing information, partners will act like isolate entities rather than a cohesive unit. And this will certainly result in higher costs and smaller profits and, eventually, will pose a serious threat to the company’s survival (Peterson, Gallen, Eponou, Wuyts-Fivawo, Wilks, 2002).
4) First of all, the structure of an organization encouraging innovative behavior mustn’t be rigid. This should be based on team work rather than hierarchical requirements. Consequently, people will appreciate the relaxed atmosphere and will not restrain themselves from expressing their creativeness.
Secondly, informal communication must be allowed and even encouraged because creative people often exchange ideas and opinions over their projects rather than on persons. Therefore, by endorsing a natural, free flow of information, employees may learn from each other and come up with brilliant ideas. In conclusion, within an innovative organization, relationships and not structure are the most important (http://www.creativityatwork..html).
Thirdly, empowerment plays a major part in stimulating creativity. By permitting employees to make decisions on their own, these feel more motivated and responsible, at the same time, and try to impress their managers and colleagues due to excellent solutions and ideas. In order to ensure empowerment, managers should design a decentralized structure, should establish a performance-based reward system and should also create an alignment among “autonomy, control, and coordination” (http://en.wikipedia.org/wiki/Organizational_empowerment#Organizational_Structure).
5) as Bassidy and Charan (2002) stated, “Differentiation is the mother’s milk for building a performance culture.” (http://en.wikipedia.org/wiki/Organizational_empowerment#Organizational_Structure)This implies rewarding people in correlation with their performance, potential, skills and so forth. Such technique is extremely useful as surveys have emphasized that employees feel frustrated when they are considered equal to other colleagues who haven’t obtained the same results (Chella, 2006). Consequently, they blame managers for not offering them a distinct position within the organization and often decide to go to another company which is capable of properly rewarding them. The impact on the organization may turn out to be disastrous especially if the employees wishing to leave are among the best specialists that the company relies on. In conclusion, differentiation is a democratic exercise that shouldn’t be banned because of the coordination and motivation problems it implies. Undoubtedly, tailoring incentives according to every person’s profile is not an easy job. It is much simpler to establish policies applicable to all employees. Still, the human nature is very complex and if a company wants to be successful, it must submit to its requirements. A way of simplifying the motivation process may consist of inviting employees to fill in questionnaires with regard to their expectations or the incentives that best stimulates them. Afterwards, individuals having the same profile should be grouped and addressed to by means of similar coordination and motivation tools.
6) Obviously, the maintenance of costs at a high level after the company’s decision to reduce its activity to core businesses proves that not diversity has been its major problem. At a certain point, the case study mentions that the organization has decided to give up collateral activities as a result of “economic downturn and changing market conditions.” Consequently, one may infer that the company hasn’t properly analyzed the opportunities and threats occurring on the market. If managers had taken a closer look at environmental changes, they would have succeeded in detecting the real cause. On the other hand, it is possible for managers to have noticed changes without being able to adapt to them because of a rigid organizational structure. Thus, they might have thought to compensate the lack of flexibility by losing the two non-core business.
To conclude with, I’d say that the company doesn’t properly interact with its environment. Therefore, I would recommend a higher emphasis on marketing and communication between this and the manufacturing department. Additionally, a more flexible structure could be needed.
7) Nowadays, advanced technology has become a to competitive companies. Regardless of the sector within they operate, high-tech systems have become compulsory. This rationale applies to pharmaceutical companies, too, because these need advanced technology in order to ensure an appropriate collaboration among physicians, researchers, scientists whose findings are extremely important for developing the necessary products. In other words, I would suggest to the pharmaceutical organization that an it infrastructure is vital as it considerably aids to research and development activities and it allows an information flow among specialists which is essential in terms of timely adapting to the market’s needs. Even though, at a first glance, the implementation of such systems puts a high pressure on resources, in the long run, the company will gain impressive revenues as a result of meeting the customers’ requirements and keeping the pace with its competitors.
8) Moving from a global strategy to a transnational one implies giving up worldwide coverage and choosing several countries in which a company will perform. For such a strategy to be successful, one of the major requirements is the ability to adapt to the cultural background of the respective countries. In order to achieve this target, the personnel operating in a foreign subsidiary should take part in trainings regarding the locals’ customs, traditions, way of thinking, language etc. Additionally, studies should be carried out for concluding if the company’s products or services are adequate to a certain foreign market. For instance, a company wishing to sell beef on the Indian market where the cow is considered to be a sacred animal or an organization which designs white packages for its products sold in Japan where this color represents mourning will surely lead to collapse. Let’s take, for example, the McDonald’s case which has developed a successful transnational strategy. The king of fast-food chains has tailored its menus according to the gastronomic habits of the foreign markets it has entered. Just imagine the disastrous outcome of a hamburger with pork sold in an Arab country. In conclusion, molding over the foreign culture’s requests is a must and this process may be facilitated by recruiting personnel from the respective country itself.
Moreover, a successful multinational should share its assets among subsidiaries by taking into account the most beneficial location and should design a structure that combines both geographic and product divisional characteristics (http://www.referenceforbusiness.com/management/Tr-Z/Transnational-Organization.html).
9) the main obstacles to change derive from the mechanistic structure of the company. This consists of a rigid pattern with many management levels, clearly established jobs, division of labor and top-down commands. It is considered to be appropriate for stable environments but as these don’t exist anymore, mechanistic structures have become a certain path to failure (http://telecollege.dcccd.edu/mgmt1374/book_contents/3organizing/org_process/org_process.htm).Thus, the organization isn’t able to adapt to changes as its stiff structure doesn’t allow that. Moreover, the management has noticed a gap between actual and desired performance and this may be generated by exaggerate bureaucracy, work specialization that makes employees feel bored with their daily tasks and, consequently, not motivated, the lack of autonomy etc.
Consequently, in order to adapt to changes and respond to the stakeholders’ desire, the company should redesign its structure from an organic perspective and should restructure activities according to the market’s needs. This way, the organization will become more flexible and will save a lot of time that has previously been lost in unnecessary operations like obeying rules and respecting the chain of command.
10) the organizational life cycle comprises five stages: birth, growth (with its fast growth and slow growth phases), decline followed by renewal or bankruptcy. The second stage is characterized by a boost in sales and the emergence of new products and services which increasingly gain market adherence.
According to Greiner, each stage includes an evolutionary phase and ends up in a crisis which represents the debut for the next phase. Thus, phase 1 implies growth through creativity and culminates in leadership crisis. Phase 2 is based on growth through direction and ends up in an autonomy crisis. Within the framework of phase 3, the growth occurs through delegation and is eventually accompanied by a control crisis. Phase 4 focuses on coordination and culminates in the red tape crisis while phase 5 implies collaboration and may result in a crisis such as “the psychological saturation of employees which grow emotionally and physically exhausted by the intensity of team work and the heavy pressure for innovative solutions” (Johanssen, 2007).
In conclusion, the company is undergoing the growth phase in its early stage because of the fast pace at which growth occurs. The crisis faced by the organization refers to the lack of autonomy which may be inferred due to the “strong top management team” responsible for the positive outcomes. This dilemma can be solved by delegating authority to the managers situated on the basic and medium levels of the organizational hierarchy.
11) Production costs are said to be due to decisions made from the very beginning of the conception phase (70-80%), decisions made during the manufacturing process (10-15%) and post-production decisions regarding marketing, distribution, administrative issues and so forth (10-15%) (Crow, 2000).Consequently, if a company doesn’t meet projections, either it fails to correctly estimate production costs or it spends too much on secondary issues like distribution, advertising and so on. On the other hand, the following scenario is possible. If projections are too high, managers rethink the product’s design in order to cut off costs. This results in starting the conceptual phase from scratch, and implicitly, determines higher overall costs and a longer period of time for bringing the product to its customers. Therefore, I think that projections should be made in a more accurate manner. Those in charge of forecast must pay higher attention to the previous quantitative and qualitative needs that have been claimed by developing a certain product. They should focus on price modifications for the raw materials on the market as these have a significant share in the final cost. Moreover, the company could compare its forecasts with other similar companies’ predictions to see if there are major discrepancies. Another alternative could consist of searching for more appropriate suppliers who are capable of providing the same materials in terms of similar quality and lower prices. Furthermore, a long manufacturing cycle may derive from the problems regarding motivation, work specialization etc. Thus, personnel may be another clue when delving into the causes of higher costs.
12) Frictions between the manufacturing and the marketing departments often exist within organizations as marketers accuse production managers of not considering their predictions regarding the customers’ needs while production managers have little confidence in the marketers’ findings. According to Greiner, this collaboration crisis occurs at the end of phase 4 that has been previously mentioned when talking about the organizational life cycle. In other words, the company has overcome the fast growth stage and is undergoing a maturity phase. Consequently, the renewal stage is approaching and its success highly depends on the cohesive force existing among the organization’s departments. Additionally, the functional structure implying a strong emphasis on work specialization is an important impediment to communication. Therefore, in order to foster linkage between manufacturing and marketing departments, managers should redesign the organizational structure for allowing an appropriate information flow.
Secondly, in order to convince belligerent parties of the productive results that interaction generates, the general or HR manager should offer edifying examples from the history of the respective organization or other similar organizations with regard to the negative consequences that can result when departments refuse to communicate.
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Crow, K. (2000). Achieving Target Cost / Design-to-Cost Objectives. On the Internet at: www.npd-solutions.com/dtc.html. Retrieved March 3.
Johanssen, M. (2007). Five Phases of the Organizational Life Cycle. On the Internet at http://business.enotes..Retrieved March 3, 2007.
Peterson, W., Gallen, V., Eponou, T., Wuyts-Fivawo, a., Wilks, M.(2002). Methods for Planning Effective Linkages. On the Internet at: www.isnar.cgiar.org/publications/briefing/Bp45.htm. Retrieved March 3.
Raisinghani, M (2007). Transnational Organization. On the Internet at: www.referenceforbusiness.com/management/Tr-Z/Transnational-Organization.html. Retrieved March 3.
Chapter 13: Organizational effectiveness. On the Internet at http://faculty.babson.edu/krollag/org_site/scott_org/chap13.html. Retrieved March 3, 2007.
Chapter 6: Managing the Organizational environment. On the Internet at: road.uww.edu/road/dragow/Building%20Effective%20Organizations/Chapter%203new.ppt. Retrieved March 3, 2007.
Creativity at work: Articles and Tips. On the Internet at: www.creativityatwork.com/articlesContent/Rose-innovation-research2.html. Retrieved March 3.
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