Organizational Design and Change

How do Technology and Environment Influence the choice of Social Co-ordinate Mechanisms-Using Mintzberg’s Typologies.


C.T.Sunilkumar
Post Doctoral Research Scholar
School of Public Policy, George Mason University
Room No 206, 3330, Truland Buildings,Washington Blvd, Arlington
Virginia- 22201, Phone # 571-748-4981 (H), 703-993-8516(W)

Introduction

As per Henry Mintzberg an Organization begins with a person who has an idea. This person forms the strategic apex. He or she hires people to do the basic work of the organization, in what can be called the operating core. As the organization grows, it acquires intermediate managers who form the middle level management. The organization may also find that it needs two kinds of staff personnel one Analysts, who design formal planning and control of work (Techno-structure) and two Support-staff, providing indirect services. Organizations will have to deal with uncertainties due to technology and environment changes. As per Henry Mintzberg there are 5 different types of structures and later he added two more. The intensity of impact of technology and environment are different in different type of structure and also varies from organization to organization. As per William Ouchi there are three types of strategies that organizations could adopt – bureaucratic, market, and clan.They can also have employment contact, commercial contract and physiological contract respectively. Each form of control uses different types of information’s. However, all three types may appear simultaneously in an organization. The uncertainty in an organization can be due to uncertainty in Environment and uncertainty in Technology.

Environmental Uncertainty (Paul Lawrence & Jay Lorsch)

Work of Lawrence and Lorsch (1969) is regarded as the classic study linking the effects of environment in to structure. For dealing with different set of environmental condition they have given appropriate structural characteristics.

1. Whether the different demands placed on organization by their environments relate to structural designs.
2. Whether Organizations with stable environments make greater use of centralized patterns of authority to achieve co-ordination and control and, if so, whether this is because fewer integrating decisions are required or because decision can be made more effectively by a small number of people at a high level.
3. Whether Organizations in different environment have same degree of specialization of functions.
4. Whether Firms in different environments have greater degrees of functional specialization, giving rise to differences in the extent to which organizational functions are coordinated, or use different ways of integrating functional activities.

To address these issues they coined two terms Differentiation & Integration. Differentiation: Differences in cognitive and emotional orientation among members of different units and consequently difference in formal structure among units. Different organizational function usually deals with distinct segments of the environment, which can mean that people in different function develop unique perspective and emotional orientation. For instances, marketing people can be far more focused on the pressures excreted by customers; this can give them a very different perspective from production people, who tend to be more sensitive to the views of trade unions and suppliers. Integration: The quality of the state of collaboration among sub units in order to achieve unity of effort in response to demands from the environment. Integration reflects the ways in which functional activities are coordinated and controlled to achieve the goals for the organization. Lawrence and Lorsch acknowledge that different functions are likely to have different orientations, but they avoided the assumption that integration is just a matter of minimizing differences to produce a common outlook. Rather, their aim was to determine whether ways had been found to allow the differences in orientation to exit, while getting the function to focus on achieving organizational goals.

Environment is not conceptualized as ‘every thing out there’ but as three specific sub-environments, normally dealt with by three major specialist functions in firms. The market sub-environment dealt with by the marketing function, technical-economic sub-environment dealt with by the production function and the scientific sub-environment dealt with by research and development. The study by Lawrence and Lorsch found that each department evolved towards a different orientation and structure to deal with specialized parts of the external environment, therefore more time and resources must be devoted to achieve coordination when attitude, goals, and work orientation differ so widely. Organizations with highly uncertain environments and with highly differentiated structures assign about 22 % of management personnel to integration activities, such as serving on committees, on task forces, or in liaison roles.

Technology Uncertainty (Charles Perrow)

Charles Perrow developed a classification based on the knowledge required to operate technology. Technology is an important factor in contingency theory. The type of technology determines an organizations most effective structure and success in the market. The classification specified two dimensions of departmental activities that were relevant to organizations structure and process. The first one is the number of exceptions (Variety) in the work and the second dimension of technology concerns the analyzability of work activities.

Variety: This refers to the task variety, which is the frequency of unexpected and novel events that occur in the conversion process. Task variety concerns whether work processes are performed the same way every time or differ from time to time as employees transform the organizations inputs to outputs. When individuals encounter a large no of unexpected situations, with frequent problems, variety is considered high. When there are few problems, and when day-to-day job requirements are repetitious, technology contains little variety. Variety in department can range from repeating a single act, such as traditional assembly line, to work on a series of unrelated problems or projects. Analyzability: When the conversion process is analyzable, the work can be reduced to mechanical steps and participants can follow an objective, computational procedure to solve problems. Problem solution may involve the use of standard procedures, such as instructions and manuals, or technical knowledge, such as that in a text book or hand book. On the other hand some work is not analyzable in this case some times the final solution will be result of wisdom and experience and not the result of standard procedures. The users of technology require less search effort to manage exceptions when able to use existing analytical methods rather than having to rely on their intuition and guesswork. The four technology categories are:

1. Routine technologies: are characterized by little task variety and the use of objective, computational procedures. The tasks are formalized and standardized. Example: Railway ticketing system.
2. Craft technologies: are characterized by a fairly stable stream of activities, but the conversion process is not analyzable or well understood. Tasks require extensive training and experience because employees respond to intangible factors on the basis of wisdom, intuition and experience. E.g. Steel furnace engineers continue to mix steel based on intuition and experience.
3. Engineering technologies: tend to be complex because there is substantial variety in the tasks performed. However, the various activities are usually handled on the basis of established formulas, procedures, and techniques Employees normally refer to a well developed body of knowledge to handle problems. Engineering and accounting tasks usually fall in this category.
4. Non-routine technologies: have a high task variety, and the conversion process is not analyzable or well understood. It is characterized by many exceptions and poor comprehensions. Problems appear frequently with no existing solutions. Commercial space engineering and biotechnology are examples of a non-routine technology.

Social Co-ordinate Mechanisms with Mintzberg’s structure

William Ouchi suggested three control strategies that organizations could adopt – bureaucratic, market, and clan. Each form of control uses different types of information.1. Bureaucratic Control: uses the characteristics given by Max Weber. Bureaucratic control: is the use of rules, policies, hierarchy of authority, written documentation, standardization, and other bureaucratic mechanisms to standardize behavior and assess performance. Weber also gave three types of authority namely rational, traditional and charismatic. 2. Market Control: Market control occurs when price competition is used to evaluate the output and productivity of an organization. The use of market control requires the output be sufficiently explicit for a price to be assigned and the competition exist. With out competition, the price does not accurately reflect internal efficiency. Some firms require that individual departments interact with one another at market prices- buying and selling products or services among themselves at prices equivalent to those quoted outside the firm. 3. Clan Control: is the use of social characteristics, such as corporate culture, shared values, commitment, traditions and beliefs, to control behaviour. Clan control is important when ambiguity and uncertainty are high. Clan control is most often used in small, informal organizations or in organizations with a strong culture, because of personnel involvement in and commitment to organizations purpose.

The structures explained by Mintzberg used the components, flows, work constellation mechanisms to define five configurations. 1. Simple Structure: Relies on direct supervision from the strategic apex. In small companies with simple structure the CEO can have a greater centralized control, such structure adapt to the rapid and flexible innovation. That is they can adapt well to the problems rising out of uncertainties due to technology and environment. The clan control mechanism in simple structure with psychological contracts may result in new innovations. 2. Machine Bureaucracy: A large organization relies on standard of work processes by the techno-structure. If the organization grows then it is likely to shift from the simple structure to the Machine bureaucracy where it elaborates its administration. With the emphasis on standardization of work for co-ordination and is resulting in low skilled and high specialized jobs.
3. Professional Bureaucracy: relies on the professional’s standardization of skills and knowledge in the operating core rather than work process or outputs for its coordination and so emerge as dramatically different from the machine bureaucracy. It relies on its skilled operating staff and decentralizes it power over many decisions. Mostly they are stable and complex and employment contracts may be required to have retention of employees 4: Divisionalised form: relies on standardization of outputs and middle level managers a run independent division. The divisionalised form was created to solve the problem of adaptability in machine bureaucracy. By overlaying another layer of administration that could add and remove divisions. The organization found a way to adapt itself to new conditions and to spread its risk. 5. Adhocracy is the most difficult of the five structures to describe because it is both complex and nonstandardized. Indeed, adhocracy contradicts much of what we accept on faith in organizations-consistency in output, control by administrators, unity of command, strategy emanating from the top. It is a tremendously fluid structure, in which power is constantly shifting and coordinating and control are mutual adjustment through communication and interaction of competent experts.
Conclusion:
Uncertainty is always there always for any organization. Consistency, Coherence and fit-harmony are critical factors in any organizational design. As the number of external elements and the rate of change are different, which structure is better varies according to situation. The structure is not what you make and it is what you achieve.




References
1. Organizational Behaviour and Analysis – An Integrated Approach by Derek Rollinson with Aysel Broadfield, Second Edition- Pearson Education p514
2. Organizational Theory , Change & Design by Richard L.Draft -Cengage Learning India Pvt. Ltd- p61,164,398,485
3. Organisational Behaviour, Foundation, Realities & Challenges by Debra L Nelson & James Camphell Quick – South Western Publishing 5th Edition, p 502-p 505
4. http://www.provenmodels .com

Enterprise Resource Planning Vs Bespoke Software in Public Policy

Enterprise Resource Planning Vs Bespoke Software in Public Policy

C.T. Sunil Kumar
Post Doctoral Research Scholar, School of Public Policy, George Mason University, Room No:206, 3330 Truland Buildings, Washington Blvd, Arlington- 22201.

Abstract
The share of implementation of ERP software in corporate world is increasing day by day and to compete with them government agencies and organizations are also on the path of implementing them. The usage of ERP system in public offices can definitely provide better results, but at what cost? This paper is comparison of ERP software with bespoke software from a public policy perspective.
Keywords: ERP, Bespoke, Business Process Reengineering
Introduction
Enterprise Resource Planning is an enterprise solution software system that allows a company to automate and integrate the majority of its business processes, and share common data and practices across the enterprise through integration of various functions in the organization, managers and staff alike can use timely information to make better decisions and to perform activities, which add value to the company. An ERP system may thus provide. 1. A repertoire of standard business process tools to support management initiatives such as activity based costing , business process reengineering and supply chain management; 2. An integrated computer system with a common framework for all corporate processes and data. 3. Potential real-time analysis of key issues for enterprises, such as material usage, costs, quality, customer satisfaction and profitability.

Comparison
SL NO Criterion ERP Bespoke
1 Time taken for Implementation Less, As the enterprise solution is already there and requires only customization More, Will have to start everything from beginning

2 Management / Organization change required More, if BPR is used but will get the benefit of Best practices Less, Will actually change the manual work to computer

3 Cost Factor Timeline and obsolesce should be taken into account Timeline and obsolesce should be taken into account
4 Quality Use of Standards May or may not use industry standards
5 Best Practices in Industry Available Not Available
6 Expertise of Staff required for customization Functional Level Technical Level
7 Integration of Functions High Low
8 Proprietary License No Yes
9 Availability Of the shelf Not Available, have to build from the scarp

The ERP is the solution for the future. If you are able to implement the ERP software as such it will be a better option, because it has all the best practices in the industry integrated in to it. Once you implement ERP you should adopt the path of BPR (Business Process Re engineering) rather than customization because we will be able to use the best practices in the industry in a better way. But in the case of bespoke there is nothing called best practices. They will be making use of the computer in the functions which are normally done manually earlier.

When we consider software project management 90 % of the software projects are scrapped. The reasons may be many. The long term retention of employees in a software company is generally not possible. The person who wrote the software code in case of bespoke may not be available for any future reference or change in the package. But in the case of ERP there is a standard procedure developed over several years. The leading corporate giants of the world use SAP. The companies like Microsoft, Tata Consultancy Service, IBM, Colgate , Steel Authority of India Limited etc use SAP for their functioning.
Risk associated with technology obsolescence is greater in bespoke software in comparison to ERP. ERP software is updated frequently and there is no question of ERP going out of business. But in the case of bespoke software at the time of completion itself, will be obsolete. Many reasons can be attributed for this including modifications required in later part of the development at the stage of testing and modification by trail and error.

Negative from the government employees perspective

The operations relating to food grain management are unique in nature and if ERP software is implemented it will require a lot of customization. In a government organization the operations cannot be changed overnight and resistance to change is very high. So the software will require a large amount of customization. When customization is large, we may loss the integrity of the system.

Each time a new version of ERP is launched in the market the ERP Company will force the government organizations to upgrade to the new package and each time they will have to customize the upgraded. But customization is normally included in the 5 year AMC @ 22 % of the implementation cost per year; this adds to the cost of ERP implementation. In government organizations the work force is not as effective as in the private sector. Whatever is the level of training provided to implement ERP? It is difficult. The Trade unions and management will ask for more staff to be posted and recruitment as a policy is banned in many government organization.

When we look to the successful completion of ERP packages it is very less. A lot of commitment from top level management is required to change any process in a government organization. One of the advantages of the ERP system is that you will have the best practices of industries embedded in the ERP systems. However it is also thought that it will not have the options to take care of the nitty-gritty of food grain management in large organizations like Food Corporation of India where the industry is vertical integrated.

In India the material management or inventory function is not fully automated. The government sector requires a great deal of flexibility to our operations. Another advantage projected by ERP is that the ERP software can be customized by functional level person but for changes to be made in bespoke software you require technically skilled person. Does it make any sense? In case of government, technical as well as functional level people are all equal with no expertise. Both will not be doing the job.

Software made to requirement of the customer is actually computerizing the actual manual operations. There is also an opinion that ERP software is for looting the organization in the name of BPR (Business Process Reengineering) and that implementation of ERP in government offices will always fail. So it is always be better to use bespoke software. Because of the lack of knowledge of computer systems expertise the government companies and organizations are being cheated by the implementers by using technical jargons. For any successful implementation of the ERP software the role of a consultant is very important.

In an organization like Food Corporation of India, data must be fed in to the system from 1,064 locations across the length and breadth of the country. Due to the immature telecommunication network and lack of high speed internet in all parts of the country the data entry from remote areas will be affected and the implementation for computer data transfer system.
In the case of software implementation in various locations and the operations can vary from state to state and region to region. Another concern is that if a functional level consultant at any of the state or smaller level customizes the software it will loss the uniformity though out the organization and therefore a center location is required to maintain the updating and revisions.

One more thing is that it requires a greater understanding of ERP systems rather than the normal operation of the organization to operate an ERP package. Therefore the expertise of the employees will come in to picture which is low in government when compared to private organizations in India.

If we are looking from a larger perspective ERP systems are monopolizing the market. India is a developing country. Does the country need this type of technology advancement? Will it put the country in a technology trap? If we are promoting the ERP system the country will be denying opportunity of thousands of young people who are in the business of developing software. The government also will have to consider things from the point of view of social benefits.

Look at the government office in India, How many are using proper computer networks. Another aspect is of cost. If we implement bespoke software we are having cushion in rolling back. Now a day’s agreement for purchase or development of software is made with less number of licenses and after the entire software is put in to use and is fully functional. Then only the organization will purchase the balance rest 5000 or 6000 licenses for the implementation in the entire organization. But is it possible in the case of ERP.

The other day I had a discussion with one of my colleagues who is a member of the ISS (Indian Statistical Survey) cadre. It was his opinion that “With ERP Marketing in India, we are trying to sell some ones projects and consultants are only facilitating it. What is the actual intellectual contribution? Are they doing anything concrete? Rather than doing marketing for this multinationals. What will happen to the indigenous developments in this country?”

Conclusion

Since the technology is taking quantum leap every day. It will be better to have government agencies and establishments concentrate in their core competency and the best technologies doing the job for them. Since the operations of the similar nature will be there in the other part of the globe in same industry or operation of the same nature in different industry. One can review the merits and demerits and come to conclusion regarding implementation. It will be better if the government organizations leave the job of assisting development of software and rather leave the job to enterprise solutions like ERP to provide the complete solutions.
References




1. Text Book on ERP, Author: Mahadeo Jaiswal, Ganesh Vanapalli, ISBN :9781403927453, Imprint:Machmillan Publishers India, copyright:2005.
2. Maximizing your ERP System – A text book for Managers, Author: Scott Hamilton., Publisher: McGraw-Hill Companies, ISBN:0071406115
3. ERP: Making It Happen: The Implementers ‘Guide to Success with Enterprise Resource Planning A Wiley-Interscience | 1 edition (July 4, 2002) | English | ISBN: 0471218766
4. E-Business and ERP: Rapid Implementation and Project Planning Author: Murrell G. Shields ISBN: 0471406775