Engineering and Administrative Phases of Organizational Adaptation

In the last blog we looked at the Entrepreneurial problem phase of the organizational adaptation process. In today's blog we look at the next 2 phases- Engineering Problem and Administrative Problem.

Engineering Problem

The entrepreneurial problem when addressed would involve operationalization of the management's solution - the creation of such a system is what the Engineering Problem summarizes. 

The management would have to select an appropriate technology (in the management sense of the word, i.e. input-transformation-output process) for producing and distributing chosen products and services and to form new information, communication, and control linkages to ensure proper operation of the chosen technology  - These are what the system would encompass.

One should also note that, the three problems don’t wait for a solution of the other to reach and then move it, Even as the Entrepreneurship Problem is in motion, the management would try to adapt a system giving rise to the Engineering Problem which when achieves some progress would attract the implementation of the Administrative system.  It is during the administrative phase that the actual form of the organization's structure will be determined as the relation between the management - environment is formalized through formal processes for coordinating and controlling internal operations.

In the TV case again, we find that the company's redefinition of its domain required a change in its technology from mass-production technology to unit/small-batch technology!

Administrative Problem

The primary goal of most organizational administration is to reduce the uncertainty within the organizational system. It could also aim at rationalizing and stabilizing those activities which successfully solve problems faced by the organization during the other two phases. 

The challenge at this phase doesn’t stop at rationalizing a model, to really succeed in the long run, the company would have to formulate and implement processes which would enable organizations to continuously innovate. 

In the next blog, we shall look at this rationalization and Articulation process in a greater detail.

Entrepreneurship Problem in the organization's adaptation process

In the last blog, we looked at the types of challenges an organization could face when it attempts to adapt to the environment around. In today's blog, we look at the first of these problems - "Entrepreneurial Problem".

The adapting cycle is most visible in the start-up organizations. These organizations are in a state of continuous flux, fighting for their survival with the environment in which they operate. They constantly grapple with the challenges at hand, with a lack of structure, processes etc. In a new organization, an idea (could also be called in the current context - "an entrepreneurial insight"), perhaps only vaguely defined at firs must be developed into an organizational domain: a specific good or service and a target market or market segment. 

When looked into from the context of an ongoing organization, the entrepreneurial problem has another dimension - this is since the organization would have already found a set of solutions to its "engineering" and "administrative" problems. The entrepreneurial energy doesn’t easily get transferred primarily as a result of the stability that the organization would have achieved. If we relate the context with reference to TV case the initial struggle when the company attempted to modify its products and market was constrained by the existing production process and the expertise of the general manager and his staff.

The entrepreneurial problem of adaptation cycle receives a logical end when the management accepts a particular product-market domain, and it become more evident when the organization commits resources to achieve the objectives relative to the domain. The commitment to entrepreneurial solution in the large ongoing businesses generally is sought through the development and projection of an organizational "image" that would define its market and the approach towards the market. GE's commitment to only compete in markets where it would be number one or two and leave the others is one such creation of an "image".

Problems of an Organization Adapting to change

In the last blog, we had a case of TV which we would begin using for the next few blogs to understand the concepts of management. We begin today's blog with the very famous question - Does strategy drive the organization structure or does the Organization structure drive the organization's strategy. The school that believes Organization behavior is only partially preordained by the environmental conditions and that the choices which top management makes is critical determinants of organization process and strategy is called the strategic-choice school. 

To link the context to the TV case, it would be easy to understand that TV had to experience a change in its products and markets, to handle these it had to change the technological processes, the administrative structure that used to plan, coordinate and control the company.

The general focus over the next few blogs is again the process of organization adaptation which we call as the "adaptive cycle". Specifically the adaptive cycle could be thought of as comprising of 3 problems listed next.

The choices that the organization's top management is many, but for the sake of simplicity to understand how the organization adapts to its changing environment, we could clarify the problem of Organization Adaptation into 

1. Entrepreneurial Problem
2. Engineering Problem
3. Administrative Problem

It would be hard to state where one problem ends and the other begins, and many a times the management of the organization would have to simultaneously handle multiple problems. Just for the sake of understanding these better it would be a good starting point to analyze these 3 separately.

Changing Environment - changing response

In the last blog, we concluded the implications of history to a practicing manager. Now, before we continue with the next set of blogs on organization development, and their process of growth. Let us look at a small case, though a bit old it would be give us a good starting point for the discussion over the next few blogs.

TV is a semi-autonomous division of a medium sized equipment manufacturing firm which is part of a large, highly diversified conglomerate. TV manufactures a line of heavy duty pumps and some components for fluid movement systems. The company does most of its own castings, makes many of its own parts and maintains a complete stock of replacement parts. TV also does special-order foundry work for other firms as its production schedule allows. 

Until recently, TV had defined its business as providing quality products and services to a limited set of reliable customers. TV's GM, a first-rate engineer who had spent most of his time in the machine shop and foundry, personified the company's image of quality and cost efficiency. In the mid-90's corporate management became concerned about both the speed and direction of TV's growth. The management and staff at corporate headquarters began considering two new product and market opportunities, both in the energy field. Fluid movement systems required for nuclear power generation provided one of these opportunities, and the development of novel techniques for petroleum exploration, well recovery and fluid delivery provided the second. TV had in the past done some large for these markets, but the opportunity now clearly indicated growth opportunities. 

TV initially moved towards exploiting these opportunities tentatively, the GM realized that the contract sales involved extensive planning, field-contact work, and careful negotiation. These didn’t suit the GM's primary strength or his area of interest. The Parent organization moved the present GM to another position at the headquarters and in his place got a new manager with extensive background both in sales and engineering and who was adept at large-scale contract negotiations.

Within a year of this changeover, TV landed several lucrative contracts, and more appeared to be in the offing. The new business created by these contracts, however, placed heavy coordination demands on company management, and while the organization's technology (production and distribution system) has not been drastically revised over the past 2 years, workflow processes and the operational responsibilities of several mangers have changed markedly. Materials control and scheduling, routine tasks in the past are now complex activities, and managers of these operations meet regularly with the executive planning committee. Moreover, a rudimentary matrix structure has emerged in which various line manages undertake specific project responsibilities in addition to their regular duties. Key personnel addition have been made to the marketing department and more are planned, with particular emphasis on individuals who are capable of performing field planning and supervising and who can quickly bring new fluid systems to full operation. Budget of some of the older departments are being cut back, and these funds are being diverted to the new areas of activity.

Manager's usage of history to predict the future

Continuing from the last blog, where we began a discussion on the managerial implications of the understanding of history that we had developed, we today look at the next 2 implications for the manager.

2. Recognize the Limited Range of Solutions

It is common to find people who would love to use what they have already learnt! In organizations too when you are faced with a new revolutionary change - it is common to be tempted to use the technique that had succeeded the last time. This essentially would complicate problems since the current organization structure is in response to the earlier revolution and the current revolution has grown out of the processes and structure that have evolved through the adaptation learning from the last revolution - seasoned through the evolutionary phase in between. 

The management should be prepared to dismantle the current structures before the revolutionary phase become extremely turbulent. Top managers too would have to realize that their management style are no longer appropriate and may even have to move out of the leadership positions.

It is important to note that evolution stage is not an automatic stage; it is a contest for survival. The company would have to consciously introduce planned structures to solve the current crisis but also are fitted to the next phase of growth.

3. Realize the Solutions breed new problems

Historical determinants are very much the determinants of what happens to the company at a much longer date. This awareness would help managers to avoid the habit of "pinning the blame" on a current development. A well experienced practitioner would also be able to "predict" future problems - thereby effective solutions and coping strategies could be gotten running before the revolution gets out of hand. 

Historical Implications to the manager

In the last blog, we summarized the various management practices that are prevalent in the various phases of organizational growth. Starting from the current blog, over the next few blogs, we shall look at what this means for the manager! 

In a recent comment to the post, one of the readers of the blog had indicated that all this is pure "common sense"; this is really the proof that it is intuitive. However, it is really hard for the individual manager who is going through the phase to really realize the challenges that he is currently undergoing and act accordingly. Today's blog and the next few to follow also deal about this issue. The first of these is:

The manager should know where the organization is in the developmental sequence

Recognizing the current stage of growth of an organization is very critical for the Top Management of the organization. This enables the organization to recognize when the time for change has actually arrived, or it may result in imposing a wrong solution to the issue at hand. 

Many a times the top management tends to work against the tide, realizing the flow and move with it is a good approach to take! It is also important to note that every phase is essential, and in a way strengthens the organization through the learning that is accumulated at that phase, these learning are very essential to the success in the subsequent phases. 

It would be wise to really let the revolution move in, it is these periods of tension, pressure, which create ideas and awareness that builds the platform for change in the future and acts as a reason for the introduction of the new managerial practices.

Organization Processes at Evolutionary stages

In the last blog, we looked at the last of the 5 phases - Collaboration. In today's blog, we intend to provide a summary of the management processes of the organization across 1the various phases.

The diagram below provides the summary.

Org Processes at Evolutionary Stages

Interpersonal collaboration & organization

In the last blog, we discussed about the phase of coordination understanding the characteristics of the evolutionary scenario there in and the following revolution. In today's blog, we look at what the revolutionary phase leads to and what would characterize the evolutionary stage there in.

Phase 5: Collaboration

The red tape crisis of the earlier coordination phase begins to slowly open up into a more inter-personal collaboration phase. The phase generally composes of temporary teams that work on projects with spontaneity. Social control and self-discipline replace the formal control mechanisms of the earlier phase. 

All is not rosy at this stage; the transition would be extremely difficult for those experts who created the old systems as well as for those line managers who relied on formal methods for answers. The characteristics of this phase include:

• The focus is on solving problems quickly through team action
• Teams are combined across functions for task-group activity
• Headquarters staff experts are reduced in number, reassigned and combined in interdisciplinary teams to consult with, not to direct, field units.
• A matrix-types structure is frequently used to assemble the right teams for the appropriate problems
• Previous formal systems are simplified and combined into single multipurpose systems
• Conferences for key managers are held frequently to focus on major problem issues
• Educational programs are initiated to train managers in behavioral skills for achieving better team and conflict resolution
• Real-time information systems are integrated into daily decision making
• Economic rewards are geared more to team performance than to individual achievement
• Experiments in new practices are encouraged throughout the organization

The possible revolution that follows this evolutionary phase hasn’t been well documented so, we wouldn’t really discuss about these at the moment.

Collaboration phase of Organization Growth

In the last blog, we discussed about the organization development phase of Delegation and the associated characteristics along with the build up to the next revolution. In today's blog we look at the next phase - Coordination.

Phase 4: Coordination

The top-management which had a lot of issues in the delegation phases achieves control over the organization's functioning in this Coordination phase. The evolutionary period of this phase would be characterized by the following:

• Decentralized units are merged into product groups
• Formal planning and procedures are established and intensively reviewed
• Numerous staff personal are hired and located at headquarters to initiate company-wide programs of control and review for line managers
• Capital expenditures are carefully weighed and parceled out across the organization
• Each product group is treated as an investment center where return on invested capital is an important criterion used in allocating funds. 
• Certain technical functions, such as data processing are centralized at headquarters, while daily operating discussions remain decentralized
• Stock options and company-wide profit sharing are used to encourage identity with the firm as a whole.

These coordination systems enable the organization grow efficiently allocating a company's limited resources. The field manager begins looking beyond the local unit needs. They still enjoy much of the decision making authority, but they would have to justify their actions to the headquarters. This smooth sailing begins to rock when the lack of confidence begins to creep in. 

The lack of confidence would be between the line and staff and between headquarters and the field. The proliferation of system and programs being to exceed its utility - a red tape is created. A lot of paper work is seen as highly bureaucratic. Procedures take precedence over problem solving, and innovation takes a backseat. The organization would have at the time of the next revolution become larger and complex to be managed through such rigid processes and formal programs. 

The next phase following this revolution is that of Collaboration

Delegation - Organization Development phase

In the last blog, we looked at the "Direction" phase of a phase in the development of an organization. In today's blog we look at the next phase of Organization Development - Delegation. We understood from the last blog, that the struggle for more responsibility at lower levels of the organization leads to the process of delegation. At this juncture, the company could grow only if a good amount of delegation is in place. 

We begin today's blog from the point of such delegation. As the phase "evolves" we find that:

• Much greater responsibility is given to the manager of the plants and market territories.
• Profit centers and bonuses are used to stimulate motivation
• The top executives at headquarters restrain themselves so managing by exception, based on periodic report from the field.
• Management often concentrates on making new acquisitions which can be lined up beside other decentralized units
• Communication from the top is infrequent, usually by correspondence, telephone, or brief visits to the field locations.

Such delegation enables the company expands through enhanced motivation at lower levels. The decentralized managers are able to penetrate larger markets, respond faster to customers and develop new markets.

But

This growing delegation to the lower levels sows the seeds of the next revolution. The top management begins to sense a loss of control. The highly diversified operations are akin to the field managers running their own show with little to no concern for coordination, money, and technology and man power with the rest of the organization!

The top-management attempts to regain control over the total company. A return to centralized top-management at this stage is not an option. The companies that really move ahead are the companies which would have to find a new solution in the use of special coordination techniques.

Direction as an organization development Phase

In the last blog, we began our discussion on the various phases in an organizational development and discussed the phase of creativity in particular. In today's blog we look at the next phase of organization development - Direction and its accompanying evolution characteristics and the revolution that could happen.

Phase 2: Direction

At the end of Phase 1, the companies would have installed an able manager at the helm of affairs. What follows would be a period of sustained growth under able and directive leadership. The duration may vary but the characteristics are:

• A functional organization structure is introduced to separate manufacturing from marketing activities and job assignments get more specialized
• Accounting systems for inventory and purchasing are introduced
• Incentives, budgets and work standards are adopted
• Communication becomes more formal and impersonal as hierarchy of titles and positions builds
• The new manager and his key supervisors take most of the responsibility for instituting directions, while lower level supervisors are treated more as functional specialists than as autonomous decision making managers.

These changes channel employee energy more efficiently into growth, they eventually become inappropriate for controlling a larger more diverse and complex organization. The lower-level employees find themselves restricted by a cumbersome and centralized hierarchy. They have come to possess more direct knowledge about market and machinery than do the leaders at the top. Consequently they feel torn between following procedures and taking initiatives on their own. 

At this stage, the 2nd revolution is due - It comes from the demand for autonomy from the lower-level managers. Most companies move towards greater delegation to handle such a scenario. The challenge lies in the top management who by this time is accustomed to being directive to give up responsibility. The lower-level managers are not yet accustomed to taking independent decisions. 

If Companies at this point choose to stick to old control mechanisms, they are bound to lose the race with most of the lower-level employees leaving the organization.

Phases of organization growth - Creativity (Ph 1)

In the last blog, we concluded the initial discussion on the dimensions affecting the organizational development. From today's blog we begin a new discussion on the phases of organizational growth. The basis of this brief discussion is still the same source - Evolutions and Revolutions as organizations grow by Prof Larry E Greiner.

Building on the understanding of the various phases of organizational development, when we analyze the growth of companies over a relatively long period of time, we could categorize the phases of growth into the following phases:

• Creativity
• Direction
• Delegation
• Coordination
• Collaboration

It is important to note that, each phase is both an effect of the previous phase and a cause for the next phase. The principal implication of each phase is that management actions are narrowly prescribed if growth is to occur. 

We shall understand each of these phases beginning with Creativity today and continue through the week. 

Phase 1: Creativity

Organizations when they begin have 2 primary areas of emphasis - creating the product, creating the market.

The characteristics of this period include

• Company’s founders are usually technically or entrepreneurially oriented and don’t focus on the managerial activities.
• Communication amongst employees is frequent and informal
• Work is generally for long hours but rewards are modest salaries. There would be promise of ownership benefits
• Control of activities comes from immediate market place feedback - "management acts as customer reacts"

While all this is the daily happening, there is something lurking in the horizon - a potential leadership crisis. As the organization scales up, the range of activities widen requiring an entirely different mindset to handle these. The founders who love their freedom and creativity find them burdened with unwanted management responsibilities. The critical question now to answer is - who is to lead the company out of confusion and solve the managerial problems confronting it.

The founders often hate to step aside even though they are probably temperamentally unsuited to be managers. The need would be to locate and install a strong business manager who is acceptable to the founders and who can pull the organization together.

Organization growth, evolution and revolution challenges

In the last blog, we began looking at the 5 dimension that are important when considering organization development. We have covered 2 of these, and the remaining 3 are being discussed in this blog.

• Stages of Evolution
• Stages of Revolution
• Growth rate of the company

As a company grows from a start up phase the first few months are with enormous confusion, the managerial processes are generally evolving and the challenges are many. There are no defined rules, procesures etc. Once the organization lives through this face, it enjoys a period of stability till another challenge of growth and scale comes in. This mandates another change in the managerial processes of the company. Once this challenge is effectively handled out by the organization there will be  a longer phase of stability - the quiter periods. This is what is indicated by the term "evolution".

A look at the forture 500 list over the last 50 years would indicate definitely that companies in the first 10 years of this search would be very distinct from the once in the last 10 years. This is due to the turbulance these organizations face. The companies might have experienced a long stable period where it wouldnt have to change much of the organization structures and processes to address external challenges. However over a period of terbulance these would have to be changed, the challenge is to find new set of organization practises to handle the new challenges and prepare for the future. These turbulent times is what is meant by the term "revolution"

The stage of the organization where the company is - revolution or evolution is also what defines what the organization structure is going to be.

If a company is in a rapidly changing market then it has to be extremely agile. In a rapidly expanding market the comapny would have to respond by expanding the employee base. This leads to a requirement of a new organizational structure. The length of the evolutionary phase is shortened and the revolutionary phases are more common. Thus the growth rate of the company plays a significant role in the oragnization structure and processes and there by its development.

5 dimensions affecting the organization's growth

In the last blog, we began our discussion on understanding how the organization grows, in today's blog we look at the key forces that affect the organization development. We shall discuss 2 of these forces and the remaining in the next blog. 

It has always been a hard call on whether the organization's structure would define its strategy or is it that the organization's strategy would define the organization strategy. Though each of these approaches could have a long and detailed discussion, to understand the way we look at the current blog, we would take the approach that it is structure plays a critical role in influencing corporate strategy. We can look at 5 key dimensions that are important in building a model for organization development, these are:

1. Age of the Organization
2. Size of the Organization
3. Stages of Evolution
4. Stages of Revolution
5. Growth rate of the industry

Let us begin looking at each of these dimensions:

Age of the organization: 

This is one of the most obvious of the dimensions that one can think of. A simple observation would clarify that the same organization practices are not maintained throughout a long time span. - Management problems and principles are rooted in time. The passage of time is also the factor that enables institutionalization of managerial attitudes.

Size of the organization:

A company’s challenges and theirs solutions tend to change a lot as the company scales up - both in terms of the number of employees and the sales volumes. Organizations that grow in size need to change their structure and management practices over a longer time frame. Along with the increase in size, come problems of coordination and communication, new functions emerge, levels in the management hierarchy multiply, and jobs become more interrelated.

Let us continue the discussion in the next blog.

Growth of Organization - Evolution & Revolution

In the last blog, we summarized the relation between technology and task interdependence. From today's blog over the next few blogs we look at some of the theories that deal with the growth of an organization, these are mostly based on the HBR paper - “Evolution and Revolution as organizations of growth" by Larry E Greiner.

The basic principle on which the growth of an organization could be predicted is that it is less determined by the environmental forces and more defined by the history of the organization! To understand the paper further, we would need to understand the 2 terms

1. Evolution
2. Revolution

Evolution stands for a phase in the growth of the organization where no major upheaval has occurred. It is relatively a stable period.

Revolution stands for a phase where substantial turmoil is felt in the organization. 

The famous adage - what goes up comes down it something that could be related to in this scenario. Every Evolutionary phase would be creating its own revolution. The nature of the management solution is what would determine whether a company would move forward into the next stage of evolutionary growth.

Let’s take an example to get this clearer - Generally start ups begin with a phase where entrepreneur is the central decision making authority. He/She works out most of the decisions to be taken regarding the company or the firm single handedly. As the company scales up, we begin seeing that the complexity of the decisions to be made would not be best decided by the entrepreneur. There needs to be a decentralization of these decisions to ensure that the company moves ahead smoothly.

Task interdependence and Technology summary

In the last blog, we looked at intensive technology and reciprocal interdependence. In today’s blog we take a look back at all the various interdependence and technologies to get a comprehensive view of the topics discussed over the last 10 blogs.

We could summarize the complete discussion on task interrelation and technology in the following diagram. 

(based on Thompson)

It is to be noted that task interdependence increases from pooled to sequential to reciprocal, mechanisms of coordination get added to the organization. Pooled interdependence only requires rules and procedures, sequential interdependence uses rules, procedures and scheduling. Reciprocal independence uses all these coordination mechanism and "mutual adjustment".

To provide an alternate view of what define the organizational structure we would like to take the focus on to what Galbraith has suggested. He claims that it is communication that shapes the organization structure. He also argues that technical complexity leads to structural complexity, uncertainty promotes organic forms, and interdependence increases demands for coordination, because these factors increase the communication load carried by organization. This in turn affects its structural form. Thus - technology is related to social structure through the mediating effects it has on communication. 

Intensive technology - Reciprocal task interdependence

In the last blog, we looked at long-linked technology and the task interdependence associated there with. In today's blog we look at intensive technology and the nature of task interdependence. 

Intensive technology generally comes with a lot higher complexity compared to the long-linked technology. The scope of the task is much task is much higher that an individual's capacity to transform things; it mandates exchange of information between the people working on the task while performing it. 

Let us take an example of restaurant to understand the scenario at hand better. The kitchen staff waits for the wait staff to provide orders, and the wait staff is dependent on the kitchen staff to provide meals prepared to the customer's satisfaction. The situation becomes even more complex when we take the situation of a surgeon at work.  The surgeon needs to continuously exchange information with the anesthesiologist, assisting doctors and nurses while performing the operation. 

We see that in addition to the existence of pooled and sequential task interdependence, we find a new type of task interdependence called - reciprocal task interference. We could diagrammatically understand this through the image shown below.

The primary difference between the sequential and reciprocal task interdependence is that while long-linked technology involves work flow in a single direction, but the intensive technology has complementary work flows. "Mutual adjustment" becomes extremely essential to the operation of intensive technology on the parts of the individuals and units involved due to the reciprocal nature of their task interdependence. 

Extreme mutual adjustment mandates the requirement of team work. In teamwork, work inputs to the transformation process are simultaneously acted upon by members of the work team, rather than passing inputs back and forth as in the case for less intensive forms of reciprocal task interdependence. The second example of surgical process is an example for this.