Supporting Organizational Structures - Page 1

Jul 20, 2007

Marcia Gulesian

Business and technological landscapes are always changing, with new business challenges and new IT tools better suited to accommodate these challenges appearing all the time.

To anticipate and thereby avoid the crises that change can induce, IT managers, be they in SMBs or large corporations, must understand the life cycle of these changes and design their own organizations and infrastructures to adapt to them over time.

Though it has become fashionable to promote the idea that the future belongs to the small, nimble enterprise, the facts seem to point elsewhere. Many large-scale enterprises have enormous vitality and can resolve the dilemmas that confront all organizations today rather efficiently. Indeed, it is this ability to combine seeming opposites that marks the progress of leading firms such as General Electric, IBM, and the other leading profit earners of the world.

Resolving the managerial dilemmas of scale and adaptability requires experimentation and transformation. The certainties of yesterday and a belief in “one-best-way” to manage in any industry have been replaced by a willingness to try out alternative possibilities.

This “willingness” on the part of larger companies is driven by competitive outcomes that are no longer decided solely by the size of the weapons brought onto the field, but also by the human and organizational ingenuity of each enterprise to gain the maximum stretch and leverage from the available physical resources.

This article is about different organizational structures, how and why they come about, and what part IT can and should play in supporting them.

Business Evolution

When an organization is first formed, business design typically receives little thought from the founding entrepreneurs. Everyone is a jack-of-all-trades. The fledgling organization is staffed with a small number of people who pitch in to help with sales, production, and record keeping. Enthusiasm abounds. The entrepreneurial firm is fun and invigorating. Adrenaline flows as everyone works together to put new products or services into the hands of customers.

Over time, however, problems often emerge. Increasing size and complexity result in chaos and missed opportunities. This usually leads to the hiring of a new professional manager to bring discipline and direction to the business. This new manager typically comes from a successful, mature business and brings the knowledge and experience to install systems and structures to get the business back on track.

Growth resumes.

In contrast to the free-for-all that characterized the start-up phase, decision making becomes highly centralized. Now rules and standard operating procedures are implemented and enforced. Discipline is imposed through the adoption of budgeting and inventory management techniques.

Unfortunately, specialization through functional orientation again brings unforeseen problems. Functional units become insulated from the marketplace, and the business begins to loose touch with its customers. Employees who joined during the exciting start-up years discover that the company is no longer a fun place to work. The discipline and centralized decision making have become stifling.

The leader is blamed and a new leader is recruited from a business known to delegate authority. Quickly, the new manager uses his or her experience to decentralize decision making.

Growth resumes.

As with the previous stages, however, growth through delegation creates its own set of problems. The decentralized structure creates independent fiefdoms whose unit managers are protected from the oversight of the head office. Coordination suffers, resources are wasted, and profitability declines – leading to a “crisis of control.”

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