Ivan f rodriguez organizational evaluation


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Ivan f rodriguez organizational evaluation

  1. 1. Running head: ORGANIZATIONAL EVALUATION 1 Organizational Evaluation Ivan F Rodriguez University of Phoenix
  2. 2. ORGANIZATIONAL EVALUATION 2 Organizational Evaluation There is only one global institution, business, motivated by capitalism and fueled by profit that can mount a frontal attack to the challenges modern world is facing. Business alone has the know-how, the skills, and the drive to rise to the defy. Business must enlarge its horizons, moving beyond its tunnel vision of shareholder value to the target tableau of stakeholder value, embracing customers, employees, suppliers, and investors, ant on to the panorama of the ultimate purpose of business, societal value, the “bettermen of mankind, with profit at the end of the rainbow” (Bhote, 2003, p. 4). The movement to involve business in tackling socials ills while earning the right to a profit, improving education, food, health, social infrastructure, and helping the dispossessed to start their own business has started. Tata represents an extraordinary example of how vision combined with leadership can create an organization to deliver outstanding results consistently. Tata introduced a new set of standards to create value, and define an unprecedented framework to support one of the largest and more diversified industrial conglomerates in the world (course of action to become a business that improves the world. Tata’s leadership development across levels is the focus of its employee policies, along with people development and growth. Business environment is changing swiftly, bringing in its own set of opportunities and challenges; at the same time, the group is rapidly evolving and expanding its reach strategically, geographically, and culturally. The new geographies and the shifting environments of the businesses demand Tata to prepare its leaders (current and future) to resolve successfully such adversities. The effectiveness of Tata’s organization design (including its modifications in structure) is performed in a sequence of three assessments. The company is measured in six areas (dynamic innovation, fiscal volatility, disruptive workforces, employment, and
  3. 3. ORGANIZATIONAL EVALUATION 3 economizing of talent, supply disruptions, and rapid growth, and unethical leadership performance) in three times (1925, 1975, and 2012). Figures 1, 2, and 3 show the results of this assessment, the area of the polygon is directly proportional to the company readiness, and maturity, the bigger it is, the more mature. Although this is a subjective evaluation, the intention is to visualize how Tata’s organizational design evolved to respond to the needs of its markets. Tata Evolution Tata comprises operating companies in seven business sectors: Materials, Engineering, Information Technology and Communications, Energy, Services, Consumer Products, and Chemicals. Tata was founded in the last quarter of the 19th century in India when the country had set out on the road to gaining independence from British rule. The founders aligned business opportunities with nation building. This approach remains ingrained into Tata’s ethos today as it spreads its operations to other geographies. Tata is today India’s largest conglomerate with revenues of $14,714 billion dollars per year – representing 2.8% of India’s GDP (Kumar, 2013), employing more than 172,000 people in 80 countries, and exporting products, and services to more than 85 countries (Bhat, 2013). Tata shares a set of five core values derived from Tata’s early beliefs that continue driving Tata’s business decisions. These values are (1) Integrity, (2) Understanding, (3) Excellence, (4) Unity, and (5) Responsibility. Tata has been distinctive in their adherence to business ethics and their commitment to corporate social responsibility. This legacy has earned the trust of Tata’s stakeholders in a measure few business houses can match. Tata’s organizational structure is decentralized. Their seven business units are led by a Chief Executive Officer (CEO) who has typically less than five layers organizational structure. Decisions are made by employees closest to the situation (gemba). The level of
  4. 4. ORGANIZATIONAL EVALUATION 4 initiative (and proactiveness) expected from each employee is high, and this is a key performance indicator (KPI) and employees are consciously motivated to exercise initiative. Tata’s decentralized structure enables more flexible response to rapid environmental changes. This has been probably one of the most relevant success factors that has allowed Tata advancing successfully in a hypercompetitive global market, capitalizing in each business sector, high dividends, and brand positioning. Tata’s organizational structure permits to fix better accountability, moving fixed cost to variable. Despite the higher risk (vs. centralized organizations), Tata’s bad decision-making has not deteriorate or reduce the speed of Tata’s growth value. The cross unit coordination is mandatory across the company and at stake for favoritism. Tata’s business growth has posed a challenge, of a kind never experienced by this company in the past, resulting in a 45% increase in demand for leadership positions compared to Fiscal Year 2010. Further, 17% of Tata’s senior leaders are retiring in the next three years, allowing the next level of the organization to occupy strategic positions. Tata growth from inside, less than 10% of their executives are from the outside (Kuman, 2013). This has compounded the challenge of meeting the increased demand in an already constrained supply situation. The executive committee, headed by the managing director, owns the development and succession plans for the top positions and reviews availability of talent across functions during talent reviews and succession planning meetings. Tata’s organizational design specify the set of organizational tasks, divide these tasks into jobs, departments, subsidiaries, and divisions to get the work done, and assign authority relationships to get the work complete in the required time and with required specifications. Evaluation of Tata’s organizational behavior
  5. 5. ORGANIZATIONAL EVALUATION 5 Operating across borders and time zones, and integrating diverse management teams and corporate governance practices do not seem to have modified the Tata imprinting. Of particular interest is that Tata has not embraced blindly ready-made recipes to resolve the challenges of multinational management, preferring instead organizational solutions aimed at fostering mutual recognition and knowledge exchange within the multinational conglomerate. Another Tata advantage is being run by a very successful minority, the Parsis, without stirring anger amid the majority of the population, as is tragically common in other countries (Chua, 2002). This gentle approach may distinguish Tata from counterparts that produce much noise in their expansion. Tata’s organization theory follows a global organization theory type, knowledge- based theory. Tata’s knowledge management research is consistent and cohesive with its performance and vision. Tata’s knowledge transfer and sharing are becoming increasingly important to explain dynamic flows of knowledge that enable workflow processes (and hence organizational performance). According to Nonaka (2004), the knowledge-based organizational performance model takes into consideration the practical aspects of knowledge transfer among temporal members, and it has implications on future methods of transferring knowledge. A good example of the effectiveness of this approach is represented by the extension of transactive memory theory Tata has included to access members who are not present in the current team and that can help improve how they manage and train their knowledge resources. Tata’s knowledge generation and transfer is critical for its continued success. Effectiveness of Tata’s organizational structure and design Tata’s strategy is created to deliver outstanding results. Critical to Tata’s success include 10 areas: (1) Customer loyalty and long-term retention, (2) Leadership (i.e.,
  6. 6. ORGANIZATIONAL EVALUATION 6 providing vision, and inspiration, which facilitates employees reaching their full potential, (3) Organization (i.e. revolutionizing the ways people are hired, trained, evaluated, compensated, and promoted), (4) Employees (i.e., empowering them on the road to industrial democracy), (5) Supplier partnership (i.e., improving customer quality, cost and cycle time, while enhancing supplier’s profits), (6) Powerful new tools (i.e., for achieving quality, cost, and cycle time breakthroughs), (7) Design (e.g., maximizing customer value and their “wow” reactions), (8) Manufacturing (i.e., transforming a sunset of obsolescence into a sun-rise enlightenment), (9) Support services (i.e., converting a black hole of little accountability in the business white-collar world to service with maximum productivity), (10) Quality of results (i.e., achieving order of magnitude improvements). Tata’s organizational design effectiveness can be measured by its ability to adapt and proactively respond to the ever-changing market. Tata’ has advanced successfully to the different phases of globalization. Their values remain intact regardless the countries where Tata does business. Advancing one step farther, Tata’s hard metrics (e.g., On time delivery (OTD), Defective parts per million (DPPM), Gross Profit Margin (GPM), OSHA Index (OSH), Operational Profit Before Interest and Taxes (OPBIT), Inventory Turns (IT), Financial Ratios (FR)), average approximately 2.5 times better than Tata’s competitors’ performance (Bothe, 2003). Despite the level of subjectivism on measuring some of the key soft metrics, Tata’ is also delivering above-average results. Metrics such as Employees Turn Over (ETO), Employees Seniority (ES), Number of Training Hours per Year (THY), Employee Multi-skill Ratio (EMR), etc. represent some of the metrics used by Tata to monitor the effectiveness of its strategies and culture’ deployment (see Appendix A). Anticipated effect of changes on organizational leadership and strategies
  7. 7. ORGANIZATIONAL EVALUATION 7 Because the opening of the Indian economy in 1991, Tata has been subject to global competition, making it imperative for the group to become competitive in India against the new entrants. To gain scale, reduce their exposure to the cyclicality of India’s economy, survive, and achieve a sustainable competitive position in industries globalizing, most Tata companies looked overseas. Tata’s recent experience is an excellent case for analyzing ‘accelerated internationalization’ (Locke, 2003). As it pertains to a challenger conglomerate from formerly peripheral areas that goes international to access resources, Tata has been driven by multiple factors, including the need to access new markets (e.g., in BPO services), the opportunity to integrate the value chain (e.g., in steel), and the quest for brand control (e.g., in tea). This strategy proved feasible because Tata possesses strong leadership combined with vision; can exploit the possibility of leveraging increasingly developed financial markets in India, a large domestic market, and global liquidity, and reacted fast to the opening of specific opportunities at given times. Conclusion The core values of an organization begin with its leadership, which will evolve to a leadership style. Subordinates will be led by these values and the behavior of leaders, such that the behavior of both parties should become increasingly in line. When strong unified behavior, values, and beliefs have been developed, a strong organizational culture emerges. Leaders have to appreciate their function in maintaining an organization’s culture. This would in return ensure consistent behavior between members of the organization, reducing conflicts, and creating a healthy working environment for employees (Kane-Urrabazo, 2006). Tata’s organization design has allowed this company adapting, and responding efficiently to its market’ demands. Tata is a global brand, with a decentralized management who soon realized that growing from inside, developing their own talent, financing with their own capital
  8. 8. ORGANIZATIONAL EVALUATION 8 sources, and deploying one of the most admirable innovative capacity, has created a successful and inspiring industrial conglomerate. They have overcome the challenge of creating expensive distribution networks, management preferred to leverage distribution centers by a partner, a joint venture, or an alliance. It became clear that the most effective option was growth through the inorganic route.
  9. 9. ORGANIZATIONAL EVALUATION 9 References Bhat, H. (2013). Tata Annual Report. Tata Annual Report, 1, 1-109 Bhote, K. R., (2003). The power of ultimate six sigma. New York: Amacom. Chua, A. (2002). World on fire: How exporting free market democracy breeds ethnic hatred and global instability. New York: Doubleday. Nonaka, I. (1994). A dynamic theory of organizational knowledge creation. Organization Science, 5 (1): 14-37. Kumar, N. (2013). Emerging TNCs: trends, patterns and determinants of outward FDI by Indian enterprises. Transnational Corporations, 16(1), 1-26. Tripathi, D., & Jumani, J. (2007). The concise Oxford history of Indian business. Oxford: UP Press .
  10. 10. ORGANIZATIONAL EVALUATION 10 Figure 1 Tata Organizational Evaluation 1925 Note: Self-assessment performed by I. Rodriguez using Tata’s public reports. Maturity Ratio 38.9%.
  11. 11. ORGANIZATIONAL EVALUATION 11 Figure 2 Tata Organizational Evaluation 1975 Note: Self-assessment performed by I. Rodriguez using Tata’s public reports. Maturity Ratio 58.3%.
  12. 12. ORGANIZATIONAL EVALUATION 12 Figure 3 Tata Organizational Evaluation 2012 Note: Self-assessment performed by I. Rodriguez using Tata’s public reports. Maturity Ratio 80.6%.
  13. 13. ORGANIZATIONAL EVALUATION 13 Appendix A Tata Group Parametric Overview Business Sector Year of establishment Core Activities Annual Revenuesa Number of Employeesb Steel 1907 Among the top ten global steel enterprises (Bath, 2013), with a crude steel capacity of more than 28 million tons per annum. It is one of the world’s most geographically diversified steel producers, with operations in 26 countries and a commercial presence in 50 countries. 1,329 81,000 Motors 1921 Tata is the world’s fourth-largest bus and truck manufacturer and India’s largest automobile company (Bhat, 2013). It has manufacturing sites in Europe, Africa and Asia. 1,657 55,000 Jaguar Land Rover 1922 Jaguar Land Rover is a business built around two iconic British car brands. Jaguar Cars, is one of the world’s premier manufacturers of luxury saloons and sports cars (Bhat, 2013). 2,170 16,000 Chemicals 1947 Tata Chemicals is the second- largest producer of soda ash in 2,352 5,000
  14. 14. ORGANIZATIONAL EVALUATION 14 Business Sector Year of establishment Core Activities Annual Revenuesa Number of Employeesb the world (Bhat, 2013). It is India’s market leader in the branded and iodized salt segment as well as urea and phosphate fertilizers. The company’s plants are located in India, the United States, the United Kingdom and Kenya. Titan 1946 Titan is the fifth-largest watch manufacturer in the world and the largest jewellery retailer in India, with a product portfolio that includes watches and accessories, eye wear, jewellery, and precision engineering products. 1,528 6,800 Global Beverages 1957 Tata Global Beverages is a global beverages company headquartered in Mumbai. It owns popular brands such as Tata Tea, Tetley, Good Earth, Tata Coffee and 1,109 3,000
  15. 15. ORGANIZATIONAL EVALUATION 15 Business Sector Year of establishment Core Activities Annual Revenuesa Number of Employeesb Himalayan mineral water. Tata Has alliances with PepsiCo and Starbucks. Power 1912 Tata Power is an integrated, independent power producer, with a presence in power generation, trading, mining, transmission and distribution. Headquartered in Mumbai, with plants in India and a presence in Indonesia, South Africa, Bhutan and Singapore (Bhat, 2013). 4,368 4,300 Rallis 1951 Rallis India is the country’s leading agri-input company, with pan-India operations, four factories and a research centre. Its portfolio has pesticides, herbicides and insecticides, along with seeds, plant-growth nutrients and organic compost, as well as a range of agri- services (Bhat, 2013). 201 900 Total 14,714 172,000
  16. 16. ORGANIZATIONAL EVALUATION 16 Note: aRevenues during fiscal year 2011/2012 in billion United States Dollars. bEmployee’s number is estimated at the end of fiscal year 2011/2012. Appendix B Tata Diversification Pattern Industry Indian Operations Foreign Operations Tata Stake 1992 2007 Textiles 1874-2001 Hospitality 1902 1982 41 28.28 Steel 1907 2005 8 30.52a Power 1910 16 Cement 1912-1990 n.a. Soaps and toiletries 1917-1983b Insurance 1919-1956c 1920 Printing and publishing 1931-2003 Aviation 1932-1953 2005 30 31.6 Chemicals 1939 Consumer electronics 1940 22 27.61d Cosmetics 1952-1998 Air-conditioning 1954 2000 30 32.34e Pharmaceuticals 1958-1998 2005 81.65
  17. 17. ORGANIZATIONAL EVALUATION 17 Tea and coffee 1962 Locomotives 1970 47.11 Watches 1984 Financial services 1984 Management consulting 1991 2005 Auto components 1993 2004 n.a. Telecom services 1994 n.a. 50.11 Motor vehicles 1998 n.a. 33.43 Retail (general) 1999 n.a. Car components 2005 n.a. 100 g Retail (electronics) 2006 n.a. 100 Fresh produce 2007 n.a. 50 h Real state 2007 n.a. Note: a Including Tata Sons (24.08) and Tata Motors (4.45). b Tata Cement was sold to Lafarge in 1999.c Sold to Hindustan Lever. d Nationalized. e Acquisition of Volkart Brothers (a Swiss trading firm operating in Bombay since 1851). f Including Tata Sons Ltd. (23.79) and Tata Investment Corporation (2.87). g Including Tata Sons (19.10), Tata Chemicals (7.31), and Tata Investment Corporation (4.88). h Croma is owned by Infiniti Retail, a 100% subsidiary of Tata Sons, while Woolworths of Australia provides technical and sourcing support (Tata Annual Report, 2013).