A Case For Restructuring An Organization


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A case study for organizational discussed as part of an organizational design course.

Published in: Business, Technology

A Case For Restructuring An Organization

  1. 1. A study of a defense organization -TARDEC Sarang Bhutada DoMS, IIT Madras [email_address]
  2. 2. <ul><li>TARDEC is US Army’s Tank-Automotive Research, Development, and Engineering Center, located in Warren, Michigan </li></ul><ul><li>Roots back to 1946, when it was formed with the sole mission of building quality tanks and supplying them to the US Army </li></ul><ul><li>Army’s hub of R&D activity for ground vehicles and their associated integration and logistics </li></ul>
  3. 3. <ul><li>Underwent a major re-structuring in 1989, when Dr. Kenneth Oscar sculpted a paradigm shift in their internal strategy </li></ul>
  4. 5. <ul><li>Showed characteristics typical of a declining organization like </li></ul><ul><ul><li>Shrinking Market Size: Figured on federal Government’s base closure list </li></ul></ul><ul><ul><li>Alternative opportunity seeking: Ventured into civilian space </li></ul></ul><ul><ul><li>Employee turnover: Faced consistently declining employee levels </li></ul></ul><ul><ul><li>Centralized in an ever changing environment: Multi-hierarchical linear structure </li></ul></ul><ul><ul><li>Ageing Infrastructure </li></ul></ul><ul><ul><li>Outdated management practices </li></ul></ul>
  5. 6. <ul><li>Issues concerning organization effectiveness </li></ul><ul><li>Quality management not efficient </li></ul><ul><li>Vehicular technology rapidly changing </li></ul><ul><li>Delayed decisions and longer response times </li></ul><ul><li>Lack of clear vision amongst and within the ranks </li></ul><ul><li>Low input by associates in management decisions </li></ul><ul><li>How do you factor this in and restructure (Delayer) an archaic organization? </li></ul>
  6. 7. Customers Suppliers Government/ Fed Agencies Competitors Armed Forces Auto Industry Academia International Markets Demographic, cultural and social forces Economic Forces Technological Forces Political Forces Specific Environment General Environment TARDEC
  7. 9. <ul><li>TARDEC had a structure that was highly complex, formalized and centralized </li></ul><ul><li>For its very survival it needed to restructure itself into an organisation that would be less formalized and decentralized </li></ul><ul><li>High level of formalization in R&D organizations stifles innovation, and increases red-tapism </li></ul><ul><li>A matrix-structure does promise the best-of-both-world effect </li></ul><ul><li>Each team would work in a product division and would include management expertise from different VPs </li></ul><ul><li>Senior management’s (VPs +) role is now more as a mentor and a guide, than authority </li></ul>
  8. 10. <ul><li>Vertical and top-down </li></ul>
  9. 12. Corporate Level Strategies Business Level Strategies Functional Level Strategies <ul><li>Delve into civilian space </li></ul><ul><li>Pursue top grade quality awards </li></ul><ul><li>Make the organization flatter </li></ul><ul><li>Tie individual performance with organization performance </li></ul><ul><li>Project TARDEC as an innovative organization to the industry </li></ul><ul><li>Detail actions concerning team processes, roles & responsibilities, awards, etc </li></ul>
  10. 13. <ul><li>As per Chandler, new organizational forms are no more than a derivative of strategy </li></ul><ul><li>Growth drivers gave rise to the need for an autonomous, multidimensional structure </li></ul><ul><li>Highly centralized structure inefficient and impractical in dealing with a complex organization, like TARDEC </li></ul><ul><li>For better allocation of resources, accountability of performance and coordination between units team based organization was preferred, which could be monitored </li></ul>
  11. 14. <ul><li>As per Miller and Snow, PROSPECTORS are organisations that </li></ul><ul><ul><li>continually search for new market opportunities. </li></ul></ul><ul><ul><li>Their domain is broad and in a constant state of development. </li></ul></ul><ul><ul><li>The main tasks are maintaining flexibility in technological and administrative components. </li></ul></ul><ul><ul><li>Technologies are less formalised and more embedded in the minds of the organisation’s personnel. </li></ul></ul><ul><ul><li>Planning is based on incremental adjustments based on feedback from experiments. </li></ul></ul><ul><li>TARDEC followed a typical Prospector Strategy: </li></ul><ul><li>Tried to exploit a new market opportunity , by extending into civilian space </li></ul><ul><li>Focused on innovation and applied for various quality awards </li></ul><ul><li>Demonstrated flexibility in scanning the environment for potential opportunities </li></ul><ul><li>Decentralized into a number of teams </li></ul>
  12. 15. <ul><li>The number of employees had been decreasing </li></ul><ul><li>However, with the elimination of a number of levels, we think TARDEC would be in a position to retrench. </li></ul><ul><li>This would result in a loss of routine for a lot of managers, and hence the reduction. </li></ul><ul><li>Since the size of the organization would be decreasing, it would aid in reducing formalization and thus help decentralize easily </li></ul>
  13. 16. <ul><li>TARDEC can be classified as an organization using small batch and unit technology </li></ul><ul><li>Such organizations have typically low technical complexity </li></ul><ul><li>However, flexibility and the ability to respond to a wide range of customer requests make this technology ideally suited to producing new and complex products </li></ul>
  14. 17. <ul><li>Typical characteristics of such an organization, as per Woodward’s Approach includes: </li></ul>*Source: J Woodward, Industrial Organization: Theory and Practice. London: Oxford University Press, 1965 Levels in the hierarchy Span of Control of CEO Span of Control of team leader Structure of organization Type of structure Ideal Small Batch and Unit Tech* 3 4 20 Relatively flat, with a narrow span of control Organic Before Delayering 8 6 4 Tall Mechanistic After Delayering 3-4 5 NA Relatively flat, with a narrow span of control Organic
  15. 18. <ul><li>Key tenets of TQM incorporated </li></ul>Cease dependence on mass inspection to achieve quality. Quality should be a team responsibility. Break down barriers between departments. Put everyone in the company to work to accomplish the transformation Benchmark the organization against the best in industry. Alternatively, set benchmarks for industry to follow. End the practice of awarding business on price tag alone. Instead, minimize total cost
  16. 19. <ul><li>We need to check if de-layering has successfully absorbed the environmental changes </li></ul><ul><li>When the environment is rapidly changing and on-the-spot decisions need to be made, lower-level employees need to have the authority to make important decisions- i.e. they need to be empowered </li></ul><ul><li>The empowered team goes ahead with their decisions, which speeds up the process of decision making </li></ul>
  17. 20. Mechanistic Organizational Structure Organic Low Environmental Uncertainty High Mechanistic Structure Simple Structure Low Differentiation Low Integration Centralized decision making Standardization Organic Structure Complex Structure High Differentiation High Integration Decentralized decision making Mutual Adjustment TARDEC before Delayering TARDEC after Delayering
  18. 21. <ul><li>Impact of Delayering on Culture </li></ul><ul><li>On OCTAPACE parameters- </li></ul>Openness Confrontation Trust Authenticity Proactivity Autonomy Collaboration Experimentation Effect of Delayering
  19. 22. <ul><li>Analysis across the 3 competing dimensions- </li></ul>Before Delayering After Delayering People vs. Organization Organization Centric People Centric Control vs. Flexibility Control Flexibility Means vs. Ends Ends Means
  20. 23. <ul><li>Delayering is an effective approach, available to declining organizations </li></ul><ul><li>Delayering effects need to be carefully evaluated and the negative ones pre-empted </li></ul><ul><li>Dimensions need to be carefully evaluated as discussed above, and validated by existing theories around them </li></ul>