CC BY
44
M. Veres Somosi
The business management of most successful companies is a result of the processes, organizational structure and coordinated operation of supporting systems and employees, which appear in organizational capabilities of the company. Within the business processes, this includes development and continuous improvement of key internal rules and regulations, sharing impact and responsibility, operation of expectations and basic checkpoints for organizational units, creation of most important technical conditions, improvement of human resource knowledge and skills within the business process and putting all the above in service of strategic goals, in which the competence development, performance management systems and knowledge-sharing techniques play a key role.
Keywords: organizational capabilities, organization development, method-choice criterion system, typology of work organizations, metaphoric approach to an organization
The concept of organizational development undergoes a significant transformation nowadays; there is a serious role of the fact that expectations of companies concerning organizational development have increased. The emphasis is increasingly shifting towards the implementation of changes that supports the achievement of strategic goals, providing the largest added value within a tolerable period of time. From a financial point of view, the attention shifts towards detectable effectiveness and promptness. The leading domestic and international companies possess such appropriately detailed strategies that show in the hierarchy of goals elements focusing on financial effectiveness, internal organizational standards, employee competencies and customer satisfaction. In order to justify that, enterprises assess regularly, on the one hand, their own previous performance, on the other hand, they compare themselves with competitors taking into account the market environment. When giving answers to these tests, it is important that the answers not only exist at the organizational level but also provide guidance for the staff to clarify the requirements and plan individual contributions.
The elements determining organizational capability are illustrated in Figure 1.
1 The described work was carried out as part of the TAM0P-4.2.1.B-10/2/K0NV-2010-0001 project in the framework of the New Hungarian Development Plan. The realization of this project is supported by the European Union, co-financed by the European Social Fund.
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Figure 1: Constituents of organizational capability (own edition)
Based on these, it is apparent that the task to create an organization that would meet the expectations listed above is very complex. Most managers can feel it when the organization under their control does not work well, but only few of them know how to improve the situation. A radical reorganization has a rather intimidating effect. On the one hand, it is accompanied by continuous balancing of advantages and disadvantages, negotiations and infinite series of creation of different versions. On the other hand, it has divisive effect and often leads to personal conflicts and power games. Thus, when organizational problems arise, managers often focus on the most important weaknesses, while the entire structure is made more "shapeless" and less strategic in nature.
Typical factors of restricting the adequacy of organizational structure are as follows:
- organizational structures rarely result from a systematic, methodical planning;
- the fragmentary nature of structures is a constant source of frustration for top-level managers;
- skirmish between different business areas limiting cooperation and information sharing of each other;
- too complex structures;
- the operation is controlled much more by the current policy than by control principles;
- blockage of strategic initiatives due to the fragmentation of responsibilities;
- loss of promising possibilities due to the lack of managerial attention.
Due to these factors, environmental changes in a short matter of time make
the companies and institutions review their strategies, structures, and change. The management often does not have reliable instruments and methodological knowledge for complex organizational rearrangements, for systematic, regular mapping and logical structuring of the company and - within that - areas (organizational units) being in critical situation. Therefore, decisions are often based on intuition and individual ideas.
Such structured transformation of a possible model of organization is presented below, which in my opinion, carries the possibility of enlargement, which may be suitable for capability development support.
In order to differentiate the model development, the preparation of typology of work organizations is required, which allows to specify and build-in new areas of investigation. When defining organizational characteristics, the considerations of empirical studies were taken into account as well (Table 1).
In order to refine the way of thinking, the specific approaches of Morgan (1986, 1998; Klein, 2001) have been improved; to present the essence of an organization graphically, metaphors are called for help (Figure 2). When
characterizing an organization, metaphors, on the one hand, expand our thinking, provide deeper understanding and a new approach, on the other hand, they may be one-sided and repulsive. The display importance is that the metaphors created from an organization are powerful tools in understanding single elements of a complex phenomenon, but we get closer to the phenomenon as a whole only if we are capable of displaying these elements alternately or simultaneously and pushing ourselves off single approach. In my opinion, during the development of organizational capabilities the separation from conventional thinking is well supported by a metaphorical approach.
Within the world-wide, almost fierce market competition, companies tend to feel and recognize that within a very short matter of time they may lose their "traditional" competitive advantage resulted from the development, excellent quality, their services, products and technologies, etc. In this way, it gets into their field of view that a more durable competitive advantage can be acquired through competencies. The corporate/institutional competencies make the enterprise competitive only if it is able to show such value producing, personal and group competencies together with skills, which - due to their uniqueness and perfectness - are inimitable by competitors.
Nowadays, due to the effect of economic, political, technological and information globalization, the primary interest of not only large, but small and medium-sized enterprises is efficiency increase, cost reduction, improved resource concentration and allocation, which can be achieved mostly by improvement of competencies and capabilities.
In my opinion, the capability development does not logically differ from the classical process of organizational development; at the same time, we can find common elements and completely different, novel approaches and different emphases within the content of individual phases. The differences in the content of the two processes - organizational development and capability improvement - are presented in Figure 3 as part of the classical process model of organizational development. Within the process model, differentiated presentation of the differences can be realized at the phase of identification of problematic areas, mapping of characteristics of the qualifying system and selection of organization analytical method.
During identification of problematic areas, the organization developing elements are complemented by standpoints characterizing the judgment of capability improvement, ensuring a new approach in thinking.
When recording the initial situation, the areas determining organizational capabilities are shown.
One of the critical elements to successfully carry out the work on organizational development and capability improvement is the successful performance of the analysis.
Table 1: Typology of work organizations
Type of organizational structure Organizationa l characteristic s Traditional Divisional Two- and multidimensional Dual Project Network
Linear Staff Organisati on Functional Matrix Tensor Strategic Business Unit Team Project
Pre-conditions of formation and effective operation * stable scientific, technical and technological market environment, * relatively transparent production/service activities, not too wide product/service structure * Wide product range, heterogeneous product or service structure * Possibility to develop product families * Relatively dynamic environment * Dynamic, heterogeneous external environment * Complex tasks within the organization * Task sharing based on different principles * Developed communication readiness of organization members * Heterogeneous environment within enterprise * Diverse product and production structure * Secondary structure built on the primary structure * Heterogeneo us environment within enterprise * Diverse product and production/ser vice structure Willingne ss to cooperate
Type of subordination connections Clear Shared Overlapped Shared Bidirectio nal subordinat ion Multidirect ional subordinati on Hierarchic levels partly overlapped Multidirection al subordination Built on voluntary membersh ip
Formability of professional contacts Encounters communicati on barriers Coordinatio n of strategic and operative levels Negotiation difficulties in adjacent areas Encounters communicatio n barriers Organizes on the basis of professional contacts Basic driving force
Separability of Fuzzy Strongly Concentrate Directed to Clearly separates Integrates Creatable being directed to goal The
Veres Somosi M. A possible model of development of organizational capabilities 83
routine and innc"~t-v~ acti separable d on top goal on the "f n members are well differentia ted
Formation of cross-sectional functions Results in increase of centralization degree Possible Forms a center by creation of cross-sectional functions
Reducibility of subordination steps Results in increase of width fragmentatio n Leads to concentrati on of functions Possible being directed to goal Subordination levels are controlled by innovation chain Partly or fully out of the subordination system (periodically) Subordination levels are controlled by innovation chain
Specialization possibility Restricted Possible being directed to goal Possible being directed to goal Possible being oriented to goal and task Essential operation element, determini ng goal
Possibility of scope sharing * Centralized decisive authorities * Total regulation * Fit to the task scope * Centralized decisive authority * Total regulation * Decentralize d decisions in relation to head-body division * Centralized decisions within division * Dimension bound scope intersections (overlapped regulation) * Centralization of decisions * Lower level formalization * Double scope sharing ^ double hierarchy * Decentralization of strategic decisions * Dimension bound scope intersections * Lower level formalization Double hierarchy based on contract
Coordination demand * Order-type vertical coordination mechanism * Technocrat ic instruments * Creation of connection between operative and strategic tasks * Channels built for vertical coordinatio n mechanism * Technocr * Application of technocratic instruments (controlling) * Choice of leader * Complex horizontal and vertical coordination being validated * Person-oriented coordination instrument * Application of technocratic and person-oriented instruments * Complex horizontal and vertical coordination being validated * Person- Totally built on technocrat ic coordinati on
* Technocra tic and person-oriented instruments atic instruments oriented coordination instrument
Possibility of task-oriented flexible transformation Restricted Flexible overview provided according to needs Flexible transformation provided according to needs
Personnel placed within organization Restricted by width and depth fragmentation Determined by the extent of division(s) Distributable proportionally to dimensions Domination of primary structure Optimal group size proportionally distributable between dimensions The network size is flexibly adjustable
Possibility of personnel rearrangement Encounters structural barriers Limited due to specialists * Encounters formal barriers * Interpretabi lity of dual solutions Easy within division or between discontinued divisions Flexible Localized in time Flexible
Possibility of mobility Professional and positional progress linked Professional and positional progress linked Unrestrict ed
Possibility to build-in interest decentralizatio n Determination of interest parameters is difficult (cost orientation) Totally built on them Possible to relate to network membersh ip
Lifespan Bound to the period of time of performing task Periodic Built upon contract system
Environmental orientation Depends upon top Depending on Staff Depends upon Environmentally oriented dimensional management Depends upon lifespan Total
Organization is a sum of rationally structured working activities and scopes aimed to achieve certain where the task ofpeople is to operate machinesand oJ^'
where it's expe from everyboH
that they behave in a -defined manner: bureaucratic model basic principlesof an organization
OR
Highlights according to my opinion:
■Sthe culture as specificity differentiating man from other organization levels of organic life,
■S relationship between recipientculture
S culture as factor of
and organiza-X^'^Qnal culture,
enterprise succt ■S types of
organizational culture, ■Sstructure and changes of organizational culture, ■S methods to study organizational culture.
Living organizations wish to sustain their existence byadapting to changing environment, thus
> organizations are unity of communicating people, business opportunities, and technical needs;
> concentrates on the art of survival,
> open to new challenges
N1
Relevant element of this approach is exploration of interests, conflicts and power relations. People thinkdifferently, their interests are different, and they differently react to possibilities. Conflict handling solutions play an important role in resolution of tensions appeared this way.
-ASp0
¡22ÍÍ**
Principal elements of the approach:
■Sthe way of corporate thinking may "entrap" the employees; ■Soften things taking place on the "surface"are reflection of hidden spiritual structures and dynamics; ■Sthe unconscious inhibiting factors may be a serious barrier for the formation of creative processes; ■S unrecognized, undesired drivingforce or such a force where both constructive and destructive components are present.
A number of organi approaches, which start fro this one:
> just-in-time,
> internet,
> educational organization,
> Kaizen,
> Total Quality Management,
> organization as holographic brain (self-organization and regeneration)
The classical organization theory has dealt mainly with such organizations that manufactured real products. A significant number of modern organizations Y ^with manufacture of 'fy ^.ract something".
reciprocal
correlation
chaostheory
I
Unity of opposites, negation of the negation and transition from quantity to quality
renovates avoid possibilities of mistakes;
think in a long matter of time <-» seek
immediate results; be flexible <-» follow the rules; cooperate <-» compete; decentralize <-»take control in your hand;
specialize <-» get a special offer; manufacture cheaper«-^ improve quality.
ON
to
The "hateful face" of thi| organization ■Sexploitation of per workmania, accider health damage, stress; ■Sdomination of multinational o
<fp VTipanies jt* extreme O >iwer within the hands of few; nr <-> rich countries size of opposites.
. AS MENTAL PRISON
Veres Somosi M. A possible model of development of organizational capabilities 87
Figure 2: Metaphoric approach to an organization (own edition started from the systematization of Klein (2001))
Figure 3: A classical model of organizational development - complemented by the development of organization capabilities (own edition)
1
Choice of the method of organization analysis •analysis of organizational connections (What does the organizational performance depend upon?) •analysis of factors acting on the structure of enterprise (What is the role of organizational characteristics in the organization characteristics?) •analysis of connections between the organizational structure and environment (How does the environmental uncertainty act upon the enterprise?) •factors influencing the organizational development, analysis of organization characteristics (How to determine the main factor?) •analysis of quantitative factors between the organizational structure and organizational performance (How to quantify the cross-connections?) Choice of the methodology of organizational capability analysis •appropriatefit is the base of competition (Does the organizational structure adequately direct the attention of management to the sources of competitive advantage on all the markets? Can we compete with other enterprises in capability improvement?) •value added by the top management (Does the organizational structure help the top management to contribute added value to functioning the organization? Does the clarification of strategy structure and development of capabilities take place in order to ensure the future?) •allocation of resources (Does the organizational structure reflect strengths, weaknesses, motivation of the employees?) •feasibility (Are there known factors preventing or restricting the implementation of planned organizational structure?) •refining structure, good plannability (Can the enterprise structure be interpreted as portfolio of capabilities, products and business units? Does the organizational structure tolerate or support the formation of cultures/subcultures different from the general one?) •problematic connections (Does the organizational structure provide coordination instruments to handle problematic, conflicting connections between organizational units?) •redundant hierarchy / status of business units (Isn't there too many hierarchic levels and units in the organizational structure? Can the strategic business unit be considered storehouse of basic capabilities?) •accountability (Does the organizational structure help effective control?) •flexibility (Does the organizational structure help the development of new strategies and give flexibility required by adaptation to the change?)
i
Recording method(s), mapping analytical parameters, determination of analytical criteria, analysis
+
Formulation of analytical results as organizational development/organizational capability improvement goals and tasks
*
Deve lopment of organizational de M^opmerii/organizational capability improvement yariations
*
Review of variations according to the selected ranking method(s), evaluation
*
Introduction of the selected solution
*
Continuous check and further development of the new organizational solution
Figure 3 continued (own edition)
What are the key features of the analysis process? First of all, it should contain the designation of boundaries of the situation study, that is an accurate definition of the test subject, and then make a distinction between the state and operation test. The actual structure of each organization - whether it is created as a result of conscious or spontaneous interventions - determines essentially the operation rules, the effectiveness together with the limits. Their study and recognition is a prerequisite of effective search for solution. Accordingly, there are so-called state-dependent failure reasons, which depend upon the level of organization of the tested subsystem/sub-capability. These error factors can be identified as a result of comparative measurement with recognizable effective organizational solution in the given area. As for their nature, they can be classified into the category of corporate/institutional category reserves. Therefore, the state tests concentrate on the collision of the actual situation and the "ideal" state. In addition, the function of each subsystem/sub-capability is burdened by numerous detectable occasional or constant failure phenomena. At a first glance, the persisting problems and operation failures that may arise during daily work and originate from the breach of regulations and rules determining the system operation mode, and breach of working practices are classified into the so-called operation failure group recognized in their surface appearance form. These operation failures are classified into the loss category. Their study occurs by comparing the planned and actual operation mode.
Operation studies - through the evaluation of the target-task-tool procedure consistency and efficiency - may give information for the determination of optimal tightness of control, for the transformation of interest and motivation system, for the elimination of temporary failures and limits, while it is possible to analyze whether the system designer intentions failed due to occasional or structural barrier factors. The determination of goals and directions of organization and capability analysis is followed by the selection of method of organization/capability analysis; one of its possible criterion systems is presented in Table 2.
When composing Table 2, the author waived from individual organization of methodologies such as factor and cluster analysis, correlation and regression calculation, combination of multivariable mathematical-statistical methods, KIPA, CHECKLAND, simulation model, etc; interpretation examples are specified according to standpoints. Generally, the following can be stated about the methodologies:
- the methods meet differently the respective requirements;
- the user is offered a number of approaches, which makes it easier to fit the decision-making situation, makes the decision-making process more efficient, fit to interest and influence relationships originating from user roles, adapt to users' way of thinking and communication patterns;
- the effectiveness of each method for a given problem is to be determined.
Table 2: Method-choice criterion system for analysis of organization _and its capabilities (own edition)_
STANDPOINTS INTERPRETATION DOMAIN / EXAMPLES
Basic goal, determination of directions of organizational analysis Organizational analysis * analysis of organizational connections, * analysis of factors acting on the organizational structure, * analysis of organizational structure and connections with environment, * test of factors acting on the organizational development and of organization characteristics * test of quantitative factors between organizational structure and organization efficiency, * test of strategy - structure - organization efficiency and environment. Analysis of organizational capabilities * appropriate fit is the base of competition, * value added by the top management, * allocation of resources, * feasibility, * good plannability, * problematic connections, * redundant hierarchy, * accountability, * flexibility
Task size whole organization / part of organization / business branch / partial skills / personal skills
Demarcation of test state and/or operation state / operation
Formal presentation of qualifying system quantitative and/or qualitative parameters
Mode of formation of evaluation parameter * correlation of criterion fulfillment indicators with the maximum score, * function / cost ratio, * sum, ratio, preference and disqualification indicators, average, frequency values, * connection analysis, causal connections
Mode of evaluation * sequential or interval scale * association graph * simulation * normative and diagnostic analysis
Application condition * hierarchic structuralism * tests * textual aspects
Usable auxiliary method NCM, BS, graphical method, advantage-disadvantage analysis, questionnaires, PARETO analysis, Guilford type pair-wise comparison, RADAR, STEEPLE, VVI
Number of analysis participants person and/or group
Structural elements of qualifying system resources, centralization - decentralization, capabilities - results.
In order to choose the analytical methodology for the improvement of organizational capability and to perform the analysis, the author composed a line of standpoints, which is applicable to the evaluation of both existing structures and new ones. There is a separate study performed or a methodology applied behind all the points; their strength is not in their innovative nature but in their accuracy and completeness. In this approach, each functional element should show the same values and put the company closer to the implementation of its strategic objectives. Finally, as a second critical phase of organizational development and capability improvement the method-choice criterion system for variation ranking is devised for the effective implementation (Table 3).
Table 3: Method-choice_ criterion system for variation ranking (own edition)
STANDPOINTS INTERPRETATION DOMAIN / EXAMPLES
Task size Random/limited from above/below depending upon the number of variations
Principle of sorting reference Referred to one another, referred to ideal, referred to the best, referred to the fastest
Recording of standpoints of opinion-makers * determination of contribution extent to the goal to be achieved, * determination of percentage of variations compared to the ideal, * based on actual values as compared with target, * qualification of variations according to scale containing different grades, * determination of minimum value of weighted divergence, * determination of opinion centers, quantification of tightness of opinion agreement, * analysis and evaluation of reliability of forecasts with the help of connection testing, * determination of optimal performance concerning all goals with single or multiple value(s).
Determination of comparison dimensions * qualitative dimensions/effects, * quantitative dimensions/actual quantifiable values, * qualitative and quantitative dimensions.
Determination of property expression criteria * with the help of an auxiliary method (BS, Delphy, ...), * collection of factors helping goal implementation and logically linked to the goals, * determination of functions having impact upon implementation of the basic function, * PARETO analysis
Number of opinion-makers person and/or group
Table 3 continued (own edition)
STANDPOINTS INTERPRETATION DOMAIN / EXAMPLES
Mode of criterion weighing (presuming interpretation according to the criterion system) * direct estimation, * pair comparison, * determination of importance grades by criteria, * determination of expected values of weight and scatter by criteria, * semi-matrix procedure, * in case of n criterion, formation of 1/m relative weight, * with the help of a qualitative scale, * appearance on interval scale - inhibition percentage of performance of the basic complex function by worst performance of the given function.
Sort-serving measurement principle * uses the measured values of sequence scale ^ Spearman-type rank correlation coefficient * determination of preference sequence based on preference ratio, * putting of evaluation factors on the interval scale ^ consistence matrix, ^ relevance numbers, ^ relative importance coefficients, ^ determination of the ratio of sum differences, ^ single and/or multiple evaluation, ^ by using real inhibition factors of all functions, ^ usefulness functions; * determination of distance values, * classification of variations into five categories (K-S one-sample significance test), * advantage-disadvantage comparison, * comparison of qualification results and requirements by criteria.
Basis of measurement evaluation * weighted, complex formal evaluation, * with the ratio of disadvantage series, * with the help of individual and aggregate preference table, * with the help of rank correlation matrix, * as weighted sum with determined total relevance numbers, * as simple sum with the help of determined absolute importance coefficients, * with the sum of simulated step variation values, * product of weighted individual values, * construction of weighted distance values, * with the help of implementation factor (by subtracting real inhibition factor from 100), * by systematic application of rules, * choice by weighing advantages/disadvantages, * selection by filtering rule and threshold, * with the help of overall usefulness (sum of the products of usefulness and weights).
Suitability conditions * record of presupposition of effects,
* hierarchic structurability of the tested system,
* determination of limits of pre-selection,
* restriction of homogeneous systems to a set.
Bibliography
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