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Competition

Competition is a critical aspect of any business. Competition decreases market share. However, it promotes innovation which often results in business growth. Business managers must be able to adapt to changes within and outside the business environment to stay ahead of the competition. One way to do this is by using change management tools to adapt to these environmental changes. To develop a strong competitive strategy, it is important that the business conducts a competitive analysis to gain an understanding of the markets, the business capabilities, and customer base. After understanding these components of the business environment, managers can then develop strategies to handle the competition.

In creating the strategy for managing competition, the business owner would first have to identify who the top 3-10 competitors are. Business owners also need to identify their indirect competitors and identify the share of the market held by each competitor. From there, the business should begin to increase its own market share through targeted marketing efforts, based upon competitors’ strengths and weaknesses. For example, a business may need to compete with rival companies by offering lower prices or better customer service (Ames, n.d.).

Marketplace

The marketplace affects how an organization is structured. For example, a manufacturer may decide to sell products via wholesalers or directly to end-users, and for this model to work, the organizational structure would have to be designed in a way as to keep these elements separate by having a dedicated marketing and sales team for each customer base (Ames, n.d.).

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Health and Safety

It is the duty of every employer to maintain a safe and healthy work environment. Doing so is required by law, but it also reduces costs associated with lost productivity, workers’ compensation, and damaged morale. Health and safety programs differ from one organization to another based on factors such as industry and job types. While most organizations are required to comply with OSHA, formal safety training makes far greater sense for some industries and employee populations than others. A training on blood-borne pathogens is much more relevant to a healthcare organization than to a logistics company. Slips, trips, and falls training is more appropriate for warehouse employees than for people working in the accounting department.  To build a successful safety program, there must be a team of managers committed to making the program work, employees engaged in the program, and a system available to identify and control hazards. Health and safety programs should be continuously improved based on audit results and identified opportunities for improvement. A regular schedule should be put in place to evaluate compliance with the requirements of the health and safety program (Maine Department of Labor, n.d.).

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Strategic Control

Strategic controls are processes that are designed to manage the execution of long-term strategic plans. They ensure that the steps required to achieve the organization’s strategic goals are executed. The steps of the strategic control process allows management to set standards, measure the organization’s performance, compare their performance against the standards set, and adjust business activities, as needed. These steps can be established for any business activity, such as production, packaging, or delivery in order to improve the organization’s performance. Because the act of managing in a rapidly changing environment can be complex, implementing the process control process prevents an organization from becoming obsolete.

Process control is achieved by establishing performance standards and measuring the actual performance of the organization against these standards. Measuring performance allows managers to assess how well processes are working. Process control is a continuous assessment of processes that allow organizations to evolve with changing times, and increase the quality and efficiency of output.

In an industrial enterprise, these standards could include sales and production targets, safety records, work attendance goals, etc. In service industries, these standards might include the number of times a customer has to wait on a queue or the number of new clients attracted by a revamped advertising campaign.

Organizations may opt to follow industry standards set forth by outside organizations such as ISO (International Organization for Standardization) standards or they may develop their own internal standards. Some standards are set forth to comply with legal requirements and some are created to follow best practices.

Performance may be measured based on adherence to established standards. Measuring performance should be done proactively so that any deviations from standards can be avoided by taking appropriate actions. If performance falls short of standards, corrective action is required (iEduNote, n.d.).

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Many different elements contribute to the success of an organization. Managers should, therefore, be able to identify, manage, and utilize these elements to ensure their organization remains competitive. This chapter highlights a few critical elements present in every organization and explains how managers can effectively manage these features to ensure organizational success.

Technology

Strategic technology management contributes to the value of the organization by ensuring that cash flow remains sustainable. Improvements in product quality and costs, as well as breakthroughs that create new market opportunities, all result from effectively leveraged technology. When effectively managed, technology facilitates the achievement of organizational goals.

There are many aspects of a business where technology can be leveraged, such as in marketing, product development, and the overall business strategy. An organization can manage technology effectively by setting and conveying strategic priorities, overseeing projects to ensure results are achieved in a timely fashion, and effectively using linkage within and outside of the organization (Erickson, Magee, Roussel, and Saad, 1990).

Culture

The culture of an organization is an essential part of any company’s philosophy. It is best characterized as the personality of the company. An important part of company culture is how employees and managers relate to each other within the company, and how the company handles its relationships with its customers. Culture is what differentiates each company from its competitors. Companies like Google, for example, work to maintain an informal, agile culture with innovative benefits for employees.

The way people in an organization conduct themselves can be a powerful asset or a real obstacle to the implementation of strategic innovation. Managers contemplating changes to the culture of the organization to support strategic change will need to determine which elements of the organization will support the needed change. This can include deciding which employees should remain with the organization, who should have decision-making authority, and how to align these decisions with the priorities of the organization (The Bridge Group, n.d.).

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Departmentalization

This element of organizational structure is the process of combining jobs or staff into groups to create functional units called departments. Departmentalization is the formal structure of an organization which gives it the ability to grow and form new sub-units and levels of management. However, this often results in less flexibility and adaptability within the organization (iEduNote, n.d.). There are several bases for departmentalization, which include:

  Functional departmentalization: This involves grouping together all activities that are similar in nature or related to a function in one department. Organizations that are divided by functional departments are able to fill positions with experts. Examples of this would be a production, purchasing, or finance department.

  Product departmentalization: This involves grouping all activities related to manufacturing a product into the same department. All resources and tasks usually fall under the authority of a manager who specializes in the product being manufactured. An example of this would be a company that manufactures both motorcycles and cars dividing their company into two departments: one for the production of motorcycles and one for the production of cars.

  Customer departmentalization: This method is used when the emphasis is placed on effectively serving different types of customers. An example of this would be a business creating a separate department to serve its wholesale customers and another department for its retail customers.

  Departmentalization by Process: This involves dividing the different processes involved in manufacturing products into separate departments. The departments creating the different components would require special skillsets. An example of this would be a company that produces leather handbags and shoes having a department for dyeing, one for stitching, and so forth.

  Departmentalization by Task Force: This involves assigning a team or task force to a specific project which extends from the beginning to the end of that project. Rolling out a new payroll system, for example, might require a task force comprised of HR, Finance, and IT professionals. The task force is dissolved and the employees return to their regular duties following the completion of the project.

  Geographic (Territory) Departmentalization: This involves arranging departments by territories or regions that an organization serves. An example of this would be an organization dividing its sales department by regions with each region having its own Regional Sales Manager.

  Matrix Departmentalization: Matrix departmentalization combines two departmental structures (often functional and task force) to improve the integration of multiple components for a specific activity, to improve economies of scale, and deliver enhanced services to customers and the organization (iEduNote, n.d.). In organizations that follow the matrix organizational structure, employees report to more than one supervisor: a direct supervisor and a project manager. An example of this would be an employee from the accounting department assigned to work with the production division but still reporting to the managers of both departments. A downside to matrix departmentalization is that effective communication becomes more challenging.

Formalization

Specialization and formalization are similar in that they deal with how jobs are structured within an organization. However, there is the main difference between them: formalization focuses on the position rather than the person in the position. Formalized structures use organizational job descriptions, rules, procedures, and processes to define the job and control an employee’s tasks. In formal organizational structures, there is a divide between the employee and the position so that the position remains the same no matter who is in the position.

Whereas, in an informal organization, more value is placed on the individual rather than the position, allowing for an expansion of a role based on the employee’s skill set, preferences, etc. This allows an organization to put more importance on the employee rather than on the department or team the employee belongs to (Devaney, 2014).

Centralization and Decentralization

Centralization occurs when decision-making in an organization is concentrated at a single point, higher up in the chain of command while decentralized organizations take on more of a democratic decision-making process. Decentralized organizations empower managers and employees, lower in the chain of command but that are more familiar with the problem, to make decisions.

Both organizational structures have their own pros and cons. Centralization provides employees with uniformity through a clear chain of command and standardized policies and procedures. It also results in a more efficient operation. However, it can lead to inefficiencies in decision-making by management that is out of touch with business operations and diminishes individual initiatives among employees. Decentralized companies allow for a quicker decision-making process and employees experience greater levels of procedural fairness. However, some disadvantages of decentralization are increased cost because of duplicating administrative services and conflicts between divisional heads. Finding the right balance between centralization and decentralization can be a challenge for many organizations, but when done successfully, it provides many benefits.

In conclusion, the degree to which an organization is formalized, centralized, the type of departmentalization it uses, the number of levels it has, the chain of command, the span of control, and the extent of specialization are all key elements to the structure of an organization. These elements affect the extent to which the company is effective and innovative. Properly structuring an organization results in better communication and optimal use of resources, which drives the overall success of the organization.

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Great businesses are not built in a vacuum; there are certain elements that not only determine the structure of the organization but also their operation. These are elements that play a major role in the goals of the company, divisions, and teams, and help define the roles of employees and resources in the organizational structure.

Without a plan for managing the various elements of an organization, an organization may fail to function efficiently or even fail completely. So, what are these essential elements of an organization? And how does management go about managing them? The six essential elements of an organization include:

Chain of Command

The chain of command is the line of authority in any organization that begins at the top level and ends at the bottom. It is the complete layout of authority, and it functions as a roadmap detailing who employees should report to. The two key concepts of this element are:

    Authority: This refers to the right to issue a command, order, or instruction and compel subordinates to take certain actions.

    Responsibility: This refers to the obligation of the subordinate to perform work that is assigned by a supervisor.

While the chain of command relates to the overall hierarchy of the organization, unity of command is one of Fayol’s 14 principles of management that states that an employee should only have one direct supervisor. Fayol believed that if an employee is assigned tasks by more than one supervisor, it may lead to confusion for the employee and conflict (Toolshero).

Span of Control

The span of control refers to the number of employees each manager is responsible for supervising in an organization. This element of organizational structure seeks to determine the number of managers an organization needs to effectively supervise employees based on the number of employees and departments it has. The more employees an individual manager has, the wider the span becomes. However, that number may be different for each organization (Meng, 2017).

Work Specialization

Work specialization, also known as division of labor, refers to the extent that a job, necessary for reaching organizational objectives, is broken down into separate tasks. This is done in situations where a job cannot be handled by one person or would require multiple areas of expertise to produce a single product. Work specialization results in employees becoming masters in a specific area of expertise. This allows managers to assign these employees to a specific task with minimal supervision (Devaney, 2014). When an employee gains knowledge and experience in a specific area of expertise this is called job specialization. While job specialization can result in increased productivity and high job satisfaction. Over time it could result in employees becoming bored with their jobs or being limited in the type of jobs they are able to perform.