Organizational Context and Structure
Nowadays organizations function in a complex, dynamic environment with an increasing demand for fast and effective strategic responses.
Management sensitivity both to an increasingly turbulent environment and to the expectations of those involved in organizations - employees, shareholders, regulators and the managers themselves - is a responsibility that is becoming more and more important.
It is a demanding job for most managers to reconcile the complex issues of business with an understanding of the human side of doing business.
Different strategies require different blends of people and systems; the size of the company and the diversity of activities determine the range of skills, opportunities and rewards for managers; the history of an organization and the dominant values or culture condition strongly the way the business is structured and operated; the degree of change in the environment, the degree of diversity and complexity of the environment, will be very influential on the choice of people, structure and systems.
The 'picture' that emerges is one of an organization where changes in its business are anticipated or quickly identified; appropriate responses are quickly designed; the responses are effectively implemented at a minimum cost.
This behavior would be possible because the company is staffed with more than enough talented managers who are skilled at organizational analysis, as well as having relatively adaptable employees. Informal relations among these people would be characterized by trust, open communications and respect for others' opinions. The formal design would include effective integrating devices, sensitive and well-designed measurement systems, reward systems that encourage adaptability and development systems that help support the achievement of business objectives.
Very few companies have organizations with characteristics even close to the above 'picture'.
Although many executives appreciate the benefits of organizational adaptability, existing evidence suggests that most organizations nevertheless cannot be described as adaptive and - even stronger - do not demonstrate the business foresightedness for creating lasting high performance. The inability of their organization to anticipate the need for change and to adjust effectively to changes in its business or in its organization causes serious problems.
As a result, poor collaboration and coordination, low morale and high turnover affect the organization’s performance: goals are not achieved and re-sources are wasted.
The forces that prevent organizations from developing a high level of adaptability and which can push successful companies into decline, are strong and numerous.
At least five reasons account for the inflexibility and short-sightedness of most organizations:
- The first and most significant restraining force is related to resources; hiring, assimilating and training/developing highly effective managers, management teams and staff; designing systems to measure performance and to achieve optimum levels of integration; developing/maintaining good relationships among managers and their employees require substantial investments
- A second reason for the non-adaptive (bureaucratic) behavior of organizations is that managers are not very skilled at producing the characteristics of an effective organization in the long run; organizations generally invest resources in current operations and not necessarily in producing adaptive human systems
- A third reason is that some stakeholders clearly benefit from a static organization
- The size of the organization can require substantial infusion of resources to overcome the organizational 'entropy'
- A fifth reason is that executives, based on their perceptions of the company's future, decided that their organization only needs a certain level of adaptability and therefore invest relative few resources in creating adaptability.
It is one of the roles of leadership to maintain the stability of the organization - avoid the decline in performance - while at the same time - at least - to adapt it to environmental change and - ideally - to achieve the leadership position in its industry.
In short, creating a highly adaptive organization requires talent rich management, time, energy and money: scarce resources, which management must nurture and allocate as effectively as possible.