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Outside forces greatly influence an organization’s service strategy, which in turn determines the organizational structure. Where the lines are drawn depends on what the organization is attempting to accomplish. A service strategy then becomes an implicit blueprint for an organization’s design, shaping scale and scope. Scale refers to size. Scope refers not only to the broadness of service offerings – it also describes the range of activities the organization performs. When an organization decides on a make-or-buy strategy, for example, it is determining the scope of its activities. The trade-offs are control versus coordination.
An organization’s age and size affect its structure. As the organization grows and matures, changes in role s and relationships must be made or problems will arise. This is particularly important for organizations adopting a service orientation, as pressures for efficiency and discipline inevitably lead to greater formalization and complexity. The risk over time is that the organization becomes too bureaucratic and rigid.
Most IT organizations tend to grow for prolonged periods without severe setbacks. The term evolution describes the quieter periods while the term revolution describes the upheaval of management practices. Organization s are generally characterized by a dominant management style: Network, Directive, Delegative, Coordinated or Collaborative33 (Figure 6.3). Each style serves the needs of the organization for a period of time. As service requirement s evolve, the organization encounters a dominant management challenge that must be resolved before growth can continue. The organization can no longer address its service challenge with its current management style. Nor can it be successful by retreating to a previous style – it must move ahead.
Figure 6.3 Stages of organizational development
6.1.1 Stage-1: Network
The focus of a Stage-1 organization is on the rapid, informal and ad hoc delivery of services. The organization is highly technology-oriented, perhaps entrepreneurial, and is reluctant to adopt formal structures. Innovation and entrepreneurship are important organizational values. The organization learns which processes and services work and adjusts accordingly. The organization believes that informal structures are far better suited to the resource s required to deliver services. Past successes reinforce this belief. As the service demands grow, this model is not sustainable. It requires great local knowledge and intense dedication on the part of the staff. Conflict is created as staff resist the creation of service structures.
As the organization grows and the need for efficient resource s increases, leaders are confronted with the task of having to manage an organization. This is a very different skill from technology and entrepreneurship and often a task for which leaders find themselves ill prepared.
A common structure in this stage is called a network (Figure 6.4). A network structure is a cluster whose actions are coordinated by agreement s rather than through a formal hierarchy of authority. The members work closely together to complement each other’s activities. The goal of the organization is to share its skills with the customer in order to allow them to become more efficient, reduce costs or improve quality.
The key advantages of a network structure:
The practical disadvantages of a network structure:
Figure 6.4 Services through network
Guidance: to grow past this challenge requires a significant change in leadership style. While this is accomplished through a variety of human performance techniques and methods, the desired outcome is a cadre of strong managers skilled and experienced in service management structures. Their influence and business focus are essential for moving to the next stage.
6.1.2 Stage-2: Directive
The Stage-1 crisis of leadership ends with a strong management team. They take responsibility for directing strategy and direct low-level managers to assume functional responsibilities (Figure 6.5).
The focus of a Stage-2 organization is on hierarchical structures that separate functional activities. Communication is more formal and basic processes are in place. Although effort and energy are diligently applied to services, they are likely to be inefficient. Functional specialists are frequently faced with the difficult decision of whether to follow the process or take the initiative on their own.
Figure 6.5 Services through direction
A crisis of autonomy arises because the centralization limits decision making and the freedom to experiment or innovate. Entrepreneurial motivation is degraded. For example, high-level approval is needed to start new project s, while successful performance at the lower levels goes unnoticed or unrewarded. Staff become frustrated with their lack of autonomy. By not solving this crisis, the organization limits its ability to grow and prosper.
Guidance: to grow past this challenge requires a shift to greater delegation. Responsibility for service processes should be driven lower in the organization, allowing process owner s to be responsible for lower-level decision making and service accountability.
6.1.3 Stage-3: Delegation
The Stage-2 crisis ends with the delegation of authority to lower-level managers, linking their increased control to a corresponding reward structure (Figure 6.6). Growth through delegation allows the organization to strike a balance between technical efficiency and the need to provide room for innovation in the pursuit of new means to reduce costs or improve services.
The focus of a Stage-3 organization is on the proper application of a decentralized organizational structure. More responsibility shifts from functional owners to process owners. Process owner s focus on process improvement and customer responsiveness. The challenge here is when functional and process objective s clash. Functional owners feel a loss of control and seek to regain it. At this stage, top managers intervene in decision making only when necessary.
Figure 6.6 Services through delegation
Guidance: Rather than the frequent reaction of returning to a functionally centralized model, the recommended approach is to enhance the organization’s coordination techniques and solutions. The most common approach is through formal system s and programme s.There are occasions when an organization attempts to resolve the coordination challenge by centralizing on a process, rather than functional model. Rather than creating a white space between function s, this leads to white space between processes. In other words, a pure process model is as problematic as a purely functional organizational model. A balance should be sought or the organization will revert back to a crisis of autonomy.
6.1.4 Stage-4: Coordination
The focus of a Stage-4 organization is on the use of formal system s in achieving greater coordination (Figure 6.7). Senior executives acknowledge the criticality of these systems and take responsibility for success of the solutions. The solutions lead to planned service management structures that are intensely review ed and continually improved. Each service is treated as a carefully nurtured and monitored investment. Technical functions remain centralized while service management processes are decentralized.
Figure 6.7 Services through coordination
The challenge here is the ability to respond to business needs in an agile manner. The business often adopts a perception that IT, despite its service orientation, has become too bureaucratic and rigid. While the linkages to the business may be well understood, innovation is dampened and service procedure s have taken precedence over business agility.
6.1.5 Stage-5: Collaboration
Figure 6.8 Services through collaboration
The focus of a Stage-5 organization is on stronger collaboration with the business (Figure 6.8). Relationship management is more flexible, while managers are highly skilled in teamwork and conflict resolution. The organization responds to changes in business conditions and strategy in the form of teams across functions. Experiments in new practices are encouraged. A matrix-type structure is frequently adopted in this phase.
A matrix structure is a rectangular grid that shows the vertical flow of functional responsibility and a horizontal flow of product or customer responsibility. The provider effectively has two (or more) line organizations with dual lines of authority and a balance of power; two (or more) bosses, each actively participating in strategy setting and governance.
An organization with a matrix structure adopts whatever functions the organization requires to achieve its goals. Functional personnel report to the heads of their respective functions but do not work under their direct supervision. Rather, the work of the functional staff is primarily determined by the leadership of the respective cross-functional product or customer team. The matrix relies on minimal formal vertical control and maximum horizontal control from the use of integrated teams.
The key advantages of a matrix structure:
In practice, there can be many problems with a matrix structure. The disadvantages:
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