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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
procedures 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:
Reduces and overcomes functional barriers
Increases responsiveness to changing product or customer needs
Opens up communication between functional specialists
Provides opportunities for team members from different functions to learn from each other
Uses the skills of specialized employees who move from product to product, or customer to customer, as needed.
In practice, there can be many problems with a matrix structure. The disadvantages:
Lacks a control structure that allows staff to develop stable expectations of each other
Staff can be put off by the ambiguity and role conflict produced
Potential conflict between functions and product or customer teams over time.
6.1.6 Deciding on a structure
Notice how each phase influences the other over time. The sequences are not always inevitable or linear. Each phase is neither right nor wrong. They are signposts to guide the organization. By understanding the current state, senior executives are better able to decide in what direction, and how far, to move along the centralized-decentralized spectrum.
The key to applying service management organizational development is understanding the following:
Where the organization is in the sequence
The range of appropriate options
Each solution will bring new challenges.
6.1.7 Organizational change
No matter what type of change the organization decides on, there remains the problem of getting the organization to change. Implementing change can be thought of as a three-step process, as in Figure 6.9.
Figure 6.9 Three-step change process
Resistance to change will force the organization to revert to previous behaviours unless steps are taken to refreeze the new changes. Role and task changes are not enough. Managers must actively manage the process.
1. The first step to change is diagnosis. Namely, acknowledge the need for change and the factors prompting it. For example, complaints about service quality have increased or operating costs have escalated. Or morale is low while turnover is high. There is little point in focusing on improving costs if the customer is concerned about quality.
2. The second step is determining the desired state. While this can be a difficult planning process with alternative courses of action, it begins with the organization’s strategy and desired structure. Is the strategy based on reducing costs or improving quality? Should the organization adopt a product or geographic structure?
3. The third step is implementation. This three-step process begins with identifying possible impediments to change. What obstacles are anticipated? For example, functional managers may resist reductions in power or prestige. The more severe the change then the greater the difficulties encountered. Next, decide who will be responsible for implementing changes and controlling the change process. These change agents can be external, as in consultants, or internal, as in knowledgeable managers. External change agents tend to be more objective and less likely to be perceived to be influenced by internal politics, while internal agents tend to have greater local knowledge. Last, decide on which change strategy will most effectively unfreeze, change and refreeze the organization. These techniques fall into two categories: top-down and bottom-up. Top-down is a dramatic restructuring by senior managers while bottom-up is a gradual change by low-level employees. Example techniques include:
Education and communication
Participation and empowerment
Facilitation
Bargaining and negotiation
Process consultation
Team building and inter-group training.
6.2 Organizational departmentalization
It is common to think of organizational hierarchies in terms of functions. As the functional groups become larger, think of them in terms of departmentalization. A department can loosely be defined as an organizational activity involving over 20 people. When a functional group grows to departmental size, the organization can reorient the group to one of the following areas or a hybrid thereof:
Function – preferred for specialization, the pooling of resources and reducing duplication
Product – preferred for servicing businesses with strategies of diverse and new products, usually manufacturing businesses
Market space or customer – preferred for organizing around market structures. Provides differentiation in the form of increased knowledge of and response to customer preferences
Geography – the use of geography depends on the industry. By providing services in close geographical proximity, travel and distribution costs are minimized while local knowledge is leveraged
Process – preferred for an end-to-end coverage of a process.
Certain basic structures are preferred for certain service strategies, as shown in Table 6.1.
Basic structure
Strategic considerations
Functional
Specialization
Common standards
Small size
Product
Product focus
Strong product knowledge