This proposal dwells upon the organizational structure of Hexaware Technologies, an India-based IT and BPO (Business process outsourcing) services company where I was employed on the similar organization as an analyst in the engineering solutions domain. This organization has been chosen for the present research into organizational theory since being an ex-employee gives an opportunity to give a first-hand account of working relationships between different units in the organization.
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Robbins and Barnwell define an organization in the book of Organization Theory Concepts and Cases as “a consciously coordinated social entity, with a relatively identifiable boundary, which functions on a relatively continuous basis to achieve a common goal or a set of goals” (Robbins and Barnwell, 6). Hexaware Technologies, is an IT major from India which ranks among the Top 20 software companies in the country (Hexaware). Hexaware also has been able to achieve the highest recognised credentials in the software industry: SEI CMMI Level 5, ISO 9001:2000 and BS7799 standards (Hexaware). It has over 1000+ global clients across North America, Europe and Asia-Pacific with 2008 revenues standing at US$262 million (Hexaware).
In the products solutions space, the company has acquired requisite experience in several large IT applications including Internet technologies, SAP, Oracle, SOA and open source technologies (Hexaware). Hexaware has a large, robust and state-of-the-art IT infrastructure at its main office in India as well as development centres in USA, Germany and Mexico (Hexaware). Among the verticals it services include Manufacturing, Health care, Engineering, Hospitality and Tourism, BFSI (Banking and Financial Services Industry), Insurance and more (Hexaware). The company is currently headed by the CEO P.R. Chandrashekhar and has undergone an aggressive recruitment drive at top-notch graduate/engineering institutions around India, and also other countries.
Now, it is necessary to take a closer look into the organisational structure at Hexaware.
The Structure of Hexaware Technologies
In the Journal of Leadership and Organization Development Aelita and Maris Martinsons classify the Organizational structure to three structures which are Functional structure, Divisional structure and matrix structure (Martinsons & Martinsons, 25). In this light, Hexaware has a matrix structure because it has different units working on different software/outsourcing projects. As can be seen in Fig 1., the projects are differentiated according to whether they benefit the industry or technical streams, thus, industry and technology solutions have been pointed out.
In each Hexaware project, the project manager or team lead reports to the Vice-President through the general manager or some other go-between executive. This allows the advantage of concentrating the power into the hands of both a centralised authority as well as delegating it to key project executioners who have functional responsibilities (Martinsons & Martinsons, 27). Among the various benefits of this arrangement, a few important ones stand out.
- First, there is reduced conflict between various team-members because of a standalone hierarchy which aims to give uniform direction to the entire project. This leads to less internal bickering between team members on issues of common interest such as job promotions, salary incentives and such (Robbins and Barnwell, 108).
- Since, operations are simultaneously centralised as well as decentralised due to the matrix arrangement, it directly impacts productivity in the organisation. Employees assigned to a project are attuned to delivering their part of the project activity within deadline which consequently leads to better workflow and improved communication.
- Reduced stress in the team due to proactive resolution of work-related problems.
- Cost-savings due to increased business focus on part elements of the work group, rather than tedious concerns about the entire central team.
The Classification of the Structure of Hexaware Techologies
‘Do not put all your eggs in one basket.’ Everybody knows the proverb. If you bet on one thing and it goes wrong, the results are dire. With software outsourcing projects, the same principle applies. In the following sections, it will be helpful to oversee various elements of Hexaware’s organisational structure evolution in a highly competitive IT solutions market.
Robbins and Barnwell define Formalisation as “the degree to which jobs and procedures within the organization are standardised” (Robbins and Barnwell, 110). In terms of processes, methods and other distinctive structural characteristics, there are indeed higher levels of rules and formalisations at Hexaware. Some areas such as personnel (human resources) and purchasing are heavily subjected to control by a centralised authority which happens to be the top management.
In order to measure specific formalisation metrics on the personnel front, it is necessary to consider documents related to fringe benefits and promotions, hiring and firing procedures and the compulsory requirement of written job descriptions and written performance records in order to ensure promotion for the same.
However, some departments within the organisation are more independent and are spared the heavier dose of formal rules and regulations which characterise the personnel department. These include the Business Intelligence and Analytics department, the Travel, transport, hospitalities and logistics department and the health care and life sciences departments. The reason these departments considerable autonomy when it comes to rules and procedures is based on the fact that they do not fall under the direct purview of the CFO and other regulatory departments.
In contrast to above, the departments of insurance, banking and financial services and quality assurance face a much more regimented and formalised work atmosphere.
Robbins and Barnwell define Centralization as “the degree to which decision making is concentrated in single point in the organization” (Robbins and Barnwell, 108). As has been mentioned earlier, Hexaware has both a centralised as well as autonomous arrangement based on its matrix structure which allows top management to streamline operations across the company and at the same time, ensure it does not prove to be too interfering with daily business activities.
As has been covered in the previous sections, Hexaware has a matrix-shaped organisational structure to deal with its current and future business growth demands. The same will be explained using Mintzberg’s typological theory which makes communication processes much simpler in the organization (Minstzberg, 103).
Robbins and Barnwell indicate in their book Organization Theory that Mintzberg mentions five essential elements to any organization (Robbins and Barnwell, 120) which are:
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- Operation core: the core operations of the organisation
- Strategic apex: the main management top of the organisation
- Middle line: the team of executioners at the helm of project undertakings
- The technostructure:
- Supporting staff.
Consequently, there are five coordinating mechanisms to be understood here: direct supervision, standardization of work processes, outputs, skills and mutual adjustments (Robbins and Barnwell, 120). Mintzberg also asserted that various parts of the organisation, empowered by specific coordination mechanisms, exerted certain “pressures” or “pulls” on these mechanisms (Mintzberg, 103). Eventually, Mintzberg has tried to prove that a degree of decentralisation is related to increased vertical communication which will build the strategy and environment of the organisation. As a holistic concept, Mintzberg’s theory speeds up decision-making activities without compromising on formalised rules within the organisation.
Hexaware, due to its far-flung structure, has an automatic set of rules which qualify it for application of Mintzberg’s theory based on the roles of various departments. The relationship between top management and various departments, especially finance, legal and quality assurance, can be said to based on how much “push” or “pull” a routine activity can influence. However, since, the departments themselves are fairly independent from each other’s interference, there has to be little or no adjustment done whenever various departments are to be brought together for collaborative work.
Now, it is possible to point out two more business terms which can be applied to organizations such as Hexaware.
One of these terms is Machine bureaucracy which refers to “an organization with very routine and formalized operating tasks, rules and regulations, which is highly centralized” (Robbins and Barnwell, 187). As has been already covered in a previous section, the company is bound by a strict of formalised rules and regulations for some of its departments, and their relationship with the CFO. However, other departments which have considerable autonomy from the finance team, because of their direct liaison with the clients, run on a traditional theory which envisages that these entities face minimum hassles when they get a new client contract or have urgent business matters at hand.
Another term of interest is Professional bureaucracy which is defined as “a structural form that has highly skilled professionals, high complexity, decentralization and the use of internalized professional standards in place of external formalization” (Robbins and Barnwell, 187). Clearly, as in above statement, Hexaware has a professional bureaucracy in place for the inter-relationship between some of the departments and the finance team. At the same time, other departments do not suffer from this problem which can be stifling to innovation and progress. The entire business runs on a simple, pre-defined value system which cherishes autonomy and independence.
Robbins and Barnwell define organizational effectiveness in their book as “the degree to which an organization attains its short-term (ends) and long-term (means) goals, the selection of which reflects strategic constituencies, the self interest of the evaluator and the life stage of the organization” (Robbins and Barnwell, 76). Judgements of organisational effectiveness serve an important social function in that they guide social behavior in much the same way that individual judgements of performance guide individual behavior (Robbins and Barnwell, 76).
If an organisation is performing effectively, it is meeting the demands of its constituencies in terms of what they feel are desirable outcomes of performance. On the other hand, if an organisation is not able to satisfy constituent preferences for performance, they will seek alternative sources to satisfy their preferences (Robbins and Barnwell, 76). If alternatives are not available, constituents will create pressure on the organisation to create alternatives.
In order to assess the effectiveness of Hexaware as an organisation due to its present structure, we can go through the following approaches:
The goal-attainment approach
Robbins and Barnwell mention that the goal-attainment approach “an organization’s effectiveness is judged in terms of whether or not it achieves its goals” (Robbins and Barnwell, 190). Now, it cannot be missed that this definition is very broad and encompasses a variety of scenarios. After all, how does one proceed to define the goal for an organisation of the size of Hexaware which has so many different functional units which have considerable autonomy from each other? Clearly, the goals for each software division are different from the other, and are thus, independent from the overall structure of the organisation.
However, when one sees the goals attainment procedure for the interrelationship between the organisation and individual departments, some metrics may be visible. In terms of revenues, specific goals may be attainable. Hexaware has over 1000+ global clients across North America, Europe and Asia-Pacific with 2008 revenues standing at US$262 million (Hexaware). Recently, it went into a USD 110 million deal with a US Fortune-500 client which should give the company strong growth projections for the next few years (Hexaware).
The system approach
This approach means “the evaluating of organization’s effectiveness by its ability to acquire inputs, process the input, channel the outputs and maintain stability and balance” (Robbins and Barnwell, 191). What we basically want here is an alignment of the organisation’s key dimensions with its strategic and financial targets (Robbins and Barnwell, 191).
The key dimensions in Hexaware’s structure have been identified as its multitude of autonomous departments, the rubric like centralisation which allows top management to control the reins of power and the company’s knowledge domain expertise in various IT technologies such as SAP, Oracle, Internet applications and more (Hexaware). The strategic targets have been identified as revenues growth and rise in customer acquisitions worldwide.
Clearly, if one has to compare the organisation’s growth over the past two years, the systems approach yields a net positive result.
The strategic constituencies approach
Robbins and Barnwell suggest that “an organization’s effectiveness is determined by how successfully it satisfies the demands of those constituencies in its environment from which it requires support for its continued existence” (Robbins and Barnwell, 85). As has been already covered in different sections, the various strategic constituencies of this company are currently aligned to its larger business goals, shaping the company’s market focus and helped it achieve a strategic direction in the times ahead.
The balanced scorecard approach
Robbins and Barnwell state that balanced scorecard approach “seeks to balance the various demands on the organization with its capabilities” (Robbins and Barnwell, 85). It’s a design methodology which takes into account the areas of finance, customer, internal employees and learning/growth values to achieve the optimum result from all parameters (Robbins and Barnwell, 210).
As far as Hexaware is concerned, the most pressing demand on the organisation comes from its various constituencies which are hurdled by bureaucratic elements and need to be taken care of. Clearly, it scores a few minus points in the internal employee count. This has to be corrected if the organisation has to achieve a perfect balanced score card value.
Problems Associated With the Current Structure
Robbins and Barnwell (2006 page 105), define complexity as “the degree of differentiation that exists within an organization”. Complexity is associated with three main factors which are horizontal differentiation, vertical differentiation and spatial dispersion. These are three of the most important factors affecting the complexity of any organization.
- Horizontal differentiation is “the degree of differentiation among units based on the orientation of members, the nature of the tasks they perform and their education and training” (Robbins and Barnwell, 112).
- Vertical differentiation is “the number of hierarchical levels between top management and operatives” (Robbins and Barnwell, 112).
- Spatial dispersion is “the degree to which the location of an organization’s facilities and personnel is dispersed geographically”(Robbins and Barnwell, 112).
Hexaware has a detailed differentiation set-up which allows the organization to allocate various people and resources to achieve specific goals through clear delegation of tasks. The company has a high degree of horizontal differentiation in both technology and business solutions units. For example, the product engineering team (refer fig 1.) has separate roles for product testing centers and design/manufacturing section. This clear demarcation of roles allows specific liaisons between various functional groups and divisions, between task forces and teams and allows faster realization of goals/targets.
As far as vertical differentiation goes, Hexaware’s corporate structure offers a lot of scope for power alignment. Since, the organization follows a clear matrix structure based on the verticals in which different IT projects are executed, there is correspondingly a higher power distance between top management and employees at the lower rung of the corporate ladder (Robbins and Barnwell, 156). This leads to a trickledown effect of problems as below.
Vertical Differentiation problems: The biggest hurdles to the growth of the Hexaware in some of their businesses due to the high degree of vertical differentiation are as follows a) isolation of top management from important human resources and international financial markets b) Shortage of skilled workforce for further development of organisational business c) Problem in accessing better clients. In addition to these, there are some minor problems such as inter-department disparities in revenue contributions which is being seen as a major problem because it tends to make many employees non-productive for no fault of theirs. Clearly, some sort of support intervention will be required in the long run.
Spatial Dispersion Issues: The issue of spatial dispersion has not affected the organisation by that great a degree because most of its present staff is located in India and there are few intercultural problems that can be expected from a mono-ethnic environment such as this. However, as the organisation grows in the future, this problem will be seen as something that has to be taken more seriously.
In this regard, an attempt has been made to leverage the precise impact of the risk scenario due to Hexaware’s overall business strategy which takes into account a high degree of spatial dispersion. In doing so, it is possible to make some assumptions (hypothesis) to be tested in a particular part of the organization, the Finance team. The team operates on the motto where it considers itself much safer to be on the side of managing risk rather than opting for conservatism since the overall interests of the organization lie in promoting value for its shareholders for long-term sustenance. Considering that accounting data provides a good visualization of the interrelationship between stock returns and key financial indices, their use provides a value of the firm that approximates its market value in all parameters of study
Since, the company has a growing global base of employees, it is forced to apply different valuation strategies which differ in presentation style, as well as desired impact on an equity environment. One of the most orderly techniques, is a comparison-based tool which gives a programmed result in helping the valuation investors achieve different targets. Robbins and Barnwell (2006 page 108) mention some of the methods that are commonly used and which include:
- P/E method: (It refers to the division between stock price and earnings per share, the easiest method for conventional accounting tasks).
- P/B method: (It refers to the division between stock price and book value of the company which is the actual amount held by shareholders).
- P/S method: (It refers to the division between stock price and sales value).
- EV/EBITDA: (Enterprise value to earnings before interest, tax depreciation and amortization).
- EV/R: (Enterprise value to revenues)
Of all the multiple methods as shown above, the CFO team of Hexaware attempts to handpick the most efficient methods which have in clarifying valuation techniques for different kinds of stocks in their global portfolio. They completely overlook P/E methods have been omitted altogether because they don’t want to deal with negative figures.
Overall scope of the problems associated with the current structure
As has been covered in this paper, the present organisational structure for Hexaware comprises the following problems:
- Too much vertical differentiation at times which leads to a) isolation of top management from important human resources and international financial markets b) Shortage of skilled workforce for further development of organisational business c) Problem in accessing better clients.
- Growing spatial dispersion due to increased geographical growth. The organisation has little way to cope with challenges of the future.
- Too much interference from finance department in the workings of a few departments such as insurance, BFSI and quality assurance.
Above bottlenecks have to be removed to make the structure more resilient to future problems. The solutions, accordingly, are as below.
- Reduce the vertical differentiation hap between top management and key project executioners.
- Appoint skilled personnel in key markets to align the organisation’s business goals with a consistent and uniform messaging.
- Change the reporting structure to ensure insurance, BFSI and quality assurance departments get considerable autonomy.
Hexaware Technologies is a successful company with great perspectives. However, this company faces quite serious problems because of some drawbacks in its organization. Thus, the structural problems which need special attention are vertical differentiation which causes top management isolation and skilled workforce shortage; excessive interference on the behalf of the financial department; and the lack of attention to the company geographic growth which leads to spatial dispersion. However, these problems can be diminished with the help of the effective measures which include vertical differentiation reduction, high skilled management appointment, changes in reporting structure. As the above result for Hexaware Technologies suggest, the only way to increase the organization’s effectiveness is by aligning its strategic goals with its constituencies.
Hexaware Company Site. The PR Department at Hexaware, 2010. Web.
Martinsons, Aelita and Martinsons, Maris. “In Search of Structural Excellence.” Leadership and Organization Development Journal 1994: Vol 15, No.2.
Mintzberg, Henry. “Organisation Design Fashion or Fit?” Harvard Business Review 59. 1981: 103-116.
Robbins, Stephen P. & Barnwell, Neil. Organisation Theory: Concepts and Cases. Frenchs Forest, NSW: Prentice Hall, 2006. Print.