When two organisations merge, they have to decide how control and decision making will occur. They could place this upon functional managers who are considered generalists. In other words, such a firm may choose to be highly centralised. Alternatively, an organisation formed after a merger may decide to give decision making powers to product managers who are specialists. In this regard, such an organisation will have adopted a decentralised structure.
Functional organisation structures are more appropriate when there is a need for the new company to share resources across various units or when there is a need to synergise its operations. These decisions are quite complicated especially when the newly merged entity will need to adopt a different structure from the one that had been previously existent in the two independent companies (Alstyne. et. al., 2007).
They must also decide which operations will be kept and which ones will have to be reengineered. This is something that will definitely alter the organisation structure since some units will be eliminated while others will be retained. It should be expected that not all operations will overlap so very serious decisions must be made on the ones that are vital to the new organisation.
Coordination is always another tricky issue in such circumstances because communication issues will have to be addressed. The amount of time and effort allocated to any kind of communication will affect strategic choices. Members of the organisation may have different perceptions on how choices may be made and this may lead to clashes. Some may be uncertain about the person they will report to; an issue that falls directly under organisational structure.
Once a new reporting structure has been created, then members of the company may still have a problem trying to understand their new roles. This illustrates a need to have them trained so as to make them more effective. Companies need to make the organisational structures more flexible once they realise that there is a high level of uncertainty caused by markets and technology changes.
After mergers, companies need to look at the extent to which organisational structure will be aligned with strategy. The company needs to have certain common objectives that guide it in its operations but the best way of ensuring that strategy plays a key role in the new firm is by changing structure to suit it (Strauss et al, 2006).
Role that organisational structure plays in an organisation’s effectiveness and efficiency
Organisational structure will determine the key issues to focus on in an organisation. If the structure is organised around the product then this will move focus away from resource coordination or overall strategies. Value adding activities need to be done in a manner that will revolve around the main sequences so as to minimise time wastage. When the organisational structure contains activities which will slow down the company cycle then this will eventually lead to poor results and may minimise the efficiency of the company.
Time taken to make decisions as well as the effectiveness of those decisions will also be determined by organisational structure. Team based structures may allow organisations to respond more effectively to consumer needs because such individuals will have been empowered to do so when they need to. Furthermore, the ability to deal with recurrent decisions occurring in a firm is highly dependent on the organisation structure. A company will tend to be more efficient if it allocates recurring decisions to low level structures.
Managers or any other decision makers will often have a certain span of control within their premises. If the span of control is large then there will be less need to integrate certain business units. This will save a lot of money that could be lost due to lack of synergies of these units.
When an organisational structure possesses a high degree of layers then chances are that decision making will take longer and this may not be efficient (Mendelson & Anand, 2005). Furthermore, if a company has split up closely associated entities like sales and marketing then chances are that there conflicts will frequently arise and the company will be less effective.
These separate groups will keep directing decisions to top management which may not always be in a position to solve them. Therefore, general managers will be better off if the combined similar business units so as to cause them to report to one or the other so that minor issues are solved at the bottom. Speedy decisions and decision making processes will tend to create better outcomes and will make a firm more effective.
Organisational structure also affects efficiency and effectiveness in terms of the technical excellence offered by the company. When members of the organisation have their goals fully clarified then chances are that they will carry them out systematically with minimal conflicts; a fact that is determined by the nature of organisational structure chosen. High technical competence occurs in functional structures and is limited in team based approaches.
This is particularly relevant to those highly technical organisations but may not work well for service based firms. In other words, the need for technical competence will be highly dependent on the nature of organisation under consideration and the industry profile that it ascribes to. If the industry requires such qualities then an organisation structure that promotes it will be more appropriate than one that does not.
Lastly, an organisation’s load levels or the amount of work done will also be affected by structures chosen. If an organisational structure focuses more on teams then it is likely that its load capacity may be limited by the size of the team or the number of members in the team. Divisional organisational structure and geographic structures are often restricted in terms of load levels as well so companies may want to think through these issues.
Mechanistic versus organic structure for Indigo
Indigo is currently operating in a challenging retail climate. It is dealing with products that require a knowledge of the local conditions i.e. music and books. Consequently, the organic system would be more effective than the mechanistic system.
An organic structure is most appropriate in conditions that keep fluctuating but when the environment is relatively stable then the mechanistic structure would have worked well. In these circumstances, Indigo has just undergone a dramatic change that has seen it acquire a number of new business units. Now the company needs to be in touch with consumer needs and the best way of going about this would be through the use of an organic structure (Chang & Harrington, 2008).
In the mechanistic system, task scope is often very precise. The technical methods, rights and obligations attached to each functional role are clearly known however the same may not be said of the organic structure which diffuses responsibility to a number of individuals rather than to one specific functional role.
This allows for creativity and innovation which are both factors that are seriously needed within this organisation in order for it to remain on top of the music and books retail industry. Even conformance to tasks is spread further in the organic structure compared to the mechanistic one because people are more concerned with the issue at hand rather than the functional positions associated with that particular issue.
Currently, Indigo has over 14 stores from its former organisation, 90 big box stores with some 7000 employees, 2010 Coles Books and Smith books stores and an online division. This is clearly a very large portfolio and if the firm insists on running things from the top then it will have a hard time managing them well. Furthermore, the functional structure worked before the merger, now the internal environment has changed and this will require a re-examination of some past strategies.
The mechanistic structure often requires the leaders concerned to outline tasks. However, in the organic structure, a constant interaction with other members of the organisation is what leads to task definition so the entire group is responsible for task definition (Dewatripont & Bolton, 2004).
This attribute is especially useful in the Indigo scenario owing to the fact that the stores are located in various locations and will be carrying out various tasks such as offering gifts and creating gift ideas, selling music and books and also offering cafe services within their premises. These highly diverse functions need a well integrated team and will therefore contribute to greater synergy in Indigo after the merger.
Communication, control and authority in the organic structure are not hierarchical but are more network-based in that the organisational members are concerned with a certain community of interest. As the case is currently, Indigo needs to establish a more cohesive workforce and the best way of achieving this would be through an organic structure. The company will be at a good position of defending its position as a unit if it chooses this pathway.
Knowledge in mechanistic systems is often restricted to the executive because they are the ones who will eventually reconcile tasks or assessments that need to be done. On the other hand, knowledge may be found in any part of the network within the organic structure so this will be a good way of responding to consumer needs as they arise not after a very long time has elapsed. Additionally, employees on the ground are always at a good position to assess consumer trends and thus contribute towards betterment of the organisation.
This structure will be appropriate for a firm that needs to establish a firm footing in the music and books industry. In the mechanistic structure, greater value is attached to industry expertise and affiliation than to internal experience or skill.
In this regard, Indigo will be at a better place to grow and lead in the industry if its members are always aware of their external environment. Also because information is conveyed in a manner that appears as advice rather than particular instructions then the employees are likely to embrace it and also think of their own contributions.
Role of technology in Indigo’s organisational design
Technology will play a role in organisational design because it can make it more efficient. This is because in case lateral communication needs to be done then the firm will need to spend less on it through the influence of technology and more information will flow in the organisation.
When this occurs then chances are that there will be more decentralised authority within the firm (Galbraith, 2007). When top management tends to retain most of the information then chances are that there is minimal influence of technology but when information easily flows then the reverse is true.
Hierarchical organisation structures are often utilised when the costs of communicating are very high. Furthermore, the central information processor within a corporation will keep being diminished if the information flow within the company occurs at a very high pace. Information overload may therefore occur once only one party is mandated with the task of making particular decisions. In this regard, IT development may lead to decentralised structures (Stern & Athey, 2007).
Indigo is also likely to be affected by technology in terms of the members located within its organisational structures. Technology tends to facilitate a high degree of automation such that some functions like payments may no longer have to be carried out by cashiers as there may be machines in place to register payments. Consequently, technology will contribute towards a leaner organisational structure in Indigo if it will facilitate automation.
New technology also requires a reorganisation of structures because that technology may involve the reorganisation of company functions such that they can be more integrated with IT. In other words, business process redesigns are sometimes necessary upon use of greater technology. However, if Indigo will be too slow to respond to this need to redesign then it may be negatively affected by the new technology.
Lastly, technology will allow more employees to actually stop and think about what they are doing so that they can offer solutions to some of the problems in their organisation. This implies that Indigo will be better placed to handle a competitive environment since there will be a lot of new ideas that emanate from the firm’s stakeholders.
References
Chang, M. & Harrington, J. (2008). Organisational structure and firm innovation in a retail chain. Computational and mathematical organisation theory, 3(4), 267-288
Mendelson, H. & Anand, K. (2005). Information and organisation for horizontal multimarket coordination. Management science, 3,56
Stern, S. & Athey, S. (2007). An empirical framework for testing theories about complementarities in organisation design, MA: MIT
Dewatripont, M & Bolton, P. (2004). The firm as a continuous communication network. Economics quarterly, 109, 809
Alstyne, M., Renshaw, A., Brynjolfosson, E. (2007). Matrix of change. Sloan management review, 5(1), 72
Galbraith, J. (2007). Organisational design. MA: Addison and Wesley publishers
Strauss, G., Olson, L., Kochan, T., & Ichniowski, C. (2006). What works at work. Assessment and overview. Industrial relations journal, 35(3), 299