Organization Behaviour Case Study

Table of Contents Table of Contents............................................................................................................................ 1 Background..................................................................................................................................... 2 Organization structure ................................................................................................................2 Financial figures........................................................................................................................... 3 Situation Assessment......................................................................................................................3 XYZ Assessment ............................................................................................................................. 4 Group Development perspective ................................................................................................4 Growth Phases Framework ..........................................................................................................5 SWAT Analysis..............................................................................................................................6 What to do next?............................................................................................................................. 8 Self mindset ................................................................................................................................8 Organization mindset................................................................................................................... 8 Plan and Approach.......................................................................................................................8 Strategy Level ..........................................................................................................................8 Dynamic stability as a change approach..................................................................................9 Communication.........................................................................................................................9 Organization Structure Level ................................................................................................. 10 Rational Behind the structure ................................................................................................11 Organization Structure description for Key positions..............................................................12 Systems .................................................................................................................................13 Detailed analysis..................................................................................................................... 14 Human Capital .......................................................................................................................15 Conclusion .................................................................................................................................... 16

1

Background Company XYZ is a family owned IT system integrator that was founded in 1978 with one branch and head office in Kuwait. XYZ owners run real estate, automotive and other business lines. XYZ represent 5% of owner’s portfolio. With headcount of one hundred employees XYZ focused on sales and support of hardware products including high end servers, storage solutions and end user equipment like laptops, personal computers and accessories. In addition to that XYZ established a business unit to sell engineering design products with focus on AUTODESK products. On opportunity basis, XYZ extended its offerings to include professional services and software implementation projects. XYZ sustained its revenue results with fluctuated profit margins during the last years.

Organization structure General Manager

Assistant General Manager

Sales and Operations Manager

Customer support Manager

Financial and administration manager

Sales operations Assistants

Engineering and Autodesk Sales Department

PC Sales Department

Enterprise Sales Department

Project Basis Employees

Project Management Team

Logistics and Inventory Department

XYZ current Organization Structure

XYZ main product lines were represented in the organization structure as a separate sales department for each product line, with sales assistance to help in preparing sales quotations, tender documents and coordinate with accounting department processing of required bank guarantees and performance bonds. In addition to different sales teams, logistics, project management as well as project-basis employees are reporting to Sales and Operations Manager who is reporting to XYZ general manager. Customer support and financial and administration functions are also directly reporting to the general manager. 2

Financial figures Diagram Below illustrates XYZ financial results for the last years $7,000,000

8%

$6,000,000

7% 6%

$5,000,000

5% $4,000,000 4% $3,000,000

Revenue Profitability

3% $2,000,000

2%

$1,000,000

1%

$0

0% FY02

FY03

FY04

FY05

FY06

FY07

XYZ revenue & Profitability FY02 to FY07

Although XYZ managed to sustain an average revenue result of $5M, profit margins have been fluctuation during last five years. Entertained profit margins still below 10% and were not encouraging for additional investment.

Situation Assessment XYZ general manager who is reporting to the board of directors is resigning due to sever health problems. I have been appointed to be an interim replacement for three months minimum to run the firm until the board decided on a new replacement. Multiple factors are affecting my decision for next course of actions. These factors include:

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-

I regret the health problems that happened to our CEO; however I have to seize the opportunity to show XYZ board that I am capable of running the firm with a clear strategy towards more successful future.

-

The situation is challenging as the board declared their intention to search for another CEO and the assignment is only temporary for three months. This situation will make it even harder to introduce major changes in the organization.

-

Some of my colleagues and peers might not be so happy of this situation, and I should not expect full cooperation from all members.

-

XYZ previous CEO managed the company for the last seven years and he stayed with the company for twelve years climbing different positions in the company, so that he got enough credit from the board as well as from XYZ staff. This in turn will make it harder to change the style of management he deployed all these years.

From XYZ board point of view: -

It might be a good opportunity to hear a different point of view of running the business. In addition to that if Myname managed to drive the business during this transition period, then no need to introduce new CEO who may and may not achieve our strategic goals.

-

In addition to that XYZ board will be willing to encourage loyalty and belongings by promoting XYZ employees to higher management levels.

From XYZ Staff point of view: -

Given that I had a peer relationship with some department managers and manager relationship with others, I do expect that some of them will cooperate while others might not be encouraged to entertain that approach.

-

For other staff members, introducing me to this position might be in their favor in their perception.

XYZ Assessment Group Development perspective a. Given the fair old age of XYZ (around 30 years), the organization as a group have went through several stages from initiation, into exploration and stabilization. XYZ operating financial results encourages a change. Since this change was enforced by the health conditions of the CEO, a Re-assessment stage is recommended.1 b. Reassessment stage of XYZ as a group has the following characteristics as illustrated in Table 1. Table 1

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Reassessment

Sta ge

Most observable characteristics - No assessment is enforced unless compelling reason - When reason happens , some of them tend to be stubborn - Some will feel betrayed - Some will feel more enthusiasm to change - Confusion or disbelief might happen to some others - Others may be depressed and withdraw

Tasks

Problems

Evaluate the necessity for change.

The history and inertia of the group may prevent it from engaging in healthy reassessment

Group must decide if they are going to change the purpose, the ground rules and the authority structure or not

Management implications Balance several attitudes and behaviors Force might be the best tool Understand and expect defense and criticism

Considering the above listed characteristics, problems that will arise, a collaborative approach might be a suitable approach to resolve the listed conflicts. Seeking board support in some situations will be a must.

Growth Phases Framework XYZ has been in the market for quite long period and already has demonstrated that it is a workable business entity. XYZ acquired customers and kept them with its products and services. The key problem is to shift from only existence to a healthy ration between revenues, profits and expenses. Although as a group XYZ should pass through an enforced reassessment stage, XYZ as a business entity still in Survival stage.2 Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

Organization Size

Crisis of ?

5

X Y Z Crisis of Leadership

Crisis of Control

Crisis of autonomy

Growth through Direction

Growth through Delegation

Crisis of red tape

Growth through Coordination

Growth through Collaboration

Growth through Creativity

Young

Organization Age

Mature

Neil C. Churchill and Virginia L. Lewis in “Five Stages of Small Business Growth” defined Stage 2 as survival stage. Survival stage characteristics that can be observed in XYZ case are: -

Company number of employees is small and the structure is simple.

-

Systems development is minimal

-

The organization stayed in survival stage for the last five years.

To move from this stage into Stage 3 (Success Stage), some changes could be implemented including: -

Structural changes that allow multiple divisions act on their own behalf.

-

Indirect control thorough delegation

-

Introduce systems to handle the growth

SWAT Analysis On a high level, the following SWAT analysis can be observed. Strengths -

Financial Position (Backed by the Group)

-

Organization Structure, Skills, System, etc, Coverage, etc.

-

Political influence of the family

-

Skilled manpower

-

Logistics arm

-

Reporting and planning systems

Opportunities

6

Weaknesses

Threats

-

Market Growth

-

Competition

-

Government initiatives

-

-

Real estate business boom

Market perception for the company as box mover

-

Aggressive market penetration

-

Vendors focus and perception

rates from vendors.

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-

Ability to invest

What to do next? Parallel moves in different tracks should be planned and carried out. These parallel moves will consider two mindsets and perceptions.

Self mindset One of the important preparation steps required for newly appointed managers is letting go of the past and embracing the imperative of the new situation to get a running start. This will require a necessary change in perspective. I recognize that I have been promoted because I might did well in my previous assignment, however keep doing and thinking the same way I used to do will not grant success in the new one.3 I also recognize that I am in a transition period and overriding goal in a transition is to build momentum by creating virtuous cycles that build credibility and by avoiding getting caught in vicious cycles that damage credibility.4

Organization mindset For each individual who transitions, there also are many others- direct reports, bosses, and peers- whose performance is negatively affected. In a survey of company presidents and CEO’s, done by Michael Watkins, their best estimate of the number of people whose performance was significantly compromised by the arrival of a new midlevel manager, on average was 12 people. In effect, all the people in the “impact network” of the transitioning manager are in transition too.5

Plan and Approach I will draw a detailed plan and approach for my next moves. This plan will address the following key aspects: strategy level, change approach, communication with stakeholders and other departments and staff, changes in organization structure, systems and detailed planning for the company.

Strategy Level In a very competitive market, XYZ experienced difficulties entertaining same profit margins on hardware and software product sales. Since the market have dramatically changed during last five years and now many players have been penetrating the market with very competitive prices and slim margins, XYZ should move into different market segments, product and service offerings. Introducing different products or services will require several organization structure changes, systems to follow up and control the expected change of operation mode as well as skills to run this show. The Strategy will focus on four main pillars:6 -

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Customer focused strategy that accommodates doubling revenues from current business lines within next three years and introduces new business line that can generate as much revenue as today’s revenues after three years.

-

Flawless operations execution that accommodates for decreasing cost of operations by 5% annually. This can be achieved through using better systems to control inventories and logistics process as well as project management practice to insure better projects delivery with maintained costs.

-

Performance oriented culture by introducing new reward schema that encourage good performers and accommodate for relating employees salaries to company’s performance and objectives.

-

Fast and flexible organization that encourage front liners to take immediate customer satisfaction decisions.

Dynamic stability as a change approach Recognizing that these proposed changes will dramatically affect the organization, a change approach that deploy continuous but relatively small changes will be elected. 7 This approach should be accomplished by a buy-in from different stakeholders, board members as well as senior level management who will execute or fail that change. To secure the required buy-in, communication on a collaborative mode can do the job.

Communication Formal communication: I will initiate a series of formal meetings with different stakeholders to discuss the strategy as follows: 1- Short term and immediate meetings: •

Company-wide meeting to announce the management change followed by a circulation from board members to secure official support.

•

Board meeting to secure a common understanding for the long term objectives.

2- Regular meetings with departments’ managers and departments to discuss business initiatives •

Sales pipeline review – once every two weeks.

•

Projects review – once every two weeks.

•

Collection and accounts receivables review – once a month

•

Logistics and operations review – once every two weeks.

•

Business review - once a month.

During these intensive meetings and business reviews I will open discussions for the following topics:

9

-

How we as a team can run XYZ to a better future?

-

What are different products and services can be offered?

-

What are different market segments can we penetrate?

-

What systems we need in place?

-

What is the best organization structure to run the business now and in future?

-

How can we improve our current staff skill set?

-

How can we improve our current reward systems?

What I need is to convey the following messages to the team: -

We can do the job and change the company to better future.

-

The change will be blessed by them and carried by them.

-

The change will benefit everyone.

To start from somewhere, I will be ready with some proposals to be discussed in these meetings. Once we framed a strategy I will call for a board meeting to review and approve team findings. Social and informal communication

Informal communication can turn into gossip and rumors hurting the company and can as well used as a parallel communication channel to ease working environment, raise the moral and declare strategies. Recognizing the effect of informal communication, I will encourage social gatherings, speak-up policy and I will create the events to collect feedbacks regarding the future.

Organization Structure Level The following will represent the initial organization structure that I will propose to start to the team as well as to the board.

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CEO

Assist ant CEO

Sales Manage r Enterpr ise

Sales Manager Engineeri ng

Solutio ns

Sales Manager End User Equipmen t

Profess ional Service s Manage r

Sales operatio n& Executio n

Sales Operation and Execution assistant

Project Managem ent

Presale s

Logistic s Manage r

Custom er Suppor t

Invento ry Control

Financi al Manage r

Procurem ent

XYZ Proposed Organization Structure

Rational Behind the structure The following are the basic assumptions and factors affected the design of the structure:

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-

Separate sales functions from delivery and logistics tasks to maximize their customer focus.

-

Separate sales function per product line (different customer base, different offering cycle, and different competitive advantage)

-

Professional service department will be responsible for presales and pricing, project management and execution, as well as after delivery customer support. This will create a pool of technical competencies that can be used in presales support as well as in delivery and customer support.

-

Check and balance is created between different department will create a sort of functional conflict8 as follows:

•

Sales departments will focus into getting more business and customers based on XYZ value proposition rather than price competition since pricing is professional services responsibilities.

•

Professional services department will be responsible for pricing as well as delivery so that XYZ ensure quality proposals as well as delivery.

•

Logistics department will handle procurement and inventory control to ensure proper supplier handling and inventory levels for all departments required stock.

-

Other functions including business development and marketing were not introduced at this stage in order to maintain the cost, however will be introduced in later stages.

-

Human resources function and treasury functions were omitted as it was a shared service granted at the group level.

Organization Structure description for Key positions Position

Major Responsibilities

Major KPI’s

CEO

Strategies development and implementation

Net operating profit

Overall business planning Develop and maintain policies and procedures to allow smooth operation Ensure effective reward systems Inform the board of overall performance. 12

Sales Managers

Develop sales strategies, sales plans, and sales targets Acquire and maintain current customers Stock level from each product.

Sales target of core business line. Contracted Gross Profit Obsolete stock value

Professional Services

Develop and maintain Technical competencies of XYZ

Operational Revenue

Develop and execute a presales organization and process

Operational Gross Profit

Develop and execute an after sales support organization and process Sales execution

Sales execution team is responsible for tender documents preparation, legal registration process, tender financial requirements follow up with accounting and treasury departments

Number of processed quotations per month

Logistics

build and maintain supplier database

Number of late deliveries

ensure supplies and deliveries on time and within budget Maintain and control shipping, handling and transportation costs.

Stock taking variations Discount levels granted from suppliers.

Systems Planning, reporting and reward systems are important tools that should be elected and implemented carefully. For planning and follow up I would suggest introducing and improving the following reporting instruments: -

13

Sales Pipeline follow up Projects Review

-

Revenue forecasts

-

Aging and receivables

-

Slow moving and dead stock

-

Profit and loss statements (Actual /Budget comparisons)

In addition to the listed, I would discuss and introduce having a reward system that assure target setting at quarter level and tie part of employees’ benefits or salaries to target achievement. Although this system is as important as or even more important than other systems, the introduction and implementation of this system will not be practical on the short term.

Detailed analysis Other strategy meetings openers that will be used in meetings will be the “Portfolio analysis of existing products and services”, as well as “Fit vs. Attractiveness - new business”9

Market attractiven ess High

Protect Position

Medium

Low

Size, growth, profit margin, competitive intensity, structural market shifts. Invest to build

Build Selectivel y

Build selectivel y

Selectivel y Manage for Earnings

Limited expansio n or harvest

Protect and refocus

Manage for earnings

Divest

Strong

Medium

Weak

Market share, share growth, sustainable profit, returns on assets, service quality, operations efficiency

Business Strength

XYZ FIT vs. Attractiveness - Current products and services

14

Market attractiven ess

Size, Expected Growth, Industry Performance, Entry/Exit Barriers, Expertise Management

High

Develop Capabilit y

Diversify

Controlle d Exposure

Leverage Opportun ity

Leverage Opportun ity

Avoid

Hold

Hotwatch

Medium

Low

Strong

Medium

Expand

Weak

Synergize, Management Capabilities, Financial Strength, Past Experience,

Business Fit

XYZ FIT vs. Attractiveness – New business

Human Capital Recognizing that all the above plans and initiatives will only come to reality by encouraged, dedicated and skilled human capital, I will propose a program to collect current knowledge assets and analyze the required gap to fulfill required business growth; accordingly a continuous training and development plan will be developed to fill this gap. This continuous development will not only address technical skills, but will also include management skills for departments’ manager.

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Conclusion This is an opportunity and a challenge that may not happen too often in one’s career so I will make sure to seize the opportunity to maximize the return. I will invest more time planning and learning details, communicating formally and informally with company’s staff as well as company’s board. I will capitalize on the enforced change due to former CEO’s health conditions and initiate series of small changes. I will make sure that these changes will be well studied with all departments and stakeholders and approved by the board. These changes will address Human capital skills and morale, current and future business, systems, organization structure, and I will communicate clearly with peers, subordinates and bosses about this vision.

References

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1

The developmental dynamics of small group – Darden Business Publishing – UVA-OB-0270.

2

The Five stages of small business growth by Neil C. Churchill and Virginia L. Lewis – Harvard Business Review 3

Critical Success Strategies for New Leaders at All Levels, by Michael Watkins ISBN 1591391105.

4

Critical Success Strategies for New Leaders at All Levels, by Michael Watkins ISBN 1591391105.

5

Critical Success Strategies for New Leaders at All Levels, by Michael Watkins ISBN 1591391105.

6

What Really works, the 4+2 formula for sustained business success by William Joyce and Nitin Nohria. 7

Change without pain by Eric Abrahamson- Harvard Business Review

8

Managing conflicts in organizations – Darden business publishing- UVA- OB-0743

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Both models were used by KPconsulting, www.kpconsulting.in