Business / Organizational Development

Organizational Development

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Autor:  anton  09 December 2010
Tags:  Organizational,  Development
Words: 2368   |   Pages: 10
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“Organizational design involves making difficult choices about how to control” (textbook, p95), coordinate, and motivate internal and external resources to maximize an organization’s capacity to create value. Having a well-developed design and structure is a key ingredient to ensure survival, prosperity, and effectiveness in a dynamic and evolving business environment that continually cultivates new impediments and problems without caution. Pine Mountain State University has found itself in a situation where its organizational design and structure has fallen out of line with its general and specific environments hindering its ability to successfully respond to contingencies that have arisen. The organization has recently undergone a restructuring in order to respond to environmental pressures; however, the reorganization has been ineffective in responding to and initiating action to minimize current threats. The key issues that require immediate resolution include the following:

1. The organization has been ineffective in its management of inputs and operations to maximize the value created

2. The organization has failed in its ability to converge and satisfy the needs of inside and outside stakeholders

3. The state has been severely affected by a recession which has impeded the ability of the organization to receive adequate real dollar funding

4. There has been increased political pressure calling for accountability and financial responsibility

5. The organization must determine the level of differentiation and integration it would like to sustain with its sister university in the urban area


Organizational Structure

A successful organization is continuously evaluating and redesigning its structure in order to cope with opportunities and constraints that arise within the environment. Pine Mountain has recently undergone a reorganization that has significantly altered the organizational structure of the university. Relative to the old hierarchy the new multidivisional hierarchy has become much taller due to an increase in new administration positions. The organization has increased both the vertical differentiation (increase distribution of authority) and the horizontal differentiation (increase division of labour).

The result of this increased differentiation has led to the development of a slow decision making process, which can be attributed to the lack of decentralization, and lack of communication between the different levels in the hierarchy. Another problem, due to the increased division of labour, has been the development of a subunit orientation—different faculties must compete with one another to receive an adequate allocation of funding. The third problem that has appeared is the increased bureaucratic costs associated with the increased level of administrative positions, which has choked off resources available to increase the level of faculty and services offered. The reorganized structure was implemented to be more responsive to the environment but rather it has created more constraints that must be addressed.

Value Creation

The fundamental principle of an organization is the notion that a collective grouping of people will result in more value created then individuals working alone. A simplified but ideal value creation system for Pine Mountain is developed in figure 1.0 (Appendix A); however, in reality the focus of the organization is centered on the input stage with less emphasis placed on the conversion and output stages. The lack of a balanced focus on the entire process has resulted in Pine Mountain creating less then maximum potential value.

Pine Mountain has placed the input stage as their primary objective with the focus being centered on money and capital inputs. This conclusion is evident through its continual increase in admission levels and its constant pursuit of funding. The university has increased its tuition from $1,000 to $1,500 which results in an approximate $11 million increase in cash inflow. Also, the organization is continuously attempting to secure funding from state and federal governments, alumni, and corporations and foundations.

Next, moving into the conversion stage it becomes evident that the inputs are not being implemented in the most effective manner to generate an increased level of high quality output. First, students continuously complain that it is difficult to enroll in mandatory classes required for graduation and the level of services, such as parking, are inadequate. Secondly, even though there has been an increase in student enrollment the level of faculty members has remained constant while the administration levels have expanded. Thirdly, the different academic departments offered by the university do not receive a balanced allocation of resources but are forced to compete with one another for a finite amount of funding. All three problems in the conversion stage demonstrate the inefficient allocation of resources which result in reduced value creation in the output stage. Currently, the inefficient conversion of resources results in a longer turnover ratio in producing output, as students take longer to complete their degrees.


When determining the level of uncertainty that is prevalent in any environment there are three basic lenses used to analyze the situation: complexity, dynamism, and ri

Ш Complexity- Mid-High

· Approximately 22,000 students attending Pine Mountain and on top of this there are faculty and administration, which result in a large sized organization.

· There are many different academic services provided (multidivisional) which lead to increased complexity due to difficulty in administrating control, coordination, and motivation.

· The General and specific environment become interconnected economic forces (general) like a recession affect the government’s contributions and ability of students to attend school (specific)

Ш Dynamism- Unstable

· General and specific environments can potentially change rapidly (economy downturn, shift in consumer tastes to tech schools and trade programs, etc.)

Ш Richness- Mid

· There is a lot of potential funding available for the school from many different sources but they must compete for this funding with other schools in the state

· A lot of potential customers (students) but again must compete with other schools

The overall level of uncertainty is mid-high for Pine Mountain State University.

Specific Environment

The specific environment refers to the ability of outside stakeholders to exert influence and pressure to directly affect the organizations ability to obtain and secure resources. Pine Mountain currently finds itself in a highly competitive environment, as the state in which it is located contains five state-supported colleges with one being a major university. The availability of numerous colleges adds to the uncertainty of an environment because Pine Mountain must compete (competitive interdependency) with these other schools in order to acquire state funding and potential clients (students). Second, the availability of diverse academic services enables Pine Mountain to attract customers away from their competitors. However, customers can greatly influence the perception of an organization’s credibility; therefore, since students are currently upset with overcrowded classrooms and the lack of availability of classes the situation can ultimately lead to diminishing credibility—therefore affecting its ability to attract customers. Thirdly, unions, such as the faculty, are currently upset with the resource distribution that resulted in all available capital being depleted on administration positions rather than increasing faculty size or pay.

Another specific environmental factor that exerts tremendous pressure on Pine Mountain is the government. Since Pine Mountain is a state-supported school it receives majority of its funding from the government, but the legislature in the state is not pleased with how the university made use of the funds. The government believes that Pine Mountain has not appropriately utilized its available funding, as it has increased high salaried administration positions rather then increasing the quality of services provided. At the same time the federal government has found it difficult to provide sufficient funding to the school and has decreased its level of contributory grants by $6 million annually. The dependence on government agencies for funding increases the uncertainties of the environment because political forces are continuously changing in unpredictable ways.

General Environment

The general environment includes forces that indirectly affect an organizations ability to obtain and secure resources by directly influencing the shape of the specific environment. Currently there are two primary general environmental factors that Pine Mountain’s specific environment is being shaped by: economic and political forces. The country at present is facing a recession, which has resulted in high unemployment and inflation. The result of these factors are that any funding that the university has accumulated has lost value in real terms, meaning the money purchases a smaller quantity of goods relative to before high inflation. Secondly, the high unemployment will mean that the government is going to have to pay out more funds in the form of employment insurance and other transfer payments, therefore there will be less funding available for schools. The political forces are interrelated with the economic forces as discussed above, but the government is also calling for increased accountability and financial responsibility on the part of the university.

Managements Measure of Effectiveness

When choosing a measure of effectiveness there involves a trade-off between three primary processes: control, innovation, and efficiency. From the measure of effectiveness that management employs, one can draw conclusions on what the organizations principal focus is in terms of value creation. From the information presented in the case it appears as though Pine Mountain is currently using an external resource approach. The organization appears to be content on obtaining its essential inputs, which are capital (funding) and customers (students) from its environment. However, the problem with this approach is that it tends to ignore how the acquired resources are used or transformed into output through conversion. Pine Mountain seems to have this problem manifesting within its structure, the reason being that resources are not equally distributed throughout the hierarchical chain:

· Faculty size has not increased although enrollment numbers are increasing (diminishing quality of service)

· Increased enrollment has resulted in overcrowded classes and low accessibility of classes

· Resources are not distributed evenly to faculties, with high amounts going to programs with low enrollment (arts & sciences) and low amounts going to programs with high enrollment (professional)


Improving Structure

Pine Mountain State University currently finds itself positioned in an environment full of uncertainties with its present structure unable to provide adequate antidotes to the constraints. When the company underwent a restructuring the increased differentiation resulted in an increased amount of barriers between people and functions. First, the hierarchy requires an integration mechanism to enable effective communication between the different faculties/departments. The mechanism that would best fit the Pine Mountain hierarchical system would be the use of the team integration mechanism. This mechanism would create a permanent committee consisting off all the Provost positions that that are at the head of the different faculties. This committee will be able to coordinate activities among the different faculties by providing the necessary support functions, such as the allocation of resources. The committee will be able to discuss which faculties are growing and require the greatest increases in budget to provide adequate service to its customers. This team mechanism would also help to alleviate the subunit orientation between the different faculties because they would no longer have to compete for funding but rather receive funding based on the enrollment levels for each program.

Second, to improve and speed up the decision-making timeframe there needs to be more decentralization due to the increased vertical and horizontal differentiation. By diffusing decision making authority down the hierarchical structure the organization will be able to become more responsive to its environment, as managers who are working in the day-to-day operations will have more knowledge about the environmental factors. This increase in responsiveness will lead the organization to become more organic which would result in a decrease in the uncertainty of the general and specific environments. Thirdly, in response to the increased bureaucratic costs the very top tier of the organizational hierarchy should return back to its old structure of president, university attorney, and executive assistant. The centralized Provost support team would handle the internal control and budgeting for the faculties which would also cancel out the dean of faculties position. The savings on bureaucratic costs can then be applied to hire increased faculty members to take the pressure off overloaded classes, which would result in better conversion leading to added value created. The increased effectiveness from the new resource usage would result in a decrease in political pressure as the government and trustees would see that the hierarchy has declined and resources are being used to increase the quality of services.

Managements New Measure of Effectiveness

As stated earlier, the use of a measure of effectiveness provides insight into what aspect of the value creation model an organization focuses its efforts on. Pine Mountain should begin to use a balance scorecard measure of effectiveness, as it would allow for the focus to be on the entire process of value creation rather then a single stage. The balance scorecard evaluates four primary aspects: financial, customer, internal business processes and people.

· Financial- this will allow for management to still focus on fundraising but it allows them to also keep in mind the success of a firm is also dependent on non-financial aspects

· Customer- is the customer satisfied with the level of service, this allows for a long-term commitment to increasing the level of service offered by the school resulting in higher quality outputs and increased credibility

· Internal Business Processes- this allows for the organization to focus on ensuring balanced allocation of resources to the different departments, and ensuring that the communication channels of the hierarchy are open allowing for increasing control, coordination, and motivation

· People- this ensures that the organization strives to fulfill the majority of stakeholders interests (majority because there is a trade-off its impossible to satisfy everyone you must choose those that are most importantа trustees, government, faculty, students, and alumni)

The overall effect of the balanced scorecard is that the organization will make strides in maximizing its value created.

Other Results of Recommendations

If Pine Mountain successfully implements the recommendations presented above the credibility and reputation of the firm will increase, as the central focus will be on gathering resources and converting them into quality outputs. Once this is achieved the company should continue its current differentiation from its sister university, the reason being that the organization will be able to provide improved and more diverse services to its customers satisfying more needs. With increased satisfaction and increased demand for its service it is likely that Pine Mountain will be able to better gather its essential inputs. With the implementation of the balance scorecard management’s focus will be on effectively creating high quality output and service; therefore, overtime it will be able to cope with the increased levels of enrollment as faculty and service are upgraded to a sustainable level.

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