Seminar Aquarius

Identifying the problem

This consulting report aims to address and suggest solutions to the issues of a middle sized advertising agency named Aquarius. To introduce the reader to the issues of the organization we first have to apply an open systems approach and study its contingency factors. According to the case study, the client turnover rate of Aquarius is high; clients are gained and lost quickly. This suggests that the task environment is very unstable, while the general environment for an advertising agency is generally quite complex, which in turn raises the question: how should Aquarius adapt and respond to such an environment? A dynamic, unpredictable environment requires an organic, flexible internal structure. Shared tasks, few rules, vis-à-vis communication, few layers of vertical hierarchy and decentralized decision making are some characteristics of a flexible structure, the current functional structure does not provide this. Exhibit 3.18 visualizes the current vertical structure of Aquarius, although according to the case study there are even more layers of authority within the marketing and operations divisions. Exhibit 3.18 further illustrates how activities are grouped in a functional manner, meaning departments are based on abilities and skills (TV, newspaper, art). Within each department knowledge, skill, evaluation and development is widely shared. While a functional structure like this leads to effective in-depth knowledge and skill development, it lacks the ability to effectively coordinate across departments, which in turn leads to slow response to changes in the environment. A high level of specialization is worth nothing if clients do not need your services anymore. A more horizontally-focused structure is needed. However, as size is another contingency factor that needs considering, efficiency in a middle-sized company is hard to achieve through a divisional structure, while the size can also make a too horizontally-focused structure can be difficult to manage. In the search for a more horizontal structure, we need to keep our eyes open for one that can create a balance of all of these needs.

Aquarius has tried to increase interdepartmental coordination through horizontal information linkages. Liaison roles called account executives have been set up between “the client and the various specialists on the professional staff of the operations and marketing divisions” to smoothen information flow. Unfortunately, the attempt has been unsuccessful as the specialists often bypass the account executives and are directly in contact with clients themselves, defeating the whole purpose of a liaison role. The problem is demonstrated in exhibit 3.19 which illustrates the communication channels of the organization. It shows that account executives communicate with every department of the organization, as well as the clients, as they are tasked to. Despite this they are often unaware and (presumably intentionally on the part of specialists) uninformed of significant progress and projects within the departments. We also see that while the account executives have been employed as specialist-client communication intermediaries, liaison roles, they have operated as full-time integrators without authority, and wanting authority. Perhaps the confusion is due to their job title being slightly misleading regarding their role, causing the account executives to see themselves as having greater responsibility than they were employed to have. As integrators, they have a lot of responsibility but little formal authority to coordinate and instead need to use persuasion and trust. They seem to have failed to maintain this trust. Our hypothesis is that the issue originates in the account executives and the specialists having different views of the roles of the account executives, causing friction between them.

The matrix structure

By transforming parts of the internal structure (operations department, marketing department and legal counsel) of Aquarius from a functional to a matrix model, we give the account executives a new role with formal authority. Their roles will effectively go from the one of project manager illustrated in Exhibit 3.3 to the one of product manager in 3.10. By studying the three conditions of the matrix model we can demonstrate how it suits the needs of Aquarius:

• Medium sized organizations have limited resources, this pressures them to utilize personnel and equipment efficiently across several projects. A matrix structure allows this.
• Advertising being an industry with endlessly new needs and expected to simultaneously provide expertise, the matrix structure is needed to serve both of these demands.
• The third and final condition explains that in an environment that is both complex and unstable, communication and coordination vertically as well as horizontally is vital for survival.

There are two types of matrixes: the functional and the product matrix. What differentiates the two is how primary authority is allocated: whether functional executives or product managers are mainly in control. We believe that, so as to directly address the issue of a difficult-to-maintain power balance, employing a product matrix will suit this firm better in order to decentralize as much decision-making as possible, locating it closer to the core processes. The product matrix may however lead to issues between account executives and specialists unless properly integrated in the minds of specialists. The problem of information being bypassed the account executives might persist and as the account executives actually become executives, friction may increase. There is a risk that specialists will argue that decision making should not lie in the hands of account executives as they lack equal understanding of the area. Therefore it is important for Aquarius to address such issues in time. They need to emphasize free communication and strong coordination across the specialist departments while simultaneously recognizing leadership, as well as integrating a little more formalization into the core processes. A horizontal structure could perhaps solve this issue by instead simply removing the account executives, so that specialists are in full control of their own projects. You could imagine such a structure being team-based where specialists from different departments would come together to work on projects from start to finish. This level of decentralized decision-making, at the hands of specialists who interact directly with clients, would spur creativity and flexibility. However, the challenges that may arise from such radical change in corporate structure, such as inertia, lead us to believe that the only slightly less horizontal matrix structure may be more suitable. In addition to this, the case of JP Carpets shows how the horizontal structure is not easily manageable in anything but very small-sized companies. While service firms benefit to a greater extent from horizontal structures than manufacturing ones like JP Carpets, we still believe the horizontal structure could be problematic because of the size of Aquarius.