Now a day’s the most competitive business organizations are engaged the strategic planning by assessing both their internal and external environments, setting clear objectives, and formulates strategies to enhance the effectiveness and efficiency of their organizations. They implement the formulated strategies by evaluating the progress towards their results periodically and adjust if necessary to keep on track. “Strategic planning is a systematic process aimed at identifying and addressing specific issues in a participatory manner in order to attain the desired outcomes, it takes into consideration contextual environmental issues and has specific goals and objectives”.
Strategic planning has more advantages for the organizations. First, all of the stockholders of that organization involve in the organizational strategic planning process that will enhance their senses of organizational ownership. It also sets the community’s aims of the organization such as the establishing vision, mission, realistic goals and objectives unswerving with the organizational mission. The goals and objectives are also communicating mechanism among various components of the organization.Similarly, “Strategic planning helps form the organizations to Identify strategies to be carried out in a defined time frame within the organization’s capacity for implementation and it ensures the most effective use is made of the organization’s resources by focusing the resources on the key priorities that provides clearer focus of organization, increased productivity from increased efficiency and effectiveness”.
Strategic planning processes have three major components that are the strategic analysis, strategic choice and strategic implementation processes. “Strategic analysis involves a thorough examination of the organization, its culture, its structures and importantly its strengths and weaknesses in terms, of people, systems, products and services, equally important are to look outside the organization; to consider what is happening in other areas and what impact this may have. In times of change this phase is crucial because without this knowledge; planning for the future becomes a difficult and wasteful task , therefore the key sub elements are, the environment, objectives/power and resources”.After the organizational situation analysis, the next step is the strategic formulation and strategic choices. Every organization have its own strategic choices with respect to the related risks costs to implements and success factors. The main elements in this part are the core strategic elements i.e. vision, mission, goals of the organization. “Therefore the key sub elements of strategic choices are, generation of options, evaluation of options and selection of options”. Then strategy implementation phase is the way forward to the realization of the process and putting the strategy into an action in specific period of time. “Therefore the key sub elements are, people/systems, structures and resource planning”.All in all ,the focus of the strategic planning process is different for different organizations. “The strategies of nonprofits organizations tend to focus more on matters of board development, fundraising and volunteer management while, those for the profits organizations tend to focus more on activities to maximize profit”.
1.1. Description of the essay
1.1.1. Purpose and Objectives of the Essay
The purpose of this essay is to understand the Organizational Strategic Planning Processes. It will determine the role of the realized strategic planning on the organizational effectiveness and performance in the practical case of SOYDAVO LNGO as None Profit Local Organization operating in Togdher Region of Somaliland. The essay will attain the following specific objectives:
- To understand the organizational strategic planning processes and their impact on organizational effectiveness and performance.
- To assess the existing organizational internal and External environment issues of SOYDOVO LNGO by analyzing environment aspects into Strength, weakness, opportunity and Treats (SWOT analysis) .
- To formulate a Five years Strategic plan that would improve the current organizational aspects of SOYDOVO LNGO.
1.1.2. Scope & Limitations of the Essay
The scope of this essay is the Organizational Strategic Planning Process. It details with the Organizational environment scanning, as well as the SWOT analysis and Strategy Formulation; it will not deal to with the strategic implementation and evaluation of strategic management processes.. It will examine the impact of realized organizational strategic plan on the effectiveness and organizational performance .The essay will emphasize more with the organizational strategic planning in the case of SOYDOVO Local Non Government, None profit organization operating at Somaliland in Togdher Region.
Due to the very inadequate time for participatory strategic planning session and review of the organizational policies and procedures that were important for developing organizational strategic planning was impossible, however, the organization will carry out that participatory session by using this report as guideline that will save more time for the strategic planning process of the organization. However, it is intend to propose strategic plan that could be employed to improve the future organizational effectiveness and efficiency after when it is screened through participatory strategic planning session. Nevertheless it currently focus more on academic intent.
1.1.3. Design and Methodology of the Essay
Different data collection tools were designed to collect both qualitative and quantitative types of primary and secondary data used within this essay. The major data collection instruments used for primary data gathering was Questionnaires, structured interviews, observations, and discussions. Similarly, some organizational documents such as the existing policies and financial procedures as well as the organizational profile were used as secondary source of information.
188.8.131.52. Primary Data Collection
Different data collection instruments were used to collect the primary data from SOYDOVO LNGO. The major topics subjected to these instruments were to assess the internal and external organizational environment. The most convenient instruments to accomplish the above stated objectives were questionnaires and structured interviews, there were also some unstructured interviews and discussions to some key SOYDOVO LNGO personals such as the directors and members of the board of directors that were more helpful to acquire the objective of this essay .Similarly, an observatory visits at the SOYDOVO LNGO main office in Burao and some field offices were carried out to closely ensure the executive capabilities of the organization as revealed by the collected data . All in all following is the major research primary data collection instruments planned for the organizational environment assessment data.
An organizational assessment Questionnaire:- one questionnaire with both open and closed questions and tabulations was designed to collect the organizational assessment data from the . SOYDOVO LNGO. The major organizational issues focused by that questionnaire were as follows:
Organizational Internal Assessments: strength and weakness
- Overview of organization scope/function
- Historical perspective & significant events of The Organization
- Organizational Human Resource Aspects
- Organizational material and Properties
- Fiscal Aspects
- Organizational External Assessments: Opportunities and Threats
- Demographics, focus on organizational Beneficiaries
- Economic Variables
- Impact of Statutes and Regulations
- Other Legal Issues
- Technological Developments
- Stakeholders analysis
- Internal stockholders and External stockholders
- Structured Interview was also subjected to the overall impact generated by result based SOYDOVO LNGO programs to their beneficiaries. This was more in focus of theory change that links the overall organizational strategy to its development programs. The major organizational issue focused by this instrument was the existing
- Correlation in between the core strategy elements of the organization.
- Organizational Values and
- Performance measurements
- Unstructured interviews and observations were subjected to ensure the executive capability of the organization factuality to cross checking collected the information from SOYDOVO LNGO. It also closely monitored the level of coordination existing within the organizational functional departments and programs.
184.108.40.206. Secondary Data collection
A secondary data also contributes a valuable part of the research information. The major sources of the secondary data used in this essay are including:-
The entire SOYDOVO LNGO documents such as the the organizational policies, procedures and , regulations, standards pertaining the organizational program management.
220.127.116.11. Data Analysis and Interpretations
The acquired primary and secondary data from the SOYDOVO LNGO environment assessment were analyzed and interpreted into graphs i.e. Pier charts, hectographs and line charts to farther examine be their future trends. Next to that analysis, all the picked out organizational pros and cons were classified into strength, weakness, opportunities and organizational threats. The cause effect relationships were closely focused in to table I-I, and strategies were derived from the SWOT Matrix that have either one of the following four types:-
- SO that means to fully utilize the existing organizational opportunity by using the existing organizational strength.
- ST that means to eliminate the existing organizational treats by using the existing organizational strength.
- WO that is to overcome the existing organizational weakness by using g the existing organizational opportunity
- WT that is to overcome both of the existing organizational weakness and threat
- The strategy selection and prioritization is done through a participatory meeting held at SOYDOVO LNGO main office at Burao.
1.1.4. Significance of the Essay
This essay has three major significances. First it has an academic significance as it will acquire me the understanding of organizational strategic planning processes. Again it will reveal the extent of my dedication to self studying upon the course of strategic management. Similarly, It combines my academic endeavors to my professional experiences, that will ease the experiential and academic understanding of organizational strategic management course as an essential part of the curriculum. Finally, it will propose a five years strategic plan that would improve the effectiveness and efficiency of SOYDOVO LNGO programs services to its beneficiaries.
1.1.5. Organization of the Essay
This essay is organized into five chapters: The first chapter is the introduction of the essay. It describes the purpose, objectives, scope, design and methodology of the essay. The second chapter is the Literature review. It reviews the strategy approaches, level and types. It further articulates the organizational designs and strategic planning processes. It will pinpoint the impact of realized strategic planning on organizational performance. The third chapter is SOYDOVO LNGO environment assessment and SWOT analysis. The fourth chapter deals with the five years SOYDAVO organizational strategic plan. The fifth chapter is the conclusions and recommendations.
2. Literature Review
Organization is number of people who work together to attain a common goal. “Organizations are social entities that are goal-directed, are designed as deliberately structured and coordinated activity systems and are linked to the external environment”. According to the contingency organizational theory, “There is no one best way to do things, it depends upon the situation, and organizations having internal structure that match with the demand from its surroundings best have the chance to survive”.
However, the organizational environment is not static in this competitive world, some organizations are organic with stable environment while some other organizations are mechanic and very turbulent within continues changing environment. Hence, “there is a need for strategies to achieve agreed organizational goals and objectives giving a sense of purpose and direction of the organization because of the technological, social and economical environment changes and competition among rival organizations”. Strategy is therefore, the linking force in-between the organization and its environment. There are “four theories of action in business strategy offering us an insight into the motivation behind the company’s vision and what strategies they most likely to implement”.The four theories are the Classical, Evolutionary, Processual and Systemic Approaches
Similarly, “there are a variety of approaches used in strategic planning”. Mintzberg had recognized ten modes of strategic formulation. “The way that a strategic plan is developed depends on the nature of the organization's leadership, culture of the organization, complexity of the organization's environment, size of the organization, expertise of planners, etc”. The model of strategic formulation adopted by an organization provides different alternatives and strategy choices for the organization. The organization can also integrate different strategic planning models to pursue the advantages of these models. “There is no one perfect strategic planning model for each organization; the model, for strategic planning depends on the purpose of strategic planning, the culture of the organization, stability of the organizational environment, and the success strategic planning approaches”.
The strategic planning framework is a set of series activities accomplished through participatory approach with involvement of all organizational stockholders. These activities among others includes, laying down the organizational direction (vision / mission) , putting strategic goals and objectives, organizational external environment assessment , organizational internal environment appraisal , initiating organizational strategic options , prioritizing organizational strategic options , choice of organizational strategies , setting organizational performance measurements and organizational strategic plan implementation. Thus, “strategic planning determines where an organization is going over the next year or more, how it's going to get there and how it'll know if it got there or not , the focus of a strategic plan is usually on the entire organization, while the focus of a business plan is usually on a particular product, service or program”.Strategic planning is developing a set of plans that moves from general to specific ,that will cause different types and levels of an organizational strategies.
2.1. Theories of Business Strategy
2.1.1. Classical approach
In the modern world of organizational management before well developed strategic planning processes the corporate planning was acted as precursor of strategy planning. According to (Barnard, 1938) “the purpose must be broken down into fragments , specific objectives not only order time so that detail purpose and detail action can go in series of progressive action of cooperation”.
The deductive of breaking down the corporate planning into many small tasks for various executives in order that they can take the organization into prosperous future and profit maximization. “According to Whittington, for these classicists profitability was the highest goal of business and rational planning as the means to attain it”.
Therefore the Classical approach supposed the top managers are responsible for the organizational profit maximization strategy. “the Classical approach to strategy requires that managers be ready and capable of adopting profit-maximizing strategies through rational long-term planning in the aim of a business is to earn a return on capital, and if in any particular case the return in the long run is not satisfactory, the deficiency should be corrected or the activity abandoned”,.
2.1.2. Processual Approaches
Followed by the classical theory was the Processual concept suggesting that the decision making is likely to respond to internal problems apparently pressing as more as it reveals continues planning on part of organization. The processualism was not confident to the rational planning of the classist and they were pessimistic about the potential market profit inductions as believed by the revolutionists. They prefer to deal with the world status focusing inside the organization in terms of micro politics and the cognitive of rational action. “Micro-political view implies that firms are not united towards a single goal such as profit. Instead it is made up of a number of individuals with different interests and bring them to the organization”.
The processualists consider more with the human behavior undermined by classical strategists. Bargaining different individuals and groups within the organization, developing in power struggle. Compromise solutions and epitomize strategy in Processual environment. The results being the strategies emerge from the mesh of compromise and internal Processual development. The strategy end up with is not always one that an individual or group desires, and each participating member is not won nor lost hopefully but the strategy ends up with something that they can live and work together to achieve their common goal. Some researchers believe that the processualists were classicalists that struggled for negations before they settle an agreed outcome.
Though, the Processualists were believed that the environment scanning is useless and tiresome, that its costs exceeds from its benefits, the theory indicates that “the members of the organization bargain between themselves to arrive at a set of goals that is acceptable to them all, and the main strategy for this approach is to simplify complex processes”.
Following the Processual approach was the evolutionary concept suggesting that it is better to let the environment to choose strategy rather than the managers. “The biological principle of natural selection is at the core of evolutionary theory wherein the most apt strategies often translate in the best performance allowing them to survive and progress, therefore, the weaker performers are driven out of the market”.
They believed that downgrading of managerial strategy in favour of environment fit, as markets not managers determine the most appropriate strategies. “Rational methods are not the basis for this approach because it is ‘evolution that is nature’s cost-benefit analysis” ’.
However, many researches’ revealed opposite to the notion that the organizational strategy and its success is contingent to the environment as some firms definitely control their markets. In evolutionary perspectives, competition is not overcome by detached calculation such as in classical perspective but by constant struggle for survival in the jungle”.
2.1.4. . Systemic Approaches
The systematic theorists believe that strategy is guided not so much by bounded rationality or the micro-politics but cultural rules, purposes and social interests and the resource of the surrounding context. According to them, “the economic activity cannot be separated from social relations such as family, state or religion, and these social factors influence the means and ends of a systemic approach and define what the suitable behavior is for their members”.
They do not believe the profit maximization as the choice as the classicalists or they do not trust that they are obliged as believed by the revolutionists and they reject the Processual concept that the strategy is internal compromise rather they consider that the firm is capable of planning and perform effectively .However, they consider a wider perspectives of the organization strategies. “In the systemic approach, the organization is not just made up of individuals but of social groups with interests, and the variables that Systemic contend with are class and professions, nations and states, families and gender, then its strategy depends on the social environment of the firm”.
2.2. Theory of Stockholders
A group of people or an “individuals that have an interest or well being of the organization are affected by the goals and operations” of the organization or the behavior of its members are called stockholders. “They are people or organizations who either a) stand to be affected by the program/project or b) could 'make' or 'break' the program/project's success, these may be winners or losers, included or excluded from decision-making, users of results, participants in the process i.e. Workshops, focus group discussions or individual interviews can be used to allow participation in the planning process”. Stockholders can be categorized into the following three parts:-
a. Internal stockholders:- these are the entrepreneurs, managers , non management staff and other organizational employee.
b. External stockholders:- these are the governments and earth pressure groups.
c. Connected stockholders;- these are the consumers, suppliers and competitors.
Stockholders are sometimes the owners and most risk takers. Hence the type of information you would expect from stockholders depends upon which type of stockholders you have. Some time they have two broad classifications:-
I. Institutional stockholders
II. Private stockholders
Whatever stockholders the organization may have it is preferable to be early inclusive within the strategic planning process. “It is advisable to engage stakeholders from the beginning of the strategic planning process to get their views and also to obtain buy-in for the new strategic thinking and the forward planning process”.
2.3. Models of Strategies
The reality at the outset is “that there is no one best way to manage the strategy of an organization”, had caused the fact that every organization has its own strategic planning model. The “way that a strategic plan is developed depends on the nature of the organization's leadership, culture of the organization, complexity of the organization's environment, size of the organization, expertise of planners”.
However, we highlighted in our previous discussions, that there are variety of strategic planning models. Model can be defined as an intellectual construct designed to simplify a complex of everyday live for the purpose of decision making reality. Model is a model not reality and therefore not linear, but it rise our thinking about the subject and know how to deal with it.
Hence, the Strategic planning models will provide us an alternatives that we can select from the best outfit model to the concerned organization, whilst we are subjecting some crucial technical modification to the selected model to suit it with the case firm.“The models provide a range of alternatives from which organizations might select an approach, before it begins to develop their own strategic planning process”.
One important premises of model selection is that the strategic planning model adopted within an organization limits the number of strategy alternatives and choices that an organization relies on prioritizing and selecting from its strategy. It determines those involving and participating within the strategic planning process. It also influences the time required for the strategic planning. Therefore, it restricts the planning accuracy and its end results.
Thus, every organization develops its own model of strategic planning process through the modification and integration of the existing models in the platform of strategic planning rationales. “Each organization ends up developing its own nature and model of strategic planning, often by selecting a model and modifying it as they go along in developing their own planning process”. We emphasized in our earlier discussions that integrating different strategic planning models can provide the organization the benefits of the integrated models. “Organization might choose to integrate the strategic planning models”.
However, we need to select the most effective strategic planning model. The scrutiny of the selecting model effectiveness depends upon how it abridges the complexity of organizational day to day decision making reality. Therefore we have to develop set theoretical rooted criteria that we can measure the strategic performance for various strategy planning models. Infect, when we are engaging the strategies activities, we are dealing to understand where we are now? That is our current position, level and status of the firm. Then we will think about where we want to be? And how possible to get there?.Hence, the effective models must perceive the firm with the tools and techniques to attain the intent response of these managerial inquiries.
Next, the effective model is to persevere with the methodology and mechanism that professional may solve the organizational problems i.e. the classical strategy for instance sees two primary ways to deal with the complex reality. First, it articulates to reduce problem into small particles, and work these particles separately. Then bring the answer together so as the answers of the small problem particles will give one big problem saluting answer. The second classical strategic way to deal with problem is to use simplifying model overlaid on the reality that allows certain responds upon the situation. The models have a predictive quality that enables decision is to be made which will have known outcomes. Hence, the model must have such mechanisms that could simplify the complexity of the problem and predictable.
Thirdly, according to the contingency views and system concepts, the effective strategic planning model must have the mechanism to reconcile or at least aware of the correlating demand of the four organizational elements of opportunity environment, capabilities and resources, responsibility in the society and its managerial interests and desires. According these premises, let us review four of the following six strategic planning models that are the “Goal Based Model, Issue Based Model, Alignment model, Organic Model, Scenario Planning model and time based model of Strategic Planning”.
2.3.1. Goals-Based Strategic Planning
This goal based strategic planning process is very basic process. “The process might be implemented in year one of the nonprofit organization to get a sense of how planning is conducted, and then embellished in later years with more planning phases and activities to ensure well-rounded direction for the nonprofit”. The organization that uses such strategic planning has the following characteristics:
- They very small firm.
- Top –down planning approach
- No former strategic planning practiced within the organization.
- Profit organization.
The goal based strategic planning process is to “Identifying the purpose (mission statement), then establish a vision statement , and Select the goals, it is also to identify the specific approaches (or strategies) that must be implemented to reach each goal, next specific action plans to implement each strategy must be identified and mission, vision, strategies and action plans is compiled into a Strategic Plan document, and finally Monitor the implementation of the Plan and update the Plan as Needed”.
2.3.2. issue-Based Strategic Planning
This approach is usually adopted by Organizations with inadequate resources. Several issues are plagued with these organizations and they experienced successive disappointment due to their accomplished basic Organizational purposes. “Organizations that have very limited resources and several current major issues i.e. little success with achieving future-oriented goals or very little buy-in to strategic planning might use the issues-based approach to planning instead of the goals-based approach”.
The goal based strategic planning process is mainly as following points. First, it is to “Identify the current, major issues facing the organization, next, Brainstorm ideas to address each major issue for the coming 10 to 12 months, then Compile the issues and ideas into a Strategic Plan document subjected to approval of the top management, and Monitor implementation of the Plan and update the Plan as Needed”.
2.3.3. Alignment model,
Organizations that meet a lot of internal ineffectiveness may prefer the alignment model, these organizations are eager to find out why this happened. “The overall purpose of the model is to ensure strong alignment among the organization’s mission and its resources to effectively operate the organization”.
The alignment strategic planning process is mainly as following points. First, “the planning group outlines the organization’s mission, programs, resources, and needed support and they identify what’s working well and what needs adjustment, the establish how these adjustments should be made, then they include these adjustments as strategies in the strategic plan”.
2.3.4. Organic Model
The traditional strategic planning or linear model articulates to reduce problem into small cause and affect related particles, and works these particles separately. “Traditional strategic planning processes are sometimes considered “mechanistic” or “linear,” i.e., they’re rather general-to-specific or cause-and-effect in nature”.it relies on an extensive environment analysis that is very valid with organizational theories and theories of business action strategies. “The processes often begin by conducting a broad assessment of the external and internal environments of the organization”.
It provides us the analysis tool that is capable to integrate the four strategic organizational elements of opportunity environment, capabilities and resources, responsibility in the society and its managerial interests and desires. “Then it conducts a strategic analysis (“SWOT” analysis), narrowing down to identifying and prioritizing issues, and then developing specific strategies to address the specific issues”.
The SWOT analysis is very important tool that is used to brainstorm the strategic planning team. it is an easy, effective and analytical tool for both organizational internal and external environment analysis. “SWOT is a powerful tool when correctly used, and generates long and useless lists when it is not taking into account the purpose of the organization, one should try to critically identify the strengths of the organization in the recent past, what has definitely been unsatisfactory, and then look at the external environment to recognize which changes could actually benefit the organization, if appropriately addressed, and which risks the organization needs to prepare for because they can directly impact on the ability to achieve its purpose”.
The SWOT matrix endorses with the strategic planning team the manner to visualize various organizational strategies. These strategies are derived into four different types; SP, ST, WO and WT that can be translated as the following:-
- SO that means to fully utilize the existing organizational opportunity by using the existing organizational strength.
- ST is meant to eliminate the existing organizational treats by using the existing organizational strength.
- WO that is to overcome the existing organizational weakness by using g the existing organizational opportunity
- WT that is to overcome both of the existing organizational weakness and threat
2.4. Types of Strategies
According Mintzberg and water (1985), there are four types of strategic planning that are the deliberate strategy, emergent strategy, opportunistic strategy, and imposed strategy.
2.4.1. Deliberate strategy
According Mintzberg and water (1985), the planning or deliberate strategy comes about where there is a precise which are written down and imposed by central leadership. “Key features of the deliberate strategy includes a large number of controls to ensure a surprise free implementation on the environment which are accountable to a controllable managers who are able to ascertain, review and evaluate every viable option and can therefore take the final possible option”. In this sense strategic planning is seen a way of preparing for a changes and providing the direction for the organization.
2.4.2. Emergent strategy
According to Mintzberg and water (1985), sometimes the “intent is not formally written down but it emerges over time as part of the culture as a series of related decisions”. Therefore, strategy can be deliberate or emergent or in-between the two types.
2.4.4. Opportunistic strategy
According to Mintzberg and water (1985), Strategy may come about in an entrepreneur ways. An organization may take the advantage of the environment or it may discover the advantage of new skills as an opportunistic manner. The “entrepreneurial mode the strategy making is dominated by active search of new opportunities and is characteristic in dramatic leap forward at the face of uncertainty, however, growth is the dominant goal of the firm and uncertain conditions”. This can of strategy can result a significant gain for the organization but the authority of the strategy must rest on only one individual.
2.4.5. Imposed strategy
According Mintzberg and water (1985), government policies may have impact on the organizational strategies. The government may impose the organizations to change their strategies ie. The privatization policies.
2.4.6. Realized and Unrealized strategies.
In some cases strategies are successfully seconded to implementation and some time they remain failed and unrealized in practices.
2.5. Level of Strategy
In most of academics the level of strategy is classified into three levels that are the corporate strategy level, the business strategy level and functional or operational strategy level.
2.5.1. Corporate Strategy
The corporate level of strategy relates with the future formula and structure of the firm. It affects the rational and the business in which it intends to complete. “Corporate level strategy occupies the highest level of strategic decision-making and covers actions dealing with the objective of the firm, acquisition and allocation of resources and coordination of strategies of various SBUs for optimal performance, top management of the organization makes such decisions”.
2.5.2. Business Strategy
Business strategy or the competitive strategy is about which product or service should be developed to offer specific stockholders and the extent to which the consumer’s needs are met whilst accomplishing the organizational objectives. “Business-level strategy is – applicable in those organizations, which have different businesses-and each business is treated as strategic business unit (SBU). “There-fore, it requires different strategies for its different product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to make the best use of its resources (its strategic advantages) given the environment it faces”.
2.5.3. Functional strategies
The operational or functional strategies are how different functions of the organization support the cooperate and business strategies. “Functional strategy deals with relatively restricted plan providing objectives for specific function, allocation of resources among different operations within that functional area and coordi-nation between them for optimal contribution to the achievement of the SBU and corporate-level objectives”.They concerned with how the functions of the organization contribute the overall strategy of the organization.
illustration not visible in this excerpt
According Mintzberg ( 1990), infect the structure constrained the strategy or the strategy is from the organizational structure and behavior. Alfred chandler (1962) had explored the relationship in-between the organizational structure and strategy of American corporate management what he finally concluded was that structure follows the strategy. Hence, it would be more valuable if we examine the three most commonly used organizational structures
2.6. Organizational Structure
Organizational structure is the allocation of tasks, responsibilities and authorities for various individuals, groups and departments within the organization. It is the “framework, typically hierarchical, within which an organization arranges its lines of authority and communications, and allocates rights and duties”. The organizational structure could be vertical or horizontal. “ Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management”.There is an organizational chart which always shows the organizational structure.“An organizational chart identifies pictorially the various functions performed within an organization and the lines of authority between people performing those functions”.
The organizational structure shapes the organizational action in several different ways. First, it outlines the reporting and organizational line of communication. It shows the vertical line of reporting and command and horizontal coordination line of the working force. “The number of people formally required to report each individual manager is immediately clear from the organizational chart”. The number of people who are reporting to one individual manager is known as manager’s span of control. If an individual manager has wide span of control then its organization has a flat hierarchy. On contrary, if an individual manager has a narrow span of control then its organization has a tall hierarchy.
Secondly, the organizational structure sets the formal operating procedures of the organization. It provides the role of decision making to individual workers who can thereafter participate the organizational decision making process at different levels. “Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions”.
There are three types of organizational structures that have different characteristics and relative advantages and disadvantages. “The existing three organizational structures are the functional organizational structure, pure project organizational structure and the Matrix organizational structure”.
2.6.1. Functional Organizational Structure
Functional organization is an organizational design that arranges the same professionals or experts together under one section or department of the organization. The experts of the organization are centralized and enable to develop their experience under a routine task in a cultural homogeneity and specialization: the people with same academic background, using same technological model, and performing task under same function. This organizational design is fine in such sense, however, different professionals may distinguish themselves and distant apart and hardly understand themselves and may easily differentiate from each other. The functional organization has a relative advantages but it has large disadvantage as shown at below table 1.
The major advantages of the functional organizational form includes among the others that it promotes professional identity of staff members. It also allows a maximum specialization within the field of work and easiness to manage and administer the organization. It creates the room for accessing to all expertise for other departments.
However, the major disadvantages accompanying with the functional organizational form are that it creates large difference in-between the departments and no standardization in organization and it also takes more time for problem solving. It is difficult to locate the responsibility of the result whether it is good or bad, so the accountability is unclear with in this organizational form. The functional organizational form does not develop to locate broadly oriented top managers.
2.6.2. Project Organizational Form
Quick changes of the competitive Markets and technology had caused a great significant for the project organization today. The specialists and resources are all focus in one project or product and the results will be clearer than that of the functional organization which is the responsibilities are more volatile.
The major advantages of the project organizational form among the others are as follows: it is simplifies the coordination in between various organizational functions. It also enables the organization in a significant growth without loss of control. It also clarifies the business outcome responsibilities and accountability. Similarly, it clarifies the objectives for division and motives and divisional management moves decision making authorities closer to the problem. However, its disadvantages are that there is a duplication of effort between departments. It also reduces professional specialization and it promotes the competition in between the divisions of one organization, it also promotes their sub-optimizations.
2.6.3. Matrix Organization
Matrix Organizational form is the mixture of the project organization and the functional organization form. That means the specialists at different organizational functional departments will work together at one project with its own project manager. The project manager will communicate every functional department such as the financial department ans human resource department. Therefore, in this structure there are two managers the functional manager and project manager and every member of the project team will report to both of the two managers. In some cases the matrix is very strong and the role of the project manager is only for the coordination of project activities ,while some times the matrix is week or balanced and the project manager have very important and powerful role in the project management.
The major advantages of the matrix organizational form are among other that it promotes the coordination possibility among the departments of the organization. It also provides the top management for coordination task. It facilitates the efficient use of the financial use of human resources. The matrix organizational form stimulates the motivation and important socializing and training of younger employee It develops the most flexible system that can take quick reactions for the solution of problems. The matrix organizational form is related with long break in period and it generates many conflicts. It does not support the professional identity. The severe disadvantage relating this organizational form is high administrative costs. However, this organizational form is the most effective organizational structure that is at twilight in-between the project and functional organizational structure.
- Quote paper
- Abdiqani Egal (Author), 2012, Organizational Strategic Planning and Leadership, Munich, GRIN Verlag, https://www.grin.com/document/198783