 In today's session, we will look at new emerging type of organization design. And first of this design, we are going to look at is process-based structure. So, process-based structure of the organization is derived after identifying 3 to 5 key processes for any organization. After identifying the key processes, we have to identify what are the value-adding things which can be incorporated in the process, how the process can be simplified by eliminating the non-essential tasks and layer of the management. So, in the process-based structure, we look at what are the core value-adding work we are performing. And second, how to eliminate the non-essential task, those may be unavoidable and those tasks can be outsourced or can be done through the contract laborers in a contract setting through different organizations. And we also look at how to deler the management, meaning how the number of hierarchical levels can be reduced. Very important feature of process-based structure is our teams. So, teams are the fundamental of the process-based structure and this structure is designed around the customer requirement. First, the customer is looked at and we look at what are the requirements for the customers. Based on the customer's requirements, self-managing teams are constituted, they are formed and teams are accountable for the goals and performance. So, naturally, when teams are the basic unit of this organization structure, the performance assessment and reward system is also predominantly team-based. So, this is one example of process-based structure. You can see the senior management team which is constituted of the chair and the key support process owners and please notice that here that the leaders in the organization are not known as department heads or functional heads, they are identified as the process heads. Senior management team is there and different process owners report to the senior management team. In this example, which is drawn from the Verlien Cummins book on organization development and change, developing new product processes is one process, acquiring and filling customer orders process is another process, supporting the customer is another process. All these processes are actually multi-functional. In the new product development, people from the different branches of the engineering may be involved, people from the marketing and finance will also be involved, people required for the HR processes may also be involved. So, generally, the processes are cross-functional or multi-functional and the heads of those processes are called process owners, they report to the senior management. Like any other organization structure, this also has advantages and some challenges or disadvantages. Very important advantage of the process-based forms of organization is that it focuses on the resources for the customer satisfaction. So, here the design from the very beginning happens to be customer focused, customer specific. Process-based structure improves the speed and efficiency. You might remember, we discussed about the four challenges of organization design. One important challenge is, one critical challenge is how to make people from the different functions to converse and interact and not develop, not let them to develop a silos mentality of operation. And the process that challenge is addressed to a great extent. Here people from the different functions, different types of expertise work together with this core objective of satisfying the customer. And because of this, there is an improvement in the speed and efficiency of the delivery of products or services. Process and process-based form of organizations are good at adapting to the environmental change. When there is a environmental challenge, may be political environment or technological environment or regulatory environment, organization has to perform, organization has to respond. But if organization is operating in the form of different departments, that response may be delayed because of the requirement of the entire departmental communication. Whereas, in the process where focus is of the customer, the probability of responding to that, to the environmental change is much higher, that is why process-based forms are generally found to be good at adapting to the environmental change rapidly. Process-based structure reduces the boundaries between department. We have already explained that in the process, the individual identity of the department reduces a great extent and that confluence reduces the boundaries between the departments. Process-based structure increases the ability to see the total workflow. The very design of the process is from the perspective of what we call outside in, meaning we look at the customers, their requirement and based on that requirement, we design the internal processes. So, this natural outside in view increases the ability of the process-based form to see the total workflow and how it impacts my customer and how it impacts my business. Process-based structure enhances the employee involvement, how? It enhances the involvement because employees are able to see the impact of their work on the customers or their clients. When people are able to see the impact of their work outside, then naturally their involvement and their engagement in the organization and in work is likely to go up. Since there are less number of departments, since there is more flexible communication, less number of boundaries, in order to develop a specific product or offer a specific service to the customers, the process-based structure reduces the cost or reduces the overhead. So, these are some of the very important advantages of process-based forms of organization. That is why you see so many organizations are process-based. Most of the KPOs means Knowledge Process Outsourcing Organization or BPUs, Business Process Outsourcing Organizations are generally defined in terms of the processes they are designed as a process-based forms. But there are some disadvantages as well of the process-based forms of the organization. Number one, the process-based form can threaten the middle managers and their staff specialists. In any organization, there are some people who develop a deep expertise and deep speciality as well. Generally in the process-based organization, people from the multiple perspective, people with the multi-dimensional competencies are preferred and in that environment, very narrow specialists at times do not find the opportunity to express their talent. Secondly, process-based structure requires changes in the command and control mindset. Here, since the generally the process-based organizations are flatter, a department hierarchy is less, people are supposed to take the accountability of their work and teams are supposed to take the accountability of their work. So, teams are fairly autonomous in the process-based structure and some people who have a habit of receiving command for taking any action, they may find it very difficult to operate in this kind of environment. At times, when there are very closely identifiable process in the process-based organization, there is a duplicacy of the SCARS resources. Process-based organization also requires new skills and knowledge to manage the lateral relationships and teams. Since in the process-based organization, the number of hierarchy is less and people have to interact laterally within the organization. They need to develop the skill of negotiating, influencing, inspiring in their lateral interactions. It means people have to get things done through the people whom or whom they do not have formal authority. They might be at the same level of hierarchy, but still you need to get things done so that both of you can satisfy your customer. In that kind of environment, people need to develop the special capability, need to develop the capability of influencing, interacting and getting things done in the lateral relationships and that is not a disadvantage, but this is an inevitable situation where not everybody is able to demonstrate their full capacity. Process-based organization may take longer to make the decisions in the team. If teams are very autonomous, if there is a very high level of democracy in the teams, at times teams are not good at reaching to the decisions very quickly. In a command and control, decisions may be reached quickly depending on leaders' proactivity. In a team-based situation, though the quality of decisions are generally better than in the situation where there is a one person who is commanding in rest of the people and large number of people are following, in comparison to that situation, in the team-based situations quality of decisions are generally better, but at the same time, since team is constituted of people of the similar level of hierarchy, everyone has the opinion, everyone can express their concerns and their thoughts and opinion and because of that teams may be delayed in making decisions. These things can be avoided by identifying the leaders pertaining to a specific level of accountability. If we specify the accountability of the people at different level pertaining to the impact of their work or the scale of their operations, this challenge can be handled. And last but not the least, in the process-based organization, there can be ineffectiveness if the wrong processes are identified. If wrong processes are identified, we may end up having lot of duplicacy of the resources. Lot of people with the similar competencies that might be the scarce competency, might be working in the different teams wherein their competencies could be used across the teams. So, this is one example where process-based forms of organization can be ineffective, particularly when the wrong processes are identified. With all these advantages and disadvantages, the question comes when is the process-based structure more appropriate? So, there are certain situations where process-based structure is more appropriate. Number one, when customer demands and market conditions change very rapidly. In that situation, our functional or divisional organization which is divided in different functions or departments and not in terms of the processes oriented towards satisfying the customers, process-based structure may not operate best. So, when the customer demands are high and the market conditions change very rapidly, that is where the process-based structure are more appropriate. That simply means in a more predictable environment, we need to promote speciality and where the speciality is need to be promoted, process-based structure is not the most appropriate one. Secondly, when organization has to work with non-routine technology and interdependent workflows, that is connected to the previous point that when organizations are operating in an environment where technology is very rapidly changing and lot of interdependent workflows are required, then it makes all the sense for people responsible for different expertise being put together at the similar level of hierarchy to satisfy the customer's requirement. In that situation, process-based structures are more appropriate. First but not the least, when we have customer segment which are powerful enough, which have a specific requirement, but those requirements are very significant to be fulfilled for the organization. When there is a heavily focused on the customer-oriented goals, when you have very powerful customers who have specific requirements in terms of technology, in terms of the interdependent tasks and workflows, that is the situation when the process-based structure is more appropriate. This design is suitable for the organizations of moderate to large size. A very small organization may find it difficult to design their organization according to the processes. So, process-based structure is suitable for the moderate to a large size of organization. The example of the process-based organizations as I mentioned before are most of the KPOs means knowledge process outsourcing firms and VPOs meaning business process outsourcing firms. Large number of IT and ITS companies in India are operating with the process-based structure. Very large organizations in the IT sector are generally the combination of the divisional structure and the process-based structure. In-house IT support services, many multinational organizations like Berkeley Bank or General Mills, they have a shared service operations where their IT requirements are being taken care of by their Indian subsidiary. IT firms, separate IT firms are established which are catering to the internal requirement of large MNCs. In those shared services organization as well, we see more process-based structure operating. Now we will look at the next structure which we call customer-centric structure. Same is sounds similar but in a while you will understand how the process-based structure are different from the customer-centric structure. So, if you look at this diagram, you can see the head of the organization which is CEO is reported by one market facing group and another support group along with the finance, R&D and human resources. This whole organization is having customer-centric structure. That means significant portion of the organization is customer-facing who is responsible for customer segment serving the specific customer segment and there is another group which is responsible for different products and services. At the corporate level there is a human resource function, finance function and R&D function. This design has the element of functional structure but those functions do not continue to remain to the last hierarchical level of organization. Those functions are more specialized function which take care of their processes within the of the organization individually in the remaining in the corporate office but the biggest part of organization is designed around customer. One segment is related to the support group, one segment is related to the market-facing group. There are lot of advantages and disadvantages of the customer-centric organization as well. The advantage of the customer-centric organization is that it presents an integrated phase to the customer. Not many people same organization has to interact with the customer. So it presents an integrated phase to the customer. Customer-centric forms also generates a deep understanding about the customer requirement. Since they are customer focus, the organizations and a particular segment of the organization just interact with the customers on a day-to-day basis they generate deep understanding of the customer requirement. It enables organization to customize and tailor the solutions for the customer naturally when there is an expertise and deeper familiarity understanding of the customer requirement they are able to customize and tailor the solutions to the customers. Customer-centric organization builds a robust customer response capability that is also a natural outcome when one very significant portion of organization is mainly interacting with the customer they develop the ability for the response to the customer requirement very quickly. There are disadvantages as well of this kind of organization structure. First is that customer's team can be too inwardly focused. They may focus only on the customers, they may not have a full understanding or bad understanding about the internal organizational challenges. Sharing learning and development functional skill is difficult because generally in a customer facing team there are people who have the multi-dimensional competencies. So in that environment specialization is not promoted and people with a different kind of special capability generally are not able to share their learning and development within the function. Thirdly managing lateral relationship with the customer facing and back office unit is difficult. When organizations are operating in a customer-centric form there has to be excellent combination of the front desk or the customer facing and the back office unit and that coordination is not something which comes very easily. It has to be developed, it has to be learned. Next point is that developing common processes at the front and back is at times problematic. Customers have certain requirement. Those who are facing the customers they are likely to look at and would like to address the requirement in some way but the back office may not find it feasible or may find it difficult. In that kind of situation the altercation or difference of opinion is very likely between the front office and back office. So developing common processes across the front and the back offices is not easy. Last but not the least clarifying the market function is problematic. Market functions keep changing. Customers expectations keep changing and tracking that is not easy. So having a customer-centric form at one point of time may be very successful but in the dynamic environment the customer-centric form may lose out on reading the technological changes, reading the implications of regulatory or psychographic or globalization related challenges which may change the customer's requirement. So in that situation this kind of design becomes a liability. With all the limitations what are the prerequisites for customer-centric organization to be successful? Number one the strong lateral capabilities like information technology related capability like capital allocation, like resources prioritization to integrate the front and back end of the organization are the requisites for making the customer-centric organization more successful. Secondly presence of strong customer forces in a complex and uncertain environment is a situation where customer-centric organizations are required and their probability of success is more in comparison to the functional or divisional organization. So in what is the role of OD person? What is the role of the organization development professional in this situation? OD professionals need to make organization realize whether the customer's requirement is really specific, whether the customer-centric organization is really important, whether the environment is really complicated where it cannot be handled or where the organization cannot carry out its function properly in other forms of organization which are simpler like divisional structures or functional structures. Next type of organization design is called network organization. This is one example of a broker organization. Why it is called broker organization? Because it is the mediator or it is the one connecting point of the different organization. So a network organization is depicted in this picture where a broker organization is the central and they have the collaboration and they engage the designer organization, producer organization, distributor organization and supplier organization for the product they deal with. The benefit of this kind of organization is that we can quickly build the operations. We can quickly scale up the business. You have to just force the alliances with the organization which have expertise in some specific functions, you get them connected, you find the market, get even a partner who can do the marketing for you and that is how in a very quick time the broker organization can scale up very fast. Networks can be of various types. Internal market network where organization is built around many small business units. So one example is ABB organization. This organization predominantly operates in the five segments like commuting or modern electronics or robotics related functions. ABB operates in a highly technologically advanced segment related to telecommunication, robotics, production and transcommunication. It has more than 1000 subunits and has more than 4000 profit centers. These subunits and profit centers keep interacting and having the business relationship with each other and that is how the whole organization operates across the sectors, across the different expertise. So this is example of the internal market network. Another type of network is vertical market network wherein there are suppliers, there are aggregators and there are retailers and all this is managed by the corporate office. One example of the vertical market network is Nike, the shoe company. They get their shoes manufactured from various parts of the world. They get the technological help from the different experts and at the different level in the organization they operate for manufacturing of the shoes, collection center, warehousing and retailing. So there is a vertical market network operate in the Nike. So with the some of the suppliers they have a contract relationship with some of the parts of the network they have an employer-employer relationship. Third example of network is intermarket network where of the same business houses they are connected in the form of a community they are operating at the different in the different industries sometime even very unrelated industries. So Japanese Kewetsu or Korean Kibble are the term used for the intermarket network wherein one brand owns large number of organizations operating in very diverse sectors and they keep interacting and having business relationship with each other and this kind of network organization is called intermarket network. Another type of network is called opportunity network. These are very flexible, quick to operate and quick to respond to the market requirement. One example is of the Lee & Fung it is a training company of Hong Kong and they are very quick at identifying the business opportunities, changing the customers need and requirements. One example is their operation in the clothing segment. They quickly interact and establish the relationship with the different manufacturers, people responsible for branding, organizations responsible for the supply chain and then they serve the customers with the clothes of the latest trend. So these are the types of the network and their example. This is the pictorial representation of the web based retail business which is example of a network organization. There is an offshore manufacturing package firm, there is a furniture design studio, there is a other home furnishing firms, share mail order catalog, there is a national accounting and financial management firm and there is a port of entry warehouse and distribution company. So these are the five very different companies, they are connected through technology and this is connected by a business core and this business core is the face of the organization. So if we can take example of a paper fry. So paper fry is an example of a network organization where the brand paper fry you see as the face of a network and who all are participant in this network. In this network there are manufacturing firms which are responsible for packaging, there are furniture designer studio who design the furniture, there are manufacturing companies which manufacture the furniture given and suggested by the central office of the paper fry and all that. And there is a warehouse which is a different company and there is a national accounting and financial management firm which might be different company and which is working on a contract basis for the paper fry. So paper fry is a good example of a web based network organization. Amazon the famous retail company can also be example of a web based network organization. So there are special features of network structure. In the network structure you see there is a vertical disaggregation. You might remember we looked at in the organization design the challenges, the challenge about the aggregation, aggregation or integration across the functions. But in the network structure you see very less variety of functions being carried out in one single organization. So there is a vertical disaggregation in the different functions and departments in the network structure. Network structure is generally managed by the broker organization or a process orchestrator. So process orchestrator may be a flip card Amazon or a paper fry. These are the examples of the organization which engage with large number of organization who are responsible for producing their stuff and they use paper fry or Amazon as a platform to sell out their product and reach out to the customers. So the core of the organization can be called a broker organization or a process orchestrator. Ola, Uber are also example of this category through Ola the lax of taxis operating across India and different and some other parts of the world. Similar thing is with Uber which is operating in so many parts different parts of the world but they do not own taxis they are the aggregators with the help of technology. So this is also an example of a network organization. Network organization in the coordination happens through the informal relationship through contracts and the market mechanism. In the organizations like Kretzu, Kibhol or many firms operating in India which are community based generally localized these are the network kind of organization where they operate based on their informal relationship. People become familiar with each other and they trust each other and based on that trust they operate their business. Network operation also happens through large number of contracts. So the contract specifically identify the kind of services and product being offered by the broker organization and the partner organization and those contracts becomes the governing mechanism of the network organization. Last but not the least it is a market mechanism like giving credit like renting etc through which the different partners of the network come together and they form an organization for providing service to the customer. So customer experiences one integrated service or product but they are being produced by different organization. They are being delivered some by different organization but they are aggregated they are orchestrated by one core which is the face of the company. So Ola the brand you see is the face of the organization, face of the network, Uber is the face of the network, Amazon is the face of the network and that is actually a platform where large number of different organizations are contacting their customers and selling their product and services. Network organization like any other organization has advantages and challenges. Advantage is that it enables highly flexible and adaptive response. You see a market requirement, you contact a channel partner or a network partner, you get the service and product and make it available to the customer. It is as fast as as you can think. So it is really very flexible way of organizing. It creates the best of the best form to focus resources on customer and market needs. When with the help of IT one can make products available and one can make the visibility of the product available across the world then it can promote only best of the best products. So when the facility of presenting their great output was not available even the substandard product could be sold in the local market. But because there are no local market and in the global market you can get access you have familiarity to the products which are the best in category. They might be they might be produced in different parts of the world but the network organization the process orchestrator or the broker is willing to is capable of providing that product at your doorstep then it promotes the best of the best forms. It promotes the best of the best product. Each organization can leverage a distinct competency. In the business environment where network based organizations are operating an organization can just focus on their expertise. Without network an organization has to take the responsibility of the production, design, delivery, finance, accounting all these functions. But in the network organization the network partners can just focus on their expertise which may be supply chain, which may be producing best of the class products, which may be about providing the great service. They can just focus on their expertise and through the broker organization or the orchestrator they can be part of the network and carry out their business. It permits the rapid global response as I explained before that with the network organization you can reach out to any part of the world without having actually starting their operation your own operations there at a very fast speed. It can produce a synergistic result. It is connected to the point number 3 that the channel partners or the network partners need to focus only on their expertise only on the product and service or the activities they are the expert when they have to focus on that they can produce a synergistic result. There are some disadvantages as well of the network based organization. First is that there is a difficulty in the network organization for managing lateral relationship across the autonomous organization. Basically that network partners are of the similar level of relationship. So, the lateral relationship has to be developed. Difficulty in motivating members to relinquish autonomy to join the network. Not all the service operators may be willing to join a network operator or a broker organization or a process orchestrator. If the process orchestrator has become really very big and the household name as it has happened with the flipkart as it has happened with the Amazon marketers will have no choice but to con connect to them. However, for a new broker organization it might be challenging to convince the other organization who are also autonomous to join the network. Another challenge is sustaining membership and benefits and that can be problematic. Sometime the channel partners or the network partners may not continue to be the members of the network and they have all the right to move in and out of the network and that might pose a challenge for a network organization. Network based firms form of organization may give partners access to the propriety knowledge and technology and when there is a close interaction between the network partners there is a probability that network partners get the access to the propriety knowledge of the orchestrator, process orchestrator, broker organization or any other closely involved network partner and that may result in reducing the competitive advantage of one network partner. So, these are some of the disadvantages or the challenges of a network based firms.