In the chapter-opening case the co-founders of Google had different opinions about the importance of maintaining the firm’s culture by keeping units at their natural size. Has Google gotten too big? I don’t know if they’ve necessarily become too big, but there is certainly a potential for this to happen at some point. My rationale is this; as an organization or its structural units grow in size, it can become more difficult for necessary interaction and collaboration to take place across structural lines or organizational boundaries.3 I would tend to agree with Google’s co-founder, Larry Page, in that an organization would almost need to operate at an optimal size in order to maintain a specific organizational culture – if that is the primary goal. The larger an organization gets, the more difficult it would become for its employees to look beyond their own areas of responsibility because the company would essentially begin to rely more on bureaucracy to get things done. If being able to maintain the “startup feel” of Google is a strategic goal that is deemed appropriate for Google, especially as it enters into acquiring new locations, then focusing on the unit size is certainly an important consideration they’ll need to keep at the forefront. (Kinicki 2008)
Horizontal approaches to organizational structure are typically designed to help a company and its employees overcome the often times difficult internal boundaries created by long-time used, more traditional approaches to organizational structure. As a new company grows in size, its need to create an organizational structure to allocate work responsibilities will invariably arise. The traditional approach to this generally divides responsibilities by function, geography, its customers or products. (Kinicki 2008)
The benefit that can be seen from organizational structure is that it makes employee responsibilities and work coordination more clear. Unfortunately, the downfall to this approach is employees may then lose sight of their role within working toward the organizations overall goals and mission when you tell them what their responsibilities are. The goal is finding the right balance. Employees must be clear on what their roles and responsibilities entail, especially within the parameters of working toward reaching the organization’s overall goals and mission. Organizations need to be able to communicate these distinctions clearly to their employees to avoid this type of situation. (Kinicki 2008)
What are the disadvantages of using annual reports as a mechanism for evaluating organizational effectiveness? Organizational effectiveness is comprised of meeting a combination of the following criteria: goal accomplishment, resource acquisition, internal process, and strategic constituency satisfaction. (Kinicki 2008) While experts recommend a multidimensional approach to assessing an organization’s effectiveness; there are some potential disadvantages of relying on annual reports as an evaluation tool, as annual reports are also a function of organizational behavior and earnings performance. 4
Although an annual report is a requirement for all public companies, as mandated by the Securities and Exchange Commission - it is meant to be a full-disclosure document with information about company earnings in the income statement, information about company assets and liabilities on the balance sheet, and information about the company's use of cash on the cash flow statement. It is also meant to be a marketing tool, as it contains a discussion from management about both the organization’s historical and future operations. Organizations will tend to only highlight ratios that show growth or above-average performance.4
While return on assets and equity are two of the most commonly used ratios for measuring operational effectiveness and the data can be obtained from the annual report; analysts must be able to compare and contrast these ratios from that of different companies in order to achieve a better understanding of how one company performs against others. 4 Annual reports are only published once a year. This means by the time is it used; the data may be old and irrelevant.
Bottom line, an annual report can always be manipulated in the company's favor. So, while an organization’s financial statements may have been audited and they are held to certain standards - the organization itself is in no way obligated to discuss any signs of its own weaknesses or issues with organizational effectiveness. As a result, it is important for investment analysts to look at both the financial data, as well as employee surveys in order to validate the data contained within the annual report.4
REFERENCES
Kinicki, Angelo. Organizational Behavior, Core Concepts. New York: McGraw-Hill/Irwin, 2008.
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