3) Internal & External Threats Faced By Organization
When II-VI Singapore Private Limited optics was first introduced into the Asia market, it took awhile before the photonics and laser industry market was accepted in Singapore. During those periods, the small size organization was comfortably handling the reasonable amount of sales volume.
Later on II-VI Singapore successfully marketed the optics into the photonics and laser industry in Asia Pacific region, commonly known as the II-VI IR (Infrared red) laser optics. II-VI Singapore used to be the only company that provides IR optics in the photonics and laser industry, but with the increase in demand and others see this as a potential lucrative opportunity, there are more companies evolving in the market now, especially China, Vietnam and Europe.
II-VI Singapore faced competitions and their market share has seen been threatened by its aggressive competitors in producing cheaper and lower quality optics. Although they have started to lose a minor percentage of the market share, II-VI Singapore sales revenues for the past five (5) years have been constantly increased. (Refer to the bar chart as shown in Appendix C for the increase of revenue over the past few years) And II-VI Inc has forecasted year 2009 will exceed last year revenue by 20% or more.
Though with the sales revenue positively increasing, II-VI Singapore faced a high turnover rate of its employees. Due to its employees continuous resigning, II-VI Singapore is always hiring new employees, which resulted in high cost as trainings are needed due to it complexity on producing the optics. New employees need to understand the nature of their work, the complicated process in manufacturing the optics and understand customer needs before they can add value to the organization.
Over the years, there is a significantly increase in optics requirements and the outlook of the photonics industry is promising for the next 5 years. (Refer to the cut-out Annual Report as shown in Appendix D from the website pdf) More demand in the optics is expected over the next few years, especially in the China and Europe.
There is a limit to what an individual can handle and this has directly leaded to II-VI Singapore not being able to provide prompt and quality optics to their valuable customers. When an employee is on leave or away from office, there is no backup support handling his / her work. This has leaded to potential sales lost to competitors as well as delays in delivery the optics to the customers. Insufficient manpower has great impact on the daily operations.
Not only the organization is being negatively affected, they have also affected the moral of their employees. Stressful employees facing the heavy workload are no longer motivated to practice the company’s values of initiatives and interdependence. There is also a high tendency of resistance and resignation from these employees.
Summarizing internal & external problems faced by II-VI Singapore are:
- Strong competitions by competitor of cheaper and inferior optics.
- Losing their competitiveness as well as market share in the photonics and laser industry due to slower responsiveness to customer’s demand.
- Not able to cope in the increase demand of optics with the shortage of manpower due to high turn over rate.
Thus the management of II-VI Singapore Private Limited identifies the needs to re-structure their organization in order to address current employees’ work load and tasks, provide effectiveness and efficiency to the customers, which bring in more sales revenue at the same time maintain and improves their market-value and share.
4) Observation & Findings
From the organization chart in Page 4, we have notice that II-IV Singapore has a tall organization structure, with six (6) level of hierarchy before reaching the functional level and most of its employees are multi-tasks, example:
- The Managing Director leading the II-VI Singapore has be the responsibility of being a Sales Manager.
- Human Resource Manager has additional responsibility as a Finance Controller.
- Production Manager needs to take care of engineering issues.
- Purchase Inventory Control / Planner Manager needs to take care of the warehouse and planning of work orders and delivery.
We have observed that the current structure has no clear job description and scope. Individual typically performs all organizational tasks and are not specialized. As such, the organization is experiencing diseconomies of scope, where it is unable to use underutilized resources more effectively.
Secondly, with the wide scope of responsibilities, employees are overloaded and not willing to accept more tasks, thus result in inefficiency and ineffectiveness. As the number of levels in the hierarchy increases, the relative difference in the authority possessed by managers at each level decreases, as does their area of responsibility. Thus the lower level of the hierarchy is less motivated. So there will be a motivation problem.
Beside that, there is communication problem due to many hierarchical levels in the organization structure. Communication between managers at the top and bottom of the hierarchy takes longer, thus decision making is slow, therefore affect the performance of the organization that need to respond quickly to customer’ needs or the action of competitors.
Secondly, information can be distorted as it flows up and down the hierarchy through many level of management, whereby managers may manipulate information to serve their own interests, thus the problem of control occur.
With the many hierarchy levels in the organization, the greater the bureaucratic cost as manager cost money. Also, it is easy for managers to pass the buck and evade responsibility by shifting their responsibility to the manager above them, this worsen the problem of slow decision making.
After identify and analysis the various problems faced by II-IV Singapore because of its high vertical differentiation, we feel that the organization indeed has to embark on some measures to flatten its organization structure, so as to improve efficiency and effectiveness to achieve their goals in relation to the market trend. Since the industry is growing, II-IV Singapore need to recruited more capable employees to enhance it core value. Thus a flat organization structure, with more horizontal differentiation of functions, is necessary.
5) Reasons For The Need To Change And Solution To Problem
We have identified that II-VI Singapore Private Limited, together with II-VI Incorporated, needs to make some organizational changes so as to move their present state in Asia Pacific to a desired state of effectiveness, mainly:
- To improve the effectiveness and efficiency services towards the existing and potential customers.
- To maintain and increase their market share within the photonics and laser industry.
- To expand and improve its competitiveness in the industry.
- To take into consideration employees’ capability and limitation as what each individual can do within their means and motivate them toward job satisfaction.
- To reduce the current high turnover rate by motivating, delegating decision-making role to talented and efficient employees.
Our proposed solution to their problem is to flatten the hierarchy with more horizontal functional units, integrating them with one of the seven (7) types of integration mechanisms (Refer to Appendix E), so as to straighten out any problem that may arise between the newly created functions and their existing function. It is necessary to integrate the process of coordinating various tasks, functions and division so that the employees can work together and not at cross-purposes.
II-VI Singapore need to be more decentralized by delegating the decision making to various function managers to motivate them to stay on with the company and assure those existing lower level employees that they will be recognized for their hard work by having pay adjustment or increment.
6) The New Proposed Organization Structure
Below is our proposed organization chart with the increase in employees (highlighted in red) of eight (8) different functional departments as well as a new Integrating Department formed within the Human Resources Department. There will be four (4) hierarchy levels instead of the current six (6) levels.
The organization has chosen to employ the twenty-three (23) vacancies as their permanent employees to add their specialization and value to the organization as well as to reduce the overloaded work situation so as to achieve its market edge.
7) Advantages Of New Organization Structure
The most signification advantage of the new organization structure is division of labour and specialized roles are developed. It provides people with the opportunity to learn from one another to become more specialized and productive as people with skills in common are assembled into a functional group, where they learn the most efficient techniques for performing the task.
Secondly, people who are group together by common skills can supervise one another, control each other’s behaviour and keep activities on track. Peer supervision is especially important when work is complex and relies on cooperation; in such, supervision from above is very difficult. With people working closely with one another over extended time period, it will develop norms and values that allow them to become more effective and committed to organization activities. This commitment may develop into a core competence for an organization.
Lastly the new structure allows transferring of resources to the functions where it is most value can be created. It gives the capacity and exploits market opportunities. It will increase the capabilities of dimensions: efficiency, quality, innovation and customer responsiveness, thus emerging a competitive advantage to the organization.
However, function structure does create new problem arise from the organization’s success, for examples: each function becomes increasingly distant from one another as more organization functions develop or strategic problem whereby top managers may be forced to spend time finding solution to everyday coordination problems instead of addressing longer-term strategic problem.
This can be address by increase integration between functions where we proposed the Human Resources department to do the integration role. At the same, the existing employees need to be addressed and prepared for the coming changes in the organization, whereby training and counseling are necessary to motivate them to stay with the company.
8) Employees Resisting To The Change
Currently, employees in the company are reluctant to change for they are fear of the unknown as it is not always foreseeable:
- Those employees who are incapable may lose their job as new employees can replace them.
- Some may lose their control or power in their existing job scope, as there is a power struggle and conflicts as one function at the expense of another, conflict impedes the change process.
- Those in the higher level may lose their property right when more functional managers are formed.
- There will be inconvenience to the employee of forcing them to learn new way for a new given role.
- Interpersonal relationships may be affected by the reorganization whereby the divisions view problems from different perspectives and seek changes to benefit their own group.
Having to coordinate more with fellow colleagues to process the same job will increase the processing time than required before. As such, miscommunication will arise and cause unnecessary conflicts and misunderstandings. Having losing some of the responsibilities to another function in the company, employees are concerned if their pay package and future will be affected as more new positions are created.
Employee’s resistance to change can cause organization inertia therefore hinder the job flow and overall company’s morale will be affected. As such to reduce the employee’s resistance, the organization need to reduce the uncertainty by means of predictable rules and routines that people can use to accomplish their tasks. The following rules can be put in place: -
- No pay reduction during this restructure.
- No retrenchment within the next three (3) years.
- Preserving the established prestige and power of high performers.
- Current efficient employees are also being recognized and promoted.
9) Recommendation For Organization Change
With the need to expand the company, we recommend II-VI Singapore Private Limited to redesign its hierarchy of authority and create reporting relationships to link organizational roles and subunits. Hence, they can consider our recommend of flattening its tall hierarchy structure to become more horizontally differentiated.
They should establish the distribution of authority between levels to give the organization more control over their activities and increase their ability to create value. At the same time, they should integrate each function by the Human Resources department acting the liaison role to minimize communication, strategy or controlling problem arise from restructuring to functional differentiation.
With the organization restructure, II-VI Singapore should pay attention to their employee’s resistance by considering our recommend Organization Development Techniques as followed:
- Education and Communication that is to inform workers about the coming changes and how they will be affected to reduce their uncertainty.
- Participation and Empowerment that is involving employees in the change process by soliciting their ideas and inputs.
- Facilitation that is helping the employees with the change by doing sensitivity training and reducing their stress by team building and inter group training.
- Bargaining and negotiating to reach a desirable compromise with the employee.
- Make sure that the restructuring follows a sensible time schedule at the most logical place so as to minimize the effect on interpersonal relationships.
At the same time, II-VI Singapore should identify the Type X and Type Y employees and motivates them using the appropriate approach so that they get the job satisfaction and willing to be stay on and committed to the organization.
10) Conclusion
The organization has sees the need and decided to expand / upsize the structure in II-VI Singapore Pte Ltd, adopting and move into the functional structure and increase both vertical & horizontal differentiation.
Understanding Differentiation in our module, the process by which an organization allocates its employees and resources to organizational tasks and establishes the task and authority relationships that allow the organization to achieve its goal, embarked on the functional structure, a design that groups people on the basis of their common skills and expertise or resources they use.
Increasing specialization and the division of labor will helps employees in the organization to become more productive and efficient at work. This allows individuals to focus on a narrow area of expertise.
The changes will allow the human, functional, technological and organizational capabilities. It also involves rethinking and redesigning business processes to increase organization effectiveness. People will feel certainty and security about the outcome and benefit them and endorse it. However, the change must be a gradual, incremental and specifically focus.
We believe that II-VI Singapore Pte Ltd be able to meets their aims and resolved the problems they faced. It will move from the present state to a desired state to increase the effectiveness.
References
- Organizational Theory, Design and Change (Six Edition) by Gareth Jones.
Refer to Page 145 to 151 for the problems on tall hierarchies
Refer to Page 170 to 173 for the advantages and disadvantages of functional structure
Refer to Page 297 to 299 for reasons for employee resistance to change
Refer to Page 315 to 319 for the theory of techniques to deal with resistance to change
- Supervision Key Link To Productivity (Ninth Edition) by Leslie W. Rue / Lloyd L. Byars.
Refer to Page 58 to 68 for the theory of motivating employee
Refer to Page 77 to 78 for the reasons of employee resistance to change
Refer to Page 78 to 81 for the theory on reducing employee resistance to change
