However, to stay within this phase, or progress further, they must make sure that ineffective management does not reduce their competitive abilities. They must have basic financial, marketing and production systems to succeed further. (Birley S. Muzyka D. 2000, p.253). Churchill also mentions the importance of a formalisation of the organisational structure and the ability of delegation and communication within this phase – abilities Softhouse seems to be lacking (Carter S. Jones-Evens D. 2006, p.108).
We will now lead our analysis to the application of Mintzberg’s model, and then at the end review the key problems of Softhouse by combining both models.
Mintzberg has another approach of understanding the changes within organisational growth – namely through four different perspectives; financial growth, strategic growth, structural growth and organisational growth. He states that “given the multitasked nature of organisation, the entrepreneur must constantly view the growth and development of their venture from a number of different perspectives” (Mintzberg 1979 The Structure of Organisations, cited in Wickham P. 2006, p.516).
When applying Mintzberg’s theory to the case study, we found several interesting aspects worth analysing. Some perspectives are more relevant to address than others, however.
When it comes to the financial perspective, Softhouse appears to have a steady growth of profit. At its’ current situation is has a turnover of £2 million per year, and both turnover and client base seem to be increasing. Its’ customer is still buying their products, thus the company is developing financially.
The way the company manage its’ strategic growth is through product development, innovation and flexibilty. This enables them to exploit their presence in the market place (Mintzberg 1979 The Structure of Organisations, cited in Wickham P. 2006, p.516). Due to the rapid development in technology, Softhouse has developed a team to develop new and different technologies e.g. within the web-based section. However, their strategy seems to have been the same since the initial start-up and as the innovation seems to be less efficient than before. “The development of multiple strategic options is the key to success, with decision making based upon opportunistic circumstances at the time” (Burns P. 2007, p.310). The strategy that makes a company successful from the start-up point is often not the same shat should continue in expansion and growth.
The two most relevant perspectives of the changing environment within growth in this study are the structural growth and organisational growth, however.
As previously discussed within the application of the Churchill-model, the company lacks the ability to keep up with the rapid growth of the company internally. The internal structure is lacking cooperation, hierarchy and formality. The managerial role is lacking, and as stated in the case study, the adoption of management development and delegation have been ignored. In reality, no clear roles or responsibilities are defined at any level, and as Softhouse is in the stage of growth this should be adapted to its changes.
This leads us to the forth perspective of the Mintzberg-model. Organisational growth relates to changes of attitudes and culture, as well as changes in the entrepreneurs’ roles and leadership styles (Mintzberg 1979 The Structure of Organisations, cited in Wickham P. 2006, p.516). The culture within the business is not adapting to the changes caused by growth. This is mainly linked to communication. As the business is growing, communication is key, as it facilitates the distribution of information and knowledge to all parts of the company. In addition to this, the four directors are still heavily involved with the day-to-day issues of problem solving, but are, however, rarely seen in the office. We question their ability to adapt to the change of roles in a growing company. The leaders may not be capable to manage all the resources and do not seem to coordinate and control operations.
Growth clearly involves development, adaption and change to an organisation. Growth is a dynamic and complex process, and all the perspectives of the Mintzberg-model are interlinked and needs to work together to impose growth (Mintzberg 1979 The Structure of Organisations, cited in Wickham P. 2006, p.516). This model and the study of Softhouse proves that one cannot cope with growth in one dimension (e.g. growth of clients-base and number of product), as long as other dimensions (e.g. organisation structure) are not adapting to growth in the same pattern.
The importance of applying these models, both Churchill’s and Mintzberg’s, primarily lies in the understanding of what key problems Softhouse is facing, however. This also includes analysing what problems that directly prohibits them from growing further. In the following, the issues faced by the company are discussed in relevance to the models:
Lack of organisational structure is one of key problems that Softhouse is experiencing, and as the directors of Softhouse agree; there needs to be a layer of management below the directors to coordinate, control and plan operations. “Organizations that relate heavily on planning have a higher propensity to respond to changes appearing chaotic in a chaotic fashion, while firms more dependent on a vision react to the changes as part of the normal course of business” (Lipton 2003, p. 35). Growth within multiple areas of the business (new markets as well as growth within the number of employees) has led to an increasing need of a clear organisational structure – which at this stage seems to be close to non-existent, resulting in a permanent flat structure of the company. A key problem linked to this is the lack of motivation for their employees, as there are no possibilities of promotion – which thereby reduces their want to be creative and innovative. Another problem linked to the one of organisational structure is lack of delegation. Churchill states the importance of delegating certain duties performed by the owners, by acquiring functional managers in certain areas (Birley S. Muzyka D. 2000, p.253). Softhouse has attempted to do so, however, there are no formal outlines of the responsibilities for these managers, and most of them are not selected due to their managing capabilities, managerial skills or potentials. The directors seem to be taking on the same responsibilities they did when creating the firm, without implementing any significant change of their own roles. They do not seem to allow themselves to move from entrepreneurs to managers, which is a key factor at this stage. The fact that there appears to be a lack of internal communication as well, worsens all four problems mentioned above. As there are no formal meetings, and most communication goes through the internet, problem solving is rarely brought up in a healthy and productive environment. The lack of communication also contributes to a reduced possibility of team-work, as employees do not share their knowledge with each other – which again worsens their ability to add value through customer service and innovation, as knowledge is key to both.
So far in this study we have applied the models of Churchill and Mintzberg to the case study of “Growing pains”. We have thereby been able to identify the key problems faced by the organisation, and will now end our analysis by coming up with relevant recommendations.
Highlighted by both models is the importance of adapting to the changes brought by growth. Primarily important are the changes within the structure of the company. Softhouse needs to design a formal organisational hierarchy, which encompasses their situation at this stage. Vital within this process is to define the key areas of responsibilities at the top layer – implying that if the current directors decide they are not ready to focus their day-to-day task on managing and directing they need to step down and give this responsibility to someone able of taking control. Further they should include a layer of quality managers between the already existing levels, to ensure excellence within this field, while at the same time allowing those managers already existing to also spend time on what they want to do – production and innovation. This ensures expertise and delegation. This type of hierarchy will also improve motivation, as it provides a system where promotion is possible. Another key problem that needs to be dealt with is internal communication. This issue may be improved by introducing a HRM-department (maybe even one employee within this department would be sufficient). An increased focus on HRM will improve team-work, internal communication, and training within all levels.
References:
Books:
Birley Sue. Muzyka Dan. Mastering Entrepreneurship. Prentice Hall. 2000.
Burns Paul. Entrepeneurship and Small Business. Palgrave. 2007.
Carter Sara. Jones-Evans Dylan. Enterprise and Small Business. Prentice Hall. 2006.
Wickham P. Strategic Entrepreneurship. FT. 2006
Web source:
LIPTON, Mark (2003) Guiding Growth: How Vision Keeps Companies on Course
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Viewed: 25.02.09
