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Structuring organizations across industries in India

Structuring organizations across industries

Sanjay Kumar Singh Institute of Management Technology, Ghaziabad, India Abstract

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Purpose – The purpose of this paper is to investigate structural patterns across industries in India. Organizational design is posited as a form of competitive advantage, which also helps Indian organizations build excellence. Design/methodology/approach – The study used a questionnaire to investigate the structural patterns of organization in 32 enterprises in India. The sample consisted of 1,532 participants across six industries. The data were analyzed using SPSS v.15.0. Findings – The findings suggest that the outward picture of structural patterns remains the same across industries but significant difference emerge in the inner core of the structural architecture of Indian organizations. For example, the inner core of the banking industry was found to be different from the other five industries studied. Practical implications – The findings suggest that the links between organizational structure and national culture should be harmonious. Simultaneously, the structure of the organizations should be aligned with both the task and general environment of the business. Originality/value – There is a scarcity of research into this domain of knowledge in India and the paper provides additional insights into the organizational structures of Indian enterprises across the major industrial sectors. Keywords Organizational structures, Business environment, India, National cultures Paper type Research paper

Introduction India and China are considered the emerging economies of the world. The opening up of these economies led to significant foreign direct investment (FDI) and both domestic and international players have established new business enterprises. Such new ventures need viable structural architectures to withstand the dynamic business environments of an emerging economy. In addition, managing the diverse workforces that characterize organizations in emerging economies requires a robust and viable structural architecture. Because management practitioners and scholars in the field view the organizational structure as primary driver of change, the skeletal structure of an organization influences its decision-making and internal processes (Wang and Ahmed, 2003). The structure of any organization consists of not only its hard components (people, groups and departments) but also the softer relational aspects of the organization (Bunge, 1985). Furthermore, according to this structure is fundamental in determining the composition of these relations and capturing the essence of the activities of an organization. The organizational structure is the sum total of the ways in which labor is divided into distinct tasks and how its coordination among these tasks is achieved (Mintzberg, 1983). While the debate about ideal organizational structures in ongoing, consensus has eluded both management practitioners and scholars. For example, an organization that operates in two distinct environments can never achieve structural ambience because of different social, political and economic conditions operating in each of its environments. This line of thinking aligns with the views of scholars who note a paradigm shift in organizational analysis. Organizations are no longer viewed using the machine metaphor; rather, a contingency approach has replaced the mechanical

Management Research News Vol. 32 No. 10, 2009 pp. 953-969 # Emerald Group Publishing Limited 0140-9174 DOI 10.1108/01409170910994169

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viewpoint (see Burns and Stalker, 1961; Lawrence and Lorsch, 1967; Morgan, 1997). Furthermore, in a knowledge economy, organizations need to be flexible, agile and adaptable to maximize opportunities existing in a knowledge-rich environment. The traditional way of conceptualizing organizational structure was found lacking in the face of new challenges and demands (Wang and Ahmed, 2003). Today, the need for organizations to create structures, which complement rather than oppose technology, innovation, national culture, the operating environment, strategic directions, organizational life cycles and diversity is paramount. Therefore, if the organizational structure is to align with the above elements, managers will need to adopt a process of continuous renewal because these contingent variables are not static. This dynamism creates a situation whereby leading managers must spend both intellectual and financial resources to keep the organization running at a satisfactory speed. Cutting-edge organizations of this type are warranted in India and cross-sector research will help paint a complete picture of the organizational structures in place in Indian companies as they strive to improve. Little research concerning organizational excellence in the Indian context can be found in the literature at present. Therefore, this study seeks to provide managers and scholars with knowledge about what works when Indian managers design organizations for competitive advantage. This study unravels the essential elements of the structural architecture of organizations in several Indian industrial sectors for the benefit of established as well as new enterprises. Organizational structures Structure involves an organization’s internal pattern of relationships, authority and communication (Thompson, 1967). The structure of an organization has two critical components – formal lines of authority and communication including the information and data that flow along those lines (Chandler, 1962). Given this, the organizational structure of an enterprise ‘‘influences the flow of information and the context and nature of human interactions’’ (Miller, 1987). Organizational structures influence collaboration internally and collaboration with external stakeholders. In addition, the structure influences the methods of coordination, the allocation of power and responsibility and levels of formality and complexity (Bower, 1970). For example, Stank et al. (1994) found that while centralized and decentralized enterprises exhibited similar capabilities in the domain of effectiveness (that is, reaching their goals), centralized firms appeared to be more efficient (that is, they used their resources efficiently). In either case, the organizational structure is believed to affect performance. A cursory review of the literature concerned with conceptualizing organizational structure suggests that the construct has been revisited constantly with economic development. The classical approach perceives organizations as ‘‘machines’’, leading to emphasizing scientific methods to separate work processes and closely monitoring the performance of workers (Fayol, 1949; Taylor, 1911). This school of thought treated enterprises as closed units impervious to the external environment. Traditionalists downplayed environmental changes. In contrast, contingency theorists posited that ‘‘there is no one best way to organize’’ and ‘‘any ways of organizing are not equally effective’’ (Galbraith, 1973). In other words, the contingency theorists advocated that appropriate organizational structures depend on certain environmental factors, including the stability and the complexity of the environment (Burns and Stalker, 1961) as well as the size, age and system of technology (Mintzberg, 1989).

While organizations generally have an operating core, a strategic apex, a technostructure and a division of labor, these elements are coordinated to accomplish the mission of the organization. To achieve their mission, organizations require coordinating mechanisms, which normally include direct supervision, standardized work processes, defined outputs and requisite skills as well as a process of mutual adjustment (Mintzberg, 1980). In achieving productivity, the organization of work is a vital factor. To this end, organizational structures provide both the task and authority relationships that predetermine the way in which employees perform their work (Hunter, 2002). Drucker (1999) also acknowledges that there is no correct way to structure an organization. There are only organizations that have distinct strengths, limitations and applications. Any given organizational structure needs to align its tasks and conditions to match its environment (Drucker, 1999). Hunter (2002) identifies ten generic organizational structures from the literature (see Ghoshal and Bratlett, 1995; Mintzberg, 1989; Wheatley, 1992). These are identified as the entrepreneurial, missionary, functional, divisional, matrix, process, cellular, quantum, professional and political structures. In this context, managers can even choose multiple organizational structures to suit the stability or complexity of their business environment. Organizations across the globe aim to be aligned for the most part with the external environment and as a consequence of multiple external environments, no universal organizational structure exists. The literature on organizational structure tends to focus on after-the-fact cases, developing theories based on descriptive analyses. Theorists look for critical factors in successful organizations and generalize their findings to produce an ideal structure and/or a formula for success (Peters and Waterman, 1982). Unfortunately, what works for one organization may not work for another, even if only slight differences exist between the circumstances of both organizations (Martinsons and Martinsons, 1994), which reinforces the contingency view on organizational structure. However, Martinsons and Martinsons (1994) point to three generic models of organizational structure in industrial contexts, namely, the functional, divisional and matrix structures. Each has their own merits and limitations. The functional structure The functional structure has a direct lineage to the bureaucratic structure, with its effectiveness based on a clear division of labor. Martinsons and Martinsons (1994) also indicate that smaller-to-medium sized organizations with a limited product range lean toward a functional structure. However, in this structure, individuals become insulated within functional groups and fail to understand or appreciate the functions of others. Coordination problems often arise in organizations that rely primarily on a functional structure. With its traditional chain of command mentality, a functional structure itself becomes a barrier to cross-function communication and the coordination required to implement effectively multiple products and multiple market strategies (Wilson, 1986). The divisional structure This structure is generally used when organizations become larger and begin to diversify their product lines. In this case, the organization is divided into separate units, based on different products or markets. In other words, the company breaks up its operation into manageable-sized units (Pascale, 1990), which operates under a mechanistic structure. The units may share some corporate resources (for example, research and development) but overall, they are relatively autonomous and free to

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realize corporate-level objectives of their own choosing. As a result, this structure is more flexible and adaptable to market conditions compared to the functional structure (Martinsons and Martinsons, 1994). Nevertheless, it is difficult to generate an overall corporate identity, as each unit remains preoccupied with creating and maintaining its own image. In turn, this gives birth to the problem of coordinating the different units.

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The matrix structure Used to bridge the gap between functional and divisional structures, the matrix structure emerged as the organization structure of the 1970s (Miller, 1986). It is based on the concept of dual command, where each employee in the matrix is responsible to one functional department and one project manager. One problem with the matrix structure is that of ambiguity as relationship between the functional and project aspects of the enterprise is not clearly specified by the rules and procedures of the organization. This has the potential to create a power struggle and blur the lines of responsibility and accountability. As a result, many organizations quickly realized that the matrix structure is more burdensome than helpful (Peters, 1979). The literature also depicts other structural forms that allow organizations to realize their corporate goals. Two particular forms, the modular and hybrid structures, warrant closer attention because each has received acceptance under certain circumstances by scholars and management practitioners. The modular structure This structure extends the concept of horizontal coordination and collaboration beyond the boundaries of the traditional organization. As a result, organizations can subcontract many of their major processes to other companies and coordinate their activities from a small headquarter-type organization (Daft, 2004). With such a structure, the hub maintains control over processes in which it has either world-class products or difficult-toimitate capabilities and then transfers other activities – along with the decision-making and control over these activities – to other organizations. These partner organizations organize and accomplish their work using their own ideas, assets and tools (Engle, 2002). The idea is that an organization can concentrate its distinctive competencies in specific areas, enabling the organization to do more with less (Tapscott, 2001). Hybrid organizational structure The hybrid approach was developed by combining the characteristics of the functional, divisional, geographic or modular structures to match the specific strategic needs of the organizations. As this form of organizational structure offers greater flexibility, it is well suited to rapidly changing business environments (Daft, 2004). The Sun Petroleum Products is an example of an organization that has extensively used the modular kind of organizational structure and have benefited significantly by its adoption (Ackerman, 1982). Structuring organizations for a competitive edge Certain organizational structures undoubtedly are more conducive to realizing corporate goals and strategies. However, because of the complexity of the situation of many organizations, a single ideal structure is difficult to identify (CIC, 2003; Martinsons and Martinsons, 1994). Martin-de-Castro et al. (2006) observed that the organizational structure is a necessary capability for any organization and although it is difficult to imitate or transfer, it is susceptible to substitution. Therefore, it can be a

source of competitive parity. The formal structures of an organization and its external links play important roles in innovation management (Teece, 1996). Furthermore, in a dynamic hyper-competitive environment, the life expectancy of a competitive advantage, based on a particular kind of organizational structure, is bound to be shortlived (Martin-de-Castro et al., 2006). In this sense, the research findings of Lawrence and Lorsch (1967) concerning the need for organizational structures to be designed with the external environment in mind remain valid today. In an era where managing organizational knowledge is seen as competitive advantage, the organizational structure can place limits on an organization’s capacity to read its environment and learn (Miles and Snow, 1978). This again reinforces the need for structuring an organization with due attention to the external environment. Drucker’s (1992) view about modern organizations having structures to pursue innovation, capture, and apply knowledge requires high degrees of decentralization for expedient decision-making. In a similar vein, to cope effectively with the demands of the fast changing knowledge economy, the N-form Corporation (Hedlund, 1994), the federated structure (Handy, 1992, 1994), the hypertext structure (Nonaka and Takeuchi, 1995), the middle-up-down management system (Nonaka, 1988) and the J-form organization (Lam, 2000) have all been identified and described. These different forms of organizational design support the contingency theory, which advocates that there is no best way to structure an organization – organizational situations dictate what kind of structuring is required within a particular time horizon. Research on organizations has explored the relationships of organizational structure vis-a`-vis creativity, innovation and productivity. A common finding among this research is that certain kinds of organizational structures have positive influences on an organization’s competitive edge. Participative structures, for example, influence positively the innovative behaviors of people (Khandwalla, 1995; Lowe, 1995). This occurs because participation in decision-making leads to greater commitment among workers, more organizational involvement and higher levels of internal integration within an organization (Shadur et al., 1999; Strauss et al., 1998). In a similar manner, empowering people, especially those at the lower rungs of the organization, influences innovative behaviors at the workplace (Samaratunge, 2003). Empowering people is a great motivator. Shavinina (2003) observed empowered multi-functional teams that were more successful at innovation than their underpowered counterparts were. Positive on-the-job behavior and the organizational structure go hand-in-hand. People have a greater capacity to engage in productive behaviors like innovation and opportunities to participate fully in organizational life. Feeling empowered increases the chance that people will make more informed and effective business decisions. Other forms of organizational structuring influences positively job behaviors necessary for organizational excellence. Rapid decision-making at every level requires a decentralized organizational structure. The decentralized structure has a positive motivational effect over employees according to Khandwalla (1995). Nevertheless, West (2000) cautions that a decentralized structure can be a negative predictor of organizational innovation. While research suggests that formalization has been viewed negatively in the context of gaining a competitive edge for an organization, others believe highly formalized organizational structures promote innovative job behaviors. Formalization assists in creating discipline in work processes and the behaviors of employees, which is fundamental for any collective creative processes (Fairtlough, 1994) and the implementation of creative ideas (Weick, 1998). It is also important for


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increasing the accountability of decision-makers towards each other and towards the entire organization (Wijnberg et al., 2002). While organizational structures have the potential to deliver a competitive advantage for many enterprises, it is important to know precisely what form an organizational structure should take to be in consonance with both its internal and external environment. The literature above attests to this contentious issue. The desired outcomes of any organization can be achieved through the right combinations of the accepted elements of an organizational structure. The diverse and sometimes contradicting research literature has created a kind of curiosity in the mind of many scholars and practitioners about what kind of organizational structures suit Indian enterprises, which now have to compete on a global playing field. The study below has been designed to address three main research questions in the context of Indian enterprises: RQ1. RQ2. RQ3.

What is the profile of organizational structures of firms across industries, which provide these organizations with the capabilities to compete effectively in a global economy? Are there significant differences in the structural form of organizations belonging to different industry segments? Is there is an industry-specific structural framework to deliver competitive advantages for organizations operating in a fast changing global economy?

Method The study adopted a quantitative research methodology to determine the structural fabric of organizations across industries in India. It sought to reveal and understand the organizational structuring of Indian organizations vis-a`-vis the characteristics of the external environment. Respondents of the study The study, in the English language, was conducted in 32 organizations, which belonged to six industry segments of the Indian economy. For some decades, these industry segments have been considered as the mainstay of the Indian economy. The six industries are Banking, Information Technology and Information Technology enabled Services (IT/ITeS), Hospitals, Automobiles, Telecom and Retail. The total number of respondents in the study was 1,523 from middle-management positions in the 32 organizations, which operate in Indian territories and abroad. The sample was not random; only participants who volunteered to take part in the study were surveyed. The sample can be considered as pan-Indian in nature. Different geographical segments as well as diverse cultural background are represented. The sample consisted of 58 per cent male and 42 per cent female middle managers. Concerning educational attainments, 38.29 per cent were engineering/technology graduates and remaining 61.71 per cent were postgraduates in the field of management in either engineering or technology fields. The average work experience of the sample was around 14 years – their average age was almost 40 years. Description about industries Thirty-two organizations from six industries were selected to investigate structuring patterns in companies for global competitive advantage. This section describes briefly the organizations and industries represented in the study.

Banking The study sampled 387 managers from the banking industry. An emerging economy, ongoing reforms of the financial sector, ever-increasing levels of FDI, a positive regulatory climate and a diverse demographic profile have led India to emerge as one of the fastest growing banking markets worldwide. Compared to global banking operations, Indian banks have done exceptionally well with the price-to-book value being second only to China (Boston Consultancy Group). In this study, participants came from the State Bank of India, Punjab National Bank, HSBC, Standard Chartered, HDFC and ICICI. IT and ITeS These sectors have significantly influenced the Indian economy for at least the past decade. Deloitte (2008), who carried out a study for NASSCOM, found that the IT/ ITeS contribution to country’s GDP has risen steadily, increasing from a share of only 1.2 per cent in 1998 to 5.2 per cent in 2007. It has contributed to India’s foreign exchange reserves by increasing exports by almost 36 per cent and direct employment in the industry has grown at a compound annual growth rate of 26 per cent in the last decade, making it the largest employer in the organized private sector in the country. The organizations surveyed produced 398 responses from major IT and ITES organizations including Tata Consultancy Services, Tech Mahindra, Infosys, Samsung, Fluor, I Flex, Parametric, Syntel, IBM, Computer Science Corporation, Electronic Data Systems, LG Electronics, Videocon India and Engineers India Limited. Hospitals India as a nation has low spending on health care and a limited availability of hospitals. Nevertheless, the future holds bright for this sector because it is projected to grow to nearly US$40 billion by 2012 (PricewaterhouseCoopers, 2007). The present study sampled 145 medical professionals working for the following health care organizations in India: the Apollo Hospital, the Escort Heart Institute and the Fortis Hospital. These organizations have successfully provided specialized health care services for decades, catering to a growing demand in high-quality services such as cardiology, nephrology and geriatrics. Automobiles This sector too has grown at a good speed with the size of the Indian automotive industry now estimated to reach between US$120.09 billion and US$155.12 billion by 2016. Industry experts peg the growth rate of Indian automobile sales at a compounded annual growth rate of 9.5 per cent. There has been a significant increase in overall sales; it is 13.5 per cent higher for the fiscal year 2006-2007 compared with the previous fiscal year. In this study, 184 respondents came from the following firms: Maruti Udyog, Honda Motors and Yamaha. Telecom The Indian telecom industry has progressed through many phases of growth and diversification. In order to achieve the country’s social and economic goals, the Government of India in 1999 authored the forward-looking National Telecom Policy 1999. An outcome of the NTP was tremendous growth in the sector among the major players such as BSNL, MTNL, VSNL in the fixed line market and Airtel, Vodafone, Idea, Tata and Reliance in the mobile segment. The practicing of new tariffs and


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discount schemes has delivered competitive advantage in this sector. In this study, 212 respondents came from middle-level management in Reliance Infocom, Vodafone and Airtel. Retail Retailing is India’s fastest growing industry, accounting for over 10 per cent of the nation’s GDP. The share of retail industry in India is such that it contributes to approximately 8 per cent of total employment. It requires an initial heavy investment and break-even is difficult to achieve in a short span of time. Experts believe that the retail sector is the next boom industry in India. The organizations included in this are Westside, the Shopper Stop and the Pantaloons. A sample of 197 middle managers participated in this study. Psychometric measures The development of the instrument used followed standard practices of test construction. Using literature in the field combined with the opinions of 30 industry experts, the major elements of an organizational structure were identified and subsequently, the writing of items for each of the elements of the structure was completed. There were 28 statements to be rated by the respondents using a five-point Likert scale. A pilot questionnaire was administered initially to a sample of 106 to identify the discriminating index of the statements. The item analysis, using the Student’s t-test, suggested that eight out of 24 statements failed to discriminate statistically, and as a result only 20 statements were included in the present study. These 20 statements were also found to possess face as well as content validity using the expert judgment method. To know the parameters as well as reliability coefficients, the statistics of factor analysis and Cronbach alpha were performed (see Table I). It was concluded that these statements about organizational structure had seven dimensions and the individual dimensions as well as instrument as a whole have moderately high reliability coefficients. The statistics used to analyze the data generated by the survey included descriptive statistics, the Student’s t-test, the analysis of variance (one way), factor analysis and Cronbach’s alpha. Results The literature generally concludes that the productivity and competitiveness of organizations largely depends upon how they are structured. The results in Table I depict the outputs of factor analysis in terms of the number of factors extracted, their eigenvalue individually and the percentage of explained variance for individual factor

Factors Table I. Outputs of factor analysis; number of factors, eigenvalue, percentage of explained variance for individual factor and Cronbach alpha coefficients

1 2 3 4 5 6 7

Eigenvalue

% of variance explained

7.291 5.432 4.852 3.988 3.213 2.846 2.014

21.56 17.52 12.26 10.54 8.89 7.62 6.97

Total explained variance

Cronbach alpha coefficient

85.36

0.748 0.694 0.681 0.719 0.689 0.678 0.698

as well as for the total scale of organizational structure and the Cronbach alpha coefficients for the factors, which were extracted. The principal component method with varimax rotation was used to factor analyze the 20 statements of the organizational structure questionnaire (OSQ). Furthermore, it was also decided to have a eigenvalue of 1 for the extraction of these factors. The results as depicted in Table I indicate that the OSQ has seven parameters/dimensions – the minimum as well as the maximum eigenvalues for these seven factors were found to range from 7.291 and 2.014, respectively. The seven factors of the OSQ (see Table I) indicate that the OSQ in its present form measures 85.36 per cent of the structural fabric of companies across the industrial sectors in India. Therefore, the OSQ is a good measure of organizational structure and the results are reliable. Table I also indicates that factors 1, 2 and 3 together are very important in understanding the structural fabric of Indian companies as together they explain almost two-thirds of the way organizations in India have structured themselves for competitive advantage. Hence, the first three factors/dimensions of the OSQ should be given prime importance when structuring Indian organizations for excellence. Table I also depicts the internal consistency reliability coefficients for the individual factor/dimension of the OSQ. It is mentioned that the reliability coefficients indicate statistically how reliable the data obtained is for organizations. The obtained reliability coefficients, which range from 0.678 to 0.748, indicate that the items belonging to the dimensions of OSQ are reliable to a moderately higher extent. Furthermore, the findings derived from the OSQ have utility for the Indian organizations in this study. Table II is an elaboration of the data presented in Table I and succinctly depicts the number of statements belonging to each of the seven dimensions of the OSQ, the factor loading for every individual item in the questionnaire and the naming of the extracted factors. From Table II, the factor loading of 0.471 was taken as a cut-off point for identifying individual items belonging to any of the seven dimensions. Furthermore, the 20 statements of the OSQ have factor loadings ranging from 0.471 to 0.821. All of the items of the OSQ are uniformly distributed across the seven factors, except for factors 6 and 7, which have two items each. Finally, all the seven factors were named using generally accepted methods of reading all statements belonging to a particular factor, and whatever theme emerges this will be the name of that factor. Hence, factors 1 to 7 have been named as vertical linkage, horizontal linkage, functional structure, matrix structure, hybrid structure, modular structure and divisional structure. Since the first three factors explain two-thirds of structural patterns in organizations across industries in India, companies seem to have high preferences for functional structures with vertical and horizontal linkages to effectively deal with challenges and problems that arise in their businesses. One of the research questions concerned whether significant differences exist in organizational structures across industries. To this end, one-way analysis of variance (ANOVA) was performed on to the data collected and the findings obtained are depicted in Table III. The results indicate that there are significant differences in organizational structuring across Indian industries. In other words, each industry segment has a different kind of structural pattern in the light of external competitions and the business environment. Therefore, no one form of organizational structure is dominant across industries in India as is the case with organizations operating in other parts of the world. Figure 1 depicts the relative preferences of structural patterns across the different industries in India. Vertical integration, the modular and the divisional form of structuring are mostly in use in these industries. At the same time, these three major


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Factor Measurement items 1.

962

2.

3.

4.

5.

Table II. Measurement items in organizational structure questionnaire, factor loading and naming of extracted factors

People know to whom they report and whom they manage/command Vertical information systems, such as periodic reports/ written information or computer-based communication are in place and practiced in this organization Every department/division has a standing plan for its members to efficiently perform activities within their respective area of resource allocation Whenever employees confront with repetitious problems to solve and decisions to make, they are provided with a set of rules and procedures as general guidelines to follow The Product Manager has the authority to hire/fire/give a raise in salary to the team members My organization believes in having a full-time integrator with a title such as Product Manager/Project Manager/ Program Manager to coordinate sales, distribution and similar activities Whenever a problem arises and employees do not know how to solve it, the organization’s policy is to refer it up to the next level in the hierarchy for an answer The prime authority over team members (Task Forces or Teams) regarding giving a pay raise, hiring or firing lies with the functional managers only In this organization, the managers/employees do not have all operations under their jurisdiction and as a result, they rely on contracts, coordination and negotiation with partners to hold things together In my organization, a permanent cross-functional Task Force/Team is created for handling large-scale projects such as major innovation or a new product line Here, there is an emphasis on members of crossfunctional Task Forces/Teams to report to both the product and the functional manager A general tendency here is that with the changing of products, markets and partners, the organization regularly reshuffles its employees to get correct mix of skills and capabilities In my organization, every department has one employee who is exclusively responsible for communicating and achieving coordination with other departments when the need arises Here, Task Forces are created regularly, which have members from every other department affected by a problem. Such Task Forces are disbanded after the tasks are accomplished This organization strictly follows a functional organizational structure only Organizational functions that are important to each product or market are decentralized to self-contained units. Other functions requiring economies of scale are centralized

Factor Naming loading of factors Vertical linkage 0.599 0.688 0.538 0.504 Horizontal linkage 0.501

0.743 0.821 Functional structure 0.777

0.722 Matrix structure 0.621 0.632

0.666 Hybrid structure 0.503

0.471 0.724

0.555 (continued)

Factor Naming loading of factors

Factor Measurement items 6.

7.

The maximum time of managers is spent on managing relationships with partners/vendors and in resolving conflicts My organization does not believe in huge investments in factories, equipment, warehouses or distribution facilities but prefers to rely exclusively on the partners/ vendors During the redesigning of products/services, all the group members that are to be drawn from different departments for such an effort are temporarily moved to a prototype factory/company until the project is completed My organization strictly follows a product/divisional/ SBUs organizational structure only

Modular structure 0.639

963 0.794 Divisional structure 0.779

Table II.

0.531

Sum of squares

df

Mean square

F

Sig.

Vertical linkage

Between groups Within groups Total

1,093.481 1,682.024 2,775.505

5 1,518 1,523

218.696 4.083

53.568

0.000

Horizontal linkage


775.306 1,994.895 2,770.201

5 1,518 1,523

155.061 4.842

32.024

0.000

Functional structure


33.737 1,317.813 1,351.550

5 1,518 1,523

6.747 3.199

2.109

0.063

Matrix structure


182.657 1,856.788 2,039.445

5 1,518 1,523

36.531 4.507

8.106

0.000

Hybrid structure


262.424 1,422.629 1,685.053

5 1,518 1,523

52.485 3.453

15.200

0.000

Modular structure


102.183 885.006 987.189

5 1,518 1,523

20.437 2.148

9.514

0.000

Divisional structure


54.776 699.301 754.077

5 1,518 1,523

Structuring organizations across industries

Table III. 10.955 1.697

6.454

0.000

ANOVA, one way for extracted dimensions of organizational structure across industries

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forms of organizational structuring are customized by enterprises to suit a particular industry segment because their operational and general environments differ significantly. Some deep-seated implications emerge for businesses in an emerging economy like India. These findings of this study will guide decision-makers in industries as well as scholars and management practitioners who are contemplating the design of an efficient and effective structural architecture for competitive advantage and organizational excellence. Discussion Organizational structures can deliver competitive advantage, and consequently the structural design of organizations should carefully analyze current and potential business challenges and problems. The findings of the study support the contention of the contingency theorists, who advocate that appropriate organizational structures depend on environmental factors that include stability and complexity (Burns and Stalker, 1961). As Mintzberg (1989) also point out, size, age and the technological system matter. While similarities exist across industries in structuring organizations, these industries differ significantly in terms of their structural architecture. Furthermore, the results suggest that organizations across industries have particular preferences for one structural form over other forms in order to sharpen their responses in the thriving and competitive emerging economy of India. All of the six industries represented in this study prefer the divisional and modular forms of organizational structure with vertical linkages. The divisional structure includes the notion that the organization should be divided into separate units based on different products or markets in order to be managed effectively (Pascale, 1990). This engenders a mechanistic structure. On the other hand, the modular structure extends the concept of horizontal coordination and collaboration beyond the boundaries of the traditional organization type. As a result, the organization subcontracts many of its major processes to separate companies and coordinates their activities from a small headquarters organization (Daft, 2004). The divisional and the modular structures are two different philosophical approaches to structuring organizations for excellence. To leverage these two different philosophies in operation, the role of extra-organizational factors cannot be ignored. Therefore, the preference and usage of vertical linkage have been included in all the organizations across the six different industries in India to provide added strength to the divisional and modular organizational architectures. This is especially a wise move given the predisposition for organizations in emerging economies to succumb to the problems inherent in such economic environments. In other words, it is assumed that

Figure 1. Graphical representation of structural architectures across Indian industries

through vertical linkages, organizations across Indian industries endeavor to compensate for the drawbacks of the divisional and the modular structures. Adopting these structural architectures by top management teams in India may be attributed to the influence of the Indian national culture as well as the threats and opportunities that go hand-in-hand with operating in a volatile external environment. The journey of Indian organizations from purely bureaucratic structures to now include divisional and modular structures may be attributed to two factors. The Indian society has slowly but steadily emerged from 200 years of bureaucratic colonial rule. The national culture has slowly but steadily become more democratic and consultative in nature. As a result, significant changes have occurred in structuring organizations in the Asian sub-continent and this is a welcome sign. At the same time, differences still exist in societal culture of the Indian sub-continent and the Western world. Therefore, the foreign multinational companies operating in India must adjust by customizing their structural architecture in accordance with the characteristics Indian national culture and history. Indian work culture exhibits a high power-distance, collectivism and affective reciprocity among the cultural values of Indian managers (Chhokar, 2000; Sinha, 1997). With respect to uncertainty avoidance, while Hofstede (1997) suggests that India is high on uncertainty avoidance, a later study by Chhokar (2000) found India to be moderate on this dimension. However, what is certain is that the structural architecture of organization needs to be consistent with the cultural fabric of the nation if excellence at workplace is to be achieved. Therefore, it is anticipated that further research will support the finding that divisional and modular structures with vertical linkages will effectively help achieve the twin goals of business performance and the needs of people at workplace bearing in mind the prevailing cultural factors within India. To date, the discussion has focused on the overall characteristic features of the structural patterns of industries in India. Revisiting Figure 1 provides some interesting insights at the micro-level of organizations. We find that the divisional and modular structures with horizontal linkages are dominant structural patterns in all six industry segments. Yet, differences between these six industries remain when the back-up structural architecture is considered. The findings suggest that companies in the IT/ITeS, telecom and retail industries give roughly equal weightage to other elements of structural forms (that is, horizontal linkages, functional, matrix and hybrid structures) whereas organizations in the banking industry prefer the matrix structure as a back-up to effectively manage any kind of internal or external challenges and problems. On the other hand, the hospital and the automobile industries rely heavily upon horizontal linkages as the back-up to cope with any similar challenges, which may not be effectively dealt with by the divisional and modular structures with vertical linkages. These structural differences at the micro-level may be attributed to the fact that every industry has different business compulsions, which require slightly different permutations and combinations in the structural design. Hence, differences are noted in the structural frameworks to bring about internal integration and external adaptation – there are similarities as well as differences among the banking, IT/ITeS, hospitals, automobiles, telecom and retail industries in India. Similarities may be attributed to the influence of national culture while dissimilarities may be attributed to differences in nature of the business, the use of technology, the demography of human resource and nature of competition in the industry. The different organizational structures for banking, IT/ITeS, hospitals, automobiles, telecom and retails industries may be considered as competitive advantages. Given the


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relatively large sample of the study, the findings may assist managers of new and established organizations design an organizational structure that delivers competitive advantage in India and abroad. Nevertheless, the ideal structural architecture for organizations in one industry should not necessarily be adopted by organizations in different industries. Ultimately, the business context is one key to the design of a successful organizational structure. Conclusions and limitations There are two limitations of this study. Firstly, it did not make comparisons of organizational structure among different units within the same enterprise in operation in different parts of the world. Secondly, the study did not make a comparison between industries in India with their international counterparts. Future research is predicted in this field. Nevertheless, the scope of the study was organizations operating in India and the study concluded that the future is bright for industries. In fact, Indian organizations may benefit from taking on board the main findings of this study, which brought to the fore several significant issues concerning structuring organizations. The findings of the study will contribute to Indian business knowledge because few empirical studies on the topic exist in the Indian context about what constitutes an effective structural architecture across industrial sectors. It is hoped that the management practitioners will internalize the findings of this study to secure competitive advantages by structuring their organization to suit their environment. Implications for Indian business The study has important implications for business organizations in India that have experienced the wonder and dread of operating in a rapidly emerging economy. The main implications of the study are summarized below: .

Organizations belonging to any industrial sector need organizational structures, which emphasizes divisional and modular structures with vertical linkages. This kind of structure was found to meet the current needs of organizations in successfully realizing their corporate goals. At the same time, organizations can fall back on a different structural mode whenever the situation of their business demands.

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Organizations in the banking sector should strive for a matrix structure with divisional and modular structures with vertical linkages to fall back on whenever difficulties are encountered. This would help banking organizations to ward off problems in their business environment.

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Organizations in the IT/ITeS and telecom sector should have the divisional and modular kinds of structures with vertical linkages but they should equally emphasize functional, matrix and hybrid kinds of organizational structure if they find themselves in adverse circumstances.

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Organizations in the hospitals and automobiles sectors need to practice horizontal integration along with vertical linkages in their divisional and modular forms of structural architecture. The findings of the study imply that many firms in this sector also create the modular form of structure in minority of situations to create and promote excellence in the workplace.

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Organizations in the retail sector have placed maximum emphasis on both the modular and divisional forms of organizational structure. However, whenever

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