 The
State of Today's Call Center Industry
By Don McCain
In this paper we will discuss the relationship of organizational
design/structure to strategy. We begin with some basic principles
of organizational design. Then, several of the more common organizational
designs/structures are presented along with a listing of advantages,
disadvantages, and some implications for the organization. This
is followed by a discussion of several of the more basic strategies
organizations use to compete. With each strategy, there is a brief
discussion of the organization requirements to support that strategy.
For maximum effectiveness, the organization structure should be
supportive of the corporate strategies. We conclude with some
general guidelines for determining which structure is more appropriate
for a given organization given its strategies and market place.
Principles of Organizational Design
Definition: The structure of an organization
is “the sum total of the ways in which its labor is divided
into distinct tasks and then its coordination is achieved among
these tasks.” (Mintzberg) “Organization design refers
to the framework of jobs, positions, clusters of positions, and
reporting relationships among positions that are used to construct
the organization” (DeNisi and Griffin, p. 50). Key principles
include:
| • |
Mission and strategy drive structure. Organizational
design or structure is a strategy to help the enterprise
reach objectives. The organizational structure translates
strategy into operations. Structure follows strategy.
To design an effective structure, you must have:
- strategic purpose of the organization
- mission, vision, and values of the organization, and
- customer characterization and requirements.
- The knowledge, skills, and abilities (KSA’s) of
the existing workers are important for the implementation
of the structure.
- The business strategies will dictate the type of the most
appropriate structure. |
| • |
Structure aligns with the culture and environment
of the organization. More formal, bureaucratic organizations
have a formal structure with many layers providing more control.
Less formal organizations that require quick response to the
market place are flatter, with decisions made lower in the
organization |
| • |
Align the formal and informal structures.
The formal structure is the charts with boxes with positions
and processes. They indicate lines of authority and flow
of communication.
- Formal structure: the documented, official relationship
among members of the organization.
- Informal structure: unofficial relationships within
work groups
|
| • |
An organizational structure provides the alignment
of roles and responsibilities for business units, departments,
and individuals. The units and jobs have the authority to
do the work. |
| • |
Span of control refers to the number of individuals
a manager supervises. |
Forms of Organizational
Structure
Bureaucratic Organizational Structure
This is the traditional pyramid structure or hierarchy with many
layers of management and based on a functional division of labor.Characteristics
of Bureaucratic Organizations include:
• Top-down management approach
• Many levels of management
• Hierarchical career paths within one function
• Highly specialized jobs (with division of work)
• Narrowly specified job descriptions
• Rigid boundaries between jobs and units
• Employees or individuals working independently”
(Gomez-Mejia, p. 53)
Advantages of Bureaucratic Organizations include:
• Increased productivity due to specialties within the
division of labor.
• Control through monitoring of plans set by upper management.
• Problems go up the chain of command until a person with
appropriate knowledge and authority can address the issue.
• Establishment of policies and procedures to efficiently
and effectively handle work.
• Written documents and files can become the organization’s
history.
• Division of tasks yields experts.
• Establishment of rules of behavior will result in consistency
over the organization.
• Establishment of job procedures makes the organization
less dependent on some individuals.
Disadvantages of Bureaucratic Organizations include:
• Requires a lot of coordination between business units;
silos become barriers.
• Takes longer to make decisions.
• Inconsistent with many of today’s employee’s
values and participative spirit.
• Due to the division of labor, it can lead to overly fragmented
jobs that people find boring.
• Is counter to a culture of empowerment and participative
management.
Implications for the Organization include:
• Less autonomy for individual decision making; less participative
decision making; more following established policies and procedures.
• More specialization of jobs, less generalists, requiring
more and specialized training.
• More of an emphasis of career path by job family.
• More structure and rigidity regarding expected individual
behavior.
• Employees are required to provide a significant amount
of documentation.
• For individuals, there are many and narrower job bands
requiring promotion, usually into management, to advance in rank
and pay.
• Upward movement is seen as good.
Flat Organizational Structure
Flat organizations have very few levels of management and encourage
employee involvement in decision making. Flat organizations are
usually divided into work units by customer, product or service
or geography. Rigid boundaries between units and people are reduced
as individuals may be in teams or need to work together.
Characteristics of Flat Organizations include:
• “Decentralized management approach
• Few levels of management
• Horizontal career paths that cross functions
• Broadly defined jobs
• General job descriptions
• Flexible boundaries between jobs and units
• Emphasis on teams
• Strong focus on the customer” (Gomez-Mejia, p. 53)
Advantages of Flat Organizations include:
• Reduced cost due to the need for fewer supervisors and
managers; less administrative overhead.
• More self-management supporting empowerment, trust, and
a participative environment.
• Faster decision making.
• Allows employees to experience empowerment and take initiative.
• Can help the development of the staff.
Disadvantages of Flat Organizations include:
• Requires more training.
• Provides less feedback to staff simply due to the increased
span of control.
• Could have increased behavioral problems among inadequately
supervised employees.
• Lack of coordination.
• May be inconsistent with management styles (fear of delegation
and low trust).
• May result in a rethinking of policies and procedures,
especially in decision making.
Implications for the Organization include:
• Flat organizations provide more opportunity for individual
responsibilities and decision making.
• Since there is not a lot of opportunity for upward mobility,
the career path is cross-functional.
• There are more generalists than specialists.
• There are fewer and broader job bands, allowing a person
to advance in pay without having to promote into management.
• Lateral moves are seen as good.
Team Organizational Structure
“A team is a small number of people with complementary
skills who work toward common goals for which they hold themselves
mutually accountable” (Katzenback and Smith p. 45). Usually
comprised of six to eight people, team members do not rely on
management but provide their own direction and leadership.
Teams are built on the idea that companies can't achieve success
based on the knowledge, skills, and abilities of a few exceptional
individuals. Rather, success requires a team that combines the
skills, talents, knowledge and experience of many individuals.
Characteristics of Successful and High Performing Teams:
• Shared purpose; commitment to a higher practice
• Team goals take precedence over personal goals
• Mutual/shared accountability
• Sharing of performance goals resulting in interdependency
• Performance-driven assessment
• Collectively developed and implemented strategies
• High-level, mixed skills
• Climate of commitment, collaboration, and open communication
• Team member trust
• Appropriately small size
Self-Managed Teams: These teams are like work
units in that they are responsible for producing a product or
component parts, providing a service, etc. Many times team members
are cross-trained on different job tasks. Self-managed teams take
on many of the aspects of a managerial function in that they set
work schedules, select or develop work processes, evaluate team
member performance, input into merit decisions, input into hiring
staff, etc.
Cross-Functional Teams: These teams are made
up of members from various functions from across the enterprise
but report to their own lines of management. Cross-functional
teams are usually set up on a project basis, but rely on the business
expertise from the various areas.
Virtual/Remote Teams: These are made up of individuals
who are geographically dispersed and rely on technology to communicate
with each other. In the extreme, a virtual team may also have
the following characteristics:
• Members may report to different lines of management,
thus are cross-functional.
• Membership is due to skills and expertise.
• Members have other, and often times conflicting, objectives.
The team structures described above can be thought of as a continuum,
from the more traditional work group to the virtual team. Some
self-managed teams may still have some management support and
direction, while others could be truly self-managed. The differences
will be due to enterprise and business unit culture, the nature
of the team and its purpose.
Advantages of the Team Structure include:
• The pooling of knowledge and skills can result in a higher
quality output.
• Team members expand their knowledge and skills that go
beyond the team or project. Increases their enterprise capabilities.
• Diversity of team members brings different perspectives.
• Is a source to identify and assess candidates for promotion.
• Supports the movement to empowerment and a more participative
environment.
Disadvantages of the Team Structure include:
• Striving for consensus can increase the time to bring
a project to completion.
• Loss of individual accountability.
• Difficult to reward individual contribution.
• Team members must be trained in team process skills.
• Tendency not to want to end the project and dissolve the
team.
• Overbearing or dominating participants can lead to “group
think.”
Implications for the Organization include:
• Team structures require more frequent and better communication.
• Team members may take on different roles, necessitating
varied knowledge, skills, and behaviors.
• Rewards may be team-based resulting in less individual
recognition and reward.
• Individuals must put their personal objectives behind
team objectives.
• Teamwork involves more self discipline and a willingness
to take and give peer feedback.
• Advancement could be dependent on team, and not just individual,
success.
Product or Service Organizational Structure
In this type of organization, the product or service unifies
the organization. A product group would also have the elements
of R&D, production, marketing, sales, customer service, etc.
They usually have P & L (profit and loss) responsibility.
Advantages of the Product/Service Organization include:
• Focus on products or services.
• Hold individuals or units accountable for profits.
• Provides control over an entire operation.
• Can lead to more product development trying to meet the
needs of the customer base.
• Quick response to rapidly changing products or market
demands.
Disadvantages of the Product/Service Organization include:
• Internal competition when the products compete for the
same customer or geographic area.
• Can create higher costs due to duplication of employees,
facilities, processes, etc.
• Narrow focus can lead to organizational myopia.
Implications for the Organization include:
• Because of the focus on products and services, many of
which may be very technical or complex, individuals must be very
knowledgeable of specific products and services including their
technical specifications, capabilities, interface with other products,
warranties/guarantees, benefits, etc. Product knowledge is a critical
success factor.
• Managers over product organizations are held accountable
for the profit and loss of that product division. This means they
have accountability for not just revenue, but all expenses as
well i.e. P & L responsibility.
• Since this structure is built around products and services,
the compensation of individuals could include incentives tied
directly to the sale of those products. This could result in a
lessening of building account relationships as people focus on
sales and not the customer.
• Since many enterprises form product organizations because
of the complexity of the product, they could also compensate employees
(pay progression) based on knowledge/skills acquired about the
product.
• Cross-functional knowledge becomes important as the people
will need to know more about the R&D to support he product,
its next evolution, how it is to be serviced, production/customization
capabilities, warrantees/guarantees from marketing, etc.
Geographic Organizational Structure
Geography dictates the organizational structure (e.g. Eastern
Region, Midwest, West Coast). It could be U.S. Canada, Mexico,
CALA; or North America, South America, Europe, and Pacific Rim.
You would use this when your customers or offices are geographically
dispersed.
Advantages of the Geographic Organization include:
• Being “close” to the customer.
• Responsible for the entire product line.
• Could result in faster response time to customer needs.
• Could result in quicker distribution of products and services.
• Takes advantage of localized knowledge.
Disadvantages of the Geographic Organization include:
• Internal communications and coordination can be a problem.
• If the product line is highly complex, may be too much
for a region.
• Can create higher costs due to duplication of staff, facilities,
processes, warehousing, etc.
Implications for the Organization include:
• Employees will need to be open to relocating.
• This structure requires good cross-boundary communication
to share best practices and customer information.
• Language and culture knowledge and skills impact recruiting.
• Management of a diverse workforce becomes important.
• Compensation may have geographic differentials that relate
to cost of living.
Customer Organizational Structure
With a customer design, you organize around customers; usually
key accounts that offer high current or future profit potential.
A second option is to organize around customer groups, as consumer,
industrial, and government.
Advantages of this Customer Organization include:
• This type of structure places the customer at the center
of your organizational efforts. You want to understand the customer
account’s business problems/opportunities, their market
situation, what they value in a supplier/customer relationship,
how they make their profit, etc. In essence, the job is to make
the customer successful through the use of your products, services,
and expertise.
• A customer structure allows for an increase in account
penetration. This means that you can gain a larger share of the
customer’s business as you sell more to the individual within
the customer’s organization and broaden your sales into
other parts of the customer’s organization. It is the up-sell/cross
sell strategy.
• Increase margins due to adding value. By focusing on
the customer and learning their business, you should add value
and move away from price competition. With this, your margins
for that account should increase.
• Partnering for R&D is a good way to develop products
that meet your customer’s needs. Forming R&D teams including
your customer at the product development stage can do this.
Disadvantages of Customer Organization include:
• Internal competition for resources as you try to meet
your customer’s needs. These resources may be dollars for
product development, expanding the account team, executive time,
etc. Your peer customer organizations will want similar access
to the enterprise’s resources.
• Redundancy in product development due to specialized
needs or poor communication. The re-development of similar products
can be costly to the enterprise. There needs to be a balance between
customization to meet the customer’s requirements and leveraging
what product capabilities currently exist. When this does not
happen, the enterprise increases its costs.
• The customer structure can create higher costs due to
duplication of employees, facilities, processes, etc. Redundancy
drives up costs as we try to meet and exceed customer expectations.
Implications for the Organization include:
• Employees must have intimate knowledge of the customers.
• Employees must align product and service benefits to the
customer’s needs.
• Internal political savvy is required to secure resources.
• Employees can move from the enterprise into the customer’s
organization.
• Employees may input into marketing, sales, product development
based on their customer knowledge.
Align Organizational Structure With Strategies
The organization has corporate and business unit objectives.
Some more common objectives include:
• Increase sales or margin on sales.
• Increase profitability.
• Introduction of new product(s).
• Increase customer retention.
• Improve customer satisfaction.
• Advance into new customer markets or geographic areas.
• Reduce costs.
• Increase productivity (output per person).
The organization has major strategies to compete in their marketplace.
These strategies then have organizational requirements to support
the effective implementation of those strategies. The major strategies
include cost leadership, differentiation, focus, defender, and
prospector.
Cost Leadership Strategy
The intent is to achieve an industry cost leadership position
through policies, practices, procedures, actions aimed at achieving
cost leadership. To achieve this objective, management is focused
on cost control in areas as: efficient-scale facilities, pursuit
of cost reductions from experience, tight cost and overhead control,
avoidance of marginal customer accounts, and cost minimization
in areas like R&D, service, sales force, advertising, etc.
The idea is that low cost production will result in above-average
return.
Briggs and Straton’s small gasoline engine business built
its success on a cost leadership strategy. Other organizations
that historically have used this strategy include Texas Instruments,
Du Pont, and Emerson Electric. (Porter)
Organizational Requirements:
• Tight cost control and efficient production
• Frequent and detailed cost reports
• Structured organization and responsibilities
• Incentives based on meeting strict targets ( which could
be quarterly or more frequent)
• Explicit job descriptions
• Job-specific training
• Use of performance appraisal as a control
A more bureaucratic form of organizational structure will reflect
these requirements.
A cost leadership strategy may result in the business unit actually
growing and increasing its costs. This is because the growth of
the business unit may reduce overall enterprise costs. This could
be through reducing the direct sales force and using more telemarketing.
Remember though, the business unit is still asked to operate as
cost-efficiently as possible by putting into practice policies
and procedures to ensure the support of the cost leadership strategy.
Differentiation Strategy
This strategy involves differentiating the product/service offering,
creating something that is perceived industry-wide as being unique.
Differentiation can take the form of design or brand image, technology,
features, customer service, and quality. Differentiation can create
brand loyalty and provide a safety net against price sensitivity.
Because it increases margins, it reduces the need to be low cost
provider.
For example, Caterpillar Tractor is known for its dealer network,
excellent spare parts availability, and for very high-quality,
durable products. In heavy equipment where downtime is expensive,
these qualities are critical. Mercedes differentiates itself by
brand image. Sony has developed a reputation as providing high
quality and value in the consumer electronics market. (Porter)
Organizational Requirements:
• Strong coordination among functions of R&D, marketing,
product development
• Subjective measurement and incentives instead of quantitative
measures
• Amenities to attract highly skilled labor
• Emphasis on innovation and flexibility
• Broad job classes with loose work planning
• Team-based training
• Emphasis on individual pay
• Use of performance appraisal as developmental
The flat or team organizations would fit this the differentiation
strategy model
Focus Strategy
This strategy requires focusing on a certain customer group,
segment of the product line, geographic market, etc. The intent
of the focus strategy is to serve that target very well. The functional
policies are developed with this target focus in mind. The premise
is that the firm can serve its narrow strategic target more effectively
or efficiently than the competitors. (Porter)
Initially, Porter Paint focused on the professional painter,
ignoring the do-it-yourself consumer market. At that time they
built their strategy around free matching-paint services, rapid
delivery of paint to the job site, and free coffee rooms for professional
painters at factory stores. Since that time, Porter has moved
into the consumer market and others have emulated some of their
original strategies. (Porter)
With a focus strategy, the enterprise or business unit may align
its teams around a product, customer, or market and provide excellent
service to that niche.
Organizational Requirements:
• Diversity of markets and customer requirements lend itself
to a focus strategy supported by a customer or geographic structure.
This brings the organization's capabilities and resources to bear
on a particular market, customer group, or product line.
Defenders
A more stable market and customer base with a more stable line
of products and services characterizes these organization types.
They are not seeking to open new markets and compete aggressively.
There is more of an emphasis on management control, effective
processes and procedures, decisions by policy, and detailed planning.
Classic examples of the defender strategy are local utilities
and government services, as the Post Office. They see themselves
as having a stable base with few new products or services. It
is only with deregulation is some sectors and the rise of the
internet have they begun to change their views, and this change
is slow. Before deregulation, Yellow Freight had more of a defender
strategy. It was only the onslaught of competition that forced
them to change or go out of business.
Organizational Requirements:
• Emphasizes management control, reliability, and employee
retention
• Explicit job descriptions and detailed work planning
• Internal recruitment
• Formal hiring and orientation process
• Uniform appraisal procedures as a control device
• Job specific and individual training
• Emphasis on job security through fixed, job-based, and
seniority pay
The organizational structure may be bureaucratic allowing for
clear division of labor with jobs assigned to functional areas.
Prospector
These organization types are aggressive in the marketplace, highly
competitive, produce new products and services, and seek to be
first to market. Their key objective is to find and exploit new
product and market opportunities. They operate in an environment
of uncertainty and instability. Think about Apple and its entry
into the personal computer market or Microsoft with its never-ending
new releases. These are good examples of organizations following
the prospector strategy.
Organizational Requirements
• Emphasis on faster innovation, flexibility, and creativity
• Broad job classes with loose work planning
• External recruitment
• Customized appraisals with multiple purposes
• Team-based and cross-functional training
• Decentralized pay that rewards risk taking
To support this strategy, the structure must be very flexible
meaning flatter, decentralized, or even team-based organizations.
Factors Influencing Organizational Structure: Selecting
the "Right" Structure
There is no “right” way to organize. However, an
organization’s strategy implemented with the right organizational
structure is more effective. The following are some general factors
with implications for organizational structure.
| • |
A quick rate of change experienced by the enterprise
and its environment means the organization must be flexible
and able to respond quickly. A flat or team structure supports
this situation. |
| • |
The degree and aggressiveness of competition
is a factor. In a highly competitive environment your strategy
could be a prospector or focus strategy. You need an organizational
structure that supports flexibility, creativity, and loose
work planning. The flat or team structure supports this type
of environment. The customer, product, or geographic structure
supports a focus strategy to address the competition and customer
requirements. |
| • |
Size of the organization becomes a factor.
Generally, very large organizations require more divisions
and layers with more procedural control resulting in more
bureaucracy. In other cases, large organizations develop product
business units that then take on their own structure. |
| • |
Another factor is the organization’s
resistance or acceptance of change. If there is significant
organizational resistance to change and the environment is
more stable the bureaucratic structure may be appropriate. |
| • |
Management style is also a factor. If management
wants control, standardization of processes, decisions made
by management, and little empowerment or delegation, then
a more bureaucratic structure is appropriate. Flat and team
structures support a participative management style, driving
decisions lower in the organization and supporting employee
empowerment. |
| • |
Diversity of markets would lend itself to a
focus strategy supported by a customer or geographic structure.
This brings organizational resources and capabilities to bear
on a particular market. |
These factors are not absolutes but are meant to provide some
examples of the interrelationship between strategy and structure.
Any specific relationship between structure and strategy is business
unit and enterprise specific.
SOURCES
DeNisi, Angelo, & Griffin, Ricky. (2001). Human
Resource Management. Boston: Houghton Mifflin Company.
Gomez-Mejia, Luis R., David Galkin, & Robert Cardy. (2001).
Managing Human Resources. Upper Saddle River, NJ: Prentice-Hall,
Inc.
Mintzberg, Henry. (1983). Structure in Fives: Designing Effective
Organizations.
Porter, Michael. (1990). Competitive Strategy, Techniques for
Analyzing Industries and Competitors. New York: The Free Press.
About the Author: Dr. McCain, Principal of Performance
Advantage Group, a company dedicated to helping organizations
improve business unit and individual performance through the development
of their human resources, can be reached at (615) 377-3050 or
by email at: donpag@bellsouth.net.
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Center Professionals on Top of Their Game
