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Organizational Architecture and My Company
Employee behavior can have a direct impact on the successful completion of organizational goals and objectives. One common way in which an organization can control and influence this behavior is through organizational design. Organizational structure is defined as the structure and operation of any business. This structure or form consists of three processes. These systems provide decision rights, performance measurement, and reward and punish performance.
These three systems that make up the organizational structure are often referred to as the “three-legged stool”. These “legs” must always be balanced and each, must be balanced with the other two. An employee should only have decision rights that can be measured and rewarded or punished. The performance appraisal system should be able to measure the position in which the employee has decision rights. And the reward and punishment system should be proportional to the measured performance of the employees.
A decision-making process should be designed specifically for the organization. It usually involves a level structure. This hierarchy is used to separate managers from employees and control decisions in the decision control aspect of the decision process. Decision management involves initiation and implementation while decision management involves verification and monitoring of the decision.
A performance measurement system should measure both selectively and differentially. Objective measures are clear and verifiable while subjective measures are vague and difficult to measure. Accounting systems are widely used by organizations in this process. Along with monitoring accounting figures, the accounting system can provide internal reports and provide a form of control. Each of these can be used as a measure of performance.
The system used to reward or punish performance can be financial or non-financial. Financial compensation usually comes in the form of an annual bonus included in the workers’ compensation contract. Often these bonuses are based on the achievement of goals or objectives and are capped. Purpose-based accounting often has a lower liability and may have a higher margin. The minimum threshold is the minimum requirement that must be met to receive the bonus. The bonus then increases as you move up over the lower limit. Then it is covered in the upper border.
Organizational design has a huge impact on my organization. Our decision rights system is divided into a three-stage process. At the highest level of the system are the Presidents and Vice Presidents. They deal with the middle level which includes Directors and Managers. The middle level controls and supervises the remaining lower level employees. Our management decisions are handled primarily by senior staff. Decision making is controlled by middle level employees.
For most of our employees, their performance is based on meeting quarterly and annual sales goals. Because of this, their performance is monitored and measured in our calculation system known as MAS90. It is used to track all financial transactions that occur in our organization. From those transactions, MAS90 then generates reports that are used by all levels of staff. For non-sales staff, their performance is measured by strict performance measures.
In the latter process, rewarding or punishing work, the MAS90 also plays a major role. The amount of employee performance is based on the amount of sales the salesperson is able to generate. Marketing commissions are paid as a flat percentage against the gross revenue of each project. MAS90 generates all these reports. Rewards are also given to the seller based on the total amount of annual sales they make. There is a formula or rate used to determine this bonus amount that is different for each dealer. Each of them has a different formula agreed upon based on their employee contract.
These systems are now working well for my organization. The most recent change was made due to the recession. Our company, like many, has lost a significant amount of business and because of this, commission rates for every sales person are being renegotiated. I believe there is always room for improvement in any building.
I believe there are two things we need to consider to improve our organizational structure. The first is to improve our accounting system. MAS90 is an older version of the software with significant improvements available. The MAS200 is a product of Sage’s new computing system that includes great features that we can take advantage of. Second, I think we should consider implementing more measures for salespeople and more targeted measures for all other workers.
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