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Wednesday, April 13, 2011

The Paradoxical Twins: Acme and Omega Electronics

After reading the case of the “Paradoxical Twins Acme and Omega Electronics”, I found Both Acme and Omega produce similar products and offer similar services. Acme president John Tyler is a very tough going individual and he is portrayed to be an autocratic individual because there is one way communication in Acme. The case provides an opportunity to evaluate both Acme and Omega’s organization structure of a business. Both companies used to have the same organizational structure but after they were sold to different investors, as a consequence of this, each company has its own procedures and company polices. Following are the some facts about both the company mentioned in the case after they became the separate business entity.
Acme retained original management and promoted GM to president. They have well defined organizational structure and decisions are often taken by top management without consulting manufacturing department. And they have well defined job responsibilities and authority.
Omega hired new president and upgraded several existing personnel within plant. They don’t have organizational structure and they believe that Organizational chart seems like artificial barrier. They have participative management style of leadership and they don’t have well defined job specification (job authority and responsibility)

Q. No. 1          Which firm should have won the final contract - Acme or Omega? Discuss.
The paradoxical twins describes two organizations, Acme and Omega Electronics that are competing for the same contract for manufacturing a memory unit to be used in a photocopier. Omega, having an organic structure, wins the race because they are able to produce higher quality memory unit. On the other hand, Acme having mechanistic structure seems less competent and less reliable because of its low quality memory unit which they are unable to produce in time and some of its prototypes fail to work. Omega even corrects a design error in the original blueprint, which improves product quality. But, both the company is given half the order, and they were encouraged to find the way to reduce the cost  and Acme takes advantage of this opportunity to experiment to find ways to reduce its costs, whereas Omega does not. Finally Acme discovers the way to reduce the cost by 20% and they own the contract.  Omega may have won the battle, but Acme has won the war because its mechanistic structure fosters a concern for technical efficiency and cost reduction in what is a routine manufacturing environment. In this particular case, Acme decides to run a "tight ship" (mechanistic structure) in order to increase productivity and efficiency, and to decrease costs. The advantage of this strategy is that they can undersell their competition (Omega) by selling at a lower cost. Omega, on the other hand, is nearly too opposite. They run a more organic structure, which relies heavily upon communication, delegation and teamwork. This strategy allows Omega to effectively compete with Acme by stressing reliability and by placing emphasis on quality.
 Omega’s decentralized, organic approach allowed for the building of prototypes 10 days faster than Acme, correction of errors, and a highly reliable prototype—much more reliable than Acme’s, which had a 10 percent failure rate. Omega was more effective when evaluated by these criteria, although Acme’s prices were lower than Omega’s because of that Acme won the competition and which was fair result in my opinion. Its mechanistic structure provided it with the management system and incentives needed to improve and reduce its manufacturing process, so that Acme won the final race over Omega.
Q. No. 2          Describe each firm’s structure especially the author’s explanation of organic and mechanistic structures.
Acme’s organizational design takes the form of a mechanistic structure. The term mechanistic structure is used to describe an organizational structure that is designed to induce employees to behave in predictable, accountable ways."(George & Jones, 2005, p. 508). All of the employees working in a mechanistic structure have assigned duties that they must perform and are prohibited to take on additional duties unless they are told so by management. The internal organization is characterized by rules, procedures, and a clear hierarchy of authority. Decision making authority in the Acme is centralized in the top level management and they have top down approach for the communication. All communication flows from the top to bottom and there is clearly defined job description (i.e. authority and responsibility associated with each job). He makes his managers run the organization with strict control, or as he phase it, a “tight ship.” The president does what he wants because all the decision-making power is in his hand (centralized). Acme has a very detailed organization charts and job descriptions. This is because Tyler believes that everyone should have clear responsibilities and narrowly defined jobs. Finally, there is vertical communication in the company. Departments don’t interact or talk with each other. All the information flows from top management down to lower management and employees. If Tyler wants to communicate to the company about changes or demands, he writes memos that he passes down to his upper management, which passes it down to lower management and maybe eventually down to the employees.
 Omega, on the other hand, has completely different organization structure than that of Acme. It has organic structure and the internal organization is characterized by “looser, free-flowing, and adaptive.” The term organic structure is used to describe an organizational structure that is designed to promote flexibility so that employees can initiate change and adapt quickly to changing conditions" (George & Jones, 2005, p. 508). This flexible structure is more like a team environment in which all the employees are able to handle any of the tasks.
There are no clearly defined rules and regulations and there is no clearly defined hierarchy of authority. The decision-making authority is decentralized to the lower level of the management. This can be seen at Omega through the departments contributing to the common tasks (when they were making the chips). Since Rawls does not believe in organization charts, tasks can be adjusted and redefined through the employee teamwork. For example: when a new member joins the engineering department, he found that his role was not clearly defined. He worked in the different place, in different day because of the lack of job description. Omega basically applies the judgmental approach in problem solving. They believe in mutual adjustment and they use informal way of communication rather than using standardization and written rules.
Q. No. 3          Did each firm’s workflow processes – i.e., organizational technology - fit its structure?
Those organizations were more effective when their technology matched the organization’s structure. Specifically, for small batch production, an organic structure was best because the production of custom items requires a good deal of informal communication and adaptation. Organizations using a mass production technology were more effective when using a mechanistic structure. The reason was that control over a complex and repetitive process could be effectively exerted by rules and regulations. When a continuous process technology was used an organic structure was more effective.
In order to compare one organization’s structure with that of another or to study the effects of structure on organizational performance or to match structure with that of technology and work flow processes, we need to have consistent ways to measure structure. Three important structure measures are complexity, formalization, and centralization. These structural measures of complexity, centralization, and formalization may be combined into the two broad and descriptive categories of mechanistic and organic. Mechanistic organizations can be seen to operate as machines. They are characterized by highly specialized tasks that tend to be rigidly defined, have hierarchical authority and control, and communications that primarily take the form of instructions and decisions issued by superiors to subordinates. Communication is mostly vertical from the top down. In our case, Acme electronics is the organization that has mechanistic structure. The best technology or the work flow processes for the organization that has mechanistic structure is large-batch and mass production technology. I think they do apply this technology which best as per their organizational structure.
In an organic organization, control depends less on formal job position and more on expertise relevant to the particular problem being considered. Communication is both vertical (up and down the hierarchy) and horizontal (across different departments of the organization) depending on where the needed information resides. These communications primarily take the form of information and advice. Commitment in the organic organization is to the organization’s tasks and goals. Organic organizations tend to be simple, low in formalization, and decentralized. They adapt to and create change in their environments. Omega electronics is the example of the organic structure. The perfect work flow process or the technology for the organization having organic structure is small-batch technology because this technology demands freedom to the people/employees to make their decisions so that they can respond quickly and flexibly to the customer’s request and produce the exact product the customer wants. 
Q. No. 4          Strategically, what can Omega do to improve its situation? Suggest changes in structure, workflow processes, strategy, and/or other changes to help Omega become a better competitor. Be as specific and actionable as you can.
Omega is a decentralized organization, where managers and subordinates delegate important decisions to lower level about new organizational projects. Omega's management believes in mutual adjustment, which is the practice of using judgment on problem solving and also creates an informal way of communicating with each other rather than using standardization or written rules.  There is not clear cut job analysis (job description and specification). Sometime new employees don’t know what to do for a month and even longer. Omega's organic structure gives the employees more flexibility to innovative thinking, and creates a unity within the organization but it is not enough to be the effective organization. Omega should have mix organization structure; it means it would be better if there is mix of mechanistic and organic organization structure. There should be formal communication channel to make sure that information is passing down or up whenever necessary. In my opinion, the company President Jim Rawls doesn’t have proper control over the employee’s functions and activities due to the lack of properly designed structure and communication network. They communicate information by direct meeting which is not good all the time especially during the rush time. Not only this, but also, the president spent too much time on listening to suggestion rather than having his own clear cut idea.
Therefore, in conclusion, to solve this kind of problem they should have transparent communication network within organization to make sure there are no barriers in effective communication, they should define the job authority and responsibility of each task, there should be some chain of command in the organization or the top level management should decide in certain things which critical to the organization. They should change the structure to mechanistic structure and finally they should change their technology to mass production so that they also can reduce the cost of production and be more competitive in the market place.
To be effective, Omega electronics should have some kind of hierarchy where employees feel themselves in the chain of command and there should be clear authority and responsibility for each employee. They should make sure that they communication channel within the organization is effective and transparent for the efficient and prompt flow of information.

Jones, R. Gareth. Fifth Edition, Organizational Theory Design and Change

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