Organizational Structure, Design, and Change

OB III | HR C | Primary Group 6

Ambar Jain H21127 | Dixit Dutta H21137 | Jatin Sharma H21143 | Meghna Puri H21147 |
Shashwat Krishna H21166 | Vaibhav Gupta H21176| Vanya Pandey H21177

Indican Ltd.

Q1. Identify the structure followed in Itarsi Plant and Indican in general.
Clearly, the Itarsi plant has a functional structure. Even though the primary focus is on operations, the
plant considers the concerns of all departments. There was division in the workforce and managing staff
based on the specific departments that they worked in at the plant. It has a strong hierarchy among the
levels, with four levels of hierarchy and a sufficiently wide span of control. The Itarsi plant has simple
integration mechanisms, with coordination occurring primarily through a hierarchy of authority and direct
contact between plant managers. The Itarsi plant holds frequent weekly and monthly meetings led by
managers to discuss finances, profits, production, and cascading important decisions.

IndiCan, on the other hand, adheres to a multi-divisional structure in which each division has its own
structure based on their needs. The Itarsi plant, for example, has a functional structure. Similarly, there
may be a division that follows a different structure. Although we cannot be certain about the other
divisions, Exhibit 1 clearly shows that a functional structure is being followed. IndiCan had plants spread
out across the country in general. It also adheres to a divisional geographic structure, with the Itarsi plant
serving as a preferred division for the successful implementation of control systems.

Q2. Comment on four design choices (Chapter 4) made by Itarsi plant. Do you think these design choices
as appropriate for an organization like Itarsi plant?

i. Differentiation and Integration: There were times of subunit orientation in different roles initially
due to incentives being linked to departmental success. There was a need for better
communication among the top brass as stated frequently by the manager, while lower levels did
better with understanding what was expected of them. The integration techniques implemented
such as hierarchical power structure and occasional direct communication between managers
were basic but there was a need for improved synergy between sales and operations.

ii. Vertical and Horizontal Differentiation: Horizontal differentiation is greater than vertical
differentiation when talking about departments. At the same time, there is a well-established
reporting relationship among the current organisational levels.

iii. Standardisation and Mutual Adjustment: There was laid emphasis on the need to “control
procedures” and operating within budget. Since the focus was on adhering to defined processes
rather than evolving as per demands of the consumer, there was no attempt to adjust the
timetable such that customer needs would be met.

iv. Centralization vs Decentralization: "All of the tasks in the Itarsi plant, up to and including the
foremen, have been measured and standards defined," according to the budget, which was
created by "the appropriate operational and staff groups in head offices." There was considerable
attention paid to adhering to the above guidelines and limiting to the budget. This indicated a high
level of centralisation. On the other hand, foremen were free to do as they pleased in their
departments, provided they fulfilled requirements of the process and stuck to the budget. This
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 indicates decentralisation, however the prevalence or the extent of it is up for debate as the
authority to make amends to budgets or standards was not given to the foremen.

Q3. Identify the various factors determining the vertical differentiation of Itarsi plant. Are they
adequate to coordinate and motivate the employees of Itarsi plant?

i. Employees had extremely specific and varied skill sets within the plant which required high
levels of supervision, and hence resulting in a multi-layered hierarchy for the same roles.

ii. Narrow span of control was required for most roles in this plant due to the stringent focus on
meeting standardization and budget targets.

iii. Since the same is being implemented, it is largely adequate to coordinate and motivate the
employees of Itarsi plant. However, for some employees like Gunta, who have no direct
subordinates but very high responsibility, there is a lack of motivation.

Q4. Rank the problems occurring in Itarsi plant and discuss the reasons for the same.

i. Standardization: With a focus on compliance with standards, they cannot take advantage of the
process improvement insights experienced employees may have. It also hinders sales reps' efforts
to improve customer satisfaction through personalization and customization of order delivery.

ii. Differentiation & Integration: There was a significant imbalance in the organization's level of
integration and differentiation, leading to coordination and subunit orientation issues within the
organization.

iii. Organization Culture: Production workers are supposed to act comfortably on standards and
productivity. This seems to be the standard they follow. This can be due to a high level of
uniformity, and there is little incentive as there is little control over performance status.

iv. Hierarchical Controls: There was a disagreement between production control and the sales team
because the sales team did not report to the factory manager.

v. Leadership: Leadership did not keep its promise. After a lecture on quality control, there is a
scenario where the foreman ignores batch quality defects.

vi. There was a trust gap between management and employees. Managers and Foreman believed
that employees were careless and indifferent to their work.

vii. Overemphasis on financial restrictions, staff, and customer demands were on a back burner.

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Q5. Identify the key roles of Itarsi plant and their approach/contribution to the problems. What’s your
analysis about the people dimension of STAR model based on roles included in Exhibit 2?

i. R Narayan, Plant Manager: A joint meeting was called by him when the October performance
report was not appropriate. He asked for upward communication of the problems when they
were faced. Along with that, he asked the managers and not the production control to make
the final decisions.

ii. Ravi Anshuman, Assistant Plant Manager: He ensures that the production schedule is running
smoothly. During the meeting he expresses that he would focus on the budget and not on
sales.

iii. Amrendra Kumar, District Sales Manager: According to him, the budget and the incentive
attached to him were the motivators of the employees. This was interfering with their ability
to deliver value to the customer.

iv. S Gunta, Production Control Manager: Manages the production plans. Even though his focus is
on quality, he wants the foremen to be happy about their work and more flexible.

v. Joe Sharma, Plant Industrial Engineer: Helped in the cost-cutting by standardization of

procedures and methods improvement. He is concerned about the machines in the Special
budget meeting.

People dimension of the STAR model:

From Exhibit 2, we can infer that even the personnel at the (n-1) level in the Itarsi Plant do not have
College Education, barring a few. The procedures and methods are standardized which reduces the
requirement of skills needed. However, it is also mentioned in the case that people skills are more relevant
to the employees as they go high up in the hierarchy.
The roles at the top of the plant are occupied by people who have been working in the plant for a long
time and have risen from lower ranks (including the plant manager).

Q6. Go through the article “Do you have a well-designed organization” (uploaded in AIS) and conduct
nine tests mentioned? How many are relevant for Indican and how many will it qualify to pass?

i. The Market Advantage Test: Indican, with respect to the Itarsi plant has been performing well
because of its strict standardization and focus on staying below or at the budgeted cost while
making higher than forecasted profits. The design of the organization with strict supervision and
vertical integration makes sure that this is fulfilled, and hence Indican passes this test.

ii. The Parenting Advantage Test: Since all plants are complying with the norms (control system in
this case) that Indican makes, which is a value-added activity being given sufficient attention.
Hence, Indican partially passes this test, as we do not know how else the organization is involved
with the plant.

iii. The People Test: Most people in the organization are doing what they are skilled, owing to a
machine bureaucracy like structure, but there are some people who are not motivated to perform
well owing to the design elements. Hence, People Test is dicey for the Itarsi plant.

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 iv. The Feasibility Test: Irrelevant in this case.

v. The Specialist Cultures Test: Since the functional units in the firm are allowed to operate as they
and their leader deems fit if the budget and standardization norms are being followed, we can
safely say that this test is passed. There is no danger or them being dominated because they are
majorly functional groups and only the output matters.

vi. The Difficult Links Test: The organization fails this test as the sales and the production departments
are on very different tangents and do not work in tandem with each other to maximize
productivity.

vii. The Redundant Hierarchy Test: There are very few vertical levels in the plant, with low division of
labour and functional distribution of work. This is partly due to the machine bureaucracy-like
structure that is present here. Hence, there are no redundant hierarchies, and this test will also be
a pass for Indican Ltd.

viii. The Accountability Test: With extremely standardized processes, budgets and forecasts, all
departments in the organization are under effective control. The control systems in the
organization are robust and the numbers are not easy to budge. Though, even then, there are
instances of faulty products being shipped. Hence, this test is dicey.

ix. The Flexibility Test: The organization sticks to its budget and its standardized methods even when
a lot of employees, including senior ones, feel that there should be a change. Hence, there is a
definite lack of flexibility. This test is not passed.

Q7. Identify the various alternatives available to improve the situation. Which one will you choose?

There are several implementable alternatives that can be identified to improve the situation at the Itarsi
plant. We shall view them as short-term and long-term alternatives and club them accordingly.

In the short term, the following alternatives would be both reasonable and feasible –

i. The current budget system at the Itarsi plant could be made less stringent, to facilitate more
flexibility that would account for uncertainties in the market.

ii. The management bonus could be made less contingent on the budget, resulting in quality
production rather than a quantity-focussed approach. Simultaneously, this would also enhance
the operating efficiency.

iii. The non-performing divisions (for consecutive time periods) should be identified and the people
responsible for it should be sacked. This would reduce the workload and responsibility on the
remaining divisions by eliminating the burden created by incurred costs.

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In the long term, the following alternatives would be both reasonable and feasible –

i. The departments and individuals who do not adhere to the quality standards repeatedly should
be identified, especially when defective products are being delivered to the customers, and they
should be let go from the organization.

ii. A customer-centric strategy should be developed instead of the current one that prioritizes the
budget over the customers. Also, this shall be duly and properly communicated with the division
managers and the sales team for smooth information exchange and flow.

iii. Given the Itarsi plant had a distinguishable performance and set its reputation on a higher level
than other plants of IndiCan Ltd., the corporate headquarters should be intimated about the need
for development and implementation of separate standards for the Itarsi plant.