Managerial Economics and Organizational Architecture

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Table of Contents

Organizational architecture and corporate culture
Always Round Tire
Low level management and promotion
Free rider problem
360 degree performance evaluation
Responsible stewardship
References

Organizational architecture and corporate culture

Organization architecture describes the systems within an organization- both formal and informal. It involves creating roles, clear reporting lines mechanisms to handle inputs and results. It has three elements, these are; mechanisms of evaluating employees performance, reward structure and allocation of decision rights. Corporate culture on the other hand, is a wider term that incorporates organization of authority and work, reward schemes, company customs, slogans, taboos as well as social rituals and heroes. The two corporate culture and organizational architecture affect each other.

Organizational architecture defines corporate culture of a company (Pride, Hughes & Kapoor, 2012). Components of corporate culture such as heroes and customs enhance communication and cultivate productivity within a firm. Organizational architecture reinforces these elements. For instance, G.Es corporate culture of innovativeness helps to steer high performance among the employees. As a result, G.E has been rated highly and as one of the top 100 companies worldwide. Its corporate culture of communication such as GE Corporate Ombudsperson that allows employees to air views regarding their integrity has allowed for coordination between its business and the employee welfare.

Always Round Tire

The problem is the leadership and building of the best team which is necessary in facilitating organizational architectural development. Leadership is essential not only in the proactive transformational change within the organization but also in the achievement of the organizational goals and objectives (Brickley et al., 2007). Active involvement and personal commitment of departmental and senior management are vital for the success of the organization.

Leaders must possess a clear vision of the organization goals, provide strategic direction, empower and integrates the desired outcome with all aspects of the organization functioning. However, in this case, the team lacks personal active involvement and commitment to their area of competence or department. In fact, the team seems not to have a clear vision of the desired end, strategic direction, motivation empowerment as well as a clear understanding of the organization functioning.

Low level management and promotion

While individuals perceive promotions as a means through which they are rewarded by the organization, promotions are also a means through which the organization perpetuate and communicate its culture and values to the workforce. Promotions are the primary means for the organization to deploy talent, reorganize, implement new strategic initiatives and achieve strategic goals (Brickley et al., 2007). The desired strategic goals form the basis in which organizations promote their employees. Therefore, individual employees being promoted must be a reflection of the competency that will enable the company to achieve the desired objectives.

Low level management does not require highly skilled techniques and knowledge that is imparted into the individuals through training and education. That is why promotions based on seniority and experience best suited low level management. However, in higher positions where competency, skills and techniques are needed, education attainment and training should form the basis through which promotions are made.

Free rider problem

According to economists, free rider problem signifies a state where individuals reap more than their fair share from a collectively shared resource. This is a common in the organizations especially where team work is involved. Economists advise the problem needs to be addressed. This will help to promote equity and satisfaction among employees. Equal participation in the running of company is of essence. Team work has contributed a lot to unequal participation by individuals.

Some members allow others to perform all the tasks while they sit back and enjoy (Pride, Hughes & Kapoor, 2012). The joy riders are mostly leaders who reap higher pays and bonuses than the rest. This can lead to resentment among the team players. Eventually conflicts may occur. These conflicts may also be as a result of clashing ideas among the team players. Teamwork limits innovativeness. Some team players focus on the overall benefit of the team and thus fail to make use of their full potential. This may lead to stagnation of the company.

360 degree performance evaluation

Performance evaluation refers to an assessment of an individuals job affiliated actions and their consequences within a particular level or setting. 360 degrees is a commonly used performance evaluation process that focuses on assessment based on the ideas of all parties involved. These include; customers clients, supervisors, junior staff, peers and suppliers. Though this type of evaluation is more comprehensive and credible in regards to an employees performance, it suffers some weaknesses.

It is more complex and it would take a lot of time in implementing it. Implementation of the program would cause tensions and conflicts as those who are rated lowly would resent their raters (Boone & Kurtz, 2011). The implementation of the program would require some training on the part of the staff which would be very costly. Dishonesty may occur among the members of staff if the tool is not carefully planned.

Responsible stewardship

Responsible stewardship involves proper planning and management of resources entrusted unto an individual. It is significant to an organization in that enables those who are involved to generate intelligence that helps in better decision making in an organization. Responsible stewardship assists individuals to formulate a planned framework of policy that provides a distinct sense of direction for the organization. Responsible stewardship has a great impact on accountability as those involved are always held responsible for their actions. Responsible stewardship ensures balance between culture, structure and the objectives of an organizations policies (Boone & Kurtz, 2011). This is because it ensures the overall organization architecture is congruent to the policy objectives and the communication lines are clear.

References

Boone, L. & Kurtz, D. L. (2011). Contemporary business. Hoboken, New Jersey: John Wiley & Sons.

Brickley, J., Smith, C., & Zimmerman, J. (2007). Managerial economics and organizational architecture. New York, NY: McGraw-Hill Irwin.

Pride, W. M., Hughes, R. J. & Kapoor, J. R. (2012). Foundations of business. Boston, MA: Cengage Learning.

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