Organizational Interdependence

1. Organizational Interdependence Facilitator and Course Coordinator Vinayshil Gautam PhD , FRAS (London) (Founder director IIM K; Leader consulting team IIM S) A AI Sager Chair Professor and first head, Management department, IITD Chairman DKIF

2. Agenda • Overview of Organizational Interdependence • Interdependence between various Organizations. • Organizational Conflict and its Management • Improving Interdependency

3. An Overview Organization as network of interdependent relationships Focus can be on Underlying Structure People who relate Contribution of relationships

4. A Systems Approach Webster defines a system as a "regularly interacting or interdependent group of items forming a unified whole," which "is in, or tends to be in, equilibrium" System consists of interdependent elements System theory assumes that organizations and their subsystems pursue certain goals.

5. Typical System In a System having n elements, we have n(n-1) relationships to be examined besides the n elements. Source : http://faculty.pnc.edu/arw as on 3/11/2005 - Element

6. J.D.Thompson POOLED Goals Types Of Interdependence SEQUENTIAL Goals RECIPROCAL Goals Goals - Element Source : http://faculty.pnc.edu/arw as on 3/11/2005

7. Inputs and Outputs in Organizational Systems Human Inputs Activities Organizational Situation Technological Inputs Interaction between individuals Organizational Inputs Sentiments or attitudes Social Inputs

8. Organization Relationship: Its Politics • Organizational politics comes into being when favorites are isolated and groups are allowed to strengthen their identities. • Politics arises from competition for power and influence.

9. Interdependency – The Competitive Strength of Large Organizations Organizations compete in different ways: • Direct competition • When organizations interact directly, and compete for same ‘space’. • Diffuse competition • Organizations reduce one another’s viability by depleting a limited common supply of resources. (Hannan & Freeman, 1989).

10. Interdependence as a Business Reality • Organizations need to sustain relationships with other groups to survive in the highly competitive business environment. • Interdependent organizations need to cooperate and trust each other and make sure customers don’t lose faith in them.

11. Interdependence in Supply Chain Management • Today’s best practices in supply-chain management all center on one basic concept: interdependence. -- Brad Berger, Publisher of Global Logistics & Supply Chain Strategies. • All must cooperate and collaborate to provide maximum customer satisfaction and to achieve optimal performance for the supply chain as a whole.

12. Interdependence in Supply Chain Management contd. • Each participant in an extended supply chain has its core competencies. • Supply chain management concerns relations within a network of organizations. For example • Contract manufacturing provides specialized knowledge and assets while gaining flexibility and releasing investment capital.

13. Interdependence in Supply Chain Management contd. • Or the outsourcing of distribution to a logistics service provider extends the supply chain to the customer. • A supply chain thus becomes a group of specialized organizations, linked and managed for a common purpose.

14. Interdependence in Supply Chain Management An Example: • Benetton, the Italian clothing company, pioneered the network organization by creating outsourcing and subcontracting relationships both with its suppliers and its franchised retail shops. • The labour-intensive production of garment assembly, finishing and ironing was shifted to small companies. • While the company retained the capital-intensive and core operations: design, weaving, cutting, dyeing and quality control.

15. Vendor Relationships The attributes of outsourcer-vendor relationship include • Commitment by both parties • Cooperation in all phases • A cultural compatibility must exist • A respectful interdependence • Flexibility in the terms and conditions of the contract • Trust in each other

16. Vendor Relationships The administration of the contract between the customer and the outsourcer requires • Communication channels. • Conflict resolution. • Coordinating priorities and projects.

17. Vendor Relationships Source: ISRC Notes – April 2000 “Negotiating and Managing Vendor Relationships” --Tim Goles and Jim Crompton

18. Organizational Conflict “the result of incompatible potential relationships. The process begins when one party perceives that another party has impeded, or will frustrate, one or more of its concerns.”Gordon (1991)

19. Functional Conflict- toward goals • Enhances and benefits the organization’s performance. Without it…. • there would be little commitment to change • most groups likely would become stagnant • Functional conflict can: • lead to increased awareness of problems that need to be addressed • result in broader and more productive searches for solutions • generally facilitate positive change, adaptation, and innovation

20. Dysfunctional Conflict • Any confrontation or interaction between groups that harms the organization or hinders the achievement of organizational goals • Management must seek to eliminate dysfunctional conflict Dysfunctional Conflict inhibits achievement of organizational goals!

21. Intergroup OrganizationalConflict • Interdependencies and shared resources: • competition for scarce resources • Personalities, hiding of information and ‘office politics’ may come into play • Intergroup differences in goals, values or perceptions: • Different departments have different objectives • Authority imbalances: • one department has to accept instructions from another • Ambiguity: • when responsibilities are not clearly defined. • when there is ambiguity regarding where to assign the credit or blame Dessler (1998)

22. Relationship Between Intergroup Conflict and Organizational Performance Level of Intergroup Conflict Organization Characterized By Level of Organizational Performance Probable Impact on Organization Slow adaptation to environment Few changes Little stimulation of ideas Apathy Stagnation Situation I Low Low or none Dysfunctional Optimal Functional Situation II Positive movement toward goals Innovation and change Search for problem solutions Creativity and quick adaptation to environmental changes High Disruption Interference with activities Coordination difficulties Chaos Situation III High Dysfunctional Low

23. Conflict Management Techniques • Problem Solving: willing to invest time and effort • Superordinate goals: Creating a shared goal • Expansion of Resources: create a win-win solution. • Avoidance: temporary expedient to buy more time • Smoothing: Playing down differences while emphasizing common interests

24. Conflict Management Techniques contd. • Compromise: Each party gives up something of value • Authoritative Command: Management uses its formal authority to resolve the conflict • Altering the human variable: Using behavioral change techniques such as human relations training • Altering structural variables: Changing the formal organization structure Robbins, 1974

25. Negotiation • is an intrinsic part of conflict management. • involves two elements. • Purposeful persuasion: attempts to persuade the other by factual information and analysis to accept their case. • Constructive compromise: realization that the possibility for complete acceptance is extremely low.

26. Negotiation contd. • is a form of bargaining. • Distributive bargaining is used when the conflict relates to limited resources, the situation is win-lose. • Integrative bargaining is the preferred type as it necessitates openness of information and creates a feeling of trust, win-win situation is possible here.

27. Improving Interdependence • Division of Work • Co-ordination • Communication • Reducing group conflict • Group Team Interventions

28. Division of Work Organization- a goal oriented association Complexity of tasks Knowledge and skill Efficiency Effective division of work among participant Interdependency between goals and subgoals

29. Co-ordination • Coordination is the integration and harmonious adjustment of individual work efforts towards the accomplishment of a larger goal. • The need for coordination arises from the existence of dependencies. DependencyExample of Coordination process • Shared resources First come first serve, Priority basis • Simultaneous constraints Scheduling, synchronization

30. Mechanisms for Coordination[Mintzberg’s Coordination Mechanisms] • Mutual Adjustment • Direct supervision • Standardization of work processes • Standardization of work output • Standardization of worker skills

31. Fitting coordinating mechanisms to tasks

32. The Management Process and Communication • Forward Communication • (Downward or horizontal • flow of plans, expectations) Manager (planning, org, dir, controlling ) Feedback (upward flow of results, expectations) Subordinate performance

33. Improving communication • Trust • Listening • Feedback • Non-Verbal

34. Group Interventions • Role Analysis Techniques • Partnering • Team Building

35. References • Robbins, S.P., 1998, Organisational Behaviour, New Jersey: Prentice Hall. • Robbins, S.P., 1974, Managing Organizational Conflict: A Non-traditional Approach, New Jersey: Prentice Hall. • Gordon, J. R., 1991, A diagnostic approach to organizational behaviour, 3rd Edition, Mass: Allyn and Bacon. • http://cimru.nuigalway.ie/david/pdf/SE/U7.pdf,31st October 2005, 11:00 am. Organizational Development : Interventions for Organization Improvement, French & Bell Jr., Pearson,2004

36. References • Organizations in Action : Social Science Bases of Administrative Theory, J.D. Thompson,McGraw-Hills,1967 • The Design of Organizations – Pradip N Khandwalla, Harcourt Brace Jovanovich Inc., 1977 • Organizational Behavior – Concept and Applications. IIIrd edition, Jerry L Gray & Fedrick A Starke. Charles E Merrill Publishing Company, 1984. • SM730: Organization Management Prof Vinayshil Gautam, DMS IIT Delhi. • Communication in organization; Owen, Zimmerman & Page, West Publishers

37. Thank You