Abstract
The current paper demonstrates the impact of organizational structure and managerial practices on business performance on the example of Dow Corning. Throughout its history, the company had varying degrees of success under functional, divisional, and matrix management systems. It continually adjusted its needs and operations, depending on the period and economic realities of business. Some of the identified factors that facilitated the organizational shift of the company were territorial expansion, increased scope of influence, contrasting demands in foreign and domestic markets, stages of business development, and external factors. Consequently, the paper investigates the reasons for Chapter 11 bankruptcy and potential methods to recover from it. Lastly, the essay addresses the current needs of business, including productive organizational culture, cultural strategy, and agile methods, which could significantly improve the company’s performance.
Introduction
Dow Corning is a pioneer in researching and synthesizing organosilicon materials with more than seventy years of development. Over its history, the company has undergone several shifts in the organizational structure associated with both rapid advancement and strategical miscalculations. Although Dow corporation is rightfully considered a leader in its field and continues to improve today, the company experienced significant problems in structure and manufacturing in the 20th century. Therefore, it is essential to thoroughly analyze the company’s history and establish the reasons for its successes and failures.
Organizational Structure Analysis
In 2000, Dow Corning strengthened its position as an innovation leader by implementing a global information platform. Growing demand for organosilicon materials worldwide allowed Dow Corning to build an industrial complex for the production of siloxanes in Asia (Dlabay et al., 2018). As a result, the business expansion globally allowed the organization to mitigate some of the previous mistakes and return to its position as the leading company in the industry. At the time, Dow corporation had a governing element in the form of a board of directors and the president of the company (Dlabay et al., 2018). In other words, the responsibilities in the organization were divided among employees and delegated according to competence. At the same time, the management of the corporation had a hierarchical structure, where the CEO & the president determined the critical vectors of the organizational development.
Main Factors of Organizational Structure Shifts (Question 1)
Nevertheless, the company has undergone several structure shifts throughout its history, and it is essential to conduct a thorough examination of its development. At the earlier stages of the company before the territorial expansion, the key component of the organization was a wide selection of manufactured products with an emphasis on one group of production, which reinforced customer loyalty. However, when the corporation grew to a larger scale, the management decided to change the management scheme, replacing it with a divisional one. Therefore, the two primary factors for replacing a functional system were the rapid territorial expansion and variety of production. These influences resemble the standard factors of organizational shift, with size and business development stage being the most influential ones.
Consequently, the company shifted to the matrix organizational structure associated with specialist functions and expanded to ten major business centers instead of five. This change was associated with increasing territorial scope of influence and contrast in the demand between foreign and domestic markets. Therefore, the company needed another organizational shift that would allow various business strategies, depending on the production demand, which is another common influence of structural change. Furthermore, the matrix system would improve the overall coordination of organizational units and increase the speed of response to potential challenges. Ultimately, considering the six common influences, Dow Corning primarily concerned only internal factors, such as expansion, deficiency of organization, and conflicting production. At the same time, external factors, such as technological, social, and political changes affected the company to a lesser extent.
Problems of Matrix Organization (Question 2)
As mentioned briefly before, the number of control elements increased while the quality of operations decreased, implying the matrix organizational structure problems. Dow Corning achieved international success created by authority; however, customers faced numerous delays and challenges (Tool, 2019). After all, the matrix structure accelerates the turnover of staff, which, in turn, implies employees’ dissatisfaction with their management (Morris & Oldroyd, 2020). Furthermore, staff turnover makes it necessary to devote more time and resources to training and searching for new specialists (Morris & Oldroyd, 2020). It led to further escalation of the conflict, with managers being accused of exceeding their authority.
Furthermore, bureaucracy is one of the significant drawbacks of the matrix organizational structure. At this point in the company’s history, there was a surplus of managers, which led to an extensive number of mistakes due to the human factor. The company’s operations were ineffective, with some tasks contradicting each other, large amounts of managerial confusion, and abundant bureaucracy. Consequently, the matrix structure significantly reduced the level of competitiveness of Dow Corning. The critical advantage of the company was a wide selection of products, implying that it was necessary to introduce more new product lines. In turn, the bureaucracy interfered with this development since any production processes ceased to be autonomous. The operations became vastly dependent on documentation and management (Morris & Oldroyd, 2020). These drawbacks could be minimized by transparent assignment of responsibilities, simplification of management, creating a sense of a “strong” matrix via teambuilding, and assigning more autonomy to employees. Ultimately, while the organization’s overall development was still improving, there were significant problems with some components of the matrix organizational structure.
Bankruptcy Recovery and Solutions for the Future (Question 3)
Due to the scandal with silicone breast implants, the company filed for Chapter 11 bankruptcy. One of the potential methods to aid its recovery is implementing the Six Sigma system that increases the efficiency of management and divides responsibilities evenly and competently among employees (Chakraborty et al., 2020). In other words, it might be beneficial to recover the divisional structure, but it should be modernized and adapted to the new economic realities. Furthermore, the Dow Corporation is an established company in the industry; therefore, it is possible to mitigate the problem of re-adjusting to the market (Shahani, 2020). Ultimately, while the lawsuits pose a significant problem to the company, it is possible to recover from bankruptcy via intelligent management strategies.
Cultural Strategy
Furthermore, it is necessary to implement the cultural strategy in the corporation. Dow Corning’s critical resource is its employees, whose interests must be respected. In order to increase the retention rate, the company should adjust salaries and working conditions (Morris & Oldroyd, 2020). In contemporary business, the employees’ satisfaction with the organizational culture, company’s objectives, HR policies, and other associated factors directly relates to the productivity of the unit (Morris & Oldroyd, 2020). Moreover, it might be beneficial to considere the factor of emotional burnout, which is caused by overtime and a negative atmosphere in the workplace. From these considerations, the equal distribution of responsibilities will be a critical instrument to eliminate the main personnel problems and establish a productive organizational culture.
Agile Solutions
Continuing on the topic of cultural strategy, it is essential to adhere to agile solutions of organizational change. In other words, the company needs to maintain a high level of flexibility and ensure a high response speed to emerging challenges (Brosseau et al., 2019). Agile solutions also imply an innovative approach to leadership styles, talent management, team processes, and other factors that contribute to enhancing organizational culture (Brosseau et al., 2019). In other words, collaboration and transparency represent the core values of the agile approach, which could potentially mitigate the major challenges of Dow Corning with the matrix organizational system. As mentioned briefly before, teambuilding and improvement of employees’ satisfaction might solve the existing problems. Ultimately, while these methods were relatively rare in the 20th century, contemporary businesses require agile solutions.
Conclusion
Dow Corning is a niche leader with a substantial reputation and a lengthy history. Although the company’s start was highly successful, the ineffective decisions of incompetent managers led the company to decline. As presented in the analysis, an incorrect management structure and the development of excessive bureaucracy led the corporation to bankruptcy. The company survived the crisis due to its public image and organizational structure shift, demonstrating that it is essential to adhere to contemporary business standards and adjust accordingly. Ultimately, the analysis revealed the utmost significance of organizational structure and its impact on the company’s business performance.
References
Brosseau, D., Ebrahim, S., Handscomb, C., & Thaker, S. (2019). The journey to an agile organization. McKinsey & Company. Web.
Chakraborty, A., Antony, J. & Sreedharan, R. V. (Eds.). (2020). Lean Six sigma for higher education: Research and practice. World Scientific Publishing Company.
Dlabay, L., Burrow, J. L. & Kleindl, B. (2018). Principles of business updated. Cengage Learning.
Morris, S., & Oldroyd, J. (2020). International business. Wiley.
Tool, M. R. (2019). Evolutionary economics. Taylor & Francis.
Shahani, J. (2020). Limits and opportunities of a matrix organization: A study of coordination mechanisms within a multiple brand organization. Springer Fachmedien Wiesbaden.