Case study analysis PowerDome

Executive summary and introduction

The case study analysis is about PowerDome, a technology company that was founded by five partners but is on the brink of losing the last two of the initial founders. The company has in the past take pride in its informality where creativity was encouraged by empowering employees to create projects and a friendly atmosphere created where employees would interact freely with the founding directors.

In this analysis, some of the problems identified are: lack of adequate responsibility and accountability lines; poor change management approaches; and incompatibility between the organisational cultures of merging business partners. A detailed description of the problems identified, their impact on the organisation, and recommendations for remedy are discussed in the subsequent sections.

Case analysis

Failure to adapt to organisational pressures in designing company structure was one of the main problems at PowerDome. Having been started as a small entrepreneurship whose membership was only comprised of the first five partners, the organisation was run informally with no clear lines of responsibility. This was a management orientation that was aimed at encouraging innovation and was extended to the rest of the employees as the company grew. This resulted in a situation where accountability systems were not in place when they were needed. The strategic importance of change in a growing organisation can be described under the framework of the organisational life cycle whose main steps are start-up (birth), growth, maturity, decline and death (Doherty, Champion and Leitao, 2010). At the start-up level, the entrepreneurs are directly involved in all aspects of operation and their visions are unified. There is little need for intensive management as the founders are all committed to the attainment of the organisational goal. However, as the organisation enters a phase of growth and begins to recruit new employees, there is need for the organisational structure to be modified.

An increase in the number of responsibilities in any organisation necessitates the setting up of an organisational structure that facilitates accountability and efficiency (Doherty, Champion and Leitao, 2010). Creation of clear responsibility lines is also necessary in any organisation. It provides the basis for accountability and identification any lapses that need to be corrected at a future date. Strategic management of the organisation, it is imperative that the organisational structure fits with the organisational culture (Carlström and Ekman, 2012). It is based on the need to maintain flexibility and informality that PowerDome resisted attempts to formalise procedures. In general, highly formalised organisational cultures are complemented with bureaucratic or hierarchical structures while informality and flexibility are complemented with flatter organisational structures (Hazman and Ahmad, 2009). The organisational culture is a way of doing things within the organisation and it dictates how employees relate to each other, their work and their superiors (Carlström and Ekman, 2012). It would appear that the founders highly valued being directly involved in operations and interacting with employees. However, this did not justify failure to establish clear responsibility lines.

At PowerDome, Managers were employed to manage the financial crisis but were unable to formalise the organisational processes due to change resistance of lack of support from senior management. The resistance was mainly coming from the fact that the new accountability procedures had the effect of high levels of formalisation in an atmosphere of an informal and flexible culture. This exposes a weakness in the manner in which they sought to introduce change. In strategic change management, three major steps to be followed are the de-crystallisation, implementation of change, and re-crystallization (Chaiporn and Amonrat, 2011). This means that uncertainty must be created at the initial stage, urgency and appreciation of need for change made, and support for the change process secured. In the second stage, the changes proposed are implemented before recrystallization is done to make the new systems the new organisational culture.

The third fault identified for PowerDome is poor management in the formation of strategic partnerships. In the deal that saw PowerDome merge with MegaFirm as a subsidiary, it was expected that their organisational culture differences would not have a major impact on the subsidiary. However, PowerDome was forced to conform to MegaFirm’s culture in exercise of one of the clauses in the merger agreement. In strategic alliances, it is imperative that there is a fit between the organisational cultures of the strategic partners. Failure to have this fit is a recipe for future disagreements as it is in this case. MegaFirm failed to appreciate the culture of PowerDome and the impact it has on its innovativeness and instead concentrated on monetary ways of motivating employees. This was a pure case of incompatibility of organisational cultures and failure to accommodate it. In the end, both MegaFirm and PowerDome were likely to suffer loses as the former would not be able to attain the innovative capabilities that they invested to acquire while the latter would be forced to either close down or do without the financial capability acquired.

Recommendation and conclusion

The main problem identified is the lack of clear responsibility lines and mechanisms for accountability. These were avoided due to the need to maintain an organisational culture characterised by flexibility and informality. The result was operational problems that adversely affected the company. There are three options that the organisation could use to overcome this problem: introducing a formalised organisational structure with clear responsibility lines, entrenching a culture of accountability for utilisation of resources, and creating criteria for evaluating strategic partners before entering into mergers or strategic alliances.

Formalisation of the organisational structure could have the impact of introducing a bureaucratic system that could discourage innovativeness. This could erode the company of its competitiveness. However, it could be advantageous to the organisation as it would enable ease of management and promotion of operational efficiency. This is based on the reasoning that organisational structures need to be refined as the organisation grows to facilitate efficiency and profitability of the organisation (Parnell, 2005).

The organisational culture was that of accountability. This reasoning is based on the assertions that it is only when the organisational culture is in line with the organisational goals set. Organisational culture has indeed become an important platform for enhancing the competitiveness of organisations. Entrenching this culture would have the impact of ensuring that all in the organisation are conscious of the need to make their innovations profitable and sustainable. It would inject the culture of responsibility in innovation. On the other hand, such a focus could inhibit innovation as employees may be more preoccupied with establishing sustainability instead of concentrating on innovation. Nevertheless, it is possible to introduce a culture of accountability in a manner that does not inhibit freedom, flexibility and the prevailing culture of innovation.

Proper procedures for forming strategic partnerships would have the advantage of ensuring that there is a fit between cultures of the strategic partners and prevents disagreements later on. In compatibility of cultures has indeed been cited as one of the main reasons for failure of strategic alliances and partnerships (Chaiporn and Amonrat, 2011). On the other hand, putting in place a strict procedure could lead to rigidity and frustrate quick decision making where quick decisions are needed. Nevertheless, it would help in overcoming challenges such as those experienced by PowerDome.

In conclusion, the problems at PowerDome can be summarised as lack of accountability structures, lack of measures for division of labour to facilitate efficiency, insistence on a culture not compatible with principles of sustainability, and poor management of strategic alliance formation processes. If the recommendations in this analysis had been adopted, PowerDome would have been more sustainable and would never have needed to get into the strategic merger.

Bibliography

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Chaiporn, V., Amonrat, T., 2011. Strategic change and firm performance: the moderating effect of organisational learning. Journal of Asia Business Studies, 5(2), pp. 194-210

Doherty, N.F., Champion, D., Leitao W.A., 2010. Holistic approach to understanding the changing nature of organisational structure. Information Technology & People, 23(2), pp. 116-135

Gundolf, K., Meier, O., Missonier, A., 2012. Mergers between size-unequal partners: strategic risks and hurdles. Journal of Small Business and Enterprise Development, 19(2), 281-299

Hazman, S.A., Ahmad, J., 2009. The fit between organisational structure, management orientation, knowledge orientation, and the values of ISO 9000 standard: A conceptual analysis. The International Journal of Quality & Reliability Management, 26(8), pp. 744-760

Parnell, J.A., 2005. Strategic philosophy and management level. Management Decision, 43(2), pp. 157-170