UNIVERSITI TEKNOLOGI MALAYSIA

HRM Individual Assignment : Assignment 1

Prepared by: Mohd Faizal Yusof MR051065

MRB 2032: HUMAN RESOURCE MANAGEMENT Semester II, December 2006/2007

EXERCISING STRATEGY: FROM BIG BLUE TO EFFICIENT BLUE Question 1: In terms of our discussion of organization structure in what ways did the structure at IBM change under Lou Gerstner and what impact did this have on individual jobs? In 1993, Lou Gerstner came in as a new CEO when IBM was racking up US$8 billion in loss. He came up with a strategy to turn IBM around. The strategy has two aspects, internal and external aspect. External aspect focused on changing from an old-fashioned manufacturing company to a modern service provider. Internal aspect involved restructuring operations in order to reduce costs and promote efficiencies. Prior to the restructuring exercise, HRM function at IBM was large, decentralized and regionally based employing 3500 people. This is a clear depiction of a divisional structure based on geographic structure. After the restructuring exercise, HRM function has turned into a single centralized unit located in Raleigh, North Carolina employing fewer than 1,000 people. In other worlds, HRM organization structure has turned from divisional structure into functional structure. Jobs in the functional structure as practiced in the new IBM HRM are highly specialized (smaller scope) and workers tend to have little decision-making authority. The jobs are normally revolving around routine tasks making them less sensitive to individual differences between workers. In the case of IBM HRM, use of software and IT has replaced certain routine jobs like to answer employees questions. Communication face-to-face with local human resources is no longer required when telephone, e-mail and fax can be used to communicate with central Raleigh facility. Geographically dispersed units were replaced with three-tier specialized system. The first tier was composed broadly trained human resource generalists to answer phone

calls from all employees. The second tier consisted of highly trained specialists in areas like 401k plans, standards etc. The third tier consisted of very small number of top executives charged with keeping the HRM practices in line with overall company strategy. Based on the nature and volume of IBM business, it is in my opinion that only selected departments can follow the functional structure. IBM as whole should use both functional and divisional structure within its huge company. I foresee certain area like sales and marketing would be best if left to operate on its own unit. In other words operating as divisional structure based on geographical locations. Question 2: Compare and contrast the direction of structural change at IBM with the direction of change we saw in our opening story regarding the structural realignment at Microsoft. In the opening story, Microsoft under the leadership Bill Gates, was depicted as organization that follow functional structure. Bill Gates has been the central figure in making decisions for the biggest software company in the company. As the company gets bigger and at one point having 55,000 employees worldwide, revenue growth rate dropped from an average of 30 percent per year to single digit due to slower speed in decision-makings. Under the functional structure also has caused many key employees to leave the company due to low motivation not having enough autonomy in their jobs. As a result, the new CEO, Mr. Ballmer, took a major step to restructure the company in order to turn around the organization. He divided the organization into seven divisions of autonomous units based on product type, e.g. operating systems, desktop applications, etc. Within each unit, a new product development process has been implemented which dictated how a project moved from one phase to another.

Immediate benefits from the new structure were the ability to assess profitability or losses based individual product types. At the same time, the moves helped reduce turnover rates among the key players by increasing their intrinsic motivation by having higher level of autonomy. In contrast, IBM HRM division has turned the other direction, from divisional to functional structure. IBM HRM was a large organization consists of many regional units with its own semiautonomous power. When time is good, nobody care less about this settings. However, when IBM racked up over US$8 billion in losses in 1993, the CEO initiated measures to reduce costs and promote efficiencies. Towards that end, IBM HRM has converted into a single, centralized unit located in Raleigh, North Carolina. The new structure has reduced cost by reducing the work force by close to one third. At the same time, employee satisfaction with service increased to over 90 percent. Question 3: Since both IBM and Microsoft achieved their goals by changing their structures and job design in opposite directions, what does this say about the relationship between organization structure and job design on the one hand and organization performance and job satisfaction on the other? Both IBM and Microsoft achieved their goals by changing their structures and job design in opposite directions. IBM was facing serious problem with its financial performance, losing over US8 billion in a 1993. One of the goals set by the new CEO was to restructure the company to reduce costs and promote efficiencies. On the other hand, Microsoft was a profitable company facing slower revenue growth due to its size and centralized decision-makings nature. One of the goals set by CEO Bill Ballmer was to maximize innovation and productivity and minimize turnover and bureaucratic impediments.

The solution for IBM, at least proven in one division - IBM Human Resource (HR) division, was to centralize the organization by setting up a single HR center for the entire global operations. Such moves have helped reduce the workforce by eliminating overlapping tasks across regions. At the same time, employee satisfaction with service has increased tremendously. In contrast, the solution for Microsoft was to decentralize the whole organization and setup a matrix-like organization structure that relied on seven autonomous divisions. A new concept in workflow design supported the work cooperation and technology integration among the divisions. The new workflow design formalized how product development would both proceed within divisions and then transferred across divisions. The moves also have positive impact on individual job satisfaction due to the some level of autonomous authority given, in particular to key managers. Both cases show that there is no clear indication that one organization structure and job design was better than the other structure. Each has its own advantages and disadvantages that might be suitable in different settings. Due to the dynamic nature of correlation between organization structure/job design and organization performance/job satisfaction, we can conclude that many factors affect the relationship between organization structure/job design of any organization to the organization performance and job satisfaction. Best solution is to take any problem on case-by-case basis. Each case must consider many factors like organization size, current organization structure, current financial performance, decision-making practices and factors that motivate employees etc.