2.2 Alternative Organizational Structures
i.Hierarchical Organization Structure
In hierarchical organizations, the employees are ranked on various levels within the enterprise with each level above or below one another. One person, usually a supervisor or manager, has several workers under him/her who work within their spans of control (Harper et al., 2015). The hierarchical structure clearly defines each employee’s roles within the organization and their relationships with other employees. Hierarchical organizations are often tall with narrow spans of control. Tall hierarchical organizations with many departments or cost centers tend to have many levels while flat organizational structures have lesser levels (Daft et al., 2012). The chain of command is organized in the legacy pyramid shape. Senior managers in this type of organization usually make up the board of directors and make the major decisions regarding company strategy and overall business goals, while the middle level managers take care of specific organizational functions like marketing or accounting.
During the rise of the industrial revolution in the 20th century, hierarchical organizations were advantageous in that they could ensure command and control of rapidly growing organizations. The structure has the advantages of having clearly defined responsibility and authority centers, which lead to a clearly defined promotion path in the organization (Daft et al., 2012). Additionally, it may foster loyalty at the departmental level as the structure encourages use of special managers to effectively manage at the lower levels. However, the disadvantages for the hierarchical structure far outweigh the perceived advantages. One of these challenges is communication as it typically flows from the top to bottom resulting in stagnated innovation, lack of employee engagement, and lack of collaboration. Hierarchical organizations often have excessive bureaucracy and are extremely slow to respond to changes in the business environment. Moreover, departments are more likely to make decisions benefiting them but not the organization as a whole especially in workplaces with departmental rivalry (Foss et al., 2013). In today’s globalized world, employee motivation is one of the major factors affecting productivity and a hierarchical structure provides no focus on employee experience thus reducing employee engagement in business processes. Due to this fact, such organizations often experience problems attracting and retaining top talent.
ii.Flatter Organizational Structures
This is an improvement on the hierarchical structure as it allows for bi-directional communication by removing the layers within an organization (Seshadri et al., 2014). While some form of hierarchy still exists within the enterprise, which helps in maintaining control and focus on organizational objectives. This type of structure is often employed in small to mid-sized organization mostly due to a lack of manpower. In companies employing a flatter organization structure, there is usually an emphasis on collaboration and communication, improving the employee experience and engagement, and challenging outdated management models (Daft et al., 2012). Rather than introducing a radically new structure, leaders have to achieve a balance that achieves similar results with much fewer resources and effort.
It is important to note that the implementation of this model requires the existence of some infrastructures in the organization. First, it requires a robust technological infrastructure, which becomes the central nervous system of the organization through facilitating communication and collaboration.
2.3 Six-Sigma Strategy
The six-sigma concept originated with Motorola Inc. in the 1980s as a way for the company to express their quality targets where defects would be treated as process failures that would affect the customer. This provided a focus on the process improvement rate, in particular emphasizing that simply making the process better was not acceptable but workers had to concentrate on becoming better as fast as possible to avoid disruption of client schedules. The strategy resulted in Motorola focusing on its organizational resources including their human resources, in an effort to reduce variations in processes from the manufacturing to administrative functions (Pyzdek et al., 2014). The decision to name it sigma was that ‘sigma’ is a measure of process variability commonly known as the standard deviation. The six-sigma designation implies an occurrence rate of 3.4 defects per million opportunities (DPMO) (Pyzdek et al., 2014). Usually, it is possible for organizations to adjust the cost of quality with the sigma level at which the process performs. Therefore, six sigma performance levels are considered to be world class since the cost of poor quality is less than 1% of total sales. In contrast, sigma levels rated three, four, and five, produce corresponding DPMO rates of 66,807, 6210, and 233 while the cost of poor quality ranges from 25-40%, 15-25%, and 15-5% respectively (Pyzdek et al., 2014). These figures clearly show the importance of reducing variations in the organizational processes across all key parts.
2.3.1 Critical Factors for Successful Six-Sigma implementation
i.Management, leadership, Involvement, and commitment
Similar to conclusions made by numerous researchers in the past, the managerial leadership practices, employee involvement, and commitment are important factors to consider in six sigma implementations since they influence other factors including the organization’s total quality management practices (Banuelas et al., 2003). A successful implementation of six sigma standards requires a significant change in organizational culture which is impossible without managerial support for continuous improvement and cooperation throughout the organizational processes.
ii.Training and understanding the necessary methodology, tools, and techniques
Past research has identified employee training as a critical part of workforce management when effecting changes in the organization. When transforming employees into active problem solvers, the training should clearly emphasize effective communication, which would aid with teaching and learning techniques in problems solving (Pyzdek et al., 2014). These tools and techniques must be continually improved for the organization to improve their process flow in the long run.
iii.Connecting Six Sigma to Business Strategy
The implementation of a six-sigma strategy cannot be treated as a standalone process. It requires the employees to subscribe to a whole philosophy rather than simple use of quality improvement tools and techniques (Naslund et al., 2013). The top management in the organization needs to explain how the six sigma strategy links to other business strategies to improve the overall performance of the organization. Since most organizations aim to maximize profits, they can consider six sigma strategies that increase business profitability while also reducing variabilities that may lead to low productivity.
iv.Connecting Six Sigma to Customers
One of the most significant factors to consider in successful six-sigma strategy is how the strategy improves the service provided to the customer. Sharma et al. (2015) recommends focusing the implementation of six sigma projects on the customers. Projects should begin by evaluating consumer needs, requirements, and their expectations for the business. Knowing their customers’ needs helps in solving the most pressing business problems and avoids wastage of resources.
v.Project Selection and Management
Effective six sigma implementation requires careful selection and prioritization of projects. Ineffectively selected or defined projects lead to project delays and increased frustration among the workers (Pyzdek et al., 2014, p.208). Another factor to consider is that project leaders demonstrate project management skills. Since Six-Sigma strategy is process oriented, it requires the team members to have some project management skills which help in meeting the process milestones and deadlines.
vi.Linking Six Sigma strategy to suppliers
The continual improvement process in an organization also needs to connect to the suppliers. This is usually in the form of long-term relationships with as few suppliers as possible to ensure the quality of goods or services provided are always exceptional. Having a smaller number of suppliers helps in maintaining high quality as it increases the negotiating power of the organization.
