Analysis of Dynacorp Case Essay
Analysis of Dynacorp Case
The strategic design lens assumes organizations are deliberate, goal-achieving entities. In this view, managers can achieve organizational goals by understanding the fundamentals of design and fitting design to strategy, as well as to the larger organizational environment. In this paper, I discuss the five major elements of strategy – environmental fit, strategic intent, strategic grouping, strategic linking, and alignment – and identify two specific elements as causes of the problems Dynacorp is experiencing with its redesign.
These elements are strategic linking and alignment. Fit with the Environment In the 1980s, Dynacorp was an excellent fit with the environment; it produced high-quality, innovation products. As result, its customers were happy to wait months or even a year for the company to bring out a new product and to “do some of their own applications work and figure out how to integrate Dynacorp’s products with the rest of their operations”. In the 1990s, however, the company lost the technological advantage it had maintained over the competition.
According to Carl Greystone, executive vice president of the U. S. Cus-tomer Operations Group, “Both foreign and domestic competitors have been cutting into our market share, and our gross margins are way down,”. Indeed, Dynacorp was finding that many of its customers needed more than hardware, but want-ed ‘complete solutions’ to problems. Customers were “looking for systems solutions, more cus-tomized software, and more value-added services”.
Dynacorp’s senior managers recognized that the firm’s existing functional structure was seriously inhibiting the organization from creating effective cross-functional responses to its external environment. Strategic Intent Dynacorp’s senior management thus moved to redefine the firm’s strategic intent, a no-tion that Ancona et al. define as “setting the strategy or mandate of the organization…”. Instead of continuing to think of itself as a company merely selling hardware, the firm reorganized with the intention of providing customers with the integrated solutions they
were demanding, and, where necessary, to do all this on a global basis. Strategic Grouping To implement its strategic intent, Dynacorp executives first had to make decisions about how to regroup tasks and functions. According to Ancona et al. , strategic grouping is a process of deciding “how the necessary activities are to be allocated into jobs, department, divisions, and other units, and how people are assigned to each…”.
The textbook describes five possible methods by which grouping of functions can be organized: activity; output; user, customer, or geography; matrix; and business process. At Dynacorp, the decision was made to move away from grouping by activity. Instead, the development, manufacturing, and marketing functions were grouped together into an output-oriented set of “‘end-to-end’ business units” in which all the functions would be ex-pected to contribute to the success of a product or a family of products or services.
Within the sales area, executives decided to group by geography (U. S. , Europe, Latin America/Asia, with each of these areas further subdivided into regions) rather than to create multiple sales forces for each business unit. “Since products overlapped,” the interviewer was told, “the purchasers of different products were frequently the same people, and the cost inherent in replicating the field structure several times was prohibitive,”.
Within each sales region, management created account teams with each team focusing on customers within market segments and industries. Greystone asserts that such a restructuring will result in industry specialists, rather than salespersons who were only knowledgeable about particular products. Greystone seemed optimistic: “You see, we feel that by targeting our investments toward growth of sales in specific industries and developing solutions to fit their needs, we’ll rebuild our market share and increase margins,” Strategic Linking Ancona et al.
describe strategic linking as both formal and informal processes and posi-tions that would integrate units and subunits which are interdependent in tasks. The text identifies a wide array of linking mechanisms, including formal reporting structures, liaison roles, permanent or temporary cross-unit groups, integrator roles, information technology systems, and planning processes. Strategic linking at Dynacorp was to be accomplished, in the first instance, by linking development, manufacturing, and marketing within each Business Unit through a change in the formal reporting structure.
Carl Greystone expressed his conviction that a “tremendous amount of progress” has been made since these changes were instituted and that his personnel are “thinking about the business in new terms…” Even Greystone, however, was forced to admit that his group had been “consistently behind plan in both revenue and profit” for the past year and a half and that the “Business Unit presidents have expressed some frustration with the performance of his group.
”Martha Pauley, a Branch Manager in Greystone’s division who supervised six teams that “handle financial institutions, insurance, and education in the Northeast Region,” was considerably quite disillusioned about the absence of effective cross-functional relations between sales and the Business Units. Specifically, Pauley was finding it difficult to compete because of business decisions in which she had been given no role. She had several complaints: “Our prices are still higher than our competitors’, and technical support services are way too slow.
The new plant in Indonesia was supposed to help bring prices down, but they’re having problems getting the factory up and running. Since I have no control over unit manufacturing costs or the availability of technical support resources, I can’t help the team’s effectiveness in these areas”. A second way in which strategic linking was to be accomplished was to establish multi-function Account Teams focused on “selling customized solutions based on integrating our products, rather than on selling fancy hardware.
”These permanent cross-unit groups were comprised of “account managers, product specialists, solution consultants, service technicians, customer administration specialists, and systems specialists. ” Describing the actual functioning of these new teams to the interviewer, Martha Pauley confessed that “everyone has been so busy trying to understand their new responsibilities while still keeping up with our customers that we have communicated only through e-mail messages. We haven’t had time for the off site meeting that I had planned.
Anyway, we’re still getting modifications on the job guidelines from the staff group. ” The time pressures reported by Pauley were evident when she takes the interviewer into a meeting of one account team; there, they found “about half” of the members missing because of other obligations. As the meeting progressed, it also became apparent that this account team was struggling to meet its goals. The team had just been outbid for a contract with a Boston bank because its competitor had been able to offer “lower prices and a much more comprehensive package” .
With regard to planning as a means of strategic linking, there too Pauley’s teams were struggling. Pauley admitted to the interviewer that she “hadn’t had a chance to develop a cohe-sive sales plan to show you”. Alignment The last of the strategic design processes is alignment: “that is, assessing the implica-tions of strategic grouping and linking patterns for the rest of the organization’s structures and processes, and making changes to ensure that the grouping and linking patterns can be implemented effectively”.
suggest that each of the following be considered as elements of alignment: organizational performance measurement systems, individual rewards and incentives, resource allocation, human resource development, and informal systems and processes. One obvious alignment problem in this case concerns individual rewards and incen-tives. Ben Walker, VP of the Northeast Region, notes that the new reward system compensates branch managers in sales and product managers in the Business Units on “performance against revenue and margin goals,” but Walker worries that “no one in these jobs has the skills to be a team player.
” Soon thereafter, Martha Pauley complained to the interviewer about precisely this problem. Although she shared revenue goals for her teams with the product team’s general managers in the Business Units, her own performance was being hampered by the fact that “different product team leaders in the Business Units are pushing different types of sales, depending on their particular product lines.
” Something similar was happening to Pauley’s Account Teams, whose sales performance depended, in part, on their ability to get adequate Technical Support to their clients, yet they had no control over this support unit. Dynacorp’s turnaround also was being hurt by the company’s failure to give appropriate support to human resources development. Ben Walker is convinced that the company has “too many people who know how to sell products but not solutions” and projects that “at least 25 percent of the current staff needs to be replaced.
” Right now we have the customer teams functioning under new guidelines that force them to collect information on customer needs and develop solutions. But too many team members are still operating under the old attitude that the equipment sells itself and the customers will do the work of integrating our products into their operations. The notion of helping the customer from initial call through implementation and use of the system is still quite alien to many of our people.
The fact that Sales Team Member 2 soon was seen expressing a desire for more customers who want “standard off-the-shelf equipment” suggests that Walker’s concerns have merit. And Martha Pauley, to her credit, does not hide the fact that her teams lack training. “You see,” Pauley says, “moving from a product salesperson to a provider of solutions in a big change. It involves knowledge of the industry and the company, the full line of products, our various software applications, and concepts of systems integration.
Exactly who handles all the pieces of a sale like this is still unclear”. Finally, there is some evidence of dissatisfaction with Dynacorp’s resource allocation practices, given the perceived high cost of manufacturing and the problems with Technical Support. As we have seen, at least one account team is having difficulty competing on price; and Martha Pauley complains that Dynacorp’s prices “are still higher than our competitors’, and technical support services are way too slow”.
Dynacorp appears to have done a good job of analyzing its fit with the environment and crafting a strategy that is likely to be responsive to that environment. The strategic groupings are well-suited to the strategic intent, positioning Dynacorp to be a geographically-focused, industry-specific organization that is organized to bring cross-functional talent to bear on the service as well as hardware needs of its customers. Dynacorp fails, however, to give adequate attention to strategic linking processes.
There is evidence of a lack of planning, particularly as it involves product and branch managers and their staffs, apparently resulting in a lack of widespread commitment at all levels of the organization to the new mission. There also are problems of coordination between branch managers in sales and the Business Units and between the Account Teams and the Technology Specialists. Finally, the new cross-functional sales teams have had little opportunity to work out their methods of operation. Dynacorp also fails to give adequate attention to alignment.
Individual reward systems and incentives work at cross-purposes with unit goals, and manufacturing costs are too high for sales teams to compete effectively. Finally, there is almost a complete absence of training—both for product and branch managers and for the various functional specialists who are now expected to work as members of teams. The senior managers at Dynacorp have made impressive efforts to respond to their highly competitive environment. However, unless careful attention is given to the strategic linking and alignment processes, this organizational redesign effort is destined to fail.