In theory, the design of an organization, including procurement, should be the one that best serves the needs of its customers, shareholders, employees and community.
For the most part, it should be structured so that staff can best accomplish all the goals of the organization, using the lowest consumption of resources, including time.
In reality, the design of most organizations has little rational basis.
Generally, the design, if it can be so called, will have come about haphazardly over a period of years. Even when an actual plan has been followed, all too often little rhyme or reason underlies that plan. To optimize performance the design must be brought into at least general conformity with the plans and operations of the organization.
While such structural change is a long-term project, it is one that should never be ignored, for without attention to it, there is a serious risk of wasting resources.
The critical questions to address in deciding on organizational design are the following:
- What is the function of each job? How does it relate directly to the business and affairs of the organization?
- Is there any overlap of responsibility (and redundancy)?
- Are there conflicting responsibilities?
- Can the process of the organization be improved? If so how?
- Why is it necessary to exercise control over each particular aspect of organizational operations?
- Where should that control reside?
- How is that control best maintained (e.g., by the direct exercise of authority, or by supervision)?
- How does one best integrate the operations of the organization?
- How does one best respond to problems facing the organization?
- How do information and decisions flow within the organization?
- How easy is it to marshal and divert the resources of the organization to deal with critical need?
- What aspects of the organization compromise its flexibility?
Traditionally, most organizations have employed a hierarchical form, if for no other reason than that it serves well as a control mechanism.
The use of a hierarchy means there is one person at the top and successive levels of more junior managers ranging out below, each reporting to the layer above.
In principle, the chain of command goes from top down, reporting and command will be reinforced by rules and regulations, the overall organization will be sub-divided into compartmentalized departments, generally by function.
Communication among departments is minimal and the typical career move will be upwards within a defined function area.
Much has been written as to the advisability of this type of approach. The sociologist Max Weber argued that bureaucracy serves specialization of function and thus enhances organizational performance.
This is certainly a theoretical possibility, but it is far from a universally true proposition.
As often as not, the growth of bureaucracy is a reflection of an underlying principle-agent problem of any organization. Specifically, the creation of a network of subordinates increases the appearance of importance of the supervising manager’s position.
The more subordinates who are given a nominal managerial title, the more effective the appearance of the supervisor’s importance.
Since that appearance will influence the manager’s remunerations, the manager has an incentive to build an empire.
Worse yet, each supervisory level above that manager has an incentive to join in the plot, because by so doing each successive supervisor also enhances the prestige of his or her own position.
Keep in mind there are other factors that also contribute to bureaucratic growth as well.
- Fossilization: new managerial layers are created but others remain in place;
- personnel adjustment, such as promotion to permit salary increases to allow the organization to retain the services of talented employees; and
- temporary posts during COVID or other crises, discontinued priorities, etc., that have been made permanent possibly because no one ever made it clear that the posts were intended to be temporary.
Stephen Bauld is a government procurement expert and can be reached at firstname.lastname@example.org. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.