Horizontal organizations

Horizontal Organizations and New Management Realities

In a changing society, organizations change with it. We have decided to study in this work this new organizational business reality, which is distinguished from previous situations by certain characteristics that we assimilate into key success factors:

Adaptation of structures to the new competitive situation in a globalized environment Adaptation of organizations to achieve greater customer satisfaction Response to growing organizational and environmental complexity Development and stimulation of intellectual capital.

This document provides an extensive presentation of all the work carried out by our team and the bibliography used as the basis for the exhibition.

Need for Horizontal Organizations

Our life revolves around organizations, understood as groups of people with common goals. The aspects of our daily life are affected in some way by these: work, family, religion, fun… Almost every facet of life takes place in, is regulated by or is the result of the action of organizations.

The emergence of the production economy (agricultural and livestock) constitutes one of the great "revolutions" in human history, because it represents the introduction of a new conception of the world and the relationship between human beings and the environment. Through it, humans do not depend exclusively on the environment, but we modify and transform it according to our needs.

People have created organizations in response to their basic needs, and over time, their complexity has increased due to their constant evolution. Indeed, and as obvious as this may seem, basic needs such as eating, drinking, growing in number and defending themselves gave rise to tribes and cities.

With the passage of time, third generation cultural, religious, leisure and values needs appeared. The responses to such human needs were athenaeums, casinos, religious communities, NGOs, etc. The satisfaction of these material needs was carried out after the appearance of trade unions and business organizations. Perhaps, to the extent that organizations are everywhere and we are so involved in them, we do not perceive their own essence, how they are and how they work.

Characteristics of organizations

The evolution of the organizational schemes of companies throughout history has allowed us to observe that all of them respond to a series of basic and common characteristics that we summarize in the following points:

Response to previously determined objectives They are complex chaotic systems (since they are made up of people) Shared objectives (holism) They have synergy They divide tasks They have action limits (rules) They seek improvement They are open and adaptable (they depend on the environment)

Historical evolution

In order to try to know those models, management styles, objectives and main characteristics of companies, we believe it is appropriate to dedicate a section that illustrates the evolution of organizations.

In Table 1, on the next page, we present the historical evolution of modern business organizations from the Industrial Revolution to the present day.

Organizational challenges

Each of our organizations faces different organizational challenges regardless of their power or wealth. The immediate organizational challenges for the new century that is beginning are:

Organizations that operate in a global environment and must act locally Organizational redesign and restructuring. Improvement of quality and competitiveness. Empowerment - delegate greater power of evaluation and decision -. Reduce complexity. Increase the speed of resolution of complex situations. Increase Ability to react to changes in the environment. Third generation values.

New focus

What is the new organizational approach? Obviously there is no single answer, since the most appropriate structure depends on the internal and external context in which the organization operates. However, in our opinion, there is a model that is flexible enough and adaptable to each environment and context: THE HORIZONTAL ORGANIZATION.

The horizontal organization

A little rebellion now and then is a good thing. (A little rebellion now and then is a healthy thing)

Thomas Jefferson, Letter to Madison

Definitions

Most companies and organizations have the mission of obtaining the desired benefit by delivering the maximum value (product or service) to their customers. The horizontal organization is designed to provide a structural form and an integrated organizational approach that allows them to deliver that value to clients, thus enhancing their competitive advantages.

Horizontal management is a transfusional management method where the visible hand of the hierarchical director gives way to the invisible hand of the market and where resources are naturally transferred to their most efficient use, so that work that does not add added value disappears.

Key Features of Horizontal Organizations

Direction by processes, not by tasks

Vertical organizations are structured in a functional way: they look for concrete improvements in functions, departments or tasks. Instead, you can organize your workflow around key processes that span the entire business and ultimately link the business to customer needs. By reducing the hierarchy, we minimize the number of activity areas into which the key processes are divided.

If the processes are designed properly, we will improve results and lay the foundations for continuous innovation and improvement.

Manage teams, not people

Teams tend to perform better than individuals because they have a broader set of skills, abilities, and points of view.

In horizontal organization the basic organizational module is a workflow carried out by a team, not the performance of tasks by individuals. This workflow can be linked through different mechanisms related to each other:

Assigning a leader or team of leaders to lead the key process Setting quantifiable objectives related to continuous improvement Establishing measurement systems for each process Creating forums that cover the entire scope of the process to review and agree on the objectives in terms of results.

Information systems facilitate horizontal integration

Instant access to information throughout the company provides the data necessary to measure performance, support effective and efficient management of processes, and provides the information necessary for continuous improvement. Information plays an essential role in horizontal management as a source of business competitiveness.

In our opinion, information systems play a key role in new organizations, both directly as facilitators of other key factors; For this reason, we will dedicate a special section to it later in this work.

Variety of skills

The broader the number of skills and competencies that each person brings to the team, and the better they understand key processes, the greater the team's problem-solving ability.

The teams are formed, therefore, multidisciplinary: people from both processes and support functions gather the necessary skills to take initiative, tolerate change, acquire a commitment to success and believe in teamwork. Again, information technologies or empowerment will form, along with competencies, an indissoluble and necessary amalgam.

Team self-management

Most companies that work with teams aspire to have those teams self-manage. The person who performs a certain job is the one who knows best how to improve it. For teams to be effective, they must have the authority, training, information and motivation to assess and modify when, how and with whom to carry out collective work. Management must also fall on the teams in which the work falls.

Traditional Organizations Vs. Horizontal Organizations

Traditional organization	Horizontal Organization
The work is divided into functions, departments and tasks.	Work is organized around various business processes or workflows. Objective: to link the activities of employees with the needs of customers and suppliers
The base unit for achieving results: the person and their work	Work is organized around various business processes or workflows.
Manager's role: assign appropriate tasks, measure, evaluate, control and reward results.	Teams assume management responsibility (hierarchical team systems). Manager's objective: continuous improvement of results
Main advantage: functional excellence Main flaw: coordination between tasks, departments and functions	Information and training: Provided to generate certain results Professional profile: able to multitask, work in a team and continually improve. The system rewards individual skill development and team results.

Construction of the horizontal organization

For Ostroff, one of the most advanced researchers on the subject, one of the greatest difficulties when defining, characterizing and launching horizontal organizations is their diversity: each of them is unique and has its own model. There are some that "horizontalize" only a basic process; others, a whole division; finally, some try to horizontalize (flatten) their entire structure.

According to Ostroff, any horizontal organization (which does not mean organization at a single level or non-hierarchical) is built on two basic elements: working through teams with attributions, capacities and responsibility for results and a direction oriented towards processes. John Quinton, for his part, indicates six stages or steps for its creation:

Organize multidisciplinary teams around the basic processes. Transfer the "power" over the process to the team, which will choose its leader. Each member of the team will train the rest on their respective competencies, in what affects the process. Measure the improvement that it implies for the customer or for their requirements; reward individually and collectively for the contributions made Develop individual career plans consistent with the skills and abilities of the team Redefine the role of Management, emphasizing its role as facilitator of team improvement, through training, support, transparency in information and clarity in objectives and strategies.

New technologies: the necessary element for communication

It is said that we live in the information society, but it is not true: we live in the data society since only relevant, properly classified and ordered data can be considered information from which new conclusions can be inferred.

Enric Colet, 1997

Life (at least human life) leaves traces: birth and death are recorded, personal and collective economic events, social events… A good part of our past acts could be reconstructed from the innumerable traces that we leave in infinity of archives, public and private.

Information and its record are as old as the history of mankind: in fact, the appearance of writing is considered as the event that allows the passage from prehistory to history. From that moment, lasting organizations were possible, since every industry or human government, no matter how old, needed information records (of harvests, taxes, expenses,…). More and more complex societies drifted towards more and more exhaustive data recording where only a strongly hierarchical system could guard, exploit and transmit important information. The bureaucracy was born.

Evolution of information support in organizations

Without going too far back in time, we can affirm that from the mid-1950s to well into the 1970s, the highly hierarchical bureaucratic organization, structured by divisions and departments, reached its peak. Corporate planning is in those years the function par excellence of the top management and can only be carried out through the collection and manipulation of huge amounts of data, which in turn implies large central structures. In this sense, electronics and an incipient computing come to the aid of large corporations.

Business	70's	90's
Dominant theme	Corporative strategy	Competitive advantage
Focus of interest	Planning Market share	Sources of competitive advantage Basic competences ("core")
Organization	Vertical bureaucratic Central-Divisions	Reengineering - Flat - Tenue Information systems
Technology	Main Frame	Open Systems - BD Networks - Internet
		(Robert M. Grant, 1995 and own elaboration)

Already in the 90s, a fundamental change took place: computer science departments, already popularized and installed in all types of companies, were transformed into information systems departments, leaving behind the merely administrative material aspect to be considered basic elements for making decisions. decisions. They are not isolated facts: the evolution of IT has gone hand in hand with the development of organizational forms, so that they have influenced and been influenced by them.

Current technological situation

We can consider that the current state of the art is characterized by digitalization and the convergence of technologies (broadband or information highways) in the social sphere; and for the development of databases and the use of networks and communication between telematic networks in business.

Databases

Databases (BD) are the neuralgic element of today's information systems (IS). The DB are not "files" in the classical sense, but can be considered, like the Operating System "hardware"; They are an element prior to the software, since the function of the software is to modify or add data to the pre-existing ones, but not to modify their structure. DBs are "duplicated" (replica or duplex), they are "incorruptible", because they do not take a step if they have not put the previous one well (the basic unit: the transaction), they take care of the internal logic of their elements (the relationships between tables: a customer that has been issued delivery notes cannot be deleted) and it is even self-sustaining.

Networking

When two computers were able to communicate, networks were born. Obviously, they were first large corporate networks, which in fact linked large "mainframes", sometimes at great distances.

On the other hand, the PC, as its name suggests, was born to meet individual needs. However, was it possible to communicate with each other two or more PCs? Could they share resources - printers, hard drives, etc? The answer was the local networks of PC (LAN): they have the advantages of the PC and many of the “mainframe”. Today networks connect not only the organization's own centers, but also the organization with all the others or with the Internet, the Network of Networks.

Therefore, once the data is stored in a database, and it is accessible to the organization via the network, the information ceases to be a good available to very few, to become a key element in any decision. It is no longer necessary that every decision and every strategy be taken or decided by senior management, but by that level of the organization that, being able to interpret the information, is closest to the problem posed.

The technology applied in this new market will make what matters are new ideas, new businesses, new forms and new companies, with a different dynamic, whose effects, in a very short time, will be felt throughout the world.

Modesto Escobar, EOI, Electronic Commerce, 1999

IT walks alongside flattening of structures

The new company, according to B. Charland, quoted by Tom Peters

The function of information systems in organizations goes from being a "department" to acting as a "base" and support on which horizontal processes of value creation or basic competencies are developed. According to Frank Ostroff (The Horizontal Organization, 1999), the ISs would occupy, along with others, a position of “internal consultancy” for the rest of the organization, and specifically for the teams in charge of key processes:

Ostroff, 1999

In summary, if we want the components of the team responsible for a key process to interact, experiment and exchange experiences, and receive and transmit information in a fast, transparent and reliable way, they will have to use a series of technological tools, among which we will highlight the following:

"Data Warehouse"

The great challenge in the coming years will be to build tools capable of filtering information overload

Umberto Eco.

It is important to differentiate between two types of systems that we find in companies:

Operational systems (not to be confused with "operating systems") are those that underpin the daily problems of the company, those that produce information that is essential for the continuity of production / administrative processes. This type of system applies online transaction processing (OLTP).

The end result was the existence of huge databases that often had different formats, preventing the transfer of their content from one site to another. The downside for decision makers with these systems was getting answers from these mountains of data to their questions, as they lacked an easy-to-manipulate structure.

Decision support systems, these handle summary information, reworked from operational systems and from other various sources. They support the process of making little or semi-structured decisions, such as those of the highest managerial or strategic level in an Organization.

This is where we find the concept of Data Warehouse. A possible definition of the concept of DW could be the following: “it is a 'storage' of thematic information (example: products, customers, etc.) aimed at meeting the needs of DSS (Decision Support System) and EIS applications, which allows access to corporate information for management, control and support for decision making ”.

This entails a series of differential technical, organizational and methodological aspects in relation to other types of applications. Thus, the databases that make up a DW must be characterized by being Integrated, Thematic, Historical, Non-volatile. The use of a DW will allow the management information to be: accessible, correct, uniform and updated.

These "virtues" associated with the information contained in a DW, together with a series of other aspects inherent to it, give rise to a set of advantages, which we could summarize as follows:

Lower cost in decision making. Time wastage that could occur when trying to run long and complex data queries against databases that were specifically designed for shorter and easier transactions is eliminated. Greater flexibility in the environment. The DW converts operational data into related and structured information, which generates the "knowledge" necessary for decision making. This allows establishing a single basis for the organization's information model, which can give rise to a global vision of the information based on the business concepts that users deal with. In addition, it provides better quality and flexibility in the analysis of the market, and the environment in general. Better customer service.Everything we have said in the previous point implies a significant improvement in the quality of management, which also affects the relationship with the client, which is, as we know, one of the basic pillars on which any lean organization rests. In fact, the fact that a DW implies greater flexibility to the environment has a direct consequence in a greater ability to respond to the needs of customers. Process redesign. Offer users an ability to analyze their business information that tends to be unlimited and often allows them to obtain a deeper and clearer view of the business processes themselves, which in turn allows them to obtain fresh ideas for redesign thereof. Alignment with the objectives of rightsizing.Responsibility for decision-making is increasingly distributed throughout the organization. This distributed decision-making capacity is increasingly necessary for the rightsizing of companies, and is one of the aspects in which DW can make an essential contribution.

In conclusion, the concept of DW encompasses much more than simply copying operational data to a different informational database. The system "should offer a complete solution to manage and control the flow of information from corporate databases and external sources to end-user decision support systems." In addition, it must allow users to know what information exists in the data warehouse, and how to access and manipulate it.

"Data-mining"

The name data mining derives from the similarities between searching large databases for valuable business information and mining a mountain to find a vein of valuable metals. Both processes require examining an immense amount of material, or intelligently investigating to find exactly where the values reside.

The DM allows a treatment of the information like the one that expert analysts would carry out, but in times several orders of magnitude smaller, and ensuring a methodological and exhaustive verification of hypotheses and models, which is not guaranteed with manual treatment. DM is a new approach to the analysis and discovery of information or "knowledge" to be carried out in large databases.

The use of this technology allows, with success, the segmentation of markets, the detection of specific and sequential buying habits in time, the prevention of fraud and delinquency in credit operations, the detection of indices and financial values of similar evolution along with your estimated future forecast, anticipation and management of employee health problems, etc. Ultimately, we appreciate in these examples a common quality (among others): the possibility of anticipating changes in the environment, which will allow us to give them a better and faster response.

Data Mining is presented to us as a powerful tool in the treatment of information for organizations and the people who are part of them. Its contribution to the flexibility of the company should be highlighted, insofar as it enables it to anticipate to a certain extent the evolution of the environment and customer needs, and its ability to promote those activities of greater value such as creativity, innovation and people's imagination.

"Workflow" and "Groupware"

Groupware is a software tool specially designed to help users work collaboratively in the most efficient way. To do this, it encourages the flow of information.

The three components that every workgroup application development environment must have are:

Communication through powerful electronic messaging tools Collaboration in a virtual work environment that facilitates the exchange and sharing of information and resources Coordination that integrates communication and collaboration into a global infrastructure that enables effective resolution of issues business processes.

The communication component is supported by email.

The collaboration component is the applications for the distribution of information and group discussions where no one forces the individual to perform a specific action but rather the person who approaches these applications looking for information or trying to collaborate by participating in discussion forums.. The most frequent applications are electronic conferencing systems and publishing and consultation systems.

The coordination component includes applications that require the participation of the individual (workflow applications). The power of a group work platform lies precisely in its ability to fuse communication, collaboration and coordination in a dynamic and transparent environment. Lotus Notes is the market's leading messaging and groupware product.

The workflow tools allow the development of process coordination applications. Workflow applications are generally based on a fully integrated shared database and messaging model. The messaging model, by itself, is efficient for sending a document, but it does not offer any way to manage it as it travels its assigned path. Whereas, the shared database model is very effective to manage documents and offer a global vision, but it lacks a system that alerts the user of a change in status or content.

As an example, let's see how the approval process of a contract is carried out using an integrated model:

The contract is drawn up and stored in a shared database, and the moment it is deposited in it, an email is automatically sent to the first person to approve the contract. Neither the message contains a copy of the contract, nor does it tell the recipient where to find it; It only contains a hypertext link that, when activated, will open the contract for approval without removing it from the shared database. The remaining approvals will then be carried out but the most up-to-date copy will always remain in the database. data. Anyone who can access it will be able to check the status of the process and the modifications that have been made so far.

We must introduce here one last element to consider: collaboration between professionals who are members of a work group does not mean that it is carried out exclusively between employees of a single company: the group can incorporate (and in fact, work groups are increasingly so) people outside the organization, be they clients, suppliers or advisers.

The future: towards the virtual company?

The organizational geometry resulting from the trends explained above would therefore be characterized by:

A reduced vertex (the Executive and Government Structure), supported by Decision-making Systems (DSS). Its functions are limited to the area of Company Policy: analysis of the present, choice of Business and Strategies, and choice of governance procedures. He is the "facilitator" of the teams. The group of collaborators, equipped with sufficient autonomy and knowledgeable about the objectives of the company. Despite a formal hierarchy, they are oriented towards the Process as a value creation tool. They work in interdisciplinary teams and through projects; They interact with each other, with other groups and with the outside world, relying on the use of IT. The assistants of the support activities: HR, Information Systems and in general all the infrastructure activity.

An organization of this type could be independent of the physical location of its collaborators, and it could even lack (in the real, not functional, sense of the term) "employees", becoming, in fact, an organization "virtual".

Although this model seems to be better implemented in the services (for example, a medical mutual), its use is also feasible in the industry. In this sense, the car factory dreamed of by López de Arriortúa was nothing more than a virtualized company.

Examples

To convincingly illustrate the theses developed throughout this document, we consider essential to indicate some significant examples of organizations that are currently structured (partially or totally) horizontally. Following Ostroff's methodology, the examples will be of horizontal processes, horizontal division and horizontal organization.

Organizations focused on key processes (not tasks)

Example applicable to a Securities and Exchange Company

Phase 1. Weaknesses of the vertical, habitual and hierarchical structure:

Multiple points of contact with the customer: poor service Confusion of services Fragmented authority High costs

Phase 2. Identification of key processes:

Distribution of securities Payment of dividends Maintenance of customer accounts

Phase 3. Setting objectives for the reorganization:

Variable cost reduction –25% Improved service delivery time + 50% “Considerable” increase in quality

Phase 4. Method Design:

Simplify activities Eliminate redundant or unnecessary steps Eliminate manual work Reorganize new horizontal workflows

Phase 5. Integrate and coordinate the implementation:

Creation of teams around the client Each team provides the full range of services to assigned clients Creation of a group of technical experts to support teams

Other examples of reorganization around horizontal workflows:

Xerox	New product development
General Electric Kodak	Production operation
American express	IDS Division for the processing of Real Estate Investment Funds
Knight-Ridder	In some of the newspapers of this chain new focus on the Department of advertising, sales and service

Organizations with a horizontally structured Division

Example: Motorola Government Electronics Group Supply Management

"Our fundamental objective and the primary responsibility of each and every one of us is total customer satisfaction"

Multiple Competencies Example: General Electric Plant in Salisbury

The Salisbury plant produces a huge variety of electrical panels.

Objective: Produce profitably and deliver any of our more than 70,000 product references in the shortest possible time.

Under the orders of the Plant Director, 4 work teams were organized, working in three shifts each, with 10-15 people in each team and shift:

Team 1 assembles and tests the electrical panel Team 2 cuts, shapes and paints the metal cabinets Team 3 takes care of the heavy machinery and their use for the rest of the equipment Team 4 (“production control”) takes care of reception ordering, planning, technical office, purchasing and subcontracting, inventory and customer service

Each one of the workers of the different teams of the plant:

Knows how to handle all the machines necessary for the equipment Knows the implication of the proper functioning of the machines for the income statement Understands the importance of interpersonal relationship capacity for the proper functioning of the plant

Developing multiple competencies helps to:

Solve problems in real time Keep all operations in proper working order Respond quickly to changing customer needs

Multiple Competencies Example: Kodak “Zebra” Teams

Kodak has assembled teams of key personnel and managers from certain technically complex operating areas. The objectives of the teams are the development and dissemination of technical knowledge. Teams are evaluated based on ideas generated and adopted by others.

Kodak's production processes are organized into 6 streams, one of which is black and white. Each flow consists of manufacturing processes from start to finish, supported by technical experts.

The “Zebra” Teams are in charge of the supervision of 1,500 employees of the production flow, and are responsible for the manufacture of 7,000 different types of black and white photo reels.

Global objectives of the “Zebra” Team:

Manufacturing High-Value Products That “Delight Your Customers” Make Black and White a Star Product Again at KODAK

Specific objectives of the “Zebra” Team:

Cycles of time, necessary stocks, total production costs, punctuality in deliveries and customer satisfaction.

The people responsible for each flow know that they can always count on the “Zebra Team” to eliminate obstacles and solve non-day-to-day issues.

An entire horizontal Organization

An Amalgam of Mini-Businesses: The Xerox 2005 Design

Xerox is a company that has learned its lesson: Starting in 1982, it suffered a major shock as a result of Japanese competition in copiers. Following its "re-founding", in 1990 it formulated its intention to lead its industry and become an excellent company in every respect. In 1992, he realized that, thanks to his technological superiority, his battle was not to be the "copier company" but the "document company" (The Document Company). For this, its hierarchical structure, its many organizational levels, and approval and decision-making mechanisms were a drag.

A process of reflection over time has given rise to the Xerox Declaration 2005, whose stated mission is "Xerox, The Document Company, will be the leading company in the global document market, providing Document Solutions that improve business productivity".

Its divisional structure (Finance, Business Operations, Customer Operations and Research and Technology) is cross-sectionally by five Business Groups.

These five business groups are subdivided into multi-group interdisciplinary teams that "cross" the groups in turn. Teams are organized by process, and their performance is measured by the development time of a new product.

New technologies: the mobile office of AT&T, IBM or Compaq Computers

With the advent of laptops, mobile phones, fax machines, pagers, and a wide range of increasingly powerful and inexpensive electronic and telecommunications devices, the traditional office is becoming a vague memory. Many leading organizations, such as AT&T, IBM, and Compaq Computers, are embracing this alternative in an attempt to run the day-to-day business more efficiently. In some cases, the decision to establish mobile offices was motivated by natural disasters such as the Los Angeles earthquake or Hurricane Andrew.

Businesses need quick and instant responses in these emergency situations, and temporary mobile offices are one answer to these occasions. However, many companies are using mobile offices as a way to manage their day-to-day business more efficiently.

Virtual Organization: Nike

At the heart of the virtual organization there is a central nucleus that performs the critical functions for which the organization is particularly well suited (“core competences”).

In a way we can consider the virtual organization as an extension of interorganizational strategies of external control, also called cloverleaf or network organizations.

Basic or distinctive competencies of Nike: Design, development, marketing and distribution.

Therefore, Nike designs, distributes and markets footwear, but it does not manufacture it but establishes alliances with different producers to manufacture its footwear or sportswear.

This network of independent manufacturers spread throughout Asia is in permanent contact with the Nike headquarters.

Bibliography

General works

Escobar, M.

Electronic commerce, School of Industrial Organization, Madrid, 1999

Grant, Robert M.

Strategic Direction. Concepts, techniques and applications. Editorial Civitas, Madrid, 1996

Hodge, BJ / Anthony, WP / Wales, LM

Theory of the Organization. Prentice Hall Iberia, SRL Madrid, 1998

Lucas Tomás, JL / Valero and Vicente, A.

Company Policy: The governance of the business company. IESE manuals. Editions of the University of Navarra, Pamplona, 1999.

Ostroff, Frank