OB Dell.docx

UBMM2023 Organisational Behaviour 1.0 Introduction

1.0 Introduction

1.1 Company Background

Dell Computer was founded by Michael Dell at the age of twenty one in his dorm

at the University of Texas, Austin. It is an American multinational information

technology corporation that develops, sells and supports computers and related products

and services. The company is listed at number 41 in the Fortune 500 list ("Fortune 500",

2006). Dell’s main strategy is to build computer only when orders are received (Build-to-

Order). This build-to-order strategy has made Dell the most successful company in the

information technology field. On the other hand, the channel disintermediation strategy

of Dell has facilitated the fast growth of the company through direct marketing. Since

1990, Dell Computer has been offering personalized services such as maintenance,

trouble shooting, servicing, repair and customization for all Dell’s products. At that time,

no company could provide such responsive, efficient and personalized services at

reasonable and sustainable costs as Dell. Michael Dell’s visionary and innovative

leadership has made Dell the second most successful PC maker in the industry in 2007,

second only to IBM.

The achievement of Dell today must be attributed to its successful organizational

structure. This report discusses the organizational structure of Dell to develop in-depth

understanding on how Dell applies theories of organizational structure to its operation.

Organizational structure plays an important role to enhance responsiveness to customers,

work efficiency, communication within company and flexibility. As Dell continues to

grow and expand around the globe, works and tasks are becoming more complex and

complicated. Human resource starts to involve different employees from different

countries and different cultures. When more people are involved, management becomes

more difficult due to conflict of interest, beliefs, values and power. Addressing these

issues, organizational structure turns into the major concern of top management as it

directly affects the company’s flexibility in and adaptation to the fast changing

environment today. Most importantly, it determines the performance and profitability of

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the company. The organizational structure of Dell today will determine whether the

company could survive, sustain or succeed in the market in future.

1.2 Nature of Business

Dell’s mission is “to be the most successful computer company in the world at

delivering the best customer experience in markets we serve”. In doing so, Dell will

meet customer expectations of highest quality, leading technology, competitive pricing,

individual and company accountability, best- in-class service and support, flexible

customization capability, superior corporate citizenship and financial stability.

Dell’s global strategy is “to be the premier provider of products and services,

including those that customers require to build their information technology and Internet

infrastructures”. With a documented record of outstanding success, customer support, and

quality, Dell has identified new markets to serve and new products and services to

provide, leading the company to a moderate level of diversification. Most of Dell’s

revenue comes from its dominant businesses such as corporate servers and personal

computers. Therefore, Dell has both functional and divisional departments to remain

focused on each product, market, and work while fully utilizing the skills and knowledge

of its human resource.

At the beginning, Dell operated as a pioneer in “configures to order” approach to

manufacturing in company industry. Dell configures and customizes individual PCs to

the specific needs of each individual customer. To minimize the delay between purchase

and delivery, Dell has a general policy of manufacturing its products close to its

customers. This allows implementation of just-in-time (JIT) manufacturing approach,

which can reduce inventory cost, while creating a network structure that enhances

flexibility of the company. Dell’s manufacturing process covers assembly, functional

testing, software installation, and quality control, grouping experts with similar skills

under the same department to achieve economies of scale.

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In 1992, Dell created and successfully marketed the world’s first fully recyclable

PC computer. Dell also became the first company to offer free recycling of its products to

customers in every country of business. In 2002, Dell expanded to other product

categories such as television, digital audio players and computer printers.

Today, Dell offers a complete line of desktop, laptop, printers, cameras, network

servers, data storage systems, HD televisions, projectors, mobile phones, smart phones,

home theater systems and a vast array of technology accessories. In addition, Dell

markets third-party hardware and software, and provides services like computer

consulting, support, and training. Below shows all the product categories of Dell:

1. Main products - Desktop PCs, notebook computers, mobile workstations, servers

and networking products.

2. Storage solutions - storage area networks, network-attached storage, direct-

attached storage, disk and tape backup systems, removable disk backup, printers,

and displays.

3. Third-party software products - operating systems, business and office

applications, anti-virus and related security software, and entertainment software.

4. Peripheral products - printers, televisions, notebook accessories, mice, keyboards,

networking and wireless products, digital cameras, power adapters, and scanners.

5. Infrastructure technology services - customer deployment, asset recovery,

recycling services, IT consulting, strategy and enterprise consulting,

implementation for prepackaged software applications, research services,

applications development and maintenance services.

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6. Business process services - claims processing, product engineering, payment and

settlement management, life insurance policy administration, receivables

collection, and call center management.

7. Financial services - originating, collecting, and servicing customer receivables

related to the purchase of its products; and financing alternatives and asset

management services.

Having a wide range of product category, Dell’s departmentalization involves

both functional structure and divisional structures to ensure that each department is

specialized in skills and manageable in terms of product, geographic area and client

(corporate server, personal PC, etc.). This is due to the fact that Dell’s global business

involves employees and customers from different countries. Therefore, some elements of

product structure, geographic structure and client structure are all involved in the

departmentalization of Dell. In-depth analysis will be discussed later.

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UBMM2023 Organisational Behaviour 2.0 Contents

2.0 Contents

2.1 Theories related to Organizational Structure

Organizational structure refers to the division of labor and patterns of

coordination, communication, workflow, and formal power that direct organizational

activities (McShane & Glinow, 2010). It discusses mainly about the division of labor and

coordination within the organization. There are four major elements of organizational

structure: span of control, centralization, formalization and departmentalization.

Span of Control

Span of control refers to the number of people directly reporting to the next level

n the hierarchy. There are two extremes: wide and narrow. A wide span of control means

that there are many people reporting directly to a manager, whereas a narrow span of

control means that there are very few. It is interconnected with the organizational size

and number of layers in the organizational hierarchy. A large number of layers in the

organization hierarchy usually means that there is a narrow span of control. Each wide

and narrow span of control has its own distinctive advantages and disadvantages.

Centralization

Centralization is the degree to which the formal decision-making authority is held

by a small group of people who are usually those at the top of the organizational

hierarchy (McShane & Glinow, 2010). When the decision-making authority is held by

only top management, the organization has high degree of centralization. When

employees at lower level of the organizational hierarchy have decision-making authority,

the organization is described as decentralized. In a decentralized organization, authority

and power to make decision are dispersed throughout the organization. Each

centralization and decentralization approach has its own advantages and disadvantages as

well. Nature of business, environment and situational factors play important roles in

determining whether the organization should centralize or decentralize.

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Formalization

Formalization refers to the extent to which organizations standardize behavior

through rules, procedures, formal training, and related mechanisms (Mintzberg, 1979).

Formalized companies have greater reliance on various forms of standardization to

coordinate work. Formalization typically happens for large organizations because large

numbers of people are involved which lead to communication and supervision

difficulties. It is a challenge for large organization to avoid too much formalization due to

the fact that the organization must also be responsive and flexible to changes in

environment, not just increasing absolute compliance of employees.

Mechanistic and organic structure

When span of control, centralization and formalization are discussed together, two

types of organizational structure are derived: mechanistic and organic organizational

structure (Burns & Stalker, 1961). Organizations with mechanistic structure have narrow

span of control, high degree of formalization and centralization, which rely on efficiency

and routine behavior of employees. On the other hand, organizations with organic

structure have wide span of control, low degree of formalization and centralization,

which rely on flexibility, adaptation, learning, information sharing and empowerment of

employees. Each structure has its own advantages and disadvantages.

Departmentalization

Departmentalization specifies how employees and their activities are grouped

together (McShane & Glinow, 2010). It involves six major pure types: simple, functional,

divisional, team-based, matrix, and network. Departmentalization is usually discussed

with organizational chart as it illustrates the chain of command system within the

organization, common measurement of performance under the same department and

coordination among people and subunits within the organization.

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Asia Pacific Japan Finance

Finance Americas

Finance Global Segment

Finance

Solutions (Europe, Africa)

Enterprises Solutions Group

Sales (Europe, Africa)

Quality, Regulatory, Test

Global Operations

Finance Latin America

Europe Marketing

China

Product Management

Engineering

Platform Marketing

Storage

Management Software

PartnerDirect (Europe, Africa)

Healthcare and Life Sciences

Global Brand

Corporate & IT, HR

Worldwide Consumer Marketing

Global Channel

CFOCEO Michael Dell

Director Klaus Luft

Director Donald Carty

Director Thomas Luce

Director Alex Mandl

Director William Gray

Director Shantanu Nara.

Director James Breyer

Director Gerard Kleister.

Director Janet Clark

Director Laura Conigliar.

Director Ken Duberstein

Director Ross Perot

Assistant to the CEO

CIO

Public & Large Enterprises

Sales

Dell Services

Software

Marketing

Operations

Dell.com (Online)

Legal

Human Resources

Strategy

Strategic Programs


2.2 Dell’s Organizational Structure

Below shows the organizational chart of Dell (Dell Homepage, www.dell.com):

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2.2.1 Overview

From the chart above, Dell’s organizational structure has three levels of hierarchy.

The CEO is situated on the upper hierarchy level since Michael Dell is appointed to

control and manage all the aspects of the company. Being on the top of the hierarchical

structure, the CEO has the most authority over the company’s operation over other

employees. The CEO also has equally as much responsibility in running the company.

However, the CEO does not have full authority over the company as he is only appointed

as CEO to manage the company. The chairperson would have the most authority over the

company with directors having some influence over the company’s decisions as well.

With so many employees needed to be overseen, Michael Dell delegates his authority to

middle and lower level managers and has them supervise the employees for each

respective department, by giving tasks to departments and have them held accountable in

finishing the task. Michael Dell will still have to be responsible in making sure that the

tasks given are successfully done in the most efficient and effective way.

The departments and their respective managers stated can be seen on the second

level of Dell organizational chart. As seen from the organizational chart, the departments

in the middle hierarchy level are broken up into more specialized with respective main

departments being responsible for supervising them. For example, CFO is branching to

Asia Pacific, America, global and corporate finance. The departments situated lower in

the hierarchy structure have less authority over the operations of the company but also

less responsibility compared to the departments situated higher in the hierarchy. For

example, CFO will have greater responsibility and authority over all managers and

employees under the department Asia Pacific Finance. Employees in the lower hierarchy

levels are usually not the decision makers and are supposed only to follow and perform

the orders given by the employees in the higher hierarchy level.

Judging from the organizational chart, Dell’s organizational structure involves

some elements of both functional and divisional departmentalization. In real business

world, it is less likely to see pure type phenomena of business theory, including

organizational structure. Using Dell as an example, there are finance divisions based on

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geographical area (Asia Pacific, Europe, America), market divisions based on different

clients (corporate, small & medium enterprise, consumer), product divisions based on

different product categories (solutions, software, service, storage), and functional

divisions based on marketing, financing, accounting, engineering and operating

functions. This means that Dell’s departments and employees which does the same type

of work (marketing, human resource, etc.) are grouped together under the same

department. As seen from the organizational chart, each department in the middle

hierarchy level branches to a few or many more subdivisions (Human Resources to all

third level subdivisions, CFO to four Finance subdivisions), resulting in more specialized

skills and knowledge being created and utilized under the same department.

Despite having only three hierarchy levels and appearing to be like a wide

organization, Dell has a narrow span of control which tall organizations usually have.

This means each manager has less subordinates to manage as opposed to a company with

a wide span of control. This is due to Dell’s extensive use of departmentalization, which

increases each department’s efficiency through specialization and makes departments

more manageable. Moreover, since Dell does not have many levels of hierarchy, the

chain of command is fairly short, making communication and relaying orders much

quicker.

Dell’s authority is fairly diluted to low hierarchy level of the organizational chart,

which identifies the company’s structure as decentralized. A decentralized organizational

structure means that a company’s authority is distributed throughout the company instead

of having just few individuals who are decision makers. Decentralization is very common

for large companies as the CEO will not have the time to make decisions for everything,

same as Dell. By doing so, decisions on less important issues can be made by employees

in the lower hierarchy levels. It greatly improves work efficiency while increasing the

employees’ morale since they have greater authority to allocate resource or make

decision.

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Between Mechanistic and Organic Structure

It is difficult to classify Dell’s organizational structure into either mechanistic or

organic structure. In real business world, organizations usually fall in-between pure types

of business theory. Dell’s structure has narrow span of control, high degree of

formalization but low degree of centralization. It does not belong to either mechanistic or

organic structure. Dell’s structure will have greater reliance on employees’ clear role

perception, learning, motivation and adaptation since power to make decision is

decentralized to managers at lower hierarchy levels. On the other hand, below these low

level managers, Dell relies on routine and efficient work performance as these low-end

labors do not have concern on decision making but high expectation on job efficiency. In

short, Dell’s organizational structure is a good example to show how flexibility to

environmental changes can be balanced against standardized work efficiency.

2.2.2 Formal Relationship in Dell’s Organizational Structure

The overall effectiveness of Dell is affected by the organization’s structural

design and by the individuals filling the various positions within the structure. On the

other hand, the relationship between these individuals within the structure plays an

important role as well. We discuss the formal relationship occurs within Dell’s structure

in this section.

Line relationships

In line relationships, authority flows vertically down through the structure, for

example from the director to managers, section leaders, supervisors and other staff. In

Dell, there is a direct relationship between superior and subordinate, with each

subordinate responsible to only one person. Line relationships are associated with the

extent to control within functional or divisional department. For example, Dell’s line

managers have authority and responsibility for all matters and activities within their own

department.

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Diagram 1: Line Relationship in Dell

Staff relationships

Dell’s staff relationships arise from the appointment of personal assistants to

senior members of staff. Persons in a staff position have no direct authority in their own

right but act as an extension to their superior and exercise only ‘representative’ authority.

For example, personal assistants of CEO, CFO and CIO have no direct authority but

‘representative’ authority of their direct superior. Normally there is no direct relationship

between the personal assistant and other staff except where delegated authority and

responsibility has been given for some specific activity. In real business practice,

personal assistants often do have some influence over other staff, especially those in the

same departments or grouping. This may be partially because of the close relationship

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between the personal assistant and the superior, and partially dependent upon the

knowledge and experience of the assistant, and the strength of the assistant’s own

personality.

Diagram 2: Staff relationship in Dell

Lateral relationships

Lateral relationships exist between individuals in different departments or

sections, especially individuals on the same level. These lateral relationships are based on

contact and consultation and are necessary to maintain coordination and effective

organisational performance. It can be formal or informal relationship. To avoid conflict,

lateral relationship is very important especially for managers from different departments.

For example, accounting manager would want to save as much as possible, but marketing

manager would want to spend as much resources as possible to achieve marketing

objectives. Collaboration such as weekly meeting between interrelated departments is

held in Dell to facilitate lateral relationship (Bateman & Snell, 2004).

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Diagram 3: Lateral Relationship in Dell

2.3 Advantages and Disadvantages of Dell’s Organizational Structure

Advantages

As mentioned earlier, Dell has both functional and divisional departments, based

on organizational functions, clients, products and geographic areas. Such extensive use of

departmentalization complements the weaknesses of each other while strengthening the

strengths of each other. In Dell’s structure, each department in the middle hierarchy level

branches to a few or many more subdivisions. Since each department has a very

specialized function and requires very specialized skills and knowledge, there will not be

too many problems on confusion over the tasks performed by each department. Dell will

be able to operate efficiently with a small amount of bureaucracy. Dell is a wide

organization as it only has three hierarchy levels, meaning that the communication within

the company will be quick as there is a short chain of command.

Furthermore, functional structure of Dell facilitates the role perception of each

employee, enhancing their skills and knowledge over time since they are only focusing

attention on their area of expertise. It results in greater organization performance due to

specialization of skills and knowledge.

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The divisional structure of Dell based on client, product and geographic creates

several distinct advantages. Some companies adopt only one form of divisional structure

among the three mentioned, while it greatly depends on the nature of business of the

organization. For example, since Dell is a global business with a global brand, it may be

necessary to develop departments based on geographic area. Within the particular

geographic area, functional departments must be developed as well. With a wide variety

of product lines, Dell needs to develop divisional department based on product categories

to ensure focus and specialization. Furthermore, with customer segments that encompass

corporate, small & medium enterprise and household consumers, it is necessary to

develop divisional department based on client type in order to meet the different services

required by different clients (large enterprises need sophisticated business solution, small

& medium enterprises need budget-oriented solution, consumers need repair,

maintenance and customer service to be convenient and responsive). On the other hand, it

may not be necessary for Amazon.com to have such extensive departmentalization, as

Amazon.com’s business nature is click-and-mortar pure-type online retailer. Therefore,

Dell’s extensive departmentalization helps to enhance department efficiency through

specialization and make departments more manageable. Furthermore, Dell avoids having

too many levels of organizational hierarchy, which greatly shortens the chain of

command, making communication and relaying orders much quicker than traditional

organization with long chain of command. Information flow within Dell’s organizational

structure is fairly fast.

The narrow span of control of Dell allows managers to closely supervise, monitor

and coach their respective subordinates. Such narrow span of control creates pressure

among employees, which then leads to greater performance optimization. The high

degree of product and service customization by Dell, which is well known as the

company’s distinct competitive advantage, requires Dell to have narrow span of control.

Since employees are not performing routine jobs (they are personalizing products based

on customer requirement), frequent needs for direction and advice from supervisors are

needed. Close supervision and coaching by department managers allow Dell to facilitate

specialization in skills and knowledge, while preventing conflicts from happening among

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employees within the same department. It is essential to prevent employee conflicts

within same department especially when Dell is a large corporation that involves more

than 100 thousand employees in 2011 (Dell Annual Report 2011 Q1, 2011).

With high degree of formalization, Dell can increase efficiency and compliance of

employees within the company. Rules, procedures and formal code of conduct are

necessary when hundred thousands of people are involved in the company. These tools

help to limit the behavior of employees from maximizing their own interest. If every

employee attempts to maximize self-interest, it conflicts with the organizational goals,

which may lead to business failure. Rule, procedures and formal code of conduct

formulate expectation on the performance and behavior of employees, in order to align

them with the organizational goals of Dell.

Dell’s decentralization delegates the CEO’s authority to middle and lower level

managers and has them supervise the employees for each respective department, by

giving tasks to departments and have them held accountable in finishing the task. Such

decentralization gives more authority to lower level employees, motivating them to be

active and passionate in meeting the organizational goal. Dell’s extensive

departmentalization shows the evidence of its decentralization, by delegating authority

responsibility to each department manager. In Dell’s structure, department managers will

be responsible to the performance of their respective department, and held the power to

make decision as well. Therefore, they are motivated or expected to act in the interest of

the organization. By giving more authority to employees, it enhances their morale while

reducing their absenteeism. Furthermore, Michael Dell will not be too busy to make

decisions for all departments.

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Disadvantages

Although both functional and divisional structure of Dell’s departmentalization

provides various advantages, there are also significant drawbacks. Lawler (2000)

identifies several limitations, which may be currently facing by Dell. First, employees

may tend to focus attention on their skills and professional needs rather than on the

company’s product, service, or client needs. This happens when experts are “trapped”

only under the same specific department, where they are unable to develop broad

understanding or big picture about the company’s business, product, service or customer

needs. For example, a R&D engineer may be over-paying attention to the specifications,

perfection and features of the product, rather than considering budget constrain, customer

needs or manufacturing process. If the product is too complicatedly designed, although it

may comprise all necessary or extra features, consumers may not need them, price may

go up, and manufacturing process may be difficult or inefficient. Top management would

not want to see these from happening. Second, poor coordination occurs among

departments, especially when they are treated and given orders separately. When there is

no coordination, conflicts may happen. As mentioned earlier, accounting department may

want the budget to be as least as possible, while marketing department may want the

budget as large as possible. When conflicts happen, each department has each different

goal to be fulfilled, which may conflict with the organization’s strategic goals. They may

then pay more attention to departmental achievement individually rather than

organizational achievement, although each department is developed to serve the same

organization.

Narrow span of control of Dell’s structure creates disadvantages such as slow or

less-timely information flow, higher overhead costs and undermined employee

empowerment and engagement. However, these problems happen only when the

organization has tall hierarchy (more levels of hierarchy). In Dell’s organizational

hierarchy, there are only 3 layers – top, middle and low. Such low number of layers helps

Dell to minimize the abovementioned problems. The major problems faced by Dell are

the consequences caused by its “low number of hierarchical levels”. First, Dell’s

managers may face increased workload and stress in management. Since they are directly

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responsible to the performance of their subordinates, they must be extremely careful and

prudent in coaching and supervising their subordinates, which may greatly increase stress

and workload of the managers. In this case, performance of managers may be adversely

affected. Second, such low number of hierarchical levels may result in fewer managerial

jobs, which cause the companies to have less maneuverability to develop managerial

skills. Promotions become riskier as they involve a huge jump in responsibility and

authority in a flatter organizational hierarchy. Therefore, managerial career of employees

may be limited, which adversely affects the morale, productivity and performance of

employees.

The major problem associated with Dell’s high degree of formalization is the

decrease in organizational flexibility. As a technology company, being flexible and

adaptable to changes in environment are always necessary. Rules, guidelines and formal

code of conduct that formulate expectation on employee behaviors may limit their

creativity in response to situation. They may just merely follow the prescribed behaviors

to avoid penalty or punishment even when the situation clearly calls for a customized

response. Therefore, learning and creativity within the organization are limited as well.

When innovation is absent in a technology company, it may result in business failure.

Some other problems associated with high degree of formalization are work stress and

dissatisfaction of employees, which may reduce their motivation then subsequently their

performance.

Dell’s decentralization may cause several disadvantages for the company. First,

lower level managers may make decisions without fully understanding the big picture of

the organization. Since low and middle level managers are usually responsible to only

their area of expertise, they do not have better understanding of the company’s strategic

vision as a whole. For example, Michael Dell may understand that Dell is positioned as a

global brand, but local marketing department in Europe may not necessarily think that the

“global context” of Dell’s brand is important. Therefore, decisions from lower level

managers become contradictory to and conflict with the company’s strategic vision.

Second, poor coordination among departmental managers happen again. Since these

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managers have greater authority decentralized from higher level managers, they may not

need to communicate with each other (such as meeting) to make decision, which limits

the flow of information within the company. Third, innovation and ideas are limited as

well. For example, although one part of the organization may have generated some

innovation and ideas that are beneficial to the company, these innovation and ideas may

not be shared with other part of the organization due to poor coordination. Top

management may not be accessible to these innovations. As a technology company, Dell

will definitely not wish to see such situation from happening.

In short, Dell may encounter the following potential problems:

1. Poor coordination between departments;

2. Limited innovation, creativity and information flow;

3. Conflicts between departmental goal and organization goal;

4. Reduced employee morale and motivation;

5. Increasing operating cost due to conflict management and resulted poor

performance.

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UBMM2023 Organisational Behaviour 3.0 Recommendation

3.0 Recommendation

Dealing with the abovementioned potential challenges and problems, we suggest

Dell to adopt the boundary-less organizational-structure design asserted by Dess,

Lumpkin, Eisener and Peridis (2006). Organizations that become boundary-less become

more open and permeable, resolving the coordination and conflict of goals problems

encountered by most large organizations. There are three basic approaches: barrier-free

approach, modular approach, and virtual approach.

Barrier-free Approach

Traditional organizations had boundaries intended to maintain order by making

the role of managers and employees clearly defined. But these boundaries also stifled

communication and created a “not my job” mindset. For example, employees from

marketing department may not wish to interfere with the affairs of accounting

department. Addressing such issue, a barrier free organization enables an organization to

bridge differences in culture, function, and goals to find common ground that facilitates

information sharing and cooperation. However, boundary-less approaches should be

considered a complement to, not a replacement for, current organizational structure of

Dell. In 2002, Toyota adopted the barrier-free approach using teams and groups,

providing a good example for Dell to benchmark (Promprasit & Jumreorn, 2009).

Teams and groups are an important part of barrier free structures because they 1)

substitute peer-based for hierarchical control; 2) often develop more creative solutions

via brainstorming and other group problem solving techniques; 3) absorb administrative

tasks previously handled by specialists; and 4) remove the boundaries between functional

departments. We suggest Dell to develop team-based structure in its departmentalization

to enjoy these benefits while resolving the stated potential challenges and problems. Dell

can develop the following three types of group to achieve the barrier-free approach:

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1. Team groups – these are fairly autonomous groups with broad terms of reference

and limited supervision. The team designates the positions to be filled, the

allocation of members, and instigates changes when necessary. They possess

greater authority than normal employees to carry out their tasks. Examples are

problem-solving groups, research teams, maintenance crews.

2. Task groups – jobs are clearly defined, and individuals are clearly assigned to

specific positions by top management. Such task group has some flexibility over

methods of work and the pace of work, but limited discretion over the selection of

group members. Supervision and standardized performance measurement are still

necessary. Examples could include many administrative or clerical workers.

3. Technological groups – members have very limited autonomy to determine or

change the operational activities. The pace of work is also likely to be controlled.

The content and method of work are specified, and individuals are assigned to

specific jobs. There is little scope for individual discretion, and often limited

opportunities for interaction among members. An example is assembly-line

operations (Bateman, Snell, 2004).

Groups provide security, social satisfaction for members, support individual needs

and promote communication, formally or informally (e.g. through the grapevine). They

also are liable to show all the problems found in an operation, exploiting the

opportunities to identify problems. According to Michael Dell, CEO of Dell, “the

winners in the next few decades will be the companies with the most empowered work

forces.” In order to align with such goal in Dell’s management, individuals must be

empowered, and the only way to give them more control while meeting their social needs

is team approach (Heywood, Siebert & Wei, 2005).

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However, such team-type processes that emerge in boundary-less approach often

need to be carefully managed. The entire organization, including its goals and strategies,

must support the effort. One way to enhance team based barrier-free approach is to

effectively implement well-designed information technology systems that support

knowledge gathering and sharing. It helps keep track of the team’s processes, results,

performance and behaviors. Dell can also improve the effectiveness of team approach by

removing barriers among functional departments such as design, engineering,

manufacturing, logistics and sales, forming them into individual small teams that are each

responsible for different project. With team approach, Dell is able to increase the

motivation and morale of employees, improve the coordination between departments and

reduce conflicts between departmental goals.

Modular Approach

The modular approach describes a central hub surrounded by networks of outside

suppliers and specialists that perform non-vital functions. In other word, modular

approach outsources non-vital functions, tapping into knowledge and expertise of “best”

suppliers to accelerate organization learning while retains strategic control. Such

approach can decrease overall costs, quicken new product development by hiring

suppliers whose talent may be superior to that of in-house personnel. It also enables a

company to focus scarce resources on the areas where they hold a competitive advantage,

which is, the customization and personalization of product and service by Dell. These

benefits can be translated into more funding for research and development, hiring the best

engineers, and providing continuous training for sales and service staff.

The modular approach allows Dell to save operating cost, while reducing the

opportunities for conflict by cutting down the total number of employees within the

organization. The resulted saving can be channeled to either creativity program or R&D

as well. However, Dell must bear in mind that it should avoid outsourcing critical

components of its business in ways that compromise its long-term competitive advantage,

such as R&D and branding functions.

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Virtual Approach

The virtual approach describes an evolving network of independent companies -

suppliers, customers, even competitors - linked together to share skills, costs, and access

to one another’s markets. By pooling and sharing resources and working together in a

cooperative effort, each gains in the long run. In other word, virtual approach is a type of

strategic alliance in which complementary skills are used to pursue common objectives.

Virtual organizations may not be permanent; participating firms may be involved in

multiple alliances at once.

Unlike the modular type, virtual organization firms give up part of their control

and participate in a collective strategy that enhances their own capacity, makes them

better able to cope with uncertainty and environment, while enhancing their competitive

advantages. Dell can achieve such benefits by formulating resources and knowledge

sharing alliance with competitors with either weak or strong positions, such as Acer, or

even Microsoft. Competitors with weak positions are more willing to collaborate with

Dell due to their needs to be backed-up or guided by a large and powerful company. Dell

possesses such requirement. However, collaborating with stronger competitors is the only

way to enable Dell to access to valuable skills and knowledge, although it is more

challenging to achieve. Currently, Dell has formulated an alliance with Symantec, the

best-in-class antivirus company well-known for its Norton 360 antivirus software, to

deliver a comprehensive server and client management solution for efficiency minded IT

organizations. It is apparent that Dell wishes to focus on its most valuable customer

segment - enterprises of all sizes - by offering them the easiest, most secured and most

cost-effective corporate servers. Such relationship also creates opportunities for Dell to

create mutual relationship with Microsoft since Symantec is the gold-certified partner of

Microsoft (Sherman, 2010).

In this way, Dell is able to stimulate innovation and creativity among employees,

by accessing to the new knowledge and skills of Symantec. Information flow and

organization learning are both greatly enhanced throughout the organization due to the

accessibility of information between two companies. It addresses the challenge of limited

22 | P a g e


creativity, innovation and information flow currently encountered by Dell’s

organizational structure. Some companies that we suggest Dell may collaborate with in

future include HP for its printer product expertise, Sensonic for its peripheral product

expertise and Razer for its gaming product expertise (Dell acquired Alienware in 2006 to

develop its gaming laptop product line).

23 | P a g e

UBMM2023 Organisational Behaviour 4.0 Conclusion

4.0 Conclusion

Dell’s organizational structure plays an important role in its success and

achievement today, providing high degree of product customization and responsiveness

to its customers. The success should be attributed to Dell’s extensive use of

departmentalization, narrow span of control, flat organizational hierarchy, high level of

formalization and high level of decentralization, which fall neither into the category of

mechanistic or organic structure described by Burns and Stalker in 1961.

However, some challenges must be addressed by such organizational structure.

The common problems faced by Dell’s structure include poor coordination between

departments due to extensive use of departmentalization, conflicts of goal and interest

between departments and the organization, limited creativity and innovation due to poor

information flow, and increasing operating cost due to conflict management and resulted

poor performance.

Therefore, we recommend Dell to adopt the boundary-less organizational

structure design proposed by Dess, Lumpkin, Eisener and Peridis in 2006. There are three

approaches: barrier-free approach, modular approach, and virtual approach. Barrier-free

approach can be effectively implemented using teams and groups which remove barriers

between different departments, as long as at the same time the company implements

sophisticated IT systems to monitor the behavior and performance of the team. Modular

approach is basically the outsourcing of non-vital functions of the organization, which

can help Dell to reduce operating cost and opportunities for conflict, while giving more

funds to involve in R&D or creativity programs. The virtual approach involves the

establishment of alliance, which enables Dell to access to knowledge, skills, expertise or

creativity of other companies to facilitate organizational learning and innovation.

In conclusion, there is no best organizational structure. It greatly depends on the

firm’s environment, size, technology, strategy and its nature of business. As

24 | P a g e

UBMM2023 Organisational Behaviour 4.0 Conclusion

organizations grow in size, they become more decentralized and more formalized since

more people from different countries and different cultures are involved. Rules,

guidelines and formal code of conduct are inevitable. The technology of the organization

determines whether to adopt an organic, mechanistic or hybrid structure. Organizational

strategies such as positioning, targeting and branding greatly affect the organization’s

structure as well. For example, Dell’s high degree of responsiveness to customers and

personalization in product and service require its organizational structure to be flat in

hierarchy and narrow in span of control, to ensure efficient performance and fast

information flow. Therefore, these contingencies must be considered by corporate leader

before they determine the structure of the organization.

25 | P a g e

5.0 References

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