IHC CASE LINK TO THE COURSE Flashcards
Modernist Paradigm at IHC
Based on the information extracted from the IHC case study, it appears that the company’s approach to change aligns most closely with the modernist paradigm. This is evident in the company’s strategic changes, which were driven by a focus on growth, diversification, and increasing sales. The company also sought to improve its competitive position and reduce its dependence on specific market fluctuations, which is indicative of a modernist approach to change.
For instance, the company implemented a transformational phase, known as the IHC² programme, which revolved around stimulating innovation and increasing sales. This program aimed to achieve 2 billion in revenue, a 10% margin, and OSBIT delivery. This strategic approach to change, with clear, quantifiable goals and a focus on improving the company’s market position, aligns with the modernist paradigm.
Symbolic Paradigm at IHC
While the modernist paradigm seems to be the most dominant, elements of the symbolic paradigm can also be observed. For example, the company recognized the importance of employee involvement in the change process, as seen in the Speak-Up Campaign where employees were encouraged to contribute ideas and initiatives. This recognition of the importance of employee perceptions and interpretations of change is characteristic of the symbolic paradigm.
Enactment Theory
Enactment theory, as described in the book, is a concept that suggests that humans create mental maps to help them navigate what they presume exists. The theory argues that organizations are essentially “talked into existence” by their members, and that organizing should replace organization as the phenomenon of interest to organization theorists.
The theory combines the concepts of externalization and objectification into the cognitive process of reification, meaning to make something real. By mistaking a cognitive map for the territory, humans reify organization and order their interactions accordingly. This ordering occurs through the enactment of beliefs about what is real. Thus, sensemaking is not about discovering the truth, but creating it by organizing experience in ways that produce (make) understanding (sense).
Weick, one of the proponents of enactment theory, emphasized that managers construct, rearrange, single out, and demolish many “objective” features of their surroundings. When people act, they unrandomize variables, insert vestiges of orderliness, and literally create their own constraints.
In the IHC case, the organization was faced with a significant challenge - the need to innovate and adapt to a rapidly changing market while dealing with internal issues such as a lack of communication and collaboration between departments.
One could argue that the enactment theory is reflected in how IHC’s management and employees interacted with their environment and each other. The management, for instance, had a certain mental map of how the organization should function and what its future should look like. They enacted this vision through various strategies and decisions, such as the decision to invest in innovation and the creation of the New Ventures department.
However, the cognitive map of the management did not always align with the reality of the organization, leading to issues such as the lack of communication and collaboration. This could be seen as a form of reification, where the management’s vision of the organization was mistaken for the actual state of the organization.
The employees, on the other hand, had their own mental maps of the organization, which were shaped by their experiences and interactions within the company. These mental maps influenced their actions and responses to the management’s decisions, further shaping the organization’s reality.
In conclusion, while the enactment theory can provide some insights into the dynamics within IHC, it’s important to note that this is just one perspective. The actual dynamics within IHC are likely influenced by a multitude of factors and theories.
Rational decision-making process
- Purpose or goal pre-exists (incl. criteria): The company’s goal was clear - to improve financial health and operational efficiency. This goal was based on the criteria of increasing revenue, reducing costs, and improving operational processes.
- Search process for alternatives is costless and there is an unrestricted number of alternatives to consider: The company considered various alternatives to achieve its goal. For instance, it implemented a transformational phase, known as the IHC² programme, which revolved around stimulating innovation and increasing sales. It also considered downsizing as an alternative to reduce costs.
- Consequences of alternatives are fully understood, including best estimates under uncertainty: The company understood the potential consequences of its alternatives. For instance, it knew that downsizing would result in job losses, but it was a necessary step to reduce costs and improve financial health.
- Choice of alternative that maximizes goal achievement = Decision: The company chose the alternatives that it believed would maximize its goal achievement. For instance, it decided to go ahead with the IHC² programme and the downsizing plan.
This example shows that the company’s decision-making process aligns with the rational decision-making model. However, it’s important to note that the model’s assumptions, such as the costless search process for alternatives and the full understanding of consequences, are idealized and may not fully reflect the complexities and constraints of real-world decision-making.
IHC Case Timeline
Based on the information extracted from the IHC case, here is a timeline of the events:
- Pre-2015: IHC was a portfolio company with a silo mentality.
- 2015: The company’s turnover was €1.2 billion.
- 2016: The company’s turnover plummeted to €750 million due to worsening market conditions and strong competition. The CEO at the time (2014-2016) was found to be too slow and indecisive when it came to reaching agreements, and decided to leave IHC. The then CFO replaced him as CEO.
- First Re-organisation: IHC announced a re-organisation plan to reduce the majority of flexible staff, and 15% of its permanent staff. This restructuring was going to take place predominantly within the shipbuilding cluster and was going to potentially affect all departments within IHC. The negotiation process with works council and labour unions for the first reorganization took over a year.
- Second Re-organisation (October 2016): A second re-organisation was announced at IHC while the first re-organisation period was still ongoing. The senior management was convinced that an acceleration of the IHC 2020 strategy was needed and as such a second re-organisation was inevitable. The management announced that 425 permanent and temporary contracts were going to be terminated.
- IHC² programme: The company implemented a transformational phase, known as the IHC² programme, which revolved around stimulating innovation and increasing sales. This program aimed to achieve 2 billion in revenue, a 10% margin, and OSBIT delivery.
- Summer of 2019: Due to the project results and the overall financial situation, IHC faced a deteriorating cash situation. The banks intervened and together with the shareholders forked out Eur 120 million. A cost-saving plan was soon announced.
- November 2019: The Executive Committee gave an update on IHC2 and the company situation. A new business plan was to kick off.
- January 2020: A clearer business plan was presented to the employees involving all the clusters.
Please note that the exact dates for some of these events are not specified in the case.
Problem-solving under bounded rationality framework
- Search: When IHC faced financial and operational challenges, the company started searching for solutions. This search was triggered by underperformance. For instance, when the company’s turnover plummeted in 2016, it initiated a re-organisation plan to reduce staff and costs.
- Satisficing: IHC did not necessarily look for the best results, but for solutions that would satisfice, or be good enough under the circumstances. For example, the company implemented a transformational phase, known as the IHC² programme, which aimed to stimulate innovation and increase sales. This programme may not have been the best possible solution, but it was a satisfactory one given the company’s situation.
- Rule Following: When IHC could not foresee the future, it leaned on experience, captured in rules. For instance, when the company faced a deteriorating cash situation in the summer of 2019, it announced a cost-saving plan based on its past experiences with financial challenges.
Bounded Rationality description
An example of bounded rationality from the IHC case can be seen in the decision-making process surrounding the implementation of the IHC² programme.
In 2017, IHC was facing financial difficulties and operational challenges. The company needed to make decisions to address these issues, but its ability to make these decisions was constrained, or “bounded,” by several factors:
- Limited Information: IHC had limited information about the future, including future market conditions and the potential success of various strategies. This uncertainty made it difficult to predict the outcomes of different decisions.
- Cognitive Limitations: The decision-makers at IHC had to process a large amount of complex information in a short amount of time. This included financial data, market analysis, and information about the company’s internal operations. These cognitive limitations may have prevented them from fully understanding all the potential implications of their decisions.
- Time Constraints: IHC was under pressure to make decisions quickly due to its deteriorating financial situation. This time pressure may have limited the company’s ability to thoroughly consider all possible alternatives.
Given these constraints, IHC decided to implement the IHC² programme, a transformational phase aimed at stimulating innovation and increasing sales. This decision can be seen as an example of “satisficing” - choosing an option that is satisfactory, if not optimal, given the constraints.
This example illustrates the concept of bounded rationality: even though IHC was trying to make the best possible decision to address its challenges, its decision-making process was constrained by limited information, cognitive limitations, and time constraints.
Political model of decision-making
The IHC case provides an example of the political model of decision-making. This model assumes that there is a diversity of interests and goals within the organization and that decisions reflect power distribution and arise from negotiations among groups.
In the IHC case, we can see this political model of decision-making in action during the company’s restructuring efforts. For instance, when the company’s turnover plummeted in 2016, it initiated a re-organisation plan to reduce staff and costs. This decision was not made in isolation but involved negotiations with the works council and labour unions, reflecting the diverse interests within the organization.
Another example can be seen in the implementation of the IHC² programme. When someone came up with an idea or initiative, they often ended up owning it, and the pressure for the idea to take off became exorbitant. This reflects the action taken to reach an alternative following individual self-interests.
Furthermore, the roles within the transformation programme were nebulous as reporting lines were not clear. Initiative owners were not always sure whom they had to report to as workstreams and initiatives involved different organization clusters. This reflects the power distribution within the organization and how decisions arose from negotiations among different groups.
Contingency Approach
The Contingency Approach can be seen in the IHC case in the way the company adapted its strategies and structures in response to changes in its environment.
For instance, in 2017, IHC faced a significant increase in its order book. However, these new orders came with strict conditions, including sharp pricing, short delivery times, high levels of innovation and customization, and no strict design freeze. This meant that IHC had to adapt its internal structures and processes to meet these new demands. This is an example of the Contingency Approach, as the company’s strategies and structures were contingent on the specific conditions of its environment.
Another example can be seen in the implementation of the IHC² programme. This programme was aimed at stimulating innovation and increasing sales, in response to the company’s financial difficulties and operational challenges. The programme involved a number of initiatives, each of which had to be developed until it became “bankable”. The level of scrutiny for each initiative was based on its size and complexity, showing that the company’s approach was contingent on the specific characteristics of each initiative.
These examples show how IHC’s strategies and structures were contingent on the specific conditions of its environment and the specific characteristics of its initiatives, reflecting the principles of the Contingency Approach.
Social Constructionism by Karl Wick
The concept of social constructionism by Karl Weick, also known as the enactment theory, is about how people make sense of their environment by interacting with it, interpreting it, and constructing their own understanding of it.
In the IHC case, we can see elements of social constructionism in the way the company and its employees responded to the challenges they faced. For instance, when the company initiated the IHC² programme, it involved a significant shift in the way the company operated. Employees were expected to come up with ideas or initiatives and often ended up owning them. The pressure for the idea to take off became exorbitant as time had to be allotted so that the initiative would be executed and become ‘bankable’. This reflects the enactment theory as employees were actively involved in shaping the transformation of the company.
Another example can be seen in the company’s response to the financial and operational challenges. The company initiated a Speak-Up Campaign, where over 1,200 colleagues had completed the survey and over 130 ideas were submitted. While many employees welcomed this and contributed enthusiastically, others were cynical stating that it looked like the top management were looking at the work-floor employees for answers they themselves should have been able to provide. This shows how the employees’ perceptions and interpretations of the situation influenced their actions and responses, reflecting the principles of social constructionism.
These examples show how the employees at IHC were not just passive recipients of the changes happening in the company, but were actively involved in interpreting and responding to these changes, shaping the company’s transformation in the process. This aligns with Karl Weick’s enactment theory or social constructionism.
Mechanistic vs. Organic structure
Based on the information from the IHC case, it appears that the company has elements of both mechanistic and organic structures, but leans more towards an organic structure.
Mechanistic elements can be seen in the company’s traditional hierarchical structure, as shown in the 2018 Organogram. The company had a clear chain of command, with different departments and roles, which is characteristic of a mechanistic structure.
However, the company also showed signs of moving towards a more organic structure. For instance, the implementation of the IHC² programme involved a significant shift in the way the company operated. Employees were expected to come up with ideas or initiatives and often ended up owning them. This reflects an organic structure, where there is a high degree of employee involvement and flexibility.
Furthermore, the company’s response to the financial and operational challenges also suggests an organic structure. The company initiated a Speak-Up Campaign, where employees were encouraged to contribute ideas and feedback. This shows a decentralization of decision-making and a focus on adaptability and flexibility, which are characteristic of an organic structure.
In conclusion, while IHC had a traditional hierarchical (mechanistic) structure, it also showed signs of moving towards a more flexible and adaptive (organic) structure, particularly in response to the challenges it faced.
Coalitional View of the Organization
The concept of a coalitional view of an organization refers to the idea that an organization is made up of different groups or coalitions, each with their own interests and goals. These groups may sometimes have conflicting interests, and decisions within the organization are often the result of negotiations among these groups.
In the IHC case, we can see elements of a coalitional view. For instance, there were different groups within the company, such as the senior management, the works council, and the employees, each with their own perspectives and interests.
For example, the works council expressed their concerns about the company’s financial situation, mainly in relation to the current projects. They feared that the banks would intervene due to the negative progress of the projects, which could lead to unforeseen consequences. This shows that the works council, representing the interests of the employees, was a distinct group within the organization with its own concerns and interests.
Another example can be seen in the implementation of the IHC² programme. While many employees welcomed this and contributed enthusiastically, others were cynical stating that it looked like the top management were looking at the work-floor employees for answers they themselves should have been able to provide. This shows the differing perspectives and interests within the organization, with some employees feeling that the management should be more proactive in finding solutions.
These examples show that the decision-making process at IHC was influenced by the negotiations and interactions among different groups within the organization, reflecting a coalitional view of the organization.
Dimensions of Organisational Social Structure
Based on the information extracted from the IHC case, we can make the following observations about the organizational aspects of IHC:
- Administrative Component: The case mentions that due to downsizing, core knowledge on yard manufacturing and engineering left the company. This suggests that there was a significant administrative component within the company, with employees having specific responsibilities in line functions and staff functions.
- Differentiation: The case mentions the existence of various departments within IHC, such as production and engineering, indicating a degree of departmental differentiation. The 2018 Organogram also suggests both vertical and horizontal differentiation within the company.
- Centralization: The decision-making process at IHC appears to have been centralized at the top level of the organization. For instance, the implementation of the IHC² programme and the decision to downsize the workforce were decisions made by the senior management.
- Standardization and Formalization: The case mentions that there was an increase in the number of layers when it came to steering and cascading information, both in a top-down manner and vice-versa. This suggests a degree of standardization and formalization in the company’s operations.
- Specialization: The case highlights the company’s focus on craftsmanship and knowledge, suggesting a high degree of individual task specialization. For instance, the company prided itself on its 350-year history and its status as a market leader, which was largely due to the skills and expertise of its workforce.
- Integration: The case mentions that due to the different skillsets that were made redundant, a certain informal way of working between production and engineering was lost. This suggests that there was a degree of integration between different departments within the company, which was disrupted due to the downsizing.
These observations provide insights into the organizational structure and dynamics at IHC, and how these aspects influenced the company’s response to the challenges it faced.
Bureaucracy
Bureaucracy: The case mentions that there was an increase in the number of layers when it came to steering and cascading information, both in a top-down manner and vice-versa. This suggests a bureaucratic structure within the company, where decision-making and information flow were structured and hierarchical.
Individual Coordination
The case also mentions that roles within the transformation program were unclear, and initiative owners were not always sure whom they had to report to. This indicates that there was a hierarchy in place, but it was not effectively used for coordination.
Programmed Coordination
The case mentions that when someone came up with an idea or initiative, they were often responsible for executing it. This required proper planning and scheduling, which is an example of programmed coordination through planning and setting targets.
Information coordination/mutual adjustment
The case describes a situation where employees felt stressed about weekly meetings because they felt they were being grilled on the progress of their initiatives. This suggests that there was an attempt at information coordination through non-formalized contact, but it may not have been effective or well-received by employees.
Pooled Interdependence
Pooled Interdependence: This is seen in the overall functioning of IHC where different departments and teams contribute to the overall output of the company. Each department or team performs its tasks independently, and their work is pooled together to create the final product or service. For example, the design team, production team, and sales team all work independently but their efforts are combined to produce and sell the final product.
Sequential Interdependence
This is evident in the production process at IHC. For instance, the design of a ship must be completed before the production team can start building it. Similarly, the production must be completed before the sales team can sell the product. This shows that one task cannot be started before the previous task is completed.
Reciprocal Interdependence
This is seen in the collaborative efforts within the company. For example, the initiative to implement concurrent design at IHC required cross-departmental cooperation and continuous alignment. This shows that everyone is dependent on everyone else, and tasks are adjusted and aligned continuously based on the inputs and feedback from all involved parties.
SCRUM
There are elements of project management and team coordination that are reminiscent of SCRUM methodologies. For instance, the case mentions weekly meetings for every work stream, where progress is reviewed and critical needs are discussed. This is similar to the SCRUM practice of regular “sprint reviews” or “stand-ups” where team members discuss their progress and any obstacles they’re facing.
Also, the case mentions the importance of cross-department collaboration and breaking down the silo mentality, which aligns with the SCRUM principle of cross-functional teams working together.
However, without explicit mention or clear indicators of SCRUM practices such as sprints, product backlogs, or SCRUM roles (like the Scrum Master or Product Owner), it’s not possible to definitively say that SCRUM was used in the IHC case.
