Analysis of the Dynacorp Case through a Political Lens
Dynacorp is a global information systems and communications business. In 1990, the company experienced a decline in earnings compared to previous years. As a result, the CEO attempted to improve the company’s performance by restructuring its design.
In this paper, I will analyze Dynacorp through a political lens to gain insight into how changing its structure can enhance revenue and quality. The political lens views organizations in terms of conflicts of interest, power dynamics, and goals among individuals and groups within the organization.
To understand the dynamics of political conflict, it is essential to comprehend who holds power, where that power originates from, the basis of that power and the extent of power held by different parties within the organization. From a political perspective, conflict arises due to differing and competing interests which necessitate political action such as negotiation, coalition building and exercising power and influence.
The key concerns of players in the political perspective of the organization revolve around who defines the problems and agenda, where they get the power to do so, who advocates solutions and why they do so, and how a particular group can procure outcomes favorable to its interests (Ancona et al., 2009: M-2, 33). At the top of the organizational hierarchy are the CEO and functional heads, including executive vice presidents representing marketing, manufacturing, and engineering.
There are four different sets of stakeholders, each with their own interests and power. The CEO is primarily focused on making Dynacorp more competitive and profitable. He has identified several challenges that need to be addressed, including high costs, slow product development cycles, and the need to create more value for customers. To achieve these goals, he has formed a task force to draft recommendations on how to redesign the organization.
These recommendations will be presented to senior management. The CEO holds immense power, covering all functions and operations of the firm. Function heads also hold significant power, but it is limited by the CEO’s authority and only extends to their respective functional groups. As members of senior management, they can influence company decisions and strategies. However, their primary focus is advancing the interests of their own groups and protecting their own territories.
According to Ancona et al. (2009), there are underlying interests that inform the explicitly-stated interests of the stakeholders. The engineering division is comprised of ten groups, each with their own set of stakeholders. Additionally, there is a grouping between technical and technical/management individuals on parallel tracks that can be seen as forming their own sets of stakeholders. It is clear that these stakeholders are interested in protecting their own interests and advancing their agenda for the firm.
Dynacorp is a company that focuses on technological innovation. The engineering function and the 10 groups within it hold immense power and influence, as they provide the technological innovation that is at the heart of the company’s competitive edge (Ancona et al., 2009, p. M2, 29). The manufacturing function is also of considerable size and geographically-based. This reflects Dynacorp’s strategy of intensive in-house manufacturing rather than relying on subcontractors for production. The ground-based members of this large interest group are the manufacturing plant managers.
Their explicitly stated interests are to ensure that manufactured products meet high standards of quality. However, the underlying interests behind these avowed interests are tied to protecting the turf of plant managers and manufacturing employees. It is evident that movements of manufacturing outside of the plants and onto subcontractors in the Asia Pacific will hurt them. In some cases, these subcontractors may provide the same or higher quality products at competitive costs compared to manufacturing them in-house.
The power of this function is somewhat limited by the fact that it is measured in terms of efficiency and capacity utilization. The function as a whole is treated as a cost center (Ancona et al., 2009, p. M2, 29). On the other hand, the marketing function also took on the role of the sales function. It was divided into six regions in the US and one international group focused on sales, divided by country. Customer intimacy drives marketing function operations, particularly with technical people in target organizations with whom sales reps developed relationships.
Strong relationships were emphasized, and technical support was given equal importance. The shift in firms from technical-led purchases to business-led purchases meant that Dynacorp’s marketing had to adapt to improve relationships with business people. This change put a strain on customer support and introduced new challenges such as the need for more effective marketing pitches and ensuring new products were launched without major malfunctions or bugs. Additionally, there was an increased demand for systems integration between Dynacorp’s systems and those of their customers.
The explicit interest of the marketing function is to ensure that sales remain healthy in all geographies and markets. This desire stems from marketing’s need to preserve its own turf and highlight its importance as a key function within Dynacorp, potentially competing with the other two functional groups for relevance in the face of organizational design changes (Ancona, et al., 2009, p.).
M2, 29). Product managers and cross-functional teams are a class of stakeholders within the firm that cut across different functional groups. However, as noted in the case, team members focused on certain products and led by a product manager are often evaluated based on their competence in their respective functions rather than their performance in those teams.
As stakeholders, the product managers are primarily interested in enhancing their capabilities and influence over decision-making regarding the products they pursue. However, their efforts may not always be successful or rewarded. Unfortunately, Dynacorp’s strong functional orientation hinders product management teams and cross-functional teams from acquiring the necessary power and influence to succeed.
The line managers and functional managers in each of the three core functions hold more power and influence due to the strong organizational and traditional inertia present in Dynacorp. This grouping has been in place for a long time, making it part of the firm’s DNA [(Ancona, et al., 2009, pp. M2-29 – M2-32)].
It is evident that coalitions exist along functional lines, with marketing people supporting one another and manufacturing and engineering people doing the same.
In cross-functional teams, individuals within their respective functions work together to resolve conflicts and differences in work-related input. They then attend cross-functional team meetings with a united front. However, product managers are acutely aware that functional managers hold more influence over the performance evaluations of their own team members compared to managers from other functions. This highlights the power dynamics and sensitive nature of relationships between different functions.
These reflect the organizational structure and power relations that the functional organization design has established over the years at Dynacorp (Ancona, et al., 2009, pp. M2-28-M2-32). The relationships among stakeholders can be understood by how they attribute major and minor problems in workflow, procurement, business fulfillment, customer interactions, product design, and other related matters to each other.
As previously discussed, product managers often defer to line managers when it comes to evaluating their own staff in cross-functional projects and product-centered team undertakings. Meanwhile, both manufacturing and engineering teams tend to blame marketing for thinning profit margins on products. This is due to the fact that marketing often offers large discounts to customers in order to meet sales targets, regardless of how much those discounts may cut into profit margins.
Manufacturing and engineering efforts are jeopardized by conflicting aims with marketing. While manufacturing and engineering aim to optimize design and lower costs to improve margins on sales, marketing aims to lower margins to drive up revenues. This creates a large gap between manufacturing and engineering, leading to further conflicts.
Engineering focuses on design, while manufacturing complains that this focus does not consider the manufacturing aspects that can bloat costs. Manufacturing also complains that engineering does not factor in common parts when designing products. On the other hand, engineering complains that marketing comes up with too many ideas and changes to product design, jeopardizing efficiency and viability from technical and commercial standpoints. Everywhere you turn along functional lines,
There are conflicts of interest within the organization, as can be seen from the mapping of gripes and problems presented by different functional managers with other departments and functions. Even within functions, managers and employees complain about issues such as having too many layers of management, which hinders innovation, communication, and change. It is clear that there are significant conflicts of interest among stakeholders identified along functional lines and within functions [(Ancona et al., 2009, pp. M2-28 – M2-32)].
This is not to say that all is conflict among divisions. There are many examples of cooperative behaviors on the management level, especially senior management across functions. This can be seen in quick deployments of engineers to product teams in need and the rapid recalibration of manufacturing lines to accommodate surges in product demand (Ancona, et al., 2009, p. M2-32).
Assessment of Individual Stakeholder Power – Type, Source, Amount:
The manufacturing managers, led by the external vice president and head of manufacturing, wield different types of power due to the nature of their work.
One type of power that Dynacorp possesses is derived from their large installed capacity and manufacturing capabilities in key regions across the United States. This power is financial in nature, as the manufacturing facilities represent sunk costs and organizational inertia that are difficult to reverse. It is also investment-derived and quite substantial. Additionally, this power stems from the company culture that relies on vertically-integrated product development, encompassing engineering, manufacturing, sales, and marketing all within the company’s functional lines.
Viewed from another perspective, the company’s strength also derives from manufacturing, which is one of the three functional legs that support the entire organization [(Ancona et al., 2009, pp. M2-28-M2-58)]. The engineering staff, ranging from entry-level engineers to external vice presidents who lead functional groups, wield comparable levels of power as those in manufacturing. However, their sources of power differ significantly in one key aspect.
Manufacturing derives some of its power from the fact that its facilities represent sunk capital costs that must be utilized and are therefore indispensable in some respects. Engineering, on the other hand, sources its power from knowledge capital, which is non-tangible in nature and consists of the knowledge stored in patents and implicit knowledge held by design engineers. This is especially true for those who have been with the company for a long time.
This vast knowledge informs design and innovation. Without it, the company would have nothing to manufacture or market. This type of power is not physical, but the company has made considerable investments in it over time. These investments are reflected in engineering payrolls, patents creation and buildup, and retention investments for key engineering talents that make up its engineering teams.
Among the three functional legs that support the firm, this can be considered the most formidable as it is the source of the company’s competitive advantage and key innovations [(Ancona, et al., 2009, pp. M2-28-M2-58)]. Marketing also holds significant power as a crucial pillar of Dynacorp’s proven but aging organizational design that has effectively served its vertically-integrated business model for years. It represents an inertial organizational power where Dynacorp relies on marketing to generate revenue and establish connections with customers.
This connection with customers and the focused functional effort to market and sell the company’s products are the sources of its power. Part of this power also stems from the expertise that the functional group has developed over the years in that line of work. The historical connection with customers is a significant advantage, without which Dynacorp would have to start from scratch in terms of building up revenues and developing a dedicated customer base (Ancona, et al., 2009, pp. M2-28-M2-58). To get buy-in,
Given the large entrenched interests that could potentially be affected by changes in organizational design, all major stakeholders are expected to present varying degrees of stiff opposition to any proposed changes. However, product managers are expected to support any proposed changes that allow for greater flexibility and cooperation among different functional groups, as they would benefit from such changes by default. As discussed in the case, there are several factors to consider when proposing organizational design changes.
Alternative designs have been studied and included in the recommendations, but there is no agreement on which design is best suited for Dynacorp. Each proposed design impacts different stakeholders in varying ways. For example, product-focused and customer-focused designs, as well as the new front/back design, all require the strengthening of cross-functional teams to enable different functions/disciplines to work together for a product or customer.
The back/front design concentrates power in the hands of marketing and support from a political point of view. It relegates manufacturing and engineering to secondary, follower roles. This will encounter stiff resistance from those two latter groups. The heads of the three functions may be suitable champions who will buy into any proposed organizational designs that have been considered in the case. They have backing from the CEO and are key stakeholders of interest.
Meanwhile, the proposed organizational design that preserves the functional arrangement while fortifying cross-linking mechanisms is the path of least resistance and greatest buy-in for all stakeholders, including product managers and those satisfied with the current design. This design can satisfy all involved parties by responding to the firm’s needs for change while maintaining Dynacorp’s past strengths that still work in the present.
Finding Allies and Building Coalitions
Creating coalitions at middle and upper management levels can facilitate the buy-in process for any proposed changes to the organizational design. However, it is important to ensure that these changes align with the political positions of all stakeholders involved. This means preserving their interests while addressing the most serious concerns and shortcomings of the current organizational design.
At the senior management level, stakeholders can be convinced to support changes by tying their performance evaluations to business and organizational targets. If they see that the proposed organizational design is the best way to achieve those targets, they are more likely to buy in. Product managers are also valuable allies in promoting changes that strengthen product and cross-functional teams, increasing their power and influence within the organization. In conclusion,
Even in the best case, proposed changes to organizational design will cause upheavals across all functions and levels. Resistance from inertia and perceived power erosion by employees in functional groups is expected. However, senior management and product management stakeholders will support change if it is necessary to achieve organizational and business targets, and if their performance evaluations are tied to those targets.
On balance, there are many factors that seem to hinder change. However, larger and more powerful forces compel change and these latter forces and factors will ultimately prevail (Ancona, 2009).
Reference:
- Ancona, D., Kochan, T., Scully, M., Van Maanen, J. & Westney, D. E. (2009). Managing for the future: Organizational behavior and processes (3rd ed.). Cincinnati: South-Western College Publishing.
- Dynacorp Case. (2009). In D. Ancona et al. Managing for the future: M-2, 97-102.Cincinnati: South-Western College Publishing.
