The Harvad Business School case study sheds light on 21st century eBay issues and overall online auction industry. Ebay was founded by Pierre Omidyar in 1995. The online site proved to be great success and opened a new platform in online auction industry. The company had functional structure where open communication and decentralization was Omidyar’s vision. However, with the increasing operations, the founder stepped down as CEO in 1998 although he remained chairman on the board. Omidyar was however replaced by Meg Whitman. Whitman brought various changes and went into IPO for the first time and ebay becomes public traded company. New divisions were formed and new president was added to meet the growing need of the organization. Further, the organizations design change to bureaucratic where rule and procedures were given importance. This was important to formalize many procedures. However, the company faced some problems regarding Trademark infringement and Tiffany Jewelers sue on property issues. The company had to undertake cost cut measures and resulted in employee’s dissatisfaction. However, with the growth of the company transformation of the organization’s design has become imperative.
Online auction industry has changed the role of conventional selling and buying. The online auction industry is growing rapidly as more and more buyers and sellers are coming towards online platform. Ever changing expectations of the users in terms of ease of use, volume of goods offered, the population of buyers and sellers, security in payment and delivery of goods and on site resources has put pressures on the organization’s design.
Hence, an organization requires adapting to the changing environment by Grouping and Linking/Integrating activities in the organizations’ structure.
Ebay has evolved its organization design from Uform or functional to a bureaucratic over the years in wave to cope with the increasing challenges of growing organization. The behavioral model based on open communication, decentralization less bureaucracy was converted to bureaucratic design where reliance on rules and procedures increased. The done changes were necessary as the operations of the company were growing and the leadership change was also witnessed. The bureaucratic environment helped in creation of formal procedures and rules to carry the growing operations of the company.
However, the organization design of the eBay gave importance in grouping various activities but neglect to create linkage among them. The failure in creating the integration among the grouped activities resulted in procedural lapses, employee’s dissatisfaction and an ambiance of stagnant growth. The case of Trademark infringement and Tiffany Jewelers also portray that the organization was unable to anticipate the expectations of the external environment owing to less employees participation towards the organization’s goals. Thus, the design of the eBay needs to enter into next stage of evolution.
Organization needs to establish the mechanisms of integration that will facilitate coordination and information sharing across groups. Moreover, this will enable leadership to provide guidance and direction across the organization. Thus a hybrid organization design is required where each unit has specific strategies objectives and goals yet have close integration for the achievement of organization’s core objectives.
Yes, the company’s design will change as it grows. The functional division along with open communication and decentralization would create the ambiguity regarding the roles of each employee. A haphazard environment would prevail as the operations of ebay are increasing with the changing expectations at the buyer and seller’s end. Hence, need to clearly define the roles of each division would become imperative. Formal rules and regulations should be defined and each employee should be insured to adhere to the rules. Further, with the growing operations the company needs to define the span of control of the mangers. The decentralization is important for the functional divisions however they should also be monitored against the set objectives. For employees to remain creative and productive the organization must encourage the participation that start to lack to bigger organizations.
The functional design is suitable when the organizations are small and the activities are limited. However, with the increasing trend the company needs to convert the functional design to the hybrid structure that should mainly focuses on customer market model and geographical model. The customer market model organized around customers/clients. Customers are very different, and have different service requirements based on the different products they bring on the auction platform.
Further, the geographical model will enable the company to deeply analyze the buyer and sellers expectations belonging to particular region and to understand the regulations governing that territory.
The organization functional model should be complemented with the integration among various departments. This will enable the employees to move in a specific direction. Further, these organization designs will also facilities the buyers and sellers to better communicate as each unit is performing dedicated job that increase the efficiency.
Read More MBA case studies