The importance of implementing an appropriate organizational structure for the development of it companies in Ukraine

Study of weaknesses and strengths of small Ukrainian IT business, detection of obstacles in its activity, search for ways to overcome them. Analysis of business structure and hierarchical levels of companies, organization of information flow management.

Рубрика Менеджмент и трудовые отношения
Вид статья
Язык английский
Дата добавления 30.03.2023
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14

Zaporizhzhia National University

The importance of implementing an appropriate organizational structure for the development of it companies in Ukraine

Liudmyla Bukharina, Oleksandra Bukharina

Oksana Onyshchenko,Nadiia Zhabytska*

Ukraine

Abstract

The purpose of this study is to investigate the problems of Ukrainian IT companies faced by them on the way of their growth due to the lack of an effective business structure. The research is focused on the weaknesses and strengths of current organizational structure that any small Ukrainian IT business most commonly would have on the average.

The initial reason to develop this research was to identify the different perceptions between the hierarchical levels inside the average small IT company in Ukraine. Using an exploratory study, the objective was to identify the obstacles the IT business face on its path of growing, as well as to outline the need to create organizational structure that will consider all the requirements and the peculiarities of the IT business. In this article, the Ukrainian IT market is analyzed as the unit that performs its activity under change conditions in the 21st century.

In this context, needs and expectations of a wide range of IT businesses are analyzed. The article is using the theoretical approach. It contains the analysis of the literature review on organizational structures, the IT sector overview and issues concerning the growth and effectiveness of IT companies in Ukraine. The research findings show that the specifics of IT business environment and the concepts of the IT organizational management greatly influence the effectiveness of the management of the business growth and effectiveness.

Keywords: management, project management, organizational structure, IT business.

Introduction

By the 2020 Ukraine is known as one of the worldwide IT outsourcing destination. There are a couple of reasons for such opinion like the high level of experienced and well-educated representatives of software development, the correspondence of the cost vs price of the final product delivery, etc. It is worth to mention that the number of specialists employed in the IT industry reached 200 000 people. Ukraine has over 4 000 companies operating in the IT sphere. Most of Ukrainian IT businesses are outsourced companies which are working mainly with the United States and Western European countries.

Today Ukraine faces a myriad of challenges hampering its progress. These include a systemic corruption, weak rule of law and an economy dominated by oligarchs.

While there are no easy solutions to these complex issues, one of the most immediately obvious low-hanging results is support for Ukraine's IT sector. Potential backing for the IT sector could involve bringing together entrepreneurs, successful startups, small and medium enterprises (SMEs) and trade groups from Ukraine, the US, and partner countries with the goal of creating new opportunities for investment, jobs, partnership and collaboration. The US already has a significant interest in the Ukrainian IT industry. American customers are the largest consumers of Ukraine's IT services, accounting for 50 percent of clients nationally.

In total, Ukrainian IT firms do business with over one hundred Fortune 500 companies. Unlike other sectors of Ukraine's economy, oligarchic interests have not permeated the IT industry, with 80 percent of the sector consisting of SMEs (Atlantic Council, 2020). Additionally, COVID-19 has not significantly affected the industry due to its virtual ecosystem. With that being said, Ukraine has all preferences to become one of the world centers for the IT industry.

However, throughout the research it was identified that mainly Ukrainian companies are the representatives of a small businesses founded by the “amatory” communities; we believe that due to this reason almost all small IT businesses struggle due to the absence of the regular management that must involve the appropriate organizational structure.

Furthering in the study the organizational structure of the average IT company will be described and analyzed. The study has been performed in Zaporizhzhia region IT community and thereby further information will be based on the profile of the average regional IT company.

Literature review

Issues of organizational structure of the enterprise and its optimal construction in order to improve the efficiency of the organization have always been of great interest for both theoretical research and practical implementation.

After all, it is an effective organizational structure and its skillful application is one of the factors of successful development of the enterprise, including in the IT sphere. Thus, the theoretical justification for the introduction of an effective organizational structure at the enterprise is found in the scientific works of domestic and foreign researchers, such as: Ahmady, Gh., Mehrpour, M. & Nikooravesh, A. (2016), Kanten, P., Kanten, S., & Gurlek, M. (2015), Eze, S. C., Bello, A. O., & Adekola, T. A. (2017) and others.

Paper objective

The purpose of this study is to investigate the problems of Ukrainian IT companies faced by them on the way of their growth due to the lack of an effective business structure that would recognize the specifics of the IT business and the environment it is surrounded with as well as to identify the most important factors that should be taken into account for creation an effective organizational structure of company's management.

Methodology

In the course of the research practical examination of the investigated subjects - small IT businesses in Ukraine was conducted. The article is using the theoretical approach. It contains the analysis of the literature review on organizational structures, the IT sector overview and issues concerning the growth and effectiveness of IT companies in Ukraine. The authors' conclusions are based on the results of verbal in-depth survey of small IT businesses in Ukraine that are on the state of development of the business and organizational structure. The focus group was set up to explore the educational assessment and commit its result for the further investigation purpose.

The investigation of 60 IT companies in Zaporizhzhia region indicates the weak matrix organizational structure in most of them. A company usually has 5 departments: Business Development (or sales), Delivery, Project Management, Finance and Human Resource. The role that each department plays in the company's life must be concretize in the context of further organizational structure analyze.

The Business Development Department (BizDev). This organizational unit is mainly responsible for defining and developing new business directions - new markets, niches, partnership relations, sales channels, the development of the company's client base, attraction of new projects etc.

The professionals of BizDev department are split into two groups: Sales and Account managers. The account management representatives work with strategic partners, take part in making of deals with key clients, building processes. Whereas the Sales ones are responsible for the attraction of new projects to the company throughout the IT market like Upwork for instance.

The Delivery Department. This department is responsible for the delivery of the final product to the client. IT delivery is the manner in which a corporation provides IT services, which include Frontend development, Backend development, Data mining, Design and Quality Assurance. The professionals of this department play role in various stages of service or product delivery.

The Project management Department. The project management department is committed to lead the project from the very first stages. It closely works with the BizDev sub department - Sales - in order to make sure that the project has everything that is needed to proceed with. In most companies, the project management department is the weakest spot of the business since it does not have any standards, metrics or practices that are usually applied for managing the project.

The Financial Department. This department along with the project management one hardly could be called as an undependably functioning unit. In most cases the finance management is performed throughout two price formation patterns: Fixed Price and Time & Materials but with the lack of corresponding practices such as financial planning, reporting and controls, short- and long-term business strategy, hedging, cash management, internal risk management, corporate finance, auditing and accounting.

The Human Resource Department. The main function of the HR department at the company is recruitment. Worth to note that the HR managers are also responsible to the Office management activities. The recruitment part covers the following activities:

- determination of the organization's need in personnel;

- personnel selection together with the heads of other departments of the company;

- analysis of personnel turnover, search for methods to combat the high level of turnover;

- preparing the staff schedule of the company;

- registration of personal data of employees, issuance of certificates and copies of documents at the request of employees;

- carrying out operations with employment records (receipt, issuance, filling and storage of documents);

- onboarding of the new employees;

- maintenance of vacation records, drawing up schedules and registration of vacations in accordance with current labor legislation;

- organization of employee appraisals; preparation of plans for advanced training of employees;

- organization of any corporate activity (holidays, birthdays, conferences, etc.).

Any small IT businesses is that it's main goal is to settle on the market a gain the reputation of trusted vendor of IT services. IT business works of the project base which implies that the main product is a variable from a client to client and the management is functioning in constantly changing circumstances. As it is stated in the definition of the project itself, the project is a temporary endeavor undertaken to create a unique product, service, or result (Project Management Institute, 2013). The two most important factors within that definition are depicted in Table 1:

Table 1 The key factors of a project

Project

Temporary

Unique

A project has a fixed beginning and end. Because of this, there are two factors that come into play in virtually every project: time (deadlines) and money

(budgets). These two factors are also fixed and the blurred these boundaries are the more potential there is for a conflict among stakeholders.

No two projects are the same. Some projects are derived from previous projects (therefore similar) but they are never exactly the same. Even if you had, for example, a project to produce 100 widgets for a customer, and then you are given another project to produce the same 100 widgets for the same customer, these are still two separate projects because they have separate schedules (deadlines).

Source: Own compilation

Additionally, to the constantly changing circumstances most of small IT businesses have to come up with a custom solution for the company management as the attraction of a new clients on the IT market is quite cost consuming and on the first steps usually the company would not have enough of finance resources that could be allocated for the creation of an effective and workable organizational structure which will meet all the requirement of a growing business.

Which is why, early on in the company's development (with the number of employees not more than twenty people on board) the company management creates a simple line-functional organizational structure. This allows to provide a transparent and easy manageable system that is applicable and effective for a small IT company.

Since the IT companies are working on the project base, it is often met that the resources are shared between the projects within the company. This is made in order to provide a full-time occupancy of the resources and create a workload within the company.

The line-functional organizational structure implies having one person in charge of all company's activities. With a small number of people on the board the company is able to stick to this organizational structure and remain profitable with fewer hiccups on its way for quite a long time. However, when the business decides to update the company goal to the growth this structure will undoubtable fail.

The average IT small company in Ukraine has approximately 30 to 80 people on the board. Such companies most likely would have a weak matrix organizational structure.

The weak matrix organizational structure is useful in small companies (20-30 employees) when skills need to be shared across departments to complete a task and can allow companies to utilize a wide range of talents and strengths. The project manager or its lead is usually the one in charge of the whole power and decisionmaking process within the project.

Often, in the companies with such structures, solution of actual problems of a department may lie beyond the authority of its head, for example, there are stable problems with downtime or lack of people resources, you need to constantly pull out the team to assess incoming projects. Problems are solvable, but they create discomfort.

The process of reengineering organizational structure in most cases is carried out without a proper planning and is applied in no time at all again due to the lack of the finance resources and skilled specialists who are able to smooth the transition process.

As it was mentioned earlier the IT companies are working on the project base (since the project is its main product). This means that the project manager must be the main role within the project, however, the weak matrix organizational structure usually implies that he or she performs the role of project coordinator rather than project manager. On the scheme 1.1 we have depicted the operations inside weak organizational structure.

Scheme 1.1 The weak matrix organizational structure

Source: Own compilation

On the scheme above it is shown that this type of matrix organizational structure is most similar to a traditional workplace hierarchy. A functional manager (team lead) oversees all aspects of a project and acts as the primary source of decision making.

While there is a project manager who also acts as a point of authority, they ultimately answer to the functional manager.

The average small IT company several main roles that are included in the project:

1. The C-level of management: CTO (Chief Technical Officer) who is the head of the delivery department and PMO (Project Management Officer) the head of the project management department. These roles are responsible for the project entrance. Before the project would be started the CTO and the PMO would have to decide based on the scope of the project to which functional manager (team lead) they should pass on the formulation of the project team and to which project manager the project will be assigned to.

2. The team leader. This role performer is the representative of a delivery department. The delivery department consists of 5 sub-units: Frontend development, Backend development, Data mining, Design, Quality Assurance. Each of the units has its own Team Leader.

This position is occupied by a person who has been selected among those ones who expressed a desire to become one within a particular sub-unit, by the in-house voting. The team leader runs the sub-unit to which he or she has been assigned to. He or she provides guidance, instruction, direction and leadership to a group of individuals (the team) for the purpose of achieving a key result or group of aligned results.

Once it has been decided on the scope of the project the team leaders of a corresponding sub-units and the CTO will formulate the team of a corresponding developers. They will also make a decision on whom will be taking the position of a project lead.

3. The project lead. This role performer is selected among the project team that has been formulated earlier. Project lead within the weak matrix organizational structure is the main role who is responsible for the project performance. This position implies close collaboration of the team lead and the project manager performers.

4 The project manager. This person in this organizational structure performs the role of a project coordinator. In his or her responsibilities included the responsibilities such as providing the transparency between all the stakeholders of the project and the project coordination correspondingly.

To conclude the weakest spot of this organizational structure is the inoperative use of the project management resources as well as the complicated information flows within the company. Any decision that should made has to go through various levels of management which significantly reduces the main competitive factor on any growing business - the flexibility.

To picture this let's take a look at an example of projects management of the average small IT company which has a weak organizational structure. In order to provide the full load of the resources it is considered as a normal practice to share the developers across the projects. Usually, one developer would work on several projects at the same time - these processes could be compared with the Japanese Methodology Just-in-time (JIT) manufacturing, also known as just-in-time production or the Toyota Production System (TPS). As the project is a temporary endeavor undertaken to create a unique product, service, or result, each project would require developers with a different skill set on different project phases.

Due to the fact that the role performers on the project usually take part in several projects at the same time, the process of the project managing, and its boundaries are being blurred out.

This creates a confusion for the lowest unit of the delivery department - the developer. With the weak organizational structure, the developer, would have several supervisors at one time and would not have a transparency of the priorities between them.

In the ideal world all the decision that are applied should be considered and agreed by the top and middle management and only then shared with the project performers, however, in the real world, in most cases each representative of managing layer would give the developer priorities that could differ from the reality and/or the understanding of other managers.

Picture this, when a developer works on the project, depending on its type, he or she would have at least two managers: project lead (the main developer on the project - is responsible for the technical part) and project manager. What if developer has two active projects.

Within small IT businesses it often happens that one developer could take several positions at one time on different projects. For example, developer has three projects: for the first one - provides a support; for the second - represents a project lead; and for the third one actively works as a developer. Each of these projects would have its own project manager and a team leader who do not have the communication processes set between them. Because of this the projects and the developers are constantly suffering from the lack the quality of management at the company.

Result and discussion

After conducting our research, we concluded that the key factor that does not allows the small IT companies to take the path of a growing businesses is the wimpy organizational structure. This line- functional and the weak matrix organizational structure “ties up” the company's management due to the following reasons:

1. The complicated decision making paths;

2. The poor use of the project management resources.

As a concur solution for the above-mentioned structures we would like to suggest the small businesses to take a look into implementation of a strong matrix structure. The strong matrix organizational structure provides the project manager with equal or more power than the functional manager (team lead and/or project lead). The project manager has primary control over resources and distribution of tasks. This type of structure is useful when skills need to be shared across departments to complete a task and can allow companies to utilize a wide range of talents and strengths. There are several benefits of implementing a matrix organizational structure within the workplace. These benefits include:

1. Increased communication efficiency. A matrix organizational structure allows multiple departments to easily communicate and collaborate on a project. Because employees report to multiple managers (that would be clearly specified before the start of the project), as opposed to various stakeholders, issues are resolved more quickly, and company-wide interaction is improved.

2. Improved employee motivation. In a matrix organizational structure, employees have much more autonomy and input in projects. This type of structure encourages employee contribution and places a higher value on workers' point of view. Matrix organization, employees work across multiple projects and with various departments within the company. This increases employee interaction and promotes a better sense of teamwork

3. Maximizes resource usage. This type of structure would allow the company resources to be maximized because of how equipment and employees are shared across projects. A matrix structure also would allow project managers to work in the areas of their expertise rather than being pulled across multiple projects, boosting the overall contribution of their talents.

4. Increased employee professional development. A matrix structure will provide employees with work across a wide variety of projects and require them to utilize and/or learn different skills. Being exposed to various job duties and responsibilities can increase employee development and enhance their professional skills. Nevertheless, it will also give the company the way to manage cross functional teams - which will enable the management to reach the maximum efficiency of the resources use.

As we have mentioned before the strong matrix organizational structure implies that the project manager would be the main authority within the project. Hence, the next step before applying the new organizational structure would be to rearrange the project management department.

The first and the most important factor that the company management should pay attention to is the proficiency of the project management role performers. Considering that the company who has the weak matrix organizational structure most likely has weak performers of the project manager's role since their responsibilities cover only the project coordination. Which is why we believing the company management would have to make either one of two possible decisions. The first solution would be to replace the current members of the department with strong project managers. In order to carry out a strong matrix structure the project management department should be one of the strongest departments within the company. Now let's identify what skill set should have a strong project manager representative.

We may highlight such primary components of the role of the project manager:

1. The basics of architecture and Release management.

2. Planning.

3. Communication.

4. People Management.

5. Mastery of tools.

6. Management of requirements and documentation.

7. Budget management.

These are the skills the project manager would need to have in order to occupy the main role of the project. Creating a strong project management team would help the companies to prosper by delivering a high quality of services and products and effective use of the project management resources. This will also allow the other role performers to dig dipper into their sphere of expertise by not spreading their powers on the management rather than on the developing the project itself. information ukraine business management

The second solution would be to stick with the team that the company already has but fulfill it with additional resources. It is considered as a good practice along the HR management to have a proportion of highly skilled professionals and junior & middle level ones. This would help a company to create a competitive environment in the team.

The second factor that is as important as the previous one is to create a document where would be specified the relations within each department (and between the departments), the role representatives' area of responsibilities, required skills of the role representative, the workload of each role, etc., before applying any changes to the structure first.

Every process, and how it is performed, who are the people you may ask for help. Setting up such document will help the current employees and the fresh one to easily infiltrate themselves with the new changes applied. This will also reduce the level of uncertainty for the developers in particular, as the document would also specify who is responsible for setting the priorities for a day/week.

Once the document that describes the new organizational structure and the skilled project managers would we set, the company would be ready to start the reorganization. We believe that applying the described above changes will create a proper structure of the company that will increase its profitability.

Below, on the scheme 1.2 it is shown what a strong matrix organizational structure for the small IT company would look like.

Scheme 1.2 The strong matrix organizational structure Source: Own compilation

The strong organizational structure is useful when skills need to be shared across departments to complete a task and can allow companies to utilize a wide range of talents and strengths. It implies that the project manager with have equal or more power than the functional manager (team lead and/or project lead). The project manager has primary control over resources and distribution of tasks.

The strong matrix organizational structure will help the company to overcome the disadvantages of the weak one. The disadvantages can be countered in the following ways:

1. There will be close cooperation between the project manager and the functional manager to avoid confusion and conflict.

2. Communication will be well defined and occur in all directions. This is important to gain support from executives, managers, supervisors, and employees.

3. The strong matrix organization would also force business to communicate their vision, objectives, and goals with their employees.

Since strong matrix structure implies that a project manager is the one who is responsible for the distribution of the resources between the projects, it will help the company to set up proper informational streams across the departments. In the strong matrix structure roles and responsibilities should be clear and communicated to employees to avoid confusion.

With the above mentioned, we would like to strongly suggest to the growing IT companies' management before applying any changes to the structure first to create a document where would be specified the relations within each department (and between the departments), the role representatives' area of responsibilities, required skills of the role representative, the workload of each role, etc. Every process, and how it is performed, who are the people you may ask for help.

Setting up such document will help the current employees and the fresh one to easily infiltrate themselves with the new changes applied. This will also reduce the level of uncertainty for the developers in particular, as the document would also specify who is responsible for setting the priorities for a day/week.

Conclusion

Setting up an effective organizational structure that will meet all the requirements and the peculiarities of the business is a mast have for any company. The small IT businesses in most cases do not pay attention to the planning phase of the company's organizational structure rearrangement process due to the lack of time and resources. However, by performing this investigation we're now able to state that as well as a strong base of the business (organizational structure) the planning phase plays one of the most important roles in the rearrangement. Ignoring it would lead to the same result the small IT companies already have - chaotic business processes; inefficient resource utilization; loss of flexibility of the processes within a project as well as the whole company.

Considering all the efforts that are required for the rearrangement of the company for the growing IT business we believe that the strong matrix organizational structure is an absolute “must-have”. It will help the companies' management to set up the processes where all the resources will be used effectively; the informational flows will be transparent for all stakeholders evenly; and there will be no overload of employees.

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Анотація

Важливість впровадження відповідної організаційної структури для розвитку ІТ-компаній в Україні

Бухаріна Людмила Михайлівна Запорізькій національний університет Запоріжжя, Україна

Онищенко Оксана Анатоліївна Запорізькій національний університет Запоріжжя, Україна

Бухаріна Олександра Олегівна Запорізькій національний університет Запоріжжя, Україна

Жабицька Надія Сергіївна Запорізькій національний університет Запоріжжя, Україна

Метою даного дослідження є вивчення проблем, з якими стикаються українські ІТ- компанії на шляху свого зростання через відсутність ефективної бізнес-структури.

Дослідження зосереджено на слабких та сильних сторонах поточної організаційної структури, яку в середньому має будь-який малий український ІТ-бізнес. Початковою причиною для розробки цього дослідження було виявлення різного сприйняття між ієрархічними рівнями всередині малої ІТ-компанії в Україні.

Використовуючи дослідницький підхід, метою було виявити перешкод, з якими стикається ІТ-бізнес на шляху свого розвитку, а також окреслити необхідність створення організаційної структури, яка враховуватиме всі вимоги та особливості ІТ-бізнесу.

У цій статті аналізується український ІТ-ринок як одиниця, яка здійснює свою діяльність в умовах змін у ХХІ столітті. У цьому контексті аналізуються потреби та очікування широкого кола ІТ-бізнесів. У статті використано теоретичний підхід. Він містить аналіз огляду літератури щодо організаційних структур, огляду ІТ-сектору та питань, що стосуються зростання та ефективності ІТ - компаній в Україні.

Результати дослідження свідчать, що специфіка ІТ бізнес-середовища та концепції організаційного управління ІТ значною мірою впливають на ефективність управління зростанням та результативністю бізнесу.

Ключові слова: менеджмент, управління проектами, організаційна структура, ІТ- бізнес.

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