Strategic Design at Dynacorp

vCase Analysis:

“Strategic Design at Dynacorp”

I. Dynacorp at a Glance

The Dyna Corporation is one of the leading global information systems and communications (ITC) companies. Dynacorp has its roots as an office equipment company and moved into high technology applications.

In the 1980s it became industry leader, being famous for technological innovations and high quality products.

The 1990s were a challenging period for the company. The former rapid growth decelerated and earnings were reduced as well.

Eventually, both inside and outside critics, identified that Dynacorp had problems in bringing new products to market, that costs were too high, and that it reacted too slow and unresponsive to changes in the market. Furthermore, ITC consulting firms entered the market and have become a serious competitor for the simple reason that they offer a higher value to their costumer through additional services and solutions.

II. Identification of Dynacorp´s status quo

Like many new companies, Dynacorp has adopted since their first days the functional grouping structure, as shown in figure 1. The strategic design consisted of three line divisions, namely engineering, manufacturing, and marketing. These were supported by corporate center units, for instance finance and human resource management.

Figure 1: Outline of Dynacorp´s Functional Organization

The engineering division was divided into ten groups of technical areas. In the beginning its personnel was based in one location. But over the time the engineering division was spread across three regions of the USA.

The manufacturing division was organized by location and controlled as a cost center. Like engineering, Dynacorp`s manufacturing division has started in one location, but afterwards it expanded to 12 plants in the USA and in Europe. In the beginning some factories had begun to produce one specific product line, but nowadays, due to a broader product range, most factories produce various product lines.

Like the manufacturing division, the marketing division was organized geographically as well. However, the geographic units differed from those of manufacturing.

III. Analysis of Dynacorp´s status quo

Subsequently to the general description of Dynacorp`s organizational design, it is time to understand its structure and its inherent problems. It is worth using the strategic design lens for this analysis. From this perspective the functional group structure has some strengths and weaknesses, which can be identified within Dynacorp.

First of all, it is valuable to know the fundamental tenor of a functional structure. Basically it brings individuals together who share similar functions, disciplines, and skills. This point helps to identify Dynacorp´s major problems, the time to market and the unresponsiveness to market needs. These problems are caused by the separation of the three functions. For example one assumption of the functional design is the existence of a sequential interdependence. This means that a process is divided into distinct stages. However the case shows that the Dynacorp´s product development process is actually a reciprocal process with dense interactions and is not a step-by-step process. For example every customer wish or proposal of the manufacturing division leads to a redesign of a product, delaying time to market, and/or eventually leading to higher costs. Dynacorp tried to solve this problem with two strategic linking techniques: cross-functional teams and product managers. However, the cross-functional teams failed and were insufficient because of the team members who persisted in wearing its functional hats. In addition, Dynacorp´s product managers have the typical characteristics of functional organization members. They have a deep functional expertise, but due to a career within a specific function the product manager have a narrow perspective and are not capable of merging the perspectives of the divisions. That is indeed why they failed.

Furthermore, this attempt reveals an additional point which has to be addressed. Namely the need of a functional structure to have a separate incentive and control system. This is confirmed by Dynacorp´s evaluation problem, especially the ”two bosses problem”.

The case also says that employees complaint about the tall hierarchy. This is also a disadvantage of functional organizations. The high number of layers is responsible for the slow information flow. Moreover, it is likely that each organizational