ING Insurance Organizational Structure and Design Analysis

Organizational Structure: Core Concepts and ING's Framework

The structure of an organization plays a key role in its sustainability and growth. ING's organizational structure has supported its expansion, and it can be assumed that the current structure is largely functional, though not without problems. To better understand where ING's system stands, it is useful first to examine conventional organizational concepts — work specialization, chain of command, and span of control — since these form the basis of any organizational system.

Span of control relates to the number of managers needed at each level of a system — in other words, a manager's ability to supervise subordinates weakens as the number of those subordinates increases. Span of control essentially describes the ratio between managers and the people reporting to them. The effective span of control — the number of personnel a single manager can oversee — may be larger when all employees perform identical work, but smaller when there is a variety of operations and diverse personnel engaged in different activities. A narrow span of control, where a manager oversees only a few people, can necessitate the employment of more managers and consequently turn the system into a bureaucracy, as happened with Google when it had managers with very short spans (Gitman & McDaniel, 2008).

In ING, the span of control is reasonably clear within individual country units, but becomes unclear when the regional offices — particularly those in Malaysia — are examined. While the independent country units appear to have developed a workable span of control within their borders, the regional office in practice has neither a well-defined authority nor a clearly identifiable span of control. This ambiguity represents one of the most significant structural problems in the organization (University, 2008).

Work specialization has produced a new breed of workers who are specialists in particular areas. These specialists require coordination, and departments are created to group them under a single manager who facilitates that coordination, enabling the department to contribute to the company's overall objectives (Robbins, 2009).

Departmentalization and Authority at ING

There are five forms of departmentalization, each reflecting a different basis for grouping activities. Functional departmentalization groups employees by specialist function — for example, a marketing department composed of marketing specialists, or an IT department staffed by engineers. Product-based departmentalization creates distinct departments for different product lines or manufacturing processes. Customer-oriented departmentalization establishes a dedicated wing to attend directly to customers, including in modern systems through electronic interaction and Customer Relationship Management (CRM) processes (Robbins, 2009).

Geographic departmentalization addresses regional differences; for example, a company exporting from Japan to the United States might maintain a U.S.-based department that complies with local laws, employs English-speaking staff, and adapts to American cultural norms. Finally, process-based departmentalization organizes work around the sequential procedures required to deliver a service — such as the processing of insurance applications, where specific steps mandated by law or custom must be followed in a precise order (Robbins, 2009).

The consultants who submitted reports on ING captured only one aspect of the company's departmentalization. A full, comprehensive view was not obtained, partly because of the error of applying a strictly departmentalized analytical lens to a company that does not in fact operate on a purely departmentalized basis (University, 2008).

Historically, responsibility and power were grounded in formal authority — an assumed right attached to a position, perceived as the sole source of influence. Under this model, managers were all-powerful by virtue of their title. That notion changed with the technological revolution, which created specialists whose expertise managers must rely upon. Power is therefore no longer the monopoly of a position; instead, a symbiotic relationship exists between managers and specialists. At the same time, managers must still take on responsibilities and require authority to carry out their roles. Authority differs from power, though it does confer power; yet even formal authority alone is insufficient today to secure the resources and cooperation a manager needs (Robbins, 2009).

In ING's system, confusion remains about the relationship between power, authority, and unity of command. It is unclear whether the regional office sits at the beginning of a chain of command or whether it exercises genuine authority. When observers question what the regional office actually does, this uncertainty itself signals that its authority is not well established (University, 2008).

Mechanistic vs. Organic Structures and Contingency Factors

Decentralization works well where operations can be carried out regionally without heavy supervision, or where cultural and geographic factors make a localized approach necessary. At the same time, formal systems that define a set of activities and responsibilities are required to maintain structural integrity and prevent chaos. Every organization therefore needs a combination of flexibility and rigidity. In ING's case, the company operates on a centralized model, with the chain of command originating at headquarters and flowing to regional offices and then to national units. However, there appears to be a maladjustment between the centralized and decentralized elements of the system.

Organizations generally follow one of two structural patterns. The mechanistic pattern features high job specialization, extensive departmentalization, a rigid hierarchy, narrow spans of control, and a long chain of command. The organic pattern, by contrast, involves less specialization, fewer rigid departments, wider managerial spans of control, decentralized decision-making, and a shorter chain of command (Gitman & McDaniel, 2008). ING exhibits more of the organic pattern. There is a high degree of job specialization — the company's financial products are inherently specialized — but these products must also be attuned to the individual financial climate of each country in which ING operates.

The immediate contingency factor shaping organizational design is the market and the organization's ability to compete by delivering better services or products. System design must accommodate specialists and departments, bridge geographic differences, and allocate authority and decentralization appropriately. No modern organization can function without a substantial number of specialists, diverse personnel, and advanced technology — a configuration that creates considerable complexity (Daft, 2009).

Designing a system therefore requires tailoring not only how the company will offer its services in different markets, but also how its units will interact with one another and who will be accountable to whom. Modern organization charts can resemble a spider web, with connections radiating from the center to many individual units. Unlike hierarchical systems, modern structures tend to be flat. Organizational design is shaped by strategy, but it is ultimately contingencies that determine structure. In stable environments, traditional methods tend to persist; in fluctuating markets, dynamic and flexible structures emerge (Daft, 2009).

Theoretical considerations must also be incorporated, including prevailing laws and fundamental economic and psychological theories. For instance, one theoretical perspective holds that people seek greater responsibility, autonomy, and freedom at work, suggesting that participative management — which involves workers in decision-making — is more effective. Another contends that work flows most efficiently through specialization and a clear chain of command. The concept of span of control is, in nature, at odds with self-managed autonomy. Organizational design must promote self-esteem and autonomy rather than enforcing a strict hierarchy that can generate resentment and even psychological harm (Kanungo, 1982). Organizational design has therefore become a complex, multidisciplinary undertaking.

Porter's three traditional designs are built on differentiation, low-cost leadership, and focus-based operations. These are supplemented by the "prospector" and "defender" systems articulated by Raymond Miles (Daft, 2009).

Modern organizations have embraced flexibility because traditional structures are rigid and do not adapt well to dynamic markets. Contemporary competitive conditions require rapid and flexible adaptation. Organizations designed on traditional, rigid models are not entirely nonfunctional, but they frequently encounter difficulty keeping pace with more agile competitors. Companies such as IBM, Sears, and General Motors have experienced substantial problems in this regard. In the 1980s, firms including Motorola, General Electric, and Xerox transitioned from traditionally designed organizations to more modern, flexible systems informed by a postmodern perspective (Volberda, 1999).

Advances in information technology have transformed how information is processed and communicated, how tasks are performed, and how firms are managed. Functions such as engineering and accounting have been redesigned so that steps once distributed across multiple positions are consolidated into single, more efficient roles, producing electronic hierarchies that are flatter but more productive (Allen & Morton, 1994).

The modern information economy has required management methods to be refined to accommodate technological change and evolving information flows. On a global scale, serving customers across many countries intensifies competition — including price wars, which are widely recognized as unsustainable. In some industries, such as computer sales, price reductions of 30% within a single year are not uncommon. Management systems therefore evolve to reduce manufacturing costs, shorten output timelines, and maintain enough flexibility to rapidly deploy changes that keep the company's products competitive and distinctive in the market (McKern, 2003).