Organization Structure and Design - Assignment Example

? Topic: Lecturer: Presentation: TABLE OF CONTENTS CONTENTS PAGE Introduction 3 Purpose of the Report 3 Scope of the Report 3 Organizational Background 3 2. Organization Structure and Design 4 Types of Structure 4 Factors Affecting Design and Structure 6 Organization Design 7 3. Teams and Team working 9 Team Effectiveness 9 Team Leadership 10 4. Approach to Leadership and Management 10 Leadership Vs Management 10 Leadership and Management Models 11 5. Organizational Culture 12 Definition 12 Importance of Culture 13 6. Conclusions 14 7. Recommendations 15 8. References 16 9. Appendix 19 1.0 Introduction Purpose of the Report The purpose of this report is to provide a critical comparative analysis of two organisations in the way they are operated and managed. This is to help us in discovering what causes success or failure for organisations and how different organisations adapt to dynamic environment. Organisations not flexible enough to adapt to the environment are unable to attract and retain talented employees or take advantage of available opportunities hence cannot achieve organisational effectiveness. Scope of the Report To analyse the operation and management of the two organisations the report will consider how they are structured and designed so as to show the interrelationships between roles and departments and lines of authority. Secondly, report will cover organisation of work especially the use of teams and team working. Thirdly, it will analyse the approaches to leadership and management adopted by the organisations as this determines their success or failure. The report will then analyse the organisational culture and its impact on the organisations operations and lastly, conclusions and recommendations will be made on how to improve operations and management. Organisations Background Biogenta is a manufacturing company producing crop-protection products and whose mission is to be the most trusted provider of crop-protection products in the world. It has manufacturing facilities in 10 countries and employees in over 80 countries. Contrary to popular belief that large size companies are bureaucratic in nature, Biogenta has an organic structure and a matrix design where individuals belong to a functional area and a project team. The chief executive officer, Jane Morgan is an effective leader and manager whose encouragement of creativity and innovation has pushed the company to greater heights. The company has a very strong culture which emphasizes on learning and development, diversity and corporate social responsibility. Outback Inc is a traditional organisation run by family members. It offers tourism services to wide range of clients and operates in a very turbulent environment. Being a small organisation, it is expected to have an organic structure but instead, it is bureaucratic in nature with a functional design and little or no teamwork. Creativity and innovation is hindered by its autocratic leadership style. The company has no vision or mission and has a high turnover culture due to lack of opportunity for advancement and employee voice. 2.0 Organisational Design and Structure Benowitz (2011, p.70) defines an organization structure as “the configuration and interrelationships of positions and departments”. An organisation design on the other hand, is the change of an organization structure to enable it to respond effectively to environmental changes. A poor organization design and structure can lead to lack of co-ordination among functions, slow decision making, and role confusion (Corkindale, 2011). Types of Organisation structure An organisation structure is determined by the degree of complexity, formalisation, and centralisation. Complexity reflects the amount of differentiation in an organisation; formalisation shows the degree to which an organisation uses rules and procedures to direct behaviour while centralisation reflects how power and authority is distributed in an organisation. Gitman and McDaniel (2008) recognise two kinds of structures; mechanistic and organic structures. A mechanistic structure has a high degree of complexity, formalisation, and centralisation. It is characterised by formal communication, clearly defined tasks, strict hierarchy of authority, formal rules and procedures, and promotion is based on competency. An organic structure has low complexity, formalisation, and centralisation and is characterised by little formal authority, flexible roles, delegation, and communication in all directions. Though both organisations have a functional structure, flexibility and communication at Biogenta is enhanced through use of cross-functional teams thus it has elements of both structures. A simple organisation chart for a traditional structure is shown below. Exhibit 1.0 Functional Structure Factors affecting Organisation Design and Structure Griffin and Moorhead (2010) indicated that an organization design and structure is affected by size, environment, and technology. Small organisations have an organic structure, but as they become larger in size, they become more mechanistic due to need for formal rules and procedures to enable fair and equal treatment of employees. However, modern organizations make use of both mechanistic and organic structures to improve efficiency and competitive advantage. Rules and procedures are to guide employees in their daily functions, but flexibility is also required to respond effectively to changing environment. This can be achieved through horizontal communication. For example, Biogenta makes use of information technology and minimal hierarchies to allow direct communication and use of project teams to solve problems. Many hierarchical levels are barriers to communication and hinder creativity and innovation (Bratton, 2010). Many young employees with brilliant ideas on product innovation at outback are unable to share them due to many hierarchies. Mechanistic structures are suited for stable environments but organisations in a dynamic environment need flexible structures to compete effectively in the global market. However, Outback which operates in an environment where there is shortage of skilled staff still emphasises on bureaucracy rather than empowering employees hence high labour turnover, and loss of customers due to poor services. An open environment enables the organisation to manage change, improve reputation, and make better decisions (Mullins, 2010). Organisation Design Research (koontz and Weihrich, 2007) shows that there are various approaches to organization design: functional, divisional, matrix, team, and networking structures. The functional structure groups activities according to similarity, skills, and resources. Biogenta is grouped into four functional areas: research and development, manufacturing, sales and marketing, and support while Outback is divided into marketing, finance, and human resources. This ensures there is no duplication of personnel and equipment leading to productivity. It also leads to mastery of skills through specialization. This may improve productivity, but with time; Mills A, Mills J, Bratton, and Garshaw (2007) found that specialization creates boredom and job dissatisfaction hence high turnover as experienced in Outback. This design also hinders communication between various departments making the organization unable to respond to changes (Bratton and Gold, 1999). An example of functional design is shown above in exhibit 1.0. The divisional design divides departments according to output hence production, customer service, or geographical departments. This allows managers to focus resources where they are needed to achieve results; however, recent research (Hayes, 2002) shows that this departmentalisation may lead to competition among departments for scarce resources and duplication of activities leading to wastage of time and resources. Cliffs Notes (2012) defines a matrix structure as “one that combines functional specialization with the focus of divisional structure”. It encourages cooperation, better customer service, flexibility, and training; however, it may lead to power struggle for managers and conflicts as employees report to two bosses thereby violating the unity of command principle. For example, Biogenta has four functional departments and several cross-functional teams to assist in product development as shown in exhibit 1.1. Exhibit 1.1 Matrix Structure 3.0 Teams and Team working Types of Teams A team is defined as a group of people with complementary skills committed to a common purpose and a set of specific performance goals (Hayes, 2002). Traditional organisations emphasized on individual work hence complex division of labour. This was as a result of scientific management principles developed by Taylor to enhance efficiency and productivity. However, contemporary organizations have realised the need to utilize teamwork to facilitate learning, build strong relationships, and improve performance. Research (West, 2012) indicates that teams may be large or small but small teams are recommended since they are easier to manage. The functional teams are permanent and included in organization chart. Cross-functional teams are used to accomplish various tasks and are permanent, or temporary. Members are recruited from different functional areas and have diverse expertise thereby enhancing transfer of skills (Armstrong and Baron, 2002). For example, the Biogenta herbicide development team comprised members from various functional areas with diverse skills; Jacqueline from marketing had a degree in biology while Jonathan from manufacturing had a PhD in chemistry. Biogenta also utilizes virtual teams to enhance teamwork in various geographical locations. For Outback, individual work is emphasized. Team Effectiveness Heathfield (2012) in her research noted that giving clear expectations in terms of performance and outcome so that team members can know what is expected of them is vital to achieving effectiveness. It allows the team to design its goals and formulate strategies to achieve them hence motivation and commitment towards the goals. For example, the team from Biogenta led by Tate worked long hours but didn’t give up as it was committed to accomplishing its goal. Management support to the team in terms of resources such as time, and skills is vital and so is recognizing and rewarding individual and team effort to motivate and improve performance. This view is supported in the work of Parker (2008). Further research (Heinemann, 2002) noted that care should be taken when rewarding the team as different personalities have different perceptions regarding rewards. Biogenta utilizes non-monetary rewards such as training and development, perks, and gym membership. Team Leadership The team leaders should create conditions that enable the team to work effectively (Jones and George, 1998). The Biogenta team leader allowed members to socialize outside work by performing various activities such as shark- fishing, and sampling the night life of Durban thus creating a good work atmosphere, and making work a fun. The team leader also has a task of ensuring the team works collaboratively and clearly define roles to avoid conflict and enable each member to know what is expected. Feedback on performance is also essential to enable the team to review its strategies, and know if their objectives are being achieved. 4.0 Leadership and Management Leadership is often used interchangeably with management but the two concepts are different. Gold, Thorpe, and Mumford (2010, p. 28) argue that leadership involves setting direction for followers while management entails directing people according to already established principles. The manager’s functions include: organizing, planning, staffing, directing, motivating, developing, and controlling and need formal authority in order to be effective. Leadership and Management Models The leadership approach used by any organisation can be attributed to many factors. Traditionally, the trait theory was used to explain a leader’s success and was based on the belief that effective leaders possessed certain traits such as self-confidence, charisma, determination, ambition, innovation, and high motivation (Hill and Jones, 2008). Leaders who possessed such traits such as Biogenta’s CEO are thus considered successful. She is inspirational and highly motivational thus encouraging staff to be creative and innovative. Outback leader lacks ambition, creativity, and charisma to influence followers. According to Macgregor’s theory Y and theory X, theory X managers do not believe in their workers hence exercise more control over them and don’t allow them to make any decisions (Mullins, 2010). These are autocratic managers such as the outback’s CEO. On the other hand, theory Y managers are democratic; they involve employees in decision making and are risk takers such as the CEO of Biogenta. She gives full control to the teams to carry out the assigned tasks and ensures they are fully equipped with skills and resources. She is also a transformational leader in that she gives a clear vision and ensures employees are committed to achieving it by motivating them. The behavioural theorists’ believe success is a result of leader’s behaviour. Some leaders have high concern for production while others have high concern for people (Schein, 2010). This results in five leadership styles which are represented in a managerial Grid developed by Robert Blake and Jane Mouton as shown in exhibit 1.2. For example, the Biogenta CEO has great concern for people and production and hence uses the team style (9.9) which is the most efficient. She ensures the employees are empowered and their personal needs are addressed through in-house training courses for technical and personal development, fees for further studies, and a conducive working environment. For products, innovation and new product development are encouraged. The management of Outback has no concern for employees or the products hence he is an impoverished leader (1.1). As a result, the employees are not listened to, so even though they have great ideas they cannot share them to improve products, staff development is non-existent, limited teamwork, and continued use standard travel agencies leading to poor client service. According to the contingency theory of management, there is no best way to lead; it depends on the situation. The Hersey and Blanchard model (Griffin and Moorhead, 2010) suggests that leadership style depends on the followers’ willingness to accept responsibility, and as readiness improves, leaders should change their styles. For example, since Outback employees are eager to learn, are highly motivated, and have great ideas for improvement; the leader should give them a voice. Great leaders are also aware of their environment and are able to change accordingly. For example, management of Biogenta utilizes virtual teams over different geographical locations hence is able to take advantage of opportunities in the environment. 5.0 Organisation Culture Organisation culture refers to values, norms, beliefs, and attitudes shared by people and groups in an organization. Research (Kotter, 1992) suggests that culture controls how employees interact with each other, and the stakeholders outside the organisation, and is influenced by manager’s beliefs and values. Cummings and Worley (2005) in their research found that culture is shaped by size and nature of workforce, technology, organization history and ownership, industry, and external environment. The culture of Outback is influenced by the industry which encourages autocratic style of leadership. The ownership also affects its culture; the family encourages development of hierarchies to serve personal interests thereby hindering teamwork and innovation. Importance of culture A strong culture results in high employee motivation and loyalty, increased productivity, and reduced turnover. Alvesson (2002) noted that a healthy organization culture involves accepting and appreciating diversity. For example, people of 20 different nationalities were employed in the research and development hub of Biogenta. This encourages sharing of information and ideas leading to success. Strong culture also involves treating employees fairly and respecting their contribution, offering equal opportunity for development, strong communication with all employees, and strong leadership with a sense of direction. Culture is important in attracting and retaining employees as it reflects the values of the organization and how things are done (Benowitz, 2011). Some people search for jobs in certain companies due to reputation which is a result of organisation culture. Biogenta has established mission and values as a result of consultation with stakeholders and also values a culture of creativity, growth and learning, open and honest relationships as well as creation of fun. These values together with the mission of being the most trusted provider of crop-protection products guides the behaviour of all members of the organization. A culture of teamwork is also encouraged and in line with company values, the teams manage to create fun despite tight deadlines. It also practices corporate social responsibility by sponsoring exhibitions and museums and encouraging staff to contribute to community work and school projects. This enhances relationship with surrounding communities, and stakeholders thereby gaining their support as well as building reputation. Outback on the other hand, has no mission, vision, or values to steer the company forward. The company has also a bad reputation due to its poor client services; it is not committed to meeting clients’ expectations. The company does not encourage creativity or team work, and has poor communication with employees; employees are not listened to and therefore even though they have great product improvement ideas, they prefer to keep quiet to avoid being blamed. As a result, the company has been experiencing various problems such as high turnover, decreasing profitability and inability to capture new markets. 6.0 Conclusion Different organisations are operated and managed differently depending on size, structure, leadership and management as well as organisation culture. Traditional organisations encouraged bureaucracy as it was viewed as an effective means of ensuring equality and fairness and increased efficiency and productivity. However, due to globalization and environmental changes, contemporary organizations have embraced the need to continually change their organisation strategies. Most organizations make use of combination of organic and mechanistic structures and also a matrix organization design which is product and customer oriented. The use of team working especially cross-functional teams has also proved to be effective in ensuring organisation success. Some organisations like Biogenta have gone as far as utilizing technology to form virtual teams hence reducing boundaries. Though the management of Biogenta has a high concern for its workers, it still has not taken advantage of a variety of rewards available to enhance motivation and commitment and also fulfil their needs. Though a matrix design is effective, the organisation is growing in size by venturing in many geographical areas hence the matrix design may not be effective in future. For outback, the leader has no vision, does not scan the environment to take advantage of opportunities such as emerging clients from China, and does not value his employees hence does not listen to them. Teamwork is also not encouraged as people are confined to functional areas. The organisation structure, culture, and leadership inhibit creativity thus resulting to high turnover and poor performance. Moreover, there are no rewards offered to employees for motivation hence it is not a fun place to work. 7.0 Recommendations Outback organization has potential for success but it has to change its strategies on how it is organised and managed. It should redesign its structure to be more flexible since it operates in a dynamic environment by reducing hierarchies and encouraging teamwork by use of a hybrid structure. It should also remove barriers to communication by empowering employees, and enhancing the horizontal dimension. The leadership should also encourage creativity and innovation by allowing workers to contribute and experiment ideas by forming task teams for problem-solving. It should also invest in training and development to encourage personal and organizational development. A change of organization culture is also overdue to enhance organization effectiveness: be socially responsible, have a mission and clear values, and embrace diversity. Biogenta also needs to make some adjustments so as to continue surviving in a dynamic environment. It needs to take advantage of technology hence redesign its structure to a network structure that emphasizes on the core areas of the organization. It can also utilize other forms of teamwork such as quality circles to improve its effectiveness. It has various rewards but today’s employees need more than pay and benefits. Both organizations should therefore design a performance and reward system that utilizes total rewards so as to motivate employees and gain commitment. Chesworth (2012, p.44) provides various rewards that successful companies are utilizing nowadays. 3 in 4 UK HR directors in a research by Robert Half said employees wanted varied and meaningful work, challenging assignments, career advancement, and work-life balance. For the managing director of Dylan Mr. Phil “employees know their energy levels”, the company thus offers unlimited holidays. The insight research group offers diversity days to encourage creativity while others offer flexible working. 8.0 References Alvesson, M., 2002. Understanding organizational culture. London: Sage. Armstrong, M., 2000. Strategic human resource management: a guide to action. 2 nd ed. London: Kogan Page Ltd. Armstrong, M. and Baron, A., 2002. Strategic HRM: The key to improved business performance. London: CIPD Benowitz, E., 2011. 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Mason, OH: Cengage Griffin, R.W and Moorhead, G., 2010. Organizational behaviour: managing people and organizations. 10th ed. Mason, OH: Cengage. Gold, J., Thorpe, R.and Mumford, A. eds., 2010. Gower handbook of leadership and management development. England: Gower. Hayes, N., 2002. Managing teams: a strategy for success. UK: Thomson Learning. Heathfield, S., 2012. Twelve tips for team Building: how to build successful work teams. Available at:< http://humanresources.about.com/od/involvementteams/a/twelve-tip-team.htm>.[Accessed 14 Feb 2012] Heinemann, R., 2002. Strategic reward management: design, implementation, and evaluation. Information Age Publishing Hill, C.W. and Jones, G.R., 2008. Strategic management: an integrated approach. Mason, OH: Cengage. Jones, G & George, J., 1998. The experience and evolution of trust: implications for cooperation and teamwork. Academy of Management Review, 23 (3), pp. 531-566. Koontz, H. and Weihrich, H., 2007. Essentials of management: an international perspective. New Delhi: Tata McGraw-Hill. Kotter, J. P., 1992. Corporate culture and performance. New York: The Free Press. Martin, J., 2005. Organizational behaviour and management. 3rd ed. USA: Thomson Mills, A., Mills, J., Bratton, J. and Garshaw, C.W., 2007. Organizational behaviour in a global context. New York: Broadview Press. Mullins, L.J., 2010. Management and organizational behaviour. 9th ed Harlow: Pearson/FT Prentice Hall. Parker, G.M., 2008. Team players and teamwork: new strategies for developing successful collaboration. San Francisco: Jossey-Bass. Schein, E.H., 2010. Organizational culture and leadership. 4th ed. San Francisco, CA: Jossey-Bass. West, M.A., 2012. Effective teamwork: practical lessons from organizational research. 3rd ed. UK: Wiley & Sons 9.0 Appendix High Country Club Team Leader Middle of the Road Concern For People Low Impoverished Produce or Perish Low Concern for Production High Exhibit 1.2 Blake Mouton Managerial Grid . Read More