The Evolution of Particular Forms of Organisational Culture - Essay Example

1 Introduction Within the context of an ever-increasingly competitive global bsiness environment, the assumption is that organisational success is predicated on the presence of a dynamic and decentralised organisational structure; that is an organisational structure which is supportive of problem-solving, proactive employees who are both expected and required to external dynamics and demands(Ahire, Landeros and Golhar, 1995; McAdam, Reid and Saulters, 2002). This type of structure is assumed to exist in the private sector but not in the public sector. The implication here is that whereas the one is inherently capable of adopting such management paradigms as would facilitate the realisation of an organisation's untapped potentials, the other is not. Needless to say, the resultant assumption is that public sector organisations should undergo a process of organisational restructuring as would allow for the adoption of more efficient and effective management paradigms. There are, however, two problems in the above stated. The first is that the notion of decentralised organisational structures as being more inherently suited for the adoption of total quality and other management paradigms which allow for efficient and effective proactive responses to shifting external environmental conditions, than are centralised organisational structures, is fallacious and based on assumptions and not fact (Cane and Thurston, 2000; Flynn, 2002; Dent, Chandler and Barry, 2004). The second is that, ultimately, organisational structure must be consciously selected on the basis of that which is most suitable for the organisation in question, the culture which it aspires to and the demands of the industry in which it is located and the market which it serves. As a strategy for determining the relationship between organisational structure and organisational performance, the research will critically analyse both of centralised and decentralised organisational structures, together with a review of the different types of organisational cultures which they support. Following from that, the theoretical implications of the aforementioned will be examined in relation to real world cases. 2 Public Sector: Centralised Organisational Structure Management scholars have determined that public sector organisations are largely modelled after the traditional bureaucratic organisational structure, as influenced by Weber (Gibson, 1966; Cane and Thurston, 2000; Dent, Chandler and Barry, 2004). The implication is that all of the four components of organisational structure-labour division, departmentalisation, span of control and scope of decision-making-are shaped by bureaucratic-traditionalist managerial theory. This, according to numerous management scholars, has only served to offset an organisation's inherent capacity for flexible response to changing external conditions and has, in the long run, resulted in the formulation of mechanistic and atrophying organisations (Gibson, 1966; Ford and Slocum, 1977; Cane and Thurston, 2000; Flynn, 2002; Dent, Chandler and Barry, 2004). As explained by Flynn (2002) among others, labour division within the public sector organisation is invariably highly specialised. Task specialisations are clearly articulated and each employee has a specific set of job functions, clearly set out in his/her job description, which he/she must operate by (Bourgeois, 1984; Bourn and Bourn, 1995; Flynn, 2002). While the advantages of specialisation and clearly articulated job descriptions are practically too numerous to articulate, the disadvantages are enormous. Certainly specialisation implies that employees are often matched to jobs according to their skill-sets and explicit job descriptions mean that employees always have a clear understanding of the tasks they are required to perform and know the boundaries of their professional responsibilities (Bourgeois, 1984; Bourn and Bourn, 1995; Flynn, 2002; Mctavish, 2004). Excessive specialisation, however, as is often the case with private sector organisations means that employees cannot function beyond the parameters of their jobs and are devoid of the proactive, problem-solving skills which are deemed integral to contemporary organisational success (Bourgeois, 1984; Bourn and Bourn, 1995; Flynn, 2002; Mctavish, 2004). Quite simply, employees are confined to the limits of the skills that they brought with them upon joining the organisation, and on which basis they were hired, and their job descriptions. As early as the 1960's, management scholars engaged in the critique of public sector management, maintain that the functional departmentalisation trend typical of public sector organisations only serves to compound the nature of the obstacles towards efficient and effective organisational functioning (Gibson, 1966; Ford and Slocum, 1977; Kearney and Berman, 1999; Flynn, 2002). The grouping of employees according to their professional skill-sets and their job descriptions has its advantages. The most obvious of these, naturally, is departmental efficiency. The disadvantages, however, are the invariable tendency for the evolution of narrow departmental visions and the formation of communication and operational disconnects between the various departments (Gibson, 1966; Ford and Slocum, 1977; Kearney and Berman, 1999; Flynn, 2002). Within the context of an organisational structure which hardly facilitates extra-departmental communication, cooperation and organisational cohesiveness, organisational goals are often sacrificed for departmental ones (Gibson, 1966; Ford and Slocum, 1977; Kearney and Berman, 1999; Flynn, 2002). The resultant disconnect prevents department heads and employees from embracing a vision other than the immediate departmental one. As may be deduced from the above, the traditional organisational structure typical of public sector entities is geared towards extreme centralisation of control and authority. Decision-making ends towards the autocratic, with the command chain flowing downwards. Employees are virtually excluded from the decision-making process and final decisions are confined to top management (Mctavish, 2004; Dent, Chandler and Barry, 2004). The traditional bureaucratic, centralised and highly formalised character of public sector organisations is problematic because it gives rise to mechanistic organisations which are highly vulnerable to atrophy, compounded with the probability of their being rendered irrelevant by the market/sector in which they operate. Bourgeois (1984) agrees and adds that the tendency of public sector organisations to devolve into mechanistic ones, largely consequent to extreme specialisation and centralisation, constitutes one of the more telling signs of organisational atrophy. Mechanistic structures, implying task repetition, inflexibility and centralised control, render an organisation incapable of responding to external environmental changes or emergent demands. The organisation functions according to a predetermined set of business strategies and tasks which employees execute in abidance with a rigid blueprint (Bourgeois, 1984; Dent, Chandler and Barry, 2004; Mctavish, 2004). The mechanistic process by which such organisations function, may mean that business processes and tasks are executed with a high degree of efficiency but, as Kearney and Berman (1999) emphasise, not with effectiveness. They are not effective because they do not address the reality of the surrounding external environment, do not influence it and are not influenced by it. Centralised organisations, irrespective of whether they are public or private sector ones (although the literature generally tends towards the identification of centralised structures with public sector organisations) are supportive of two organisational cultures: clan and hierarchy culture. 2.1 Clan Culture Clan Culture is a family type of culture where cohesion and shared values are paramount (Alvesson, 2002). The organisation feels a sense of togetherness typical of Japanese firms and encourages teamwork and participation. Clan cultures feel like extended family to many loyal members and are often found in small businesses and Japanese firms. Emphasis here is placed on internal maintenance and concern for people, both customers and employees (Berrio, 2003). Contrary to assumptions regarding leadership in centralised structures, leaders of clan cultures are assumed to be most effective through teamwork and joint decision making. Managers are responsible for providing a comfortable work environment and members feel empowered to confront most of the organization's problems (Cameron & Quinn, 1999). Supervisors are often mentors and viewed as more of a parent than a boss as they oversee operations. Characteristics of clan organisations include minimal management levels, informal atmosphere, work teams, and participatory problem solving. Internal competition and individual aggressiveness are not encouraged and are considered disruptive. Members of a clan culture share of themselves while at work (Cameron & Quinn, 1999). Loyalty and tradition are important to the organisation and worker commitment is elevated. Success of the organisation is defined by the internal climate of the workplace and its concern for the members. Collaboration, involvement, and consensus are important to the members. Morale is usually high and employees rate the environment as a friendly place to work. 2.2 Hierarchical Culture Hierarchical culture predominates in bureaucratic organisations o which emphasize rules and structure, policies and procedures, and well-defined multiple levels of authority. Focus of the organisation is on stability and control with workers' roles defined and enforced through policies and procedures (Goodman, Zammuto, & Gifford, 2001). Hierarchy cultures exemplify workplaces that are formal and structured (Cameron & Quinn, 1999). Processes and procedures are well documented and control business activities. Hierarchy cultures stress efficiency and their leaders excel at coordinating and organizing (Alvesson, 2002). These leaders maintain efficient organisations and offer predictability and stability to employees. Rather than a common vision of united cause, it is the policies and procedures of the organisation that unite it and allow it to complete its goals. These documented procedures define how the organisation responds to internal and external stimulus. When there is a new stimulus to the organization, one that is not covered by existing policies and procedures, these organisations have difficulties determining the best course of action. Many large organisations are examples of this hierarchy culture. These include the federal government, industrial companies such as Ford Motor, and large franchises such as McDonalds (Alvesson, 2002). Standardized procedures ensure efficiency and consistent service that the public has come to expect. Enforcing these procedures are many levels of management to train workers and ensure process compliance. McDonalds, for example, often hires people with little or no experience and to achieve consistent output, these new employees are trained to do a specific task using a specific protocol designed to develop specific skills. These finite skill sets are easy to learn so new workers can quickly learn the skill and enter the workplace at a productive level. Workers are not given discretion in deciding how to perform their assigned task. There is one correct protocol, eliminating the need for judgment, and following the process leads to consistent output, even with relatively inexperienced workers. Employees must memorize and are tested on rules regarding their specific job. Even promotions are highly regulated with a documented process each employee must proceed through, and there are multiple levels to achieve before an employee becomes an official manager. Hierarchy organisations are effective and efficient in familiar situations that allow members to employ standard policies and procedures. However, these same organisations do not respond well to change. There is a lack of innovation and solving unique problems is difficult due to the lack of a defined process to handle new problems that require a paradigm shift. The emphasis is on doing more of what they do well and increasing efficiency rather than creating or seizing new opportunities (Alvesson, 2002). 3 Public Sector: Decentralised Organisational Structure Organisational development and industrial management scholars, Birkinshaw and Hagstrom (2002) maintain that it is erroneous to assume that private sector organisations can be categorised under one general heading and, subsequently, allotted the same set of structural, organisational and strategic characteristics. Certainly, and in the most general of terms, it is possible to describe private organisations as flexible and decentralised vertical structures which rely on specialisation but equally focus on diversified skill sets (Birkinshaw and Hagstrom, 2002). It is further possible, as Coglianese and Nash (2005) point out, to define private organisations' decision-making process/strategy as a largely participatory one. This, however, provides only a general framework for the characteristics of private organisations and should not obscure the fact that there exists management, strategic and structural differentials within this matrix. The differentials, or variances, which visibly exist between private sector firms is the key to their success. As Erridge, Fee and McIlroy (2001) explain in this regard, the majority of private sector firms custom-design their management styles and strategies for greater consistency with their own internal environmental structure, concomitant with the nature of their external environment and, most importantly, with the market in which they operate. Few, if any, successful private sector companies undertake the blind adoption of existent management formats but prefer, instead, to actively engage in the design of its model (Erridge, Fee and McIlroy, 2001). Concurring, Kearns (1995) adds that even as they preserve the outlined structural framework and ensure that selected management models support and promote shared decision-making, decentralisation and varied skill-sets, the more successful of the private sector organisations design the particularities of their management strategy in consideration of their growth stage. The implication here is not just that individual private sector organisations are continually evolving and are continuously engaged in the re-articulation of management and organisational strategies and policies for greater consistency with their growth stage (Kearns, 1995). They are, in other words, designed for flexibility. While decentralised organisations are supportive of several types of organisational culture, the two most popular are adhocracy and market culture. 3.1 Adhocracy Culture Adhocracy culture is a common business culture and is characterized as dynamic, entrepreneurial, and creative (Alvesson, 2002). Adhocracy cultures are ad-hoc and temporary in nature. Teams are quickly formed and disbanded. It is important for members to develop adaptability, flexibility, and creativity. Many situations arise during the workday that are ambiguous and information overload is common. Members must be able to constantly acquire and interpret new information. Organisations with members functioning in this environment are very flexible and responsive to changing markets. Adhocracy cultures encourage initiative and freedom as sources of competitive advantage. Such cultures have been demonstrated to be superior in business performance in certain industries (Paulin, Ferguson, & Payaud, 2000). These organisations value creativity and are able to thrive in changing environments. The work environment for members is dynamic, entrepreneurial, and innovative. Effective leaders in these environments instil vision, take risks, and are inventive, much like the organisations they lead (Alvesson, 2002). Organisations that apply adhocracy practices strive to keep pace with state of the art product development and seek to lead the competition in knowledge (Cameron & Quinn, 1999). They are committed to experimentation to acquire this new knowledge. The long term organisational goal is using new products to drive rapid growth. Success is measured by the ability to produce new and unique products and services. Opposite on the business culture spectrum are companies that adopt a more traditional organisational culture, hierarchy cultures. 3.2 Market Culture Market cultures became fashionable in the 1960's and focus on competitors and market share (Alvesson, 2002). Many of the functions of these organisations are transaction based with third parties such as customers, suppliers, contractors, regulators, and unions. The primary objectives of market organisations are increases in productivity and sales rather than a true market orientation towards the customers (Goodman, Zammuto, & Gifford, 2001). Market cultures are different from marketing departments; they highlight transactions such as sales and other measures of monetary exchange. Market cultures focus on competitive measures such as external positioning and differentiation rather than flexibility and discretion. Members of market culture organisations do not focus on internal processes and procedures resembling hierarchy cultures, they focus externally on making deals. Success in a market culture is measured by contributions to the financial bottom line. There is evidence that market cultures are likely to provide the best business performance, even in Japan where clan cultures are considered the classical style of business culture (Goodman, Zammuto, & Gifford, 2001). In this model, organisational effectiveness is aided by the market culture core values of competitiveness and productivity. 4 General Electric On the basis of the literature reviewed in the preceding, one would assume that decentralised organisational hierarchies which adhere to a market culture are most likely to succeed in globalised and intensely competitive business environments. They certainly do have the potential to succeed but, as shall now be seen, so do centralised organisational structures which adhere to a hierarchical culture. General Electric's experiences with both establish this claim. Competitiveness and productivity in market cultures are maximized by focusing management on external positioning and control (Alvesson, 2002). A strong example of this culture was exemplified when former CEO of General Electric, Jack Welch bought and sold three hundred businesses during his tenure as he stressed business results and moved GE from a hierarchy to a market culture. The work atmosphere became highly competitive and stressed achieving results without excuses. Like Welch, leaders in a market culture are aggressive and competitive. They are interested in improving their firm's competitive position by increasing market share, productivity, and profits (Alvesson, 2002). Managers are firm and replace employees with unsatisfactory performance. The organisation focuses on winning in the marketplace. Long term organisational goals highlight competitive issues such as market share and not internal factors such as employee morale. General Electric moving from a hierarchy culture to a market culture to increase competitive focus is one example of an organisation choosing to change their culture to match a new leadership style. This leadership lead change happens over time as the organisation is pushed into a new way of acting and reacting to its environment. Within the context of the stated, it is very interesting to note that GE's success, including high levels of employee commitment and productivity, was not an outcome of its adoption of a decentralised organisational structure and a market culture (Slater, 1998). When GE was a centralised organisation with a hierarchical culture, it was (and still remains) the leader in most of the industries it was engaged in. Productivity levels were high, as was employee commitment and morale (Slater, 1998). The implication here is that, contrary to theoretical assumptions, some of which were reviewed in the preceding, centralisation and hierarchical cultures are efficient organisations which are perfectly capable, under the right leadership and within the context of a well-defined management paradigm, capable of directing an organisation towards success. Of further interest is the fact that GE's shift from one organisational structure to another, concomitant with the associate change in organisational culture, lent to a situation of temporary instability in employee- organisational relations. Cutbacks and divestments created a strong sense of instability and employee insecurity, neither of which was resolved until the process of organisational restructuring had reached completion (Slater, 1998). 5 Conclusion Organisational structure lends to the evolution of particular forms of organisational culture and both combine to affect organisational performance, inclusive amongst which are employee morale, productivity and commitment. It is generally assumed that centralised organisational structures, most commonly associated with the public sector, are inefficient and ineffective, insofar as they are fundamentally unsupportive of proactive, problem-solving, decision-making employees. Centralised organisations with their market or adhocracy cultures, generally linked to the private sector, are defined as the very antithesis of the aforementioned. The black and white, either or, perceptions of centralised versus decentralised organisational structures tend towards the fallacious. The example of General Election clearly establishes this. While its current decentralised structure with its market culture has facilitated organisational success, so did its earlier centralised organisational structure with its hierarchical culture. The implication here is, and as may have been deduced from the foregoing, is that the one does not spell out success and the other failure but that success/failure are ultimately predicated on whether the organisation's hierarchy and associate culture are aligned with the external environment and employee needs. This is lesson to be learnt from GE. Alignment is the key and once the organisational structure and culture are aligned with neither the external environment nor employee needs, restructuring, despite the temporary instability it leads to, should occur. 6 Bibliography Ahire, S.L., Landeros, R., Golhar, D.Y. (1995). Total quality management: A literature review and an agenda for future research.' 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