Understand the Organisational Purposes of Businesses - Literature review Example

Understand the Organisational Purposes of Businesses P 1 For effective operation and performance, organizations must include an organizational structure and culture. Depending on the nature of work and the industry of operation, organizations adapt different types of structures. In essence, organizational structure refers to the framework that determines the reporting structure and the hierarchy in a given organization, common as the organization chart. In other words, an organizational structure is a detailed plan showing the systematic work arrangement and organization of work. There are three common types of organizational structures, including traditional, divisional, and matrix. However, other kinds of structures also exist, including pre-bureaucratic, bureaucratic, team, and network structures (Thomas and Coe, 2003:124). The commonality between all the different organizational structures is that they aim to improve the organizational efficiency, as well as provide a clear framework of operation and reporting. Nonetheless, they differ in a number of factors. The traditional (functional) structure divides the organization into groups or departments according to their purposes. For instance, an organization with a functional structure may have a production department, a sales department, and a marketing department. This type of structure suits small businesses because each department can rely on the knowledge and talent of its employees. Nonetheless, the main drawback of the structure is the limited communication and coordination between departments by the organizational boundaries. On the other hand, divisional structures are common in larger firms that operate separate smaller organizations under the main umbrella group or in a large geographical area, covering different types of market segments and products (Mullins, 2005:106). For instance, a manufacturing company may have a compressor division, a small engine division, and a parts division in different geographic locations. Each division specializes in a particular type of need. The main advantage of this type of organizational structure is the rapid and effective resolution of needs. Similar to the functional structure, this form of structure also limits communication as employees work in different divisions. Additionally, this type of structure is expensive because of its scope and size (Salaman, 2002:167). Lastly, the matrix type is a hybrid of the functional and divisional structures. Often adapted in multinational companies, the structure enables an organization to enjoy the benefits of both the divisional and functional structures simultaneously. In most cases, this creates power struggles as most organizational areas are under dual management: a divisional and a functional manager, both working at the same level and occupying the same management territory. The other common organizational structure is product-based structure, common in companies with multiple product lines. Essentially, each part of eth structure focuses on an individual unit within the company (Walker et al., 2003:124). This structure allows flexibility in the organization, but suffers from lack of achieving company-wide goals and objectives. Structure Advantages Disadvantages Functional (Traditional) a. Division of labour b. Development of team spirit and cooperation c. Mass production a. Emphasis on specialization b. Leads to conflicts c. Weak disciplinary controls Product-Based a. Simple b. Unified control c. Better discipline a. Lacks specialization b. Overburdening of management c. Favouritism Divisional a. Dispersal of power b. Increased efficiency c. Delegation of duties a. Delayed decision b. Lack of accountability c. Minority tyranny Matrix a. Greater efficiency b. Coordination c. Non-autocracy a. Conflicts between functional and divisional managers b. Authority dependent on management c. Poor administration Decades of research show a link between organizational performance and organizational culture. Despite the lack of emphasis on business culture and its importance to performance a few decades ago, today most organizations consider it as a competitive advantage. Nonetheless, an organization must realize its culture, and this forms the major challenge. The concept of culture is complex as it involves the organization’s shared values, assumptions, behaviours, artefacts, and attitudes. Organizational culture is broad, encompassing both internal and external aspects, as well as guiding individual behaviour and actions (Salaman, 2002:167). Various models strive to explain organizational culture, one of them being Charles Hardy Model. According to Hardy, organizations may have one of the four types of culture. The first type of culture is power, where power in an organization remains in the hands of a few individuals. These people have the authority to make major decisions and actions. They enjoy all the special privileges at work, and are the most important people in the organization as far as decision-making is concerned. However, these individual often delegate their responsibilities to other employees. In such an organizational culture, the subordinates have little, if any, opinion other than heeding to the instructions of their superiors. Thus, employees do not have liberty of expression of personal views or share ideas in open forums. Such organizations may have managers who are partial to particular individuals or groups, leading to unrest among other employees (Thomas and Coe, 2003:124). Similarly, poor anticipation of this type of culture may lead to high labour turnover and lack of enthusiasm and effort. The second culture is task culture, where the management forms teams to solve critical issues and achieve targets. Individuals sharing common specialization and interests come together and form a team of four or five members (Lewin and Regine, 2000:219). All members of eth team must contribute in equal proportion and strive to accomplish tasks in the most suitable and innovative way. Teamwork is the backbone of task culture organizations. Advantages of this culture include sensitivity and flexibility to environment or market. However, control is difficult because senior managers retain it. The third culture is person culture, where employees consider themselves more important than the overall organization. Here, individuals concentrate on themselves rather than the organization. Essentially, the employees work for monetary purposes and avoid attachments to their roles. Such organizations seldom exist, and are difficult to introduce management hierarchies or control mechanism. Role culture is the last, where delegation of responsibilities and roles occurs in accordance with interest, academic qualification, and specialization (Chapman, 2005:32). Employees are accountable for assigned roles, and power accompanies responsibilities. This culture benefits from economies of scales, but suffers from rigidity to changes. P 1.2 This paper uses Autonomy, a software company headquartered in Cambridge, and Tesco, the leading retail chain store giant in UK. Before the merger with Hewlett Packard, Mike Lynch led Autonomy. The founder of the company instilled an entrepreneurial spirit in the company, adapting a Power culture organization (Child, 2005:14). Analyzing the organizational chart of the company, it follows the traditional organization structure, with major decision-making being a reserve of the founder. According to research, the organization maintained a start-up business structure, with major decision making from the founder. On the other hand, Tesco adapts a matrix organizational structure, highlighting both instances of the traditional and divisional structures. This may be attributable to the large number of stores operated by the giant. Tesco’s regulation requires employees to wear uniforms, adhere to a code of conduct, and share similar privileges. Tesco’s culture resembles the description of role culture: delegation of roles and responsibilities are according to academic qualification, interest, and specialization. Autonomy has been performing exceptionally well before the merger with HP, perhaps due to the power culture and traditional organizational structure. On the other hand, Tesco has been recording falls in profits in UK, despite being the leader in retail chain stores (Mabey, Salaman, and Storey, 2001:132). In this case, the relationship between organizational culture and structure and organizational performance is evident. P 1.3 Different factors influence the behaviour of individual at the workplace. According to Michael Mattson and John Ivancevich, the main factors include abilities and skills, demographic factors, personality, attitude, and perception. Ability refers to the physical capabilities of an individual, whereas skills are the ability of individuals to act in a particular manner that allows them to perform well (Salaman, 2002:167). Research shows that individual performance and behaviour largely depend on abilities and skills of an individual. For instance, an employee will perform well if their abilities and skills match with their job requirements. Thus, managers must be able to match the employees’ skills and abilities with particular job requirements. Demographics factors include factors such as education, race, economic background, age, sex, nationality, among others. Conventionally, employees with good education, socio-economic background, and young are said to perform better. In this sense, their behaviour to perform well is because of their demographic factors (Slocum and Frondorf, 2002:241). Demographics factors enable managers to select the most suitable candidate for vacant positions. Personality refers to the distinctive traits and characteristics of an individual, as well as their interrelation with their adjustment and response to other people. The factors that influence individual personality include family, society, heredity, situation, and culture. Indeed, personality is the most influential factor of an individual’s behaviour, and its study may provide vast knowledge in how and why they behave. In understanding employee personality, managers may effectively direct their motivation and efforts to ensure the achievement of organizational goals. In the workplace context, personality may refer to the response of employees to the work environment and other work-related activities. The other major factor that influences individual behaviour is attitude, which is the tendency to respond, favourably or unfavourably, to certain situations, persons, or objects. Factors affecting the formation of attitude include culture, society, family, peers, and other organizational factors. Managers must study the job-related variables and strive to create a favourable working environment for employees through forming positive attitudes towards individual jobs (Allen, 2001:165). Employees will perform better if they work in environments with positive attitudes. Perception also influences personal behaviour, and refer to the cognitive process that interprets environmental stimuli. Each individual may interpret and organize their environmental stimuli based on their reference. Essentially, various factors influence individual perception. Understanding perceptions is very crucial to managers, as creation of working environments that employees perceive as favourable contribute to good performance of the organization. In other words, employees will perform better if hold positive perception of their organization. Other factors that influence behaviour include conflict, change, and stress. Resistance to change is a universal element of all organizations, and most employees may behave differently on institution of change (Chapman, 2005:38). Similarly, conflicts and stress may affect the ideal behaviour of individuals at the workplace. Management experts argue that stress and conflicts are the leading causes of poor and unwanted behaviour in most organizations, as well as bad performance. M1 The above research and analysis shows that organizational structure and culture are integral to the performance of an organization. Nonetheless, no single organizational structure and culture suits all organizations, as they strive to achieve different objectives and operate in different working environments. Therefore, the management of an organization must study, understand, and adapt the most suitable combination of organization culture and structure that will enhance efficiency and effectiveness of the organization (Lewin and Regine, 2000:219). Another important aspect is the behaviour of individuals. Managers must identify ways of making the working environment appreciable to the employees. This will improve their performance. Bibliography Allen, P., 2001. A Complex Systems approach to Learning in Adaptive Networks. International Journal of Innovation Management, Vol. 5(2), 149-180. Chapman M., 2005. Defining culture: a social anthropological perspective. Presented to the 2002 Annual Conference of the Academy of International Business (U.K.) Brighton Polytechnic Business School. Child J., 2005. Organizational structure, environment and performance: The role of strategic choice. Sociology, Vol. 6, 1-22. Lewin, R. and Regine, B., 2000. The Soul at Work. London: Orion Business Books. Mabey, C., Salaman, G., and Storey, J., 2001. Organizational structuring and restructuring in Salaman G. Understanding Business Organizations. London: Routledge. Mullins, L., 2005. Management and Organizational Behavior, 5th ed. London: Pitman Publishing. Salaman, G., 2002. The emergence of new work forms. London: Routledge. Slocum, K., and Frondorf, D., 2002. Business management using a fractally-scaled structure. Complexity and complex system in industry, McCarthy, I. and Joel, T. eds. UK: University of Warwick. Thomas, C. and Coe, T., 2003. The Flat Organization: Philosophy and Practice. London: British Institute of Management. Read More