Fit Between Organisational Structure and Organisational Goals for Shell - Assignment Example

 Table of Contents Introduction 3 Overview of Shell 3 Organisational Structure of Shell 4 Organisational Goals of Shell 11 Organisational Contingencies of Shell 12 Assessment of the “Fit” Between Organisational Structure and Organisational Goals for Shell 15 Conclusion & Recommendations 17 References 19 Bibliography 23 Appendix: Organisational Structure of Shell’s Various Business Units 24 Introduction The aim of the assignment is to illustrate the overall organisational structure of Shell Oil Company which is considered to be among the foremost energy companies throughout the globe focussing upon the relevant concepts concerned with the organic form of organisational arrangements. Moreover, the organisational objectives along with a few recommendations for the improvement of the company in relation to its organisational structure will be portrayed in the discussion henceforth. Overview of Shell Shell is recognised to be a universal group of petrochemicals as well as energy companies which operates with nearly 93,000 employees in over 90 nations and territories. The company holds an innovative approach and strongly believes that it is ready to tackle the probable challenges that might arise in future while performing its business operations (Shell, n.d.). In Qatar, Shell has founded a learning centre as well as a research and development facility in order to build two biggest energy projects with the cooperation of Qatar Petroleum. The company established a strategic business partnership especially with Qatar Petroleum International for the purpose of working jointly on various projects throughout the globe. Moreover, Shell is also working with Qatar Fuels (WOQOD) in order to deliver the marine lubricants of the company in several ports of Qatar. The tactical business partnerships of Shell, particularly with Qatar Petroleum International as well as Qatar Fuels, effectually supported the company to flourish its business operations successfully in the international forefront. In this context, the State of Qatar has selected the company as a valuable partner in order to work upon various noteworthy and beneficial projects globally (Shell, n.d.). The company commenced its business operations in Qatar in the year 2002 with the support of the Pearl GTL Project along with other business advancement activities (Shell, n.d.). Organisational Structure of Shell The aspect of organisational structure indicates the various responsibilities of a particular job that has been integrated in a particular business organisational hierarchy. The chief purpose of the business organisations in order to establish a suitable organisational structure is to recognise the responsibilities which are assigned for each job positions along with the interrelation amid the job responsibilities. It has been viewed that the organisational structure may vary amid the business firms due to various significant reasons including the span of control, execution of various staff positions and organisational reputation among others. On the basis of these vital facets, the organisational structure can affect the overall performance of the business organisations by a large extent (Madura, 2006). The organic type of organisational arrangement in a particular business organisation is often featured by decentralised mode of decision-making which permits the people to directly engage with the assigned jobs in order to develop and nurture their valuable decisions. The organic organisational structure is viewed to be quite simple, even though being formal and decentralised. In relation to the organic structure, the personnel of the organisations are likely to decipher generalist behaviour towards their job orientation (Bharathiar University, n.d.). Furthermore, the salient features of organic culture include low formalisation, unrecorded rules as well as regulations and open communication patterns. However, along with the concept of organic structure, there also lies other structural pattern which is known as mechanistic organisational structure. The business organisations can transform the organic structure to a mechanistic form with the intention of remaining competitive in the continuously changing business market gaining the advantage of making decisions engaging lesser time period. The mechanistic model is viewed to be based upon the model of bureaucracy; however, the organic form in relation to organisational structure is regarded as a boundary-less organisation (IGNOU, n.d.). The organic appearance of organisational structure emphasises upon the accomplishment of different job tasks within an organisation by introducing formal regulations as well as rules to preserve departmental boundaries, formal hierarchical authorities and two-way communication. Besides, the organic structure in comparison with mechanistic culture adopts suitable roles in order to solve any sort of difficulties for the business organisations while performing their business operations. Thus, collectively, it can be stated that the organic structure in organisations stresses upon the factors of flexibility, change, innovation and consultation that eventually assist the business organisations to specify responsibilities to be assigned for each job positions avoiding confusion within the workers (Scribd Inc, 2012). Shell is considered to be a unique company amid the other major organisations in the global energy industry. The group was formed by the merger of two companies in the year 1907, i.e. Royal Dutch Petroleum Company of Netherlands and Shell Transport and Trading Company of UK. The organisational structure as well as the daily management activities of Shell before the year 1995 was recognised to be a complex one. However, the formal organisational arrangement of Shell, prior to the year 1995, was comprised of four types of business units such as the parent unit, operating unit, group holding unit and the service unit. During that period, the management control of Shell was under the responsibility of the Committee of Managing Directors (CMD) which created the higher management team of the group. The Committee included five Managing Directors. It was the CMD which provided the principal association between the management structure and the formal structure of the group (Grant, n.d.). Moreover, the CMD also played an imperative role in connecting together the group holding unit as well as the parent unit. During the initial period of 1960’s, Shell generated a matrix based organisational structure within its service companies in order to manage its business operating unit. This particular matrix based organisational structure was viewed to be persistent during the period of 1990’s. In this similar context, the three major dimensions of the matrix of the group include the CMD, principal executives belonging to the service companies and functional coordinators. The CMD comprised of a Chairman, a Vice-Chairman as well as Managing Directors. The principal executives belonging to the service unit included the Regional as well as Sector Coordinators. The functional coordinators consisted of Manufacturing and Group Planning Coordinators, Group Treasurer, Finance Director, Legal Coordinator and Group Public Affairs Coordinator (Grant, n.d.). However, Shell restructured its matrix based organisational structure due to a number of reasons. It is in this context that the group realised that by restructuring its organisational structure, the company, can reorient its expected business goals and can maximise the value of its shareholders by large. Furthermore, the group also believed that it can decrease excess capacity in the course of refinery closures as well as sales and can thus develop effective decisions from the corporate to divisional levels. In this regard, the newly developed formal organisational structure of Shell was formed on the basis of an organic pattern by which the company focused upon the idea of a decentralised structure. However, in comparison with the former matrix based organisational structure, it has been viewed that the formal structure of the different units of Shell that include the parent unit, operating unit, group holding unit and the service unit was not altered, even though, certain major transformations were observed, especially in the management structure of the group within the service unit (Grant, n.d.). The decentralised or organic form of organisational structure within Shell fundamentally comprised of four new organisational components such as the Business Organisations, Professional Services, the Corporate Centre and the Operating Units. With the advantages of such an organisational structure, the CMD of Shell gained the assistance from its four business segments which included exploration and production of oil products, chemicals along with gas and coal. These different business organisations were headed particularly by the Business Committees which involves various Business Directors under the appointment of the CMD of the group. These business directors include the Directors engaged with Research and Technical Services, Strategy and Business Services along with those who are responsible for various particular business segments. It is worth mentioning in this context that the Business Committees were responsible to CMD of the group for developing competent strategies for the four business units and supporting the capital expenditures along with various financial plans, particularly those of the operating unit (Grant, n.d.). Furthermore, the Business Committees were also accountable to CMD of the group for appraising the business performance of the operating unit and the various business segments and finally enhancing the accessibility of functional, technological as well as business services to the operating unit. The other component of the new organisational culture of Shell i.e. the Corporate Centre also plays an imperative role similar to the function played by the Business Committees for the CMD of group. The Corporate Centre supported the CMD of the company by setting resourceful strategies as well as fruitful directions, augmenting and shaping the investment and resource portfolios and improving the assets performances of the group. Moreover, the Corporate Centre also assisted the CMD in Shell by acting as the curator of the business policies, reputation and procedures of the group and most importantly offering external as well as internal communication facilities to the company. Apart from assisting the CMD of the group, the Corporate Centre also aided the parent as well as the group handling unit belonging to Shell by organising and managing their various corporate affairs and financial obligations. The Corporate Centre of the group used to comprise of several directorates from various departments including the functions related to legal issues, human resources, corporate affairs and planning along with environment and external affairs among others. Along with these directorates, the Corporate Centre of Shell also embraced other departments such as taxation, contracting and procurement, intellectual property and security among others (Grant, n.d.). Additionally, the segment of the Professional Services of the new organisational arrangement in Shell, evidently delivered functional assistance to the service as well as the operating unit within the group. The units were also able to offer services to the third-party customers of the group related with legal operations, intellectual properties, human resources, finances, contracting and procurement functions, as well as health and security issues. Every unit of the Professional Services of Shell was headed by related Directors belonging to the Corporate Centre. Apart from the units of Professional Services, the other component i.e. the operating unit of the new organisational structure of Shell played a significant role as chief business units within the company. It has been viewed that each of the operating units was managed by a Chief Executive along with the assigned Board of Directors. The decisive responsibilities of the Chief Executives responsible for managing the functions of the operating units of the group included setting strategic goals of the company against the failure of any operational guidelines founded by the Business Committees delivering effective leadership in order to put the strategic goals into effect. Moreover, the role of the Chief Executives also included administrating the overall business management and appropriately reporting to the group about the activities as well as the results of the different operating units inclusive in the organisational structure of Shell (Grant, n.d.). Shell is recognised to be a multinational corporation which has been successfully performing its business operations globally since its inception. In relation to the organisational structure of Shell, it has been viewed that the company follows a tall organisational arrangement in which there lies the presence of many administrators in order to handle a range of different tasks. Moreover, the company follows a complex as well as an organic form of organisational structure in the form of a matrix based pattern owing to the fact that the group has a broad network of outlets around the globe being considered to be a large-scale business organisation in the world. As the company is based upon the form of matrix organisational structure, it can be stated that the workforce of the company is grouped on the basis of their specified functions. The organisational hierarchy of the group includes Board of Directors, Zonal Heads which comprise Regional or Zonal Chairman, Managing Directors, Departmental Heads, Regional Managers, Territory Managers, Franchise Heads, Service Heads and Front Line Managers. It has been observed that the organisational structure of a single business outlet in Shell has been designed as Franchise Head, Service Head and Front Line Managers (Slideshare Inc, 2012). Organisational Goals of Shell The chief organisational goal of Shell is to comply with the growing energy need of the world and also to generate fruitful benefits for the local communities by contributing towards sustainable development while operating its business functions (Shell, n.d.). Moreover, the company intends to work enthusiastically in order to deliver active support in the advancement of the State of Qatar by working with various organisations such as Qatar Petroleum. The sole intention of the company behind targeting this strategy is the purpose of increasing its productivity along with its profitability by a significant extent (Shell, n.d.). The vision of the company can be further identified to decrease the business’ operational impact upon the environment by large extent. In this regard, one of the significant strategic plans of Shell includes raising its operational efficiency by establishing a considerable capability especially in the process of Carbon Dioxide Capture and Storage (CCS). Furthermore, the company also implemented other major strategic plans that include continuous tracking upon the research and developing technologies of Shell in order to reduce emissions and dynamically encouraging the governments to provide a resourceful international policy structure for controlling the emission of various harmful gases (Shell, n.d.). Organisational Contingencies of Shell It has been identified that there lay a few organisational contingencies for Shell that would reflect the organisational structure of the company in future by a considerable level. In this context, the organisational contingencies might include the factors of technology, business size and political conditions among others. With reference to the business size of Shell, it has been viewed that the company is regarded as one of the biggest energy as well as one of the leading publicly traded organisations in the world in terms of revenues. Currently, the company has segregated its business functions in three major divisions that include Downstream, Upstream and Projects & Technology. The Upstream business segment of Shell produces natural gas as well as crude oil along with altering the already produced gases into Liquefied Natural Gas (LNG) to be delivered to the customers worldwide. The other upstream business activities of Shell include the trading as well as marketing of the natural gas and power and also advancing the concept of wind power for the purpose to generate renewable energy as electricity. The company separates its upstream business functions into two major segments such as Upstream Americas and Upstream International. The Downstream business segment of Shell involves the conversion of crude oil into a wide array of refined products that include fuels, bitumen and lubricants which are marketed as well as traded throughout the globe. Moreover, the downstream segment of the company also includes the process of distribution, refining and supply of a broad variety of refined products. This particular business segment of Shell has the responsibility to organise as well as to manage the fleets of the oil tankers and also the biggest LNG carriers of the company. Apart from the Upstream and Downstream business segments, the Projects and Technology Oriented business segment of Shell also plays an imperative function in the overall business operations of the company. This particular business segment provides various technological capabilities as well as services especially in downstream along with upstream business activities of the company. The major roles of the Projects and Technology segments of Shell include managing as well as organising the delivery of various projects, assisting the company to enhance the business performance of the company and offering technology related information to the various business units of the company. In addition, the other responsibilities of the segment include establishing technological research as well as innovation and supervising Safety & Environment along with Contracting & Procurement activities of the company (Parshall, 2011). In terms of technology and innovation, Shell has successfully introduced various efficient technologies since its expansion in the global market. In this regard, it has been viewed that in the year 1961, the company was successful to complete its first sub-sea well which followed with the construction of its first semisubmersible drilling rig in the year 1962. Gradually, the factors such as innovation as well as technology became the key drivers for the company which ultimately raised the organisation to the position of one of the worldwide leaders, especially in the natural gas and oil industry. In the year 2006, Shell began to operate its production of offshore natural gas which was powered with solar renewable as well as wind energy by investing a significant amount in the field of research & development (R&D). In the year 2009, Shell invested over USD 1.1 billion, especially in the field of R&D which ultimately led them to introduce a broad variety of effective technology applications (Parshall, 2011). From the perspective of political circumstances, Shell constantly refers to itself as a responsible corporate citizen and is quite concerned about the various issues in relation to human rights linked with politically sensitive areas. Moreover, the company makes the commitment of delivering sustainable as well as quality services not only to the government but also to the nations along with the communities in which it needs to perform its business operations. It is in this context that in its global expansion, Shell has to face a considerable influence of various political issues which can have a substantial impact over its latest Upstream structure (Tangen, 2003). Assessment of the “Fit” Between Organisational Structure and Organisational Goals for Shell The evaluation of the “fit” between the organisational structure and goals for Shell can be determined by focussing upon both the negative as well as the positive aspects of the newly developed organic structure as followed by Shell while performing its business functions. However, the positive factors of the new organisational structure which was initiated by Shell can be implied by emphasising upon the key features or conditions of its related industry environment. The chief conditions include the highly competitive business market in which the factor of cost efficiency is quite important for maintaining profitability. Moreover, the industry is expanding quite rapidly in which the decision making process needs to be decentralised so as to make it a cost as well as time efficient procedure. It is worth mentioning that all these significant conditions or features have promoted radical organisational restructuring of various oil majors. Furthermore, the radical organisational restructuring also supported the related business organisations in order to augment their geographical focus, especially in the downstream as well as upstream business segments. On the basis of the aforementioned grounds, it can be stated that the organisational structure of Shell considerably fits with its expected goals. Apart from the positive points of the radical organisational restructure, there also lay a few major weaknesses possessed by the organisation. It includes the absence of effective central control with a major focus of the company towards its long-term tactical planning as well as creative thinking rather than emphasising upon shareholder return along with cost reduction. It has been recognised that few of the business unit of Shell do not fit with the overall organisational structure of the company. Moreover, it was not apparent from any such fact that the innovative organisational structure supported the company with regards to powerful financial controls along with restructuring the company into a more profit-oriented management approach (Scribd Inc, 2012). Conclusion & Recommendations The various limitations of the organisational structure of Shell can be identified as a lack of flexible control on its overall organisational functions focusing upon creative thinking rather than emphasising upon the aspect of shareholders’ value. This particular lacuna is majorly owing to the fact that the organisation attempts to build customised organisational structure for its various units and thus have to witness limitations in connecting the functions of these segments in a structured and flexible manner. Conclusively, after acquiring a brief idea about the conception of organisational structure, it can be stated that the aspect of organisational structure provides guidance to the entire workforce in a transparent and comprehensive manner that ultimately govern the workflow of the business organisations. The presence of a rigid organisational structure in a particular business firm enhances the operational efficiency as well as raises the business operational standards. In this regard, Shell, which is viewed as one of the leading oil and natural gas organisations in the global market have been identified to follow an organic form of organisational structure which has certainly supported the company to fit with its expected organisational goals by a considerable extent. However, it can be affirmed that the various relevant contingencies which include the aspects of business size, technological advancements and political situations might act as the major determinants to reflect the organisational structure of Shell. Contextually, it can be stated that the organisations which are structured appropriately can be able to make competent decisions and flexible enough to adapt to various transformations in this competitive world of business market. On the contrary, a complex or lack of appropriate organisational structure can generate major disturbances for the business organisations while making effective decisions and also have a negative effect on the profitability aspect. Considering these aspects, in order to improve the organisational structures, Shell should develop as well as allocate departmental hierarchical flowcharts to the employees so that the key responsibilities and their hierarchical position are visibly understood by everyone. Moreover, the business organisations should ensure that while developing the procedure of decision making as transparent to every employee in the hierarchy (Demand Media, Inc, 2012). Moreover, Shell should attempt to establish a mixed organisational structure, considering the advantages of both informal as well as formal flow of information. Apart from introducing informal as well as formal organisational arrangement, the organisation should also uphold an effective communication with the working team along with motivating and providing adequate training to them within the entire organisation (Waldron & et. al., n.d.). References Bharathiar University, No Date. Organic Form of Organisation. Key Elements of Organisational Behaviour. [Online] Available at: http://www.b-u.ac.in/sde_book/msc_organ.pdf [Accessed June 20, 2012]. Demand Media, Inc, 2012. Recommendations for Improving an Organization's Structure. Business Management. [Online] Available at: http://www.ehow.com/way_5207414_recommendations-improving-organization_s-structure.html [Accessed June 20, 2012]. Grant, R. M., No Date. The Formal Structure. Documents. [Online] Available at: http://www.blackwellpublishing.com/grant/docs/07Shell.pdf [Accessed June 20, 2012]. IGNOU, No Date. Mechanistic and Organic Structures. Typology of Organisation Structures. 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