Rationalization and Organizational Culture - Literature review Example

Rationalization and organizational culture of the of the Number: Introduction Rationalization,in context of a business organization, refers to closing or selling of many or some units of a firm in order to reorganize structure of an organization. Rationalization is adopted by firms so as to improve core competencies and overall efficiency. It is also considered as a suitable measure for costs cutting in order to improve financial health of an organization or effectively bring down costs of production. In the broader sense, rationalization refers to taking measures for organizing business in order to increase overall efficiency of operations. In this essay, emphasis is given upon the aspect of cost rationalization and its importance in business organization. Every firm tries to reduce its cost of operations and attain maximum efficiency. However, it is important for the firm to cut down costs at the right places. If the cost cutting strategy is not well planned, then it may adversely affect the firm’s operational capabilities. This can render the firm weak and unable to generate adequate revenues. In order to reduce cost, the firm needs to thoroughly forecast and budget the implications of cost cutting measures. Accordingly, a plan of action requires to be chalked out for reducing costs. After the cost reducing strategies are suitably implemented, management is required to monitor whether the measures taken have helped in achieving the desired results (Anand, Ashforth and Joshi 39). Features of rationalization The recent economic crisis has rendered many organizations financially weak. It also paved way for organizations to adopt rationalization measures so as to reduce costs and support innovation. Some of the primary features of rationalization in terms of cost cutting have been discussed as follows. Rationalization involves thoroughly studying the different investments made by an organization. This helps in identifying those investments that are yielding adequate returns and requires to be retained in the long run. It also helps to spot those investments that are not generating sufficient returns. Such investments can be eliminated from the company’s portfolio. While analyzing investments, it is essential to consider the future economic condition. It may so happen that investments, generating insufficient returns at present, may become positive in the future (Hendry 955). An organization might possess technologies or business processes that have become obsolete or are non-supportive to growth. Such aspects lead to additional costs that can otherwise be avoided by firms. There may also be idle and non-resourceful units within the organization. This may lower ability of an organization to optimize its resources. It is important for organizations to keep in mind the requirement of stakeholders while considering rationalization measures. Stakeholder’s interests are largely related to ability of a firm to generate adequate profits. If firms do not earn sufficient revenue, it cannot meet the obligations towards stakeholders such as, paying dividends and interests. It is also necessary for a firm to inform its stakeholders regarding the different strategic measures taken for reducing costs (“Benefits of Application Rationalization: Reduce Costs and Improve Service with a Systematic Approach.”). Another important aspect that firms need to consider while considering reduction of costs is return on investments. Every strategic decision taken by a firm should aim at producing positive returns. The revenue earned must be higher than investments made. When a firm adopts rationalization measure for reducing costs and increasing efficiency, it must be taken care that future cash inflows are not affected in this regard (Hasselbladh and Kallinikos 697). Rationalization for increasing efficiency and control The main objective of rationalization is to allocate resources and align organizational activities in such a manner that optimum utilization through low expenditure can be achieved. Operations are implemented with an aim to lower wastage and maximize utilization. Control is an important aspect of rationalization. Effective control helps keeping costs in check. Through proper control mechanism, it is possible to make sure that all organizational activities are being conducted as per preconceived plans. Control is an effective tool for regulating activities of an entire organization. It helps in minimizing faulty work and wastages (Townley, Cooper and Oakes 1045). Rational organizations In order to understand the concept of rationalization in a meaningful manner, its application in organizations requires to be analyzed. In McDonald’s, the rationalization concept has been used well. McDonald’s follows four basic factors in this respect; efficiency, predictability, calculability and control. The company believes that efficiency is all about sorting out the best way of getting from one place to another through best possible utilization of resources. McDonald’s, at every stage of production, ensures that each action takes place at the right place and at the right time. The rationalization concept of McDonald’s gets revealed largely from the aspect of calculability. The company has established standards regarding the level up to which each bag of fries requires to filled, quantity of fillings and toppings for each burger and so on and so forth. Hence, by controlling quantity at the level of supplying products to consumers, McDonald’s is successful at minimizing cost. Consumers hardly notice if the bag of fries from McDonald’s is a little less filled or if there are minor changes in the fat content. The focus of consumers remains upon quality of the final product as long as there no drastic changes in quantity (Fleming and Zyglidopoulos 837). Advantages and disadvantages of rationalization on employees Rationalization, if established well, makes organizational operations fair and efficient. It helps removing malpractices and any type of redundant and unprofitable tasks from organizational structure. Employees are provided with better working conditions and it is made sure that every action performed by them is productive directly or indirectly. Rationalization also at times has negative impacts upon consumers. For instance, as a part of the rationalization plan, if a particular unit of a firm is closed down, then many employees may end up losing their jobs. As a result of such an action, employees may develop insecurity about being unemployed at any point of time. This may influence their level of dedication towards the firm. Downsizing must be collaborated with employee retention schemes by transferring employees to different units in order to avoid negative impacts upon them (Townley 163). Organizational culture Organizational culture can be defined as the beliefs and values that are shared by people and groups of an organization. The organizational culture also portrays how a firm interacts with external factors such as, its stakeholders. The values of an organization pertain to the kind of goals and objective that each individual of an organization should have. It is these values that direct their actions, so that desired goals can be achieved. The culture of an organization also defines the norms and guidelines that employees are required to follow while working. Such standards are expected to be followed and incorporated in behaviour of the employees. A suitable organizational culture tries to establish coherence between the structure, processes and people of the organization (Ogbonna and Harris 766). Organizational culture has several important roles to play. It helps in uniting the organization as a whole by providing with a sense of identity. Such an identity helps in differentiating the members of an organization from others. Organizational culture plays an important role in developing a sense of commitment in minds of the employees towards the organization, keeping aside their personal interests. Through the established rules and standards, employees are taught an appropriate way to behave. Some of the elements of an organizational culture are discussed as follows. Values form an important part of an organization’s culture. It specifies goals, philosophies and views of an organization in the society. The mission and vision statements of an organization highlight these aspects. Norms and standards that are set out by administrators of a firm also form an important part of organizational culture. These rules monitor aspects such as, ways in which employees are expected to behave at the workplace, ethics that they are required to follow and dress code existing in the firm (Homburg and Pflesser 449). Different types of rituals existing in a firm also form part of culture of the organization. These include celebrations, meeting and other types of group activities, which help in instilling a sense of unity and belongingness towards organization. Giving special recognition to individuals who perform well is also an essential aspect, in terms of organizational culture, so as to motivate employees. Another important aspect regarding climate of an organization is relating to the organizational communication network. It should consist of both formal and informal channels of communication. The formal channels help in flow of information that are important to get different kinds of works done. The informal channels of communication facilitate social interaction between employees. Although performing different types of tasks remains to be the main focus in an organization, it is still essentially a social platform where people interact. The communication climate existing in an organization also signifies whether there is adequate freedom to express views and ideas. The communication network should be supportive of the type of work that an organization does (Homburg and Pflesser 449). Organizational change and culture Change is an aspect that cannot be avoided in the functioning of an organization. An organization is in constant interaction with the external climate, which is frequently characterized by changes in technology, economy and other social dynamics. The internal environment of an organization should be able to adapt to such changes. Managing a change in the organization involves careful planning and implementation. Employees must be well informed about the type and extend of change. Enforcing change upon employees is not considered ethical. Their considerations and needs should be taken into account while incorporating a change. The change must be achievable, realistic and measurable (Homburg and Pflesser 449). It is important to develop a culture in an organization that is supportive of change. If culture of the organization is rigid, employees would find it difficult to adapt to its climate and norms of working. The organization should be able to sufficiently motivate people to accept changes in respect of technology, method of working and so on. The success of implementing a change depends largely upon leadership qualities of people responsible for affecting the change. Managers should, however, keep in mind not to sell organizational change to employees. Selling organizational change refers to implementing the change first and then informing employees about the same. Such an approach is not considered fruitful as employees are seen not to respond to the change positively. Instead, it is important for managers to handle change in a manner where employees can cope up in a positive manner. Employees should be made to understand the necessity for change. Face-to-face communication is regarded as most effective for communicating change (Homburg and Pflesser 449). It also facilitates in observing reactions of employees in respect to the change. Contemporary organizational culture Studying the culture existing in other companies helps in understanding different values and beliefs that can be incorporated into one’s own organization. Google is one such company that is reputed for its highly favourable organizational culture and other companies aspire to emulate the same. Google puts a huge emphasis upon selecting the right workforce and developing a work environment that supports growth. The internal climate of the organization is informal in many ways when it comes to communication, giving ordinary employees access to top level administrators. Google’s organizational culture is unique and different from most of the typical cultural systems existing in contemporary firms. Googleplex, where employees of the company work, looks more like an adult playground and less like a work place. This indicates to an informal culture existing in the firm. The management team of Google consistently strives to build employee satisfaction in such a manner that their productivity is enhanced. Effective communication is an aspect that has led to development of a good corporate culture within the company. Managers are advised to spend quality time with their subordinate in order to discuss plans. Teamwork is also an aspect that is widely encouraged. Google encourages employees to be a leader for themselves as well as their team members. This helps in increasing their ability to take responsibilities (Homburg and Pflesser 449). The company emphasizes on recognizing success of their employees. It also believes that welfare of the organization and personal well-being of employees are directly related. Organizational culture and rationalization Rationalization focuses upon increasing efficiency of a firm through different measures. Organizational culture defines values and beliefs of an organization, which leads towards achievement of goals and objectives. The system adopted for rationalization should be such that it is supported well by these abovementioned values and beliefs. An organization that considers its employees to be highly valuable is less likely to apply cost rationalization through employee lay off. Hence, measures that a firm engages itself with for implementing rationalization require being compatible with norms and belief system of the organization. A firm that gives high importance to productivity develops rationalization measures through which greater innovation and growth is possible. Rationalization is largely a quantitative concept whereby organisational growth is measured, in terms of expenditures and revenue. On the other hand, culture of an organization is a qualitative aspect. Thus, quantitative and qualitative factors get aligned when rationalization is done, keeping values of the organization in mind (Townley 163). Junction Hotel case study In this section of the case study, the concept of organizational change and culture has been discussed from the view point of Junction Hotel. Junction Hotel is a fictional case study that was developed by authors, Daniel King and Scott Lawley. The authors have discussed many aspects pertaining to successful organizational behaviour, in context of Junction Hotel, by developing artificial scenarios. In respect of organizational change and culture, the case study outlines the fact that an organization is required to implement change, only after communicating the same to employees. So, the firm needs to have a proper network of communication. The organizational culture should support effortless and convenient communication. Reaching out to different units of the organization should not be difficult. An organizational culture that is flexible towards change can incorporate decisions relating to rationalization in a more convenient manner (King and Lawley 4). Apart from a healthy system of communication, an organization should also motivate employees for contributing their ideas towards growth. The case study also emphasizes upon the aspect of managing groups and teams in an effective manner. The leader of a team should oversee that each member is contributing considerably towards growth of the organization. There should be adequate unity amongst team members. While working in teams, it is essential to put personal interest aside and give more emphasis upon needs of the group as a whole. Employees must be made aware of the fact that their contributions play a significant role in achieving desired results. Managers and subordinates should share a healthy communication network in order to facilitate problem solving and managing different issues. The case study also sheds sufficient light upon the aspect of managing individuals. Each employee should be recognized as a unique entity with separate set of skills and knowledge. Therefore, factors that motivate them also differ highly. For some employees, recognition and growth act as motivating factors. Then again, for others, organizational climate and team behaviour are the motivating factors. It is essential for the management to identify factors that encourage employees to work better (King and Lawley 4). The case study also reveals the aspect that culture and change are matters that need to be developed on the basis of goals and objectives of the firm. As a result, different insinuations exhibit dissimilar cultural behaviour and adhere to changes in their own unique manner. Conclusion The concept of rationalization can be analyzed from the Junction Hotel case study point of view. Organizations like, Junction Hotel, believe in incorporating rationalization on the basis of organizational culture. Culture suitably chalks out the principle and ethics that are needed to be considered while adopting rationalization. An organization should take into account aspects relating to bureaucracy and scientific management systems in rationalization. Bureaucracy relates to the level of control and rigidity that needs to exist in a firm. It is generally seen that firms that are less rigid can incorporate changes in policies easily. However, certain philosophies and beliefs should be maintained rigidly. In respect of cost rationalization, organizations must ensure that every factor that is incorporated for reducing costs and increasing efficiency supports objectives of the firm. Care should also be taken so that interests of all stakeholders are met while adopting any change in respect of rationalization. Rationalization measures bring about changes in the way an organization functions. The change can be either small affecting only a few operations or can be wide spread influencing all the departments. Before a firm incorporates change, it is essential to study extent of its impact. Based upon culture of the organization, managers should develop a suitable plan for communicating the rationalization changes to employees. Employees must be made aware of necessity behind the change and results that are expected from it. When such discussions take place, employees feel that the management considers them to be an integral part of the organization and therefore, value their suggestions. It is also essential for organizations to examine the impact of rationalization upon employees. If employees feel that measures taken by the firm towards rationalization is not ethical or will not prove to be productive, then their level of acceptance in this matter will be low. This might affect the commitment factor existing between the organization and employees. Firms should try to avoid employee lay off as far as possible when it comes to rationalization. Instead, it can involve measures such as, redeploying employees to other division. Such measures are not only ethical, but also help in maintaining cultural norms of an organization. Works cited “Benefits of Application Rationalization: Reduce Costs and Improve Service with a Systematic Approach.” InfoWorld. InfoWorld.Inc, 2014. Web. 30 April 2014. Anand, Vikas, Blake Ashforth and Mahendra Joshi. "Business as usual: The acceptance and perpetuation of corruption in organizations." The Academy of Management Executive (2004): 39-53. Print. Fleming, Peter and Stelios C. Zyglidopoulos. "The escalation of deception in organizations." Journal of Business Ethics (2008): 837-850. Print. Hasselbladh, Hans and Jannis Kallinikos. 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