Lloyds Banking Group Integration - Essay Example

?Lloyds Banking Group Integration Introduction The various brands of the company include Lloyds TSB, Halifax, Bank of Scotland, Birmingham Midshires,Blackhorse, Cheltenham & Gloucester, Clerical Medical, Intelligent Finance, Lex Autolease, Scottish Windows and Investment Partnership, Scottish Windows, St Andrew’s Group and St. James’s Place Bank (Lloyds Banking Group, 2011). The Group is geographical diversifies and offering financial services throughout the UK and across UK. In 2009, Lloyds Banking Group reported the total income of ?24,601 million as compared to ?21,836 million in 2008(Lloyds Banking Group, 2009). The profitability of the company has been possible through its efficiency of operations and management. After the integration of Lloyds TSB and Halifax and Bank of Scotland to form Lloyds Banking Group, the Group could face significant challenges however, it has been able to maintain its profitability because of its efficient structure. The current structure of the Group is divisional structure and typically tall as compared to a flatter structure before integration. In this report, the various possible structures of the Group have been identified and discussed. Moreover, after discussing the cultural aspects and analysing the fit of the structure with the organisation, the most suitable structure has been recommended. Possible Organisational Structures for the Group Lloyds Banking Group could go for various kinds of organisational structures. Sinclair-Hunt and Simms (2005, pp.6) have given a summarised table to identify the best possible structure for the organisation (Table). Table: Options for Organisational Structure Stable Dynamics Simple Centralised bureaucratic Centralised organic Complex Decentralised bureaucratic Decentralised organic Source: Sinclair-Hunt and Simms, 2005 Since Lloyds Banking Group has a huge size therefore, Group is facing significant complexity. Moreover, integration has made the environment dynamic for the group because Group is currently dealing in various types of financial services. Therefore, based on its complex nature of operations and dynamic environment, it has been identified that possible organisational structures with decentralised organic structure will be more suitable for the Group. According to Miles and Snow (1984 cited in Senior and Fleming, 2009, pp.11) the organisational forms have evolved over time and divisional structure was suitable in 1900s when companies were pursuing diversification strategy in the national and international markets. Matrix structure was suitable in 1950s when innovative products were being introduced in the stable and changing environment and dynamic network structures are suitable in 2000s when global environment is continuously changing. Since the Group already have a divisional structure therefore, the possible structures of the Group include hybrid structure and matrix structure. Moreover, in order to determine how changes in the organisational structure dimensions can bring changes in National cultural dimensions (Pearlson and Saunders, 2010) of the organisations, four components of structure and culture have been selected. Hybrid Structure The first possible structure of the Group is the hybrid structure which is typically used in the large organisations and it combines the characteristics of different approaches tailored to meet the specific needs of the organisations. In this structure, Lloyd Group can combine the characteristics of different organisational structures such as functional, divisional, and horizontal and network structures (Daft, 2009, pp.122). In the rapidly changing environment this structure can provide significant flexibility to the organisation. If Lloyds Banking Group go for this structure then it can either combine the characteristics of functional and divisional structure or the Group can combine the characteristics of functional, divisional and horizontal structures. Most of the multinational enterprises adopt the hybrid organisational structure (Dunning and Lundan, 2008, pp.). The structure dimensions of the organisations in hybrid structures vary because the organisations have the flexibility to adopt different characteristics of organisational structures and develop one efficient structure. For example, degree of centralisation can be high in the units where the functional structure has been adopted and degree of centralisation is low across the units with divisional and flatter structure. The cultural dimensions also vary based on the characteristics which an organisation adopts. By brining various positive changes in the culture of the Group, Hybrid structure can provide various benefits to the Group. First, the combination of functional and divisional characteristics can help the organisations to align the corporate and divisional goals. The directions can be also set based on the specific needs of the goals. The processes which require high control can be controlled through a centralised mechanism by promoting a bureaucratic culture. The adaptability and flexibility in the divisions can help Lloyds Group to influence the behaviour of employees based on their performance. However, because of the varying cultures across different units of organisation, the possibility of conflicts is high between corporate departments and divisions. Moreover, because of the authoritative culture and decision making on some units and independence and decentralisation in other units can reduce the time efficiency thereby, slowing down the responses of employees to exceptional situations. Matrix Structure In the matrix structure, the departments of divisions are developed horizontally across a typical hierarchically organised structure and the structure is designed on some principle (product, customer, and region) on its horizontal axis and functionally designed on horizontal axis (Senior and Fleming, 2009). In other words it is a structure in which the horizontal lines are superimposed on the traditional structure. In a matrix structure, there are two chains of commands or dual lines of authority. The degree of specialisation is low because the organisation gets benefits from specialisation of both the product and function. Degree of standardisation is low because of the teamwork culture in the organisation. Degree of formalisation is also low because the jobs are not standardised Degree of centralisation is significantly low as compared to divisional and functional structure. Matrix structure significantly influences the culture of the organisation. If Lloyd Group adopts matrix structure, the uncertainty avoidance will decrease because members of the reduced bureaucratic practices and rules. The power distance will reduce as members will be more willing to share the power. Collectivism will increase because of the teamwork and collective distribution of rewards. The future orientation behaviour of the members of Group will improve. Moreover, human orientation, customer focus and performance orientation will also improve. The matrix structure of Group can enhance the customer focus of the Group and the improved communication and interaction as a result of lower hierarchical levels and flatter structure (Gido and Clements, 2009, pp.413) will boost cooperation and harmony among the members of the Group. Matrix structure can be suitable for the Group because it may increase the rapid response time of problem resolution (Kerzner, 2009, pp.71). The dual reporting relationships can create conflicts (Gido and Clements, 2009, pp.413) between different business segments of Lloyds Banking Group. Factors Affecting Goal Congruence of Group and Its Members The goal of Lloyds Banking Group is to become the best financial service provider in the United Kingdom (Lloyds Banking Group). On the other hand, the personal goals of the various members of the Group are different from the goals of the Group. To achieve the goals of the Group, the management of Lloyds Banking Group needs to consider the interests and goals of members of the Group thereby, achieving goal congruence. Goal congruence is the process through which the actions of the members of the organisation with their perceived self-interests are for the best interest of the company (Anthony, Dearden and Vancil, 1972, pp.98). Therefore, adopting a structure which may help the management to achieve goal congruence is very important. Anthony, Dearden and Vancil (1972, pp.98) argue that perfect goal congruence between the members of the organisation and the organisation is not possible in the imperfect world. However, through adopting an efficient structure and building a strong culture, Lloyds Banking Group can expect to achieve significant level of goal congruence. If the structure of the Group enhances its centralisation, then power distance in the organisation will increase which may not be favourable for the members of organisation who are motivated under less authoritative culture. On the other hand, low centralisation through a matrix structure can reduce the power distance which may create conflicts between the members of the Group which have been associated with the Group for many years and enjoying their seniority. The teamwork culture both in the matrix and hybrid structure can boost collectivism in Lloyds’ culture however; it may not be favourable for the members of the Group who prefer working individually. The changes in group structure can also influence the performance orientations for example, if Group adopt the matrix structure, it can introduce performance based rewards which may encourage the members to improve their performance; however, the experienced and senior members who are associated with the Group for many years may not favour this orientation of the Group. Moreover, changes in the decision making style and authority patterns may increase or decrease the control of supervisors on their subordinates which may have both the positive or negative influence on the members. In short, changes in organisation culture will influence the behaviour of members and achieving the goal congruence between the members of the Group and goals of Lloyds Banking Group becomes a challenge for the management. Relationship between Organisational Structure, Approach to Management and Culture and its Impact on Business Performance The given model shows how objectives and goals of the organisations are communicated downward and the ideas and suggestion of the employees are communicated above. Through this model, the relationship between the structure of the organisation, approach to management and culture and performance of business can be explained. Source: Dransfield, 2004 Any structure which Lloyds Group adopts will influence the interaction, relationship and communication between the members of the Group. A hybrid structure with the characteristics of functional and divisional structure can increase or decrease downward-upward communication in some processes. In the functional structure the level of hierarchies will increase and this upward and downward communication of goals and feedback will take longer time and it will become more time consuming. When the employees will not be communicated the goals and objectives of the Group, they will be more inclined towards their personal goals, as a result the business performance will decline. On the other hand, in divisional structure with flatter hierarchies, this communication will become easier and response and interests of the employees will increase. In the matrix structure, like divisional structure, upward and downward communication increases however, the dual lines of authority if conflicts, may negatively influence the behaviours of the employees. Therefore, a change in the organisational structure brings change in the culture of the organisation and the approaches of management to control the organisation. This change directly influences the behaviour of the employees thereby, influencing the overall performance of the business. Recommendation In the light of discussion and analysis of various forms of organisational structures, it is recommended to Lloyds Banking Group that hybrid structure appears to be the most suitable structure for the Group. The integration of TSB, Bank of Scotland and Halifax in the form of Lloyds Banking Group has enhanced the diversification of the business of the Group. The environmental uncertainty has also increased. In the previous year, the Group has enjoyed significant profitability; therefore, to maintain the profitability of operations, Group needs to achieve flexibility across its different operations. The complete centralisation can contribute to a decline of control over the important strategic matters of the company whereas; the complete centralisation can make the culture of the organisation more authoritative. The current structure of the Group is flatter and complete centralisation can negatively influence the behaviours of the members of the organisation. The Group needs to combine the characteristics of both the functional and divisional structure, thereby, adopting a hybrid structure. In this way, a hybrid of centralised and decentralised structure can help the Group to achieve its aims and objectives and to pursue its profitable operations. Bibliography Anthony, N. R., Dearden, J., & Vancil, F. R., 1972. Management Control Systems: Text, Cased and Readings. Tata Mc-Graw-Hill. India Daft, L. R., 2009. Organisation Theory and Design. Edition 10. Cengage Learning. Dransfield, R., 2004. Business for Foundation Degrees and Higher Awards. Heinemaann. Dunning, H. J. and Lundan, M. S., 2008. Multinational Enterprises and the Global Economy. Edition 2. Edward Elgar Publishing. Gido, J. and Clements, P. J., 2009. Successful Project Management. Edition 4. Cengage Learning. Kerzner, H., 2009. 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