Organisation Structure and Effectiveness - Assignment Example

Organizational Structure and Effectiveness (Institution) (Name) (Course) (Module) (Prof) 28th June 2009 1. Explain Virgin Blue, how from small organization into large organization. Virgin blue has a relatively short history. Established in 2000 in the Australian air travel industry, the company quickly flourished from a small company to a major player in the airline industry. The company launched operations operating on one route only with two aircrafts all managed by a team of 200 people. The entrance of the company in the industry is viewed to have been revolutionary as it introduced low cost flying in a country where the operators then had only served the high income earners. Low cost flying as a market entrance strategy of the company targeted existing air travel consumers and also non air travel consumers who had previously could not afford the service. As such, the company expanded the air travel market in general. Currently, the company controls 32% of the Australian domestic air travel market with over 2,400 flights a week to 24 Australian and regional destinations. The company has evolved from a low cost carrier to an international brand with a number of subsidiaries such as Polynesian Blue Airlines and Pacific Blue Airlines. In 2004, the company launched its Pacific Blue subsidiary which targets the leisure travelers with flights between Australia New Zealand, the Cook Islands, Fiji, Tonga and Vanuatu. Therefore, the need to target various market segments has been a very relevant motivation for expansion. For one the company has sought to serve the increasing market and gain a significant share in the industry. Again according to the company’s CEO, economies of scale is a fundamental factor in the scheduling of flights and even purchasing of airplanes. 2 What or what (reason), How, Why and give an example, a large organization back/ into to a small organization Going by the organization life cycle, an organisation may fail to grow further if the management does not fully appreciate and respond to both internal and external challenges facing it. Each stage however, has a unique set of these challenges. For instance, the entrepreneurial stage requires a lot of creativity to survive whereby if lacks, the venture dies. Again at this stage, the organisation faces a crisis in need of leadership. If appropriate leadership skills are not present, the organisation fails and does not advance to the next stage of collectivity. A good example is the sinking of AIG into bankruptcy. While many would relate the failure of the group to the recent global financial turmoil, its failure is in my own opinion largely due to its inability to reinvent itself and survive in a changing environment. While the company may be said to global and attained its maturity stage, the need to reinvent itself in necessary as it would happen in real life situations where a new life is mandatory if death is to be avoided. In the case of AIG, changes in the market environment demanded that the organization responds failure to which it fell only to be bailed out by the American government. 3 What is organization life cycle? Give an example An organization lifecycle is a theorised growth path that organizations go through starting at the time of their establishment. These stages are entrepreneurial, collectivity stage, formalization stage and elaboration stage. Again it can be said that organization lifecycle is a model proposed by business experts who theorize that organizations tend to follow a certain path similar to living things in their growth and development. These stages occur in a sequential manner that involves a wide range of organization and structural activities. In fact the processes are rarely reversed. Various authors have identified various stages ranging from three to ten stages. Nevertheless, the development process is basically similar hence the stages can be standardized to five, namely startup, growth, maturity, decline and death/revival. The premise of this model is that each stage in the growth of the company is characterized with unique internal and external factors that dictate on the structure and organization of the company. Similarly, products and services have life cycles that have a similar growth path. On another perspective, the life cycle might be viewed as transforming from a local/domestic entity to a global organization. Take for example Virgin Blue Airlines. The company commenced operations as a domestic flight services only. With time the company introduced subsidiaries to tap into other markets and help it achieve a larger market share in regional and international flights. Again the company has made a joint venture with the government of Samoa in establishing the Polynesian Blue Airlines. The company is thus at the multinational level. However, the classification of an organization in any of the levels is largely theoretical with the empirical classification being a bit complicated fur to various factors. 4. Changing of structure, when, why, the company decide to go global, what are the stages have to go through The first stage in the development of a company into an international level is called Domestic. The company only operates in one country where it was established and is registered. In the case of domestic operations the company usually has a smaller workforce since operations only serve a limited market. Consequently, such a company has a relatively simple structure. This stage is characterized by the company aligning its organizational culture and products and services to the host country. International/multi-domestic In this stage the company serves several countries and markets. This involves exporting products and services to other countries. Each country is treated as a single market on its own. As such, there is some degree of product differentiation in order to serve the needs of the various markets fully. Multinational As the name suggest, this stage involves the company operating in many countries other than the home country. In fact, a third of the sales have to be made overseas n order to qualify as a multinational. In this context, operating means that production and marketing activities are carried out in the various countries. Companies operating at this level tend to align themselves with the culture of the people and therefore attract the local appeal. More often than not, the locals do not realize that the company is foreign based as it uses local people in its labor force and the products and services produced are specifically designed for that particular market. However, the company identifies with one nation as its home country where its headquarters are based. This implies that the individual companies located in other countries liaise with the headquarters for approval of headquarters otherwise called the parent company. Global Such a company has operations all over the world. No allegiance is paid to the home country or the head quarters in the marketing of products. The company prides itself in the global acceptance of its products and services. 5. Five types of organization structures, advantages and disadvantages, in and out, definition. Horizontal structure The horizontal structure is intended at empowering all employees in the decision making process and to eliminating bureaucracy. In so, doing the levels of power and authority in an organization are kept at the minimum hence the name flat structure. Essentially this structure organizes employees around core processes whose interdependence in high. For example, an organization with a marketing department will have to ensure that activities carried out by the marketing department are well coordinated with the product research and development functions of the same organization in order to harmonize activities. This type of structure is common in manufacturing industries though it can be successfully adopted in the service industry. Advantages There is quick response to market needs as the response has relatively levels of authorization to go through before it is enacted. This is directly related to the facilitation of employees in clearly knowing their role in the meeting the organizational goals whereby all efforts are directed at achieving the set goals and targets. The structure also encourages teamwork and collaboration between employees. Once the teamwork spirit is fostered in the organization, the sharing of roles and responsibilities improves quality of life for employees in the workplace. Disadvantages Identifying core processes in which to organize employees around them is difficult and time consuming. Adopting this structure requires changes in organizational design, management philosophy, and information and reward systems. Therefore it becomes hard to adopt for existing organizations. The senior management my not welcome this structure as they have to give up some of their powers and authority which are distributed to the junior employees. Unfortunately, the junior employees are not trained in managing their obtained power and hence fatal decisions may be made. To avert such a scenario, the organization will have to invest heavily to the training of employees in responsible practicing of authority and exercising power. Modular structure This model is more or less the same as the horizontal structure only that collaboration and coordination present in horizontal structure extends beyond the organizations boundaries into outsourcing. An organization structured in this modular manner seeks professionalism not from its employees but from specialized organizations through contracts. Advantages Enables worldwide access to talent and resources worldwide Contracting allows global reach for organizations without large initial capital outlay. There is a high degree of flexibility that allows organization to respond appropriately and timely to market changes. There are reduced administrative costs Disadvantages There is very small degree of control of many functions and employees Drafting and arranging contracts is time consuming and is prone to conflict and disagreement The success of failure of the company is highly dependent on the performance of the contractors There is little or no sense of belonging for the employees hence little loyalty and poor organizational culture. Dual authority: Matrix structure This structure is a combination of the horizontal and vertical grouping hence the name hybrid. It tends to facilitate movement of authority on a horizontal and vertical manner. Advantages High coordination levels necessary to meet market demand. Flexibility in allocation of labor resources Best suited for unstable market environments Facilitates both product skill and functional development. Disadvantages Dual authority is confusing and frustrating Requires high interpersonal skills Consumes time in conflict resolution It is more demanding in balancing power Requires employees to adopt collegial relationships rather than vertical ones if it is to work. Divisional grouping Operations and employees are organized around products or geographic areas. Geographic grouping may be carried out in order to separate markets and serve each market segment efficiently. On the other hand, grouping according to product ensures specialization in meeting market demand. Advantages Most relevant to unstable markets and more so large organizations with a wide product range or serving a geographically large market. Higher levels of customer satisfaction due to high product responsibility levels and clear contact points. Ensures high coordination among different functions of the organization. Allows distribution of power and authority. Disadvantages Leads to poor coordination and relation across product lines Eliminates economies of scale as it encourages subdivision of operations into semi-autonomous units Makes it almost impossible to integrate and standardize products and services. Reduces in-depth competence and technical specialization Functional grouping structure Organizes employees who perform similar functions or who provide/apply similar knowledge and skills in one group. Advantages Specialization facilitates in depth knowledge development and professionalism Encourages economies of scale Best suited in narrow product/service range Disadvantages Slow response time to environmental changes Hierarchy overload Poor horizontal coordination Less innovation There is a limited view of organization goals due to specialization 6. Traditional vs Mechanistic Traditional structures tend to treat organizations as a homogenous unit where coordination between the various functions and processes is assumed to be automatic, which is not the case. Mechanistic structures recognize that there are necessity divisions in an organization whose coordination and contribution lead to a healthy organization. Traditional structures are supported by vertical grouping whereby there are several layers of authority and bureaucracy is high. Mechanistic structures are supported by horizontal and divisional grouping where there fewer layers of authority. Apple incorporation is one such company that has successfully employed a mechanistic structure that uses geographic grouping according to countries. 7 Differentiate between Adaptive and Flexible structure and give example A flexible structure tends to be more responsive to changes in the consumer demands and market externalities. A divisional grouping structure is a good example as such a structure tends to give recognition to a particular market whose conditions do not necessarily have to affect the organization as a whole. On the other hand, an adaptive structure is one that is formulated in response to the market and consumer demand thus its structure is dictated by the environment. 8 Measuring Effectiveness It is the degree to which an organization achieves its set goals and targets both the official and operational. Measuring effectiveness is important in that it a form self assessment on the success or failure of the company in is management and operations. However, measuring effectiveness is difficult because organizations are fragmented and are involved in numerous activities simultaneously. Therefore a more user friendly method called contingency effectiveness approach is used. This incorporates three perspectives namely internal process approach, goals approach and resource based approach. For example a company such as Virgin Blue may target a specified number of customers on one route or the entire company within a specified time period. The achievement of failure of that shows the effectiveness level of the company from a goals approach. 9. Different between Service & Manufacturing Technologies, advantages and disadvantages, definition, an example Service Technology 1. Intangible product 2. Production and consumption take place simultaneously 3. Labor and knowledge intensive 4. Customer interaction generally high 5. Human element very important 6. Quality is perceived and difficult to measure 7. Rapid response time is usually necessary 8. Site of facility is extremely important Manufacturing 1. Tangible product 2. Products can be inventoried for later consumption 3. Capital asset intensive 4. Little direct customer interaction 5. Human element may be less important 6. Quality is directly measured 7. Longer response time is acceptable 8. Site of facility is moderately important 10. The Woodward model classifies organizations based on the system of production. His model divides organizations into three groups, namely; Small-batch and unit production (group 1), Large-batch and mass production (group 2) and Continuous process production (group 3). The perrow model aims at showing that organizations tend to routinise all tasks and processes which at times does not serve the purpose of the organization well. Thompson’s Classification of Interdependence and Management Implications is a model that groups organizations into three categories, Sequential, Reciprocal and Pooled based on the level of interdependence. The model identifies different levels of Horizontal Communications and decision making and type of coordination required across the three groups. According to the model, the reciprocal group demands high horizontal communication and decision making while the pooled group requires the least. 11 Controlling environmental Resources Environmental resources may be grouped into internal and external. While many organizations are in good and direct control of their internal environment which is largely predictable, they abandon the external environment. There are two common ways through which an organization can assume to “control” the environmental resources by 1. Setting up Inter-organizational linkages through; ownership, Contracts, joint ventures, Cooptation, interlocking directorates, Executive recruitment and advertising, public relations 2. Controlling the environmental domain through; change of domain, political activity, regulation, trade associations and illegitimate activities. For instance Virgin Blue has formed a joint venture with the Samoan government in Polynesian Blue Airline in order to “control” the government regulations that would have been faced the company had it operated single handedly. References Daft L. Organisation Theory and Design, 9th. Ed., New York, South-Western Read More