Organizational Structure Impact on Performance and Profitability - Essay Example

Running Head Leading Change Paper Leading Change Paper The aim of the paper is to identify and analyze the role and impact of organizational structure and corporate culture on the performance and profitability. The analysis is based on ‘Managing Across the Organization’ simulation framework on Transformational Leadership. The paper includes analyzes of Good Sport’s corporate culture and organizational structure, influence of politics, power and leadership style on its performance. The recommendations are made for change management and conflict resolution. Good Sport is a sport organization aiming to reduce alcohol and drug consumption and promote healthy life style for wide target audience. The aims of Good Sport are: ”highlight clubs important role in the community; help clubs serve and sell alcohol with the law; reduce alcohol-related problems (eg. Binge and underage drinking, violence, etc.); increase club viability; provide free ongoing education and support” (Goose sport Home Page 2007). These aims and strategies have a great impact on structure and culture of the organization, its ethical and social values. Good Sport, similar to other organizations, is built out of basic units overlaid with units of executive structure. The size of units is determined by the limitations of effective leadership. In turn, these limitations depend on the complexity of both purpose and technology, the difficulty of communication, the extent to which communication is needed, and the complexity of existing interpersonal relations. Thus spans of managerial responsibility are established. Good Sport has a narrow span of managerial responsibility (Good Sport Home Page 2007; Senior, 2001). Organizational Culture and Structure Prasad et al (1999) explain that “organizational structure institutionalizes how people interact with each other, how communication flows, and how power relationships are defined. The structure of an organization reflects the value-based choices made by the company; it refers to how job tasks are formally divided, grouped, and coordinated” (p. 440). Within the context of formal organizations informal groupings have the functions of fostering communication, maintaining cohesiveness, and providing for feelings of personal integrity and independent choice. It represents the political aspects of personal relationships within formal organizations, and it serves a useful purpose in communicating opinions and suspicions that cannot pass through formal channels. Organizational culture reflects and establishes various attitudes, understandings, customs, and the like; it also creates conditions that may give rise to formal organization. Following Schrodt (2002) culture can be defined as (a) a pattern of basic assumptions, (b) invented, discovered, or developed by a given group, (c) as it learns to cope with its problems of external adaptation and internal investigation, (d) that has worked well enough to be considered valid and, therefore (e) is to be taught to new members as the (f) correct way to perceive, think, and feel in relation to those problems (p. 189). A fully developed organization appears indispensable to the effective functioning of the formal organization. There is a strong link between organizational structure and culture because both of them help to achieve cooperative efforts from a number of individuals who, as a total, integrated system, represent more than the sum of the individual efforts. Individuals are induced to contribute to such a cooperative system through the use of various incentives, including pay. Good Sport: Organizational Culture and Structure Good Sport has been established 15 years ago. It has a formal organizational structure which influences employees’ relations and span of control. The four departments are: R&D, Sales, Finance and Production. The view of authority is bottom up and by the consent of the governed. Individuals decide what range of authority they will let the organization exercise over them and thus accept; within this range they will do whatever they are told (Good Sport Home Page 2007; Senior, 2001). The organization has thee management levels managed and directed by the CEO, Karl Andersson. Executive functions serve to maintain the system of cooperative effort. One of the functions involves providing a system of communication. Inherent in this function are two tasks—to create positions as communication centers, and to select people to fill these positions who will communicate effectively. Either may be changed on occasion to perfect the total communication process by adjusting one to the other (Schrodt, 2002). The other function is to promote the securing of essential efforts (personal services) from individuals. This involves bringing people into a cooperative relationship with the organization through recruiting; then eliciting the necessary services, after people have been brought into the relationship, by arranging for appropriate inducements and incentives. The organization is based on hierarchical structure which involves positions of Vice President, Senior Manager and Team Manager (Sogunro, 1998). Organizational culture and structure are interrelated and based on similar principles and rules. For instance, Good Sport introduces formal communication and has a formal structure. Formal organization is a type of cooperation that at its best is conscious, deliberate, and purposeful (Wood, 2003). To achieve this cooperation, changes must be made in the motives of organization members, changes that without such efforts would not occur (Senior 2001). When favorable to the cooperative system, these motive changes become resources to the system. Cooperative systems must somehow create a surplus of member satisfactions. If the member gets back from the cooperative system only what is put in, no incentive or net satisfaction exists and cooperation is unlikely (Storey, 2004; Good Sport Home Page 2007). Power Structure and Politics In Good Sport, status is established and maintained by various ceremonies, insignia, titles, perquisites, and restrictions of office. Status considerations are a constant matter of concern for executives, particularly with regard to the system of organizational communication and the system of incentives, along with being a means of fixing responsibility. Status systems have their origins in differences in the acquired characteristics of people, in the varying difficulties of particular activities, and in the social evaluation of these activities (Wood 2003). The leader and CEO only deals with the complex situation external to the organization and the internal operative organizational situation, but now with the democratically produced majority opinion and often with various minority positions as well. These political factors can produce so many complications that it is common practice (especially in business) to exclude much of what is done from the democratic process. (McShane & Von Glinow 2004). Power structure and politics influence organizational culture and structure and establish formal organizational relations. Following Wood (2003O power is exercised through personal image of a manager and his influence on subordinates. There are many instances where the introduction of democracy is clearly superior, but in many other situations democracy is an inferior approach and cannot be practiced effectively (McShane & Von Glinow 2004). Formal communications have the presumption of authority when they originate in a communications center and are within the scope of that center, as well as relevant to the situations recipients face. This is the authority of position. However, there are some individuals who, because of superior ability, are able to exercise authority regardless of position. Departmentalization is a result of the formal structure and division of labor. The power structure in Good Sport reflects functional structure of the organization and delegation of authority (Good Sport Home Page 2007). This type of reliance on personal respect to obtain contributions is the authority of leadership. When these two are combined, people generally will grant considerable authority, accepting orders that extend far beyond the zone of indifference. Also, Good Sport has a centralized authority. It means centralizing performance where the operation is under one roof. It often refers to department activities. The advantage of centralized organizations is that it is easy to control all activities and implement a general and unified policy. The disadvantage is complicated “bureaucratic” structure which slows decision-making and change processes. The degree of centralization is not easy to determine because some decisions must be taken locally and management must decide what are vital decisions and keep these, then delegate the rest (Mowday & Sutton 1993; Good Sport Home Page 2007). Beyond the options given within the simulation, I would pay a special attention to influence and importance of a leader’s figure and his personality. I suppose that the CEO has a strong influence on the organization and his formulations regarding decision-making processes. Good sport was faced with organizational problems and poor decision making under the leadership of Karl Andersson. In this case, rational-legal authority tends to become infused with tradition over time. Like other bureaucratic organizations, Good Sport tends to be headed at the very top by charismatic leaders, not bureaucratic officials, and they function more effectively if this is so. Charismatic authority alone is highly unstable. The charismatic community that maintains itself over time must become rationalized or traditionalized to some degree. In order to improve the situation, I would change the nature of formal relations and introduce more informal communication. This would help to the CEO and senior management to understand the problems and expectations of employees. Bureaucratic systems dominate through knowledge, and this fact gives them their rationality. The result is a climate of formal impersonality, without hatred or passion and hence without affection or enthusiasm (Senior, 2001). Movement toward such an organizational form is fostered by sheer growth of Good Sport and, consequently, of the administrative task. A shift towards informal communication will help to change organizational culture and imp cove management-subordinates relations (Huisman, 2001; Good Sport Home Page 2007). Resistance to Change Lack of cohesiveness is the main problem of Good Sport. The task of Good Sport is to maintain a social organization in which individuals and groups can work together to satisfy their personal and collective desires. In this context, informal organization, although capable of restricting output, is not bad; in fact, it is a necessary prerequisite for effective collaboration. The parts of a plant social system are interdependent: changes in one part create changes in other parts (Sogunro, 1998). If a small change is introduced, equilibrium will be disturbed, and a reaction to restore equilibrium will be activated. The technical organization can change more rapidly than the social; the formal organization more rapidly than the informal. In these disparities exists the potential for imbalance, which can breed distrust and resistance to change (Hastie, 2001). Lewin’s approach (Senior 2001) to change can be used as the main strategy to manage corporate culture and resistance to change. The aim of the change is to improve corporate culture and morale of employees, increase their participation in decision-making and problem-solving. Social habits represent inner resistances to change. The inner resistance must be unfrozen, usually by the action of some party external to the group, which is called an environmental force. Groups hold to standards that can represent forces against change. If an individual varies widely from such a standard, that person will be ridiculed, punished, and ultimately rejected from group membership. Assuming a desire for group membership in good standing, members can be expected to hold closely to the standards of the group. However, if the group standards can be modified in some way, then the individual would be expected to change as well so as to stay close to them. This is what group decision is about—modifying group-based habits that serve to resist change (Kennedy, 1995). Lewin (Senior 2001) notes that one way to change an aspect of an individual is for that person to accept membership in a new group, a new culture, with different standards and values. New perceptions result from new identifications and memberships. However, for these changes to occur, the new group and culture cannot be forced on the person; that only creates hostility. Belongingness to the new group must be experienced as an “in-group” feeling. To achieve this, the group must be voluntarily chosen. It has been noted that people who at one point in their lives identify with the far left end of the political spectrum (socialism, communism) may at another point come to identify with arch-conservative causes at the opposite pole. Lewin (Senior 2001) attributes these types of changes to shifting group identifications and memberships. New values are accepted as the individual comes to experience belongingness in a new in-group. The solution for Good Sport is to eliminate the unit goal and replace it with a series of short-range goals that rose slowly to the unit figure, thus permitting a continuing feeling of success (Senior 2001). Leadership Style If change was initiated, situational leadership style would be the most effective. Following the Hersey and Blanchard model “situational leadership theory is based on the interplay among the extent of leader directive (task) behavior, leader socioemotional (relationship) behavior, and follower readiness/maturity for performing a certain function. In their view, followers are the most critical factor in leadership events” (Storey 2004, p. 35). In particular, the use of situational pressure, task-related satisfaction, subordinate need for information, job level, subordinate expectations, congruence of leadership styles in the hierarchy, subordinates organizational independence, and leader upward influence served to enhance correlations between the leader behavior measures and outcome variables. The basic concept itself remained highly questionable, although there clearly were instances when it worked. In contrast to bureaucratic leadership, task-oriented leadership and servant leadership, situational leadership is more effective and successful because it meets organizational needs and problems faced by Good Sport. Successful situational leaders are defined as those who accurately and flexibly adjust their behavior to these various situational constraints on the choice of a leadership pattern. In its original version, normative decision process theory differentiates between instances when, if decision sharing occurs, it will be with two or more subordinates and thus of a group nature, and cases when only a single subordinate would be involved (Sogunro, 1998). The main strategies to manage different groups in Good Sport will involve delegating and supporting, coaching and motivation. Personal knowledge of managing in a large corporation is not only scholarly knowledge but also a particular type of scholarship that is attuned to the values and viewpoints of the times. In this case, if a strong leadership and entrepreneurship are to be successful, they must be supported by an appropriate corporate culture. According to Muchinsky (1983), "As opposed to thinking in terms of leader characteristics or situational factors that moderate leader effectiveness, mutual influence theories focus on the dynamics of the leader-follower relationship, stressing the link between the two rather than either particular role" (p. 417 cited Sogunro 1998, p. 26). In Good Sport, the findings provide support for the view that there was a tendency for managers to choose a more or less participative style with some consistency, but the tendency to vary ones style depending on the situation was much more pronounced. In all probability this situational effect is inflated in the research over what would be found in any one actual managerial situation, because the case problems covered an atypically large range of situations. Nevertheless, the theoretical expectation that situational factors do matter is supported. The problem or situation faced is a much better predictor of managerial behavior than the managers basic style. People do vary their behavior to match the demands of the problems they face, and they do so over a wide range (Sogunro, 1998). To be successful, plans for change must be firmly focused on developing a culture that is aligned with the firms intended strategy. Trying to implement a change that is counter to the strategy is almost certain to fail. It is the high-level leaders responsibility, once strategy is chosen, to bring the corporate culture into close alignment with strategy and keep it there (Schrodt, 2002). In Good Sport, attention should focus on sources of employees’ reactions to the managerial situation. By providing the managers with what amounted to psychoanalytic interpretations of their unconscious motives, and how these might yield anxiety on the job, perhaps some diminution in negative affect could be achieved. Stimulating people to these activities requires conditions that foster creativity and innovation. Taking into account problems faced by the Good Sport, I would introduce mediation and problem-solving workshops as the main conflict management methods. Following Wood (2003) mediators represent an intermediate step between leader behavior and a criterion, a step that operates as part of a causal chain; as such, mediators must be correlated with both the leader behavior and the criterion. This mediation process may be partial or complete, although the former is more typical. This strategy would help to avoid aggressiveness and misunderstanding between the parties. This approach would help to maintain positive atmosphere and organizational culture within Good Sport. Problem-solving workshops will increase administrative staff availability (training personnel, human relations troubleshooters), increasing the professionalism of subordinates (staffing with professionals, development planning), redesigning jobs to increase inherent performance feedback and ideological importance, and starting team-building activities to develop group self-management skills in solving work problems as well as resolving conflicts and providing support. A similar listing of creative enhancers includes increasing subordinate perception of leader influence and expertise, building organizational climate, increasing leader position power, and creating cohesive work groups with high performance norms (Senior 2001). Nevertheless, as usual employees when making decisions tend to combine their own judgment with benefits of the corporation, although frequently without being aware of the consequences of their decisions. In this case, the responsibility of Good Sport is to analyze social conditions and possible threats of their products for potential consumers. Conclusion The facts mentioned above show that Good Sport has a formal organizational structure which determines politics and power, culture and relations between employees, and influences overall success of the organization. Changes in corporate culture and communication, situational leadership style and better conflict management will help to improve organizational performance and productivity. The active leadership participation is required.. The goal of grid organization development is to improve organizational relations and to move an organization from that which is repetitious, mechanical, arbitrary, or senseless toward one that is meaningful, purposeful, problem - solving, and goal-oriented; interactions should change from those that arouse distrust and disrespect to those that use problem solving to create mutual trust, support, and feelings of personal worth. Corporate culture plays an important role because some moral justification comes from a value system that is independent of the business itself and where individual opinion can be sharply divided. References 1. Good Sport Home Page (2007). Retrieved 22 August 2007, from http://www.goodsports.com.au/ 2. Huisman, M. (2001). Decision-Making in Meetings as Talk-in-Interaction. International Studies of Management & Organization, 31 (1), 69. 3. Hastie, R. (2001). Problems for Judgment and Decision Making. Annual Review of Psychology, p. 653. 4. Kennedy, P.W. (1995). Performance Pay, Productivity and Morale. Economic Record, 71 (1), 214. 5. McShane, S. L., & Von Glinow, M. (2004). Organizational Behavior, Team Processes: Leadership in Organizational Settings. New York: The McGraw-Hill Companies.   6. Mowday, R.T., Sutton, R.L., (1993). Organizational Behavior: Linking Individuals and Groups to Organizational Contexts. Annual Review of Psychology, 44 (1), 195. 7. Prasad, S., Tata, J., Thorn, R. (1999). The Influence of Organizational Structure on the Effectiveness of TQM Programs Journal of Managerial Issues, 11 (4), 440. 8. Schrodt, P. (2002). The Relationship between Organizational Identification and Organizational Culture: Employee Perceptions of Culture and Identification in a Retail Sales Organization. Communication Studies, 53 (2), 189. 9. Senior, B. (2001). Organizational Change. Capstone Publishing. 10. Sogunro, O.A. (1998). Leadership Effectiveness and Personality Characteristics of Group Members. Journal of Leadership Studies, 5 (3), 26. 11. Storey, J. (2004). Leadership in Organizations: Current Issues and Key Trends. Routledge. 12. Wood, J.T. (2003). Interpersonal Communications. Wadsworth Publishing. Read More