Organizational Governance Analysis - Essay Example

1.0 Decision making process occurs at every level of life. When dealing with an organization, the decision making function is the onus of the governing organ of an organization. It also occurs at every function of society. It occurs in religion, in families, in management organs of organizations, at the individual level etc. Decision making is the very way of life of human beings and any system constituting of human beings can never be bereft of decisions. Yet still within an organization and specifically the managerial organ of organization, decision making process is instrumental in the general performance and efficiency of the organization (Schwarber, 2005). At departmental levels, decisions are mandatory and all departments need to make decisions which are oriented to the vision, mission and general objectives of the organization. The governance of an organization bears on organizational culture which may be construed to refer to attitudes, values and beliefs which are shared by the people constituting a particular organization. Alternatively, organizational culture may be seen to refer to both the norms, principles and standards that guide individual behavior in an organization thereby controlling the way individuals and groups of people within the organization interact with one another and with other stakeholders that are found out of the active running of the organization (Hill and Jones, 2001). The governing body not only gives direction to organization through decision making but also initiate a permanent organizational culture (Huse, 2009). This paper seeks to highlight the general concept of organizational governance paying emphasis to the good and bad organizational governance practices. This is achieved through an analysis of an organization thereby giving its strengths and weaknesses as far as governance is concerned. 2.0 Introduction Organizational governance may be defined as the processes, Policies, and structures which an organization puts to use so as to not only gain direct control of the organizational activities but also realize organizational objectives and also protect the interest of the entire shareholder population and the society as a whole. The processes, Policies, and structures distinct of organizational governance enhance the handling of the interests of the shareholders and society in such a way that is based on the most appropriate moral and ethical standards. Another way of terming the words in the foregoing paragraph is that the function of organizational governance is basically the leadership function in an organization which offers direction within an organization manages risk and controls all the organizational activities. Based on this submission, the organizational governance can then be termed as a function which enables the organization to: Comply with societal legal and regulatory rules Comply with the accepted business norms, ethics and meet the general societal social expectations of the organization. Benefit the society at the same time enhancing the interests of the stakeholders Report completely and honestly to not only its owners but also its regulators, stakeholders, and the general public in a bid to ensure responsibility for its conduct, decisions and performance Successful organizational governance requires that there exists synergy among its basic functions of its governing body. The governing body of an organization is made up of the board of governors, the management, the internal auditors and the external auditors. If synergy among these four organs of organizational governance exists, then the result is a well performing and efficient organization. The board of governor's responsibility is that it sets a governing and managing tone at the top. Being the focal point of all management activities in the organization it ensures ultimate accountability at every level of the organization and oversees all the organizational activities without necessarily managing them directly (Pointer & Orlikoff, 2002). The management is divided into two; the senior management and the operating management. The senior management develops the strategic guidelines for the organization under the board's oversight. It also defines the organizational value system and assures and ensures the risk management process (Kaen, 2003). This organ of organizational governance also monitors operations, measures results in the organization and implements corrective actions meant to steer the organization to the greater heights depicted in the vision and mission statements of the organization. Unlike the senior management, the operating management not only deploys strategy handed down by the senior management but also enforces the internal controls in place in the organization and offers the general supervision of the organization's activities. In this way, the operating management is responsible to the board and senior management not only for the implementation of strategy but also for the deployment and enforcement of appropriate internal control systems (Samuelson, 2005). The auditing function in the organizational governance comes in two levels; the internal auditing function and the external one. The internal auditing assesses the general governance structures of the organization to ensure that they are well designed, constituted and operating efficiently thereby bearing the responsibility and power to provide advice to the senior management and the board on the possible improvements on the design, constitution and operation of the governance structures. Finally, the external auditing function bears the responsibility of provision of the independent financial statement preparation and thus reports activities in accordance with appropriate rules and accounting principles. Therefore, the organizational governance is a foursome affair. It is like a four-legged stool whereby if you start chopping off some of the legs, balance will be evasive. This is why synergy, coordination, cooperation and consolidation of efforts from every part of organizational governance to ensure logical balance in the general governance of the organization are more than necessary. 3.0 Organizational Analysis; Tesco Good governance or bad governance of an organization determines the general success of that organization. It is obvious to note the direction of the dual relationship between organizational governance and organizational success. Bad governance is more and more being regarded as one of the main source of all evils within our organizations and societies. Most donors, international and national financial institutions are now basing their aid and loans respectively on the condition that good governance is ensured through a competent undertaking of thorough reforms. This emphasis implies a distinction between the organizations with good governance structures, activities and practices and those in the contrary. The organizations with good governance practices are deemed to be strong and successful and the contrary is also true. Therefore, the general analysis of organization is usually based on organizational governance. Tesco is an international grocery and general merchandise retailing chain which is based in the UK. It happens to be the largest retail chain in the UK and fairs fairly well in the international arena. In 2008, Tesco was ranked as the fourth largest retailer up from its fifth position in 2003. At the inception of Tesco in 1919 by Jack Cohen, Tesco specialized in retailing of food and drinks but as time went by, the chain diversified into general merchandise thereby dealing with: Retailing and renting DVDs, software, CDs and music downloads, Retailing clothing, electronics and telecoms Offering services such as health insurance, dental services and plans, car insurance, financial services and Internet services (Tesco plc, 2007). 3.1 Massive Growth of Tesco between 1992 and 2005 In 1992 Tesco's domestic market share started to grow appreciably and before anyone could notice, Tesco's market share had almost superseded that of its two major contestants when combined. Having managed a strong base in the UK with a giant market share, Tesco moved on to go international and managed to own more retail space abroad than in the UK. Definitely, Tesco's growth was not by unfairly acquiring competitors but it grew in the full glare of competition from its intact competitors by simply taking over small investments; a move that enabled it to implement its format range whereby convenience stores are inclusive (Simms, 2007). The swift growth was inevitably supported by Tesco's tendency to spot social trend and capitalizing on these trends. For instance, the chain introduced a Card scheme (ClubCard) which is simply a loyalty scheme demonstrating Tesco's insightful understanding of its customers' shopping habits besides Tesco's unyielding philosophy listening to its customers thereby enacting a consumer-driven procurement function (Humby et al, 2006). By so doing, Tesco remained in the lead and continued to ensure that its goods remained not only desirable to the customers but also available and affordable and in the process, Tesco's brand became a household brand and the most trusted brand in the entire Britain. Tesco capitalized on the popularity of its brand and combined it with its listening culture and used the two to venture further into other inconceivable areas such as financial services, insurance etc. By 2005, Tesco had clearly mapped its success course and it was evident that nothing was going to stop the giant retail chain from soaring higher (Tesco plc, 2007). 3.2 Governance Strengths of Tesco 3.2.1 Continuous improvement, Fast response, Equity and Inclusiveness Tesco's TQM helps achieve customer satisfaction through superior quality of goods and services but this alone is not sufficient in sustaining this customer satisfaction. Continued improvement of product and service quality helps in sustaining the required customer satisfaction. Tesco believes in maintaining a listening to customers culture which not only helps in responding fast to their needs hence achieving satisfaction but also helping to conceive quality improvement to sustain the satisfaction. Continuous improvement in a bid to achieve and sustain customer satisfaction is not only limited to quality of goods and services but also that of the operations and activities. Elimination of defects and waste is embraced in continuous improvement but there exists a general 'prevention is better than cure' approach. Secondly, a spirited customer-driven orientation aids in defect-free production. However, when quality problems occur in the product, rapid response to customers complaints helps fix it early enough before escalation. Generally, Tesco fight to take care of every stakeholder's interests within a reasonable timeframe. Further, the organization ensures equity and inclusiveness through its corporate social responsibility programs in which it tries to give back to the community to make the community to feel that it belongs. 3.2.2 TQM Culture and Employee Participation Tesco has always maintained a competitive TQM culture and this explains its competitive market edge. Tesco's management creates an open cooperative TQM culture in which all the employees are made to internalize responsibility for customer satisfaction. Actually this has been the secret behind Tesco's success story; the fact that it emphasizes a TQM-oriented workforce which is not only well trained and committed to quality but also participates actively in activities aimed at improving product and service quality. Such workforce participation is reinforced by a reward system which stresses the attainment of quality objectives (Kochan, 1990). TQM at Tesco highlights employee remuneration and its link with customer satisfaction and thus does all that is possible to ensure that employees are paid well so as to help improve customer satisfaction. Actually, Tesco's employees are well paid; well than their colleagues working for Tesco's competitors. 3.2.3 Respect for Rule of law, Accountability and Transparency Good governance necessitates just legal frameworks that are enforced in an impartial manner. Full safeguarding of the general human rights within and even without the organization is necessary as far as good organizational governance is concerned. Tesco generally respects the internal and external rules and regulations (Edelman, 1985). In its enforcement of internal rules it ensures that this is done in an impartial way without any discrimination against any member on whatever grounds. Further, the external law is respected and Tesco hires and fires employees constitutionally and files and documents its tax reports in a transparent, accountable and honest way. Generally, Tesco's success has resulted from the accountability, transparency and honesty of Tesco coupled with the respect for the rule of both internal and external laws. 3.2.4 Consensus Orientation Tesco management and Governance has several actors and as many perspectives. For meaningful and workable decisions, consensus is upheld. This is specifically the case because lack of this may slow down the implementation or enforcement of the decision so arrived at. Good governance at Tesco requires mediation of the different interests and view points at management levels, the employees, the customers, stakeholders and the society at large. The listening culture at Tesco not only shows its responsive nature but also emphasizes the need for consensus on a number of issues and policies. Generally, good governance behavior of Tesco can be summarized by the figure below: Source: http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp 3.3 Governance Weaknesses of Tesco It is not is not proper that an organization scores perfect in governance and lacks even the minimal flaws in its governance practices. However, with the success of Tesco it is conceivable that this scenario is possible. Nevertheless, Tesco has often been accused of unfair competition. This comes from the aggressive culture at Tesco which has brought them this far. To reform this weakness, the management and governance at Tesco requires inducing a logical balance of its aggressive orientation. It is not as if this aggression is bad but lack of regulation can cause undesirable results such as being accused of unethical business practices Conclusion In conclusion, the governance of an organization determines the degree of success the organization can achieve. It has been realized from the foregoing paragraphs that strong and very successful organizations also enjoy good governance practices. It is therefore imperative that the governance of the organization is taken seriously by the foursome components gaining formidable synergy which is necessary to steer the organization to greater heights of success as seen in Tesco. Reference Tesco plc, (2007): Tesco: Our History retrieved on 2nd March 2009 from http://www.tescocorporate.com/page.aspxpointerid=D01B1F9C28E346B38DA0479EF0BE8FC3. 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