KC: Organisational goals
The stated goals of an organization exist to give direction to the activities of its members. In many companies, goals comprise both an overall statement of intent, sometimes referred to as a mission statement, and a set of more detailed objectives to guide strategic planning. Since many organizations are made up of different interest groups the formulation of goals can be a highly political process. This can cause conflict, but the goals of most businesses are generally accepted as being those of the senior management team. Goals often have a role in shaping the culture of an organization.
4 strategic intentions
- Vision
- Mission
- Goals
- Objectives
8 choices that should be made in structure of the company
- The nature of the hierarchy, for example, whether it is tall or flat.
- The degree of specialization. In particular structures this will reflect the combined influence of hierarchy and specialization.
- The type of grouping, deciding which tasks should be placed together.
- Rules, schedules and systems and in particular how rigid or flexible working practices should be.
- Integration in terms of the mechanisms to be used to achieve effective coordination and operations throughout the organization.
- The nature of control mechanisms. In contemporary organizations the nature of both inte-gration and control have changed as a result of developments in information and commu-nications technology (see Chapter 4), more especially the use of email and more recently Facebook and Twitter. One effect of this has been the reduction in the number of manag-ers, a theme we return to later in this chapter when discussing delayering.
- The nature of the reward systems. This is linked to structure in that reward can be based on hierarchy or, for example, more flexibly on performance.
- The extent of cross-boundary and cross-border activities, especially outsourcing, alliances and joint ventures.
4 things structure is concerned with:
- the organization of work around roles
- the grouping of these roles to form teams or departments
- the allocation of differential amounts of power and authority to the various roles
- job descriptions, mechanisms for coordination and control, and management information systems.
KC: Organisation structure
An organization structure is a grouping of activities and people to achieve the goals of the organization. Consid-erable variation is possible in the type of structure employed and the influences include management strategy, technology, size, the nature of the environment, the behaviour of interest groups, the firm’s history and wider cultural factors. In general terms, a particular structure emerges to maximize the opportunities and solve the problems created by these influences. In practice, however, the evidence concerning the influence of structure and performance is very patchy.
Factors that influence structure
- Technology
- Size
- Changes in environment
- Culture
- Interest groups
KC: The multidivisional company
A multidivisional company comprises a number of business units which may pursue markedly different types of business activity. The business units operate as profit centres and are centrally coordinated by a corporate headquarters, which may also control certain central services, such as research and development, and finance. This kind of structure was developed in the USA in response to business growth and complexity.
Types of structure
- Functional organization
- Divisional organisation and holding company structures
- Project teams
- Matrix organisation
Functional organisation advantages and problems
Advantages:
* Specialization
* The logic of custom and practice
* A clear chain of command
Problems:
* Conflicting departmental objectives
* Conflicting management values
* A lack of coordination
* A lack of consumer orientation
Divisional organization and holding company structures advantages and problems
Advantages:
* The operation of businesses as profit centres
* The encouragement of entrepreneurship
* Reduces upward dependency on top management
* Economies of scale by centralization of common features like R&D
Problems:
* Cooperation and interdependence
* Accounting procedures, especially transfer pricing
* Increasing diversity of operations
* Overall management control
Project teams advantages and problems
- The ability to cope with an unstable environment
- The use of individual expertise
- The ability to cope with diverse problems
- Deal directly with the customer
Problems:
* A costly duplication of services
* Scheduling
* The participants have no functional home
* What happens when the project is finished?
Matrix organisation advantages and problems
Advantages:
* Emphasizes the strengths of the functional and project types
* Flexibility of labour
* The ability to transfer expertise where it is most needed
* Dual control via function and project
* Closeness to the customer
Problems:
* Coordination and control
* A proliferation of committees and meetings
* Too many bosses
* Conflicting loyalties for staff
* Can be slow to adapt
Three trends in organisation structure:
- Large organizations are being broken down into smaller units accompanied by a reduc-tion in the number of employees (downsizing) and a reduction in the numbers of level of management (delayering). There is a shift away from more rigid structures often associated with functional, divisional and even matrix organizations.* Instead, the focus is upon the creation, through decentralization, of more flexible forms of organization, which empower employees and are more responsive to the needs of the customer.* The emergence of technology supported networks of players who together create a form of flexible organization.
Arguments for downsizing and delayering
- Large bureaucracies are inefficient, ineffective, expensive, slow to respond to change, and focus on internal processes rather than on the needs of the customer
- Delayering will result in better communication across the organization and improve the speed of decision making
- Delayering will create more flexible and responsive organizations that will empower employees and bring the firm closer to its customers
- While cost cutting is often claimed not to be a primary objective, this is often achieved as labour costs are cut.
Three types of flexibility
- Numerical flexibility. This is achieved through management’s ability to make rapid altera-tions to the headcount of the firm to meet changes in demand. A growth in part time work, temporary contracts and subcontracting were the expected consequences of numerical flexibility.
- Functional flexibility. This is achieved when employees are able to perform a range of jobs and can move between them as the need arises. In many organizations this will see an end to demarcation between different jobs and result in multi-skilling.
- Financial flexibility. This is required to reflect changes in the supply and demand of labour and to enhance the operation of functional and numerical flexibility. This can be achieved through the creation of differential rates of pay for full and part time workers, introducing the link between effort and reward for a greater number of workers and the use of incen-tives to encourage workers to become multi-skilled.
4 additional types of flexibility
Temporal flexibility is concerned with changing the time patterns of work, as with the introduction of shift work. Geographical flexibility involves the increased mobil-ity of groups of workers as in the introduction of transnational teams. Organizational flexibility relates to structural and systems changes and cognitive flexibility to the changing mind set of the workforce.
KC: Flexible firm
Flexibility within organizations occurs in a number of ways. These include the employment of part time workers, those on short term contracts and the use of outsourced contract work. It also involves getting employees to do a range of jobs, introducing variations in pay and times of attendance, and increasing the geographical mobility of labour. Such changes are seen to be on the increase as a result of globalization, higher levels of competition and the need for most firms to reduce costs. There is clear evidence that all forms of flexibility are on the increase. While the impact is often viewed positively from the perspective of the organization, disadvantages have been noted for the individual worker.
Types of ownership
- Sole trader
- Partnership
- Limited companies
- Public sector organizations
KC: Ownership versus control
The ownership versus control debate is concerned with potential conflict of interests between the owners or shareholders of business organizations and those who manage them on a day to day basis. The issue is a product of the creation of the joint stock company and the emergence of the professional manager to replace the owner– manager. The key issues are the extent to which managers make decisions in their own self-interest and the extent to which shareholders with no involvement with the firm act in their own self-interests rather than in the best inter-ests of all stakeholders. This issue becomes especially significant in volatile share markets with a large proportion of institutional investors, where high levels of share trading can lead to large numbers of mergers and acquisitions. There is a fear that pressure from shareholders for dividend leads to short term management decisions that may not be in the long term best interests of the firm. Current issues have also focused on high levels of pay, bonuses, share options and generous pension arrangements for senior managers of publicly quoted corporations.
KC: The agency problem
manager.An agency relationship exists when one person, the principal, instructs another person, the agent, to carry out work under contract on their behalf. With the separation of ownership and control, managers have become the agents of the shareholders. The relationship carries with it a potential problem in that agents, acting in their own best interest, may not act in the best interest of the principals. The problem exists in other forms of agency relationship, for example between employers and employees or firms and their subcontractors.
Four types of management in the public sector:
- Industries that are wholly owned and controlled by the state.
- Companies that the state controls as majority shareholder.
- Services to the population.
- Other government departments at national and local levels
Problems with the public sector:
- The goals of public sector organizations have often been ill defined and conflicting
- The superordinate goal of the public sector to operate in the public interest is itself open to question.
- Financially, the public sector operates under considerable constraints
- Excessive intervention
- Decision making is slow and complex
- Management autonomy and motivation are limited.
Advantages of privatisation:
- It creates increased competition, which leads to increased efficiency, higher productivity, quality improvement and, ultimately, growth and profit
- Shareholders have a financial interest in the effective management of the enterprise. Managers’ performance is therefore closely monitored and controlled. Organizations that perform badly can become subject to takeover. Interestingly, the agency problems are not considered within the scope of this commentary
- Since customers have a choice, there will be a focus on customer care and service levels will improve
- Costs will be reduced as a result of competition. In particular there will be a reduction in labour costs as organizations seek greater efficiencies
- There will be improved awareness of and adaptation to changes in local, national and global environments
- There will be greater incentives for staff through more flexible pay arrangements and profit sharing schemes. Managers will be encouraged through incentives to be more innovative and proactive
- For the newly privatized organizations there would be greatly increased opportunity for raising revenue which could be reinvested in the operation. It was assumed this would stimulate innovation to the benefit of all
- For the state there will be a reduced public sector deficit and borrowing requirement. Privatized businesses will attract more inward investment
- Society will change as more people are given the opportunity to own shares.
KC: Privatisation
Privatization refers to the government policy of selling off public assets to private ownership and control, usually by share issue. The policy was prevalent in the UK in the 1980s and 1990s, driven largely by an ideological belief in the workings of the free market. The policy extended to the deregulation of certain public services, thereby ending public monopolies over the provision of public transport and refuse removal. The process has also been pursued in other countries such as France, Germany, Japan, Australia and Canada as well as in former com-munist countries in Eastern Europe and in China. The policy is driven by the belief that private firms are both more effective and efficient, and free managers from the constraints of political control.
