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: Critical Analysis Of Organisational Structure And Culture In Relation To Business Performance

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Autor:  denver_d  26 May 2010
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Introduction

From the analysis of the Phrase “Provided the underlying culture is strong, a bad patch will sooner or later end. Properly regarded, setbacks can be instructive. Enduring cultures regard them not as calamities but challenges, and absorb their lessons…..” We can hypothesise that �underlying culture �refers to organisational culture; �bad patch’ refers to a period where business performance is low or employees are moving away form the organisational culture resulting in low business performance; �Properly regarded, setbacks can be instructive’ means that the organisation can learn from their mistakes and overcoming obstacles, and �Enduring cultures’ are cultures that are long lasting in the organisation. Substituting translations into the above mentioned phrase, it would state that: once organisational culture is strong and lasting, periods of low business performance will soon end, the organisation will learn from its mistakes and overcome challenges.
This paper proposes to critically evaluate how structure and culture of organisations affect their business performance and individual behaviour in the workplace by: defining structure and identify four types of organisational structures, defining culture and identify the types and different dimensions of culture, Defining business performance and identifying and analyzing the factors influencing individual behaviour at work. Furthermore it will seek to compare and contrast the different organisational structures and organisational culture. Analyze the relationship between organisational structures and organisational culture and its effects on business performance. Additionally the learning cycle will be defined and it will be used to show how structure affects an individual’s behaviour at work and along with the other factors that will be identified and with the different types of culture show how this affects business performance. Upon completion of this, recommendations will be made for improving organisational structure and culture.
“Organisational structure is the pattern of relationships among positions in the organisation and among members of the organisation. Structure makes possible the application of the processes of management and creates a framework of order and command through which the activities of the organisation can be planned, organised, directed and controlled. The structure defines tasks and responsibilities, work roles and relationships and channels of communication.” Mullins (2005. p 596.) The objective of creating organisational structure is to link individuals in established network of relationships so that authourity, responsibility and communications can be controlled. It is also necessary to assign suitable levels of authourity and responsibility to groups or individuals to achieve the desired outcomes of the organisation. This creates a hierarchy or chain of command in which authourity flows downward and accountability because of responsibility flows back up. Structure also allows for tasks to be assigned to groups or individuals and that these groups or individuals can be coordinated so that overall objectives can be completed without wasted resources. Adapted from EDEXCEL HNC & HND Business Organisations and Behaviour Course book, (2004 p58:59)
Organisational culture as defined by Fons Trompenaars (1999) is the �shared assumptions, beliefs, values and norms as well as artifacts and language patterns. It is an acquired body of knowledge about how to behave and shared meanings and symbols which facilitate everyone’s interpretation and understanding of how to act within an organisation.’ Trompenaars as cited in and adapted from Mullins (2005 p45:46) goes on to describe culture in terms of layers the outer, middle and core. The outer layer represents artifacts i.e. style of dress, language and atmosphere of surroundings and climate it is the facets of an organisation’s culture which can be easily understood even after a short visit to an organisation. The middle layer houses intangible characteristics such as leadership style, perception, motivation, organisational structure control and power. The core layer of culture relates to the deepest assumptions i.e. belief in quality, loyalty, freedom to make decisions and mistakes and goals whether ideological, formal or sheared personal goals.
Business performance is the organisation’s ability to attain its finical goals by using its resources in an efficient and effective manner in order to meet its primary mandate which is to increase profits. Now that we understand these elements lets us look at their varying types and what factors influence an organisation to adopt different types of structures and cultures.

Theoretical framework

Structure exists to bring order to organisations; the fundamental nature of structure is the division of work among employee or functional departments and the coordination of their activities. There are factors that influence an organisation’s structure namely its size, as size increases the more complex division and sub division becomes, subsequently difficulty in control. Coordinating and communication increases as increase in layers have to be formed to regulate manager’s span of control i.e. the amount of subordinates one can control effectively. Span of control is proportional to the individual’s skill, nature of tasks assigned and level of technology available. The nature of work of the organisation will determine how tasks will be assigned and divided and determine how many functional areas are required. The level of skill of staff will determine how tasks are structured the amount of supervision and level of independence to make decisions required. The level of technology available to carry out tasks, does it require creativity or the human element or can it be mass produced resulting in automation, reducing the number of employees required. Adapted from EDEXCEL HNC & HND Business Organisations and Behaviour Course book, (2004 p60). There are other factors which also determine an organisation’s structure but it is necessary to identify the different types of organisational structure.
The Tall organisation structure is one that in relation to its size has a large number of management hierarchy and authourity; it has a narrow span of control. There is a “long chain of command” running from the top of the organisation, example Managing Director down to the bottom of the organisation example floor worker. There is a narrow span of control that is, each manager has a small number of employees under their control. This means that employees can be closely supervised and small groups enable team members to participate in decisions. There is a clear management structure. The function of each layer will be clear and distinct. There are clear lines of responsibility and control and there is clear progression and promotion up the hierarchy. The freedom and responsibility of employees (subordinates) is restricted which inhibits delegation and restricts employee initiative. Decision making could be slowed down as approval may be needed by each of the layers of authority. Communication has to take place through many layers of management and will take time. High administration and management costs because managers are generally paid more than subordinates. Each layer will tend to pay its managers more money than the layer below it. Adapted from http://www.learnmanagement2.com/organisational%20structures.htm.
The Flat organisation structure in contrast is one that in relation to its size has a small number of management levels and authourity; it has a wide span of control. There is a “short chain of command” running from the top of the organisation. Due to the small number of management layers, flat organisations are often small organisations. There is greater communication between management and workers with more opportunity for delegation. Better team sprit. There is less bureaucracy and easier decision making with increase in communication because of fewer levels of management but this sacrifices control. Fewer levels of management include benefits such as lower costs as managers are generally paid more than worker. Employees may have more than one manager/boss. Because of the small hierarchy it may limit/hinder the growth of the organisation. The structure is limited to small organisations such as partnerships, co-operatives and some private limited companies. Functions of each department/person can be blurred and merge into the job roles of others. Managers may only get a superficial idea of business strategic plan and have to convert that plan into operational terms. At Some times managers tend to be overworked and are more likely to be involved in emergency management situations.
�A Matrix structure organisation contains teams of people created from various sections of the business. These teams will be created for the purposes of a specific project and will be led by a project manager. Often the team will only exist for the duration of the project and matrix structures is usually deployed to develop new products and services.’ www.learnmanagement2.com. The advantages of a matrix include: Individuals can be chosen according to the needs of the project. There is increased flexibility and greater cooperation and mixing of skills. Employees’ foster attitudes accepting change and departmental monopolies are broken down. There is a motivation factor involved when employees empowered with greater participation and planning and control decisions. Some of the disadvantages include: A conflict of loyalty between managers over the use of resources. Increased autonomy of teams can make them difficult to monitor. Employees or teams with or more managers are more likely to suffer from stress at work.
A virtual organisation is an organisation that does not have any physical existence or permanence; they have a 'reality' only on the worldwide web. They can be created and re-formed to meet the needs of new projects. �From a Human Resource perspective, virtual teams may be composed of specialists working from home, 'telecottages' or small companies. They work together for the purposes of the project. Selecting, managing and assessing the performance of virtual team members is a whole new ball game.’ http://www.hrmguide.co.uk/hrm/chap4/ch4-links4.htm
Like the matrix structure virtual teams are formed and then dismembered on completion of tasks and new teams are then formed to tackle new objectives. Traditional hierarchical structures have no role in this kind of organizational structure. Team members meet through video conferencing and other electronic means only when required. “Virtual organisations create new challenges for human resource management. A networked company does not require a personnel function but its core management must be adept in managing people at a distance, some of whom may not be 'employees' as such” (Thomson and Mabey, 1994). �In practice virtual organisations are only partly virtual. Most companies of this kind have 'real world' elements which still use offices and have face-to-face meetings. After all, human contact is invaluable for engendering good relationships and sparking off creative ideas.’ http://www.hrmguide.co.uk/hrm/chap4/ch4-links4.htm
Culture influences the decision making process, style of management and what everyone determines a success in the organisation. �Each culture stems from different assumptions about the basis of power and influence, what motivates people, how people think and learn, and how change should occur.’ http://www.onepine.info/phand.htm. Charles Handy (1987) cited in EDEXCEL HNC & HND Business Organisations and Behaviour Course book, (2004 p103) refers to culture as �the way we do things around here’. He also goes on to describe four main types of organisational cultures: Power culture, role culture, task culture and person culture.
The power culture is frequently found in small entrepreneurial organisations, control and decisions are made by key personnel and there are little rules and procedures with minimal bureaucracy. The orginisation is not exactingly structured and is capable of flexibility adapting quickly to conform to change. There is need for good employee relations in order for this type of structure to be successful. As the organisation’s size increases personal influence of key members (usually owners, or investors) decreases, this is why it is bound to small organisations where leaders have direct communications with all employees. This implies a flat organisational structure.
The role culture often stereotyped as bureaucracy. Just as Max Weber theory (1964) implies there is hierarchy and scalar chain of command with defined and matched authourity and responsibility. There are clear job descriptions rules and policies. This implies a tall organisational structure which makes it inflexible and slow to change. This type of culture is evident in stable economic environments or where work is predictable
The task culture seeks to join the right resources to employees to complete certain tasks. It is very much a small team approach, small organisations cooperating together to deliver a project. The importance is on results and achieving objectives. Individuals empowered with discretion and control over their work. There is clear division of labour and specialisation with each member of the team having expertise in a particular area. In such organisations there is no clear leader, influence is widely spread and based more on expert power than organisational/position or personal power. Performance is judged by results, and teams are dismantled on completion of objectives and new teams are formed in order to achieve new goals. This type of culture is reflected in matrix organisations.
Person culture is where �the individual is the central focus and any structure exists to serve the individuals within it….Individuals have almost complete autonomy and any influence over them is likely to be on the basis of personal power. ’ Mullins (2005 p 892). The organisation depends on the knowledge, skill and ability of the individual. Individuals believe themselves superior to the organization.. Management and control is achieved only through mutual agreement. This type of culture is rare and found in law firms, studio artists, architects and consultants.
Terrence Deal and Allan Kennedy (1982) categorise culture according to two factors: the level of risk involved and feedback the speed at which communication between organisations and their employees receive. These two factors give rise to four generic types of culture: Tough guy/macho culture where organisations take high risks and receive quick feedback. Financial risks are high and there is a focus on speed example investments in the stock market. This can be a very stressful culture in which to operate. Work hard play hard culture where employees take few risks but feedback is quick. This is usual in large organizations, which endeavor for high excellence customer service. This culture encourages promotions, meetings and conventions to create motivation. The Bet Your Company Culture, �where big stakes decisions are taken, but it may be years before the results are known. Typically, these might involve development or exploration projects, which take years to come to fruition, such as oil prospecting or military aviation.’ http://en.wikipedia.org/wiki/Organisational_culture. The Process Culture �where there is low risk, slow feedback where employees find difficulty in measuring what they do…..Process cultures can be effective when there is need for order and predictability. ’ Mullins (2005 p893). This is often associated with bureaucracies.
�Geert Hofstede (1980) demonstrated that there are national and regional cultural groupings that affect the behavior of organizations. Hofstede identified five dimensions of culture in his study of national influences’: Power distance used to categorise levels of inequality in organisations, there are differences in the levels of power. Uncertainty avoidance refers to the degree which members of a society feel threaten to uncertainty and risk. Individualism refers to the extent to which people are expected to stand up for themselves, or otherwise act mainly as a member of the group or organization. Masculinity vs. femininity refers to the significance placed on conventionally male or female values. �Male values for example include competitiveness, assertiveness, ambition, and the accumulation of wealth and material possessions’ where as examples of feminine traits are caring, stress upon quality of life and environmental concerns. Long vs. short term orientation originally labeled Confucian work dynamism, refers to �importance attached to the future versus the past and present. In long term oriented societies, thrift and determination are valued more; in short term oriented societies, respect for tradition and reciprocation of gifts and favors are valued more.’ Works cited and adapted from http://en.wikipedia.org/wiki/Organisational_culture, Mullins (2005 p47:48)
�Learning is the process of acquiring, through experience, knowledge which leads to changed behaviour.’ EDEXCEL HNC & HND Business Organisations and Behaviour Course book, (2004 p128) David Kolb (1985) describes the process of learning as a cycle, �it demonstrates that there is no end to learning but only another turn in the cycle.’ Mullins (2005 p 411) the first stage is concrete experience where the learner experiences something for the first time example riding a bicycle and falls. The learner then analyzes (observation and then reflection stage) why he/she fell and comes to the conclusion that he/she needs to concentrate and improve balance (formation of abstract concepts and generalizations stage). He/she then applies the new strategy and attempts to ride the bicycle again (active experimentation stage).
The ability to learn from experiences will affect an individual’s behaviour at work, other factors that affect an individual’s behaviour at work include ability and aptitude, �abilities are things that people can do, or are good at, this is largely believed to be inherited. Aptitude is the capacity to learn and develop abilities or skill.’ EDEXCEL HNC & HND Business Organisations and Behaviour Course book, (2004 p127). Another factor is the individual’s attitude. Firstly their attitude to work that is their perspective on working, management, acquaintances and the organisation and their attitude at work which is their stance or standpoint about politics, religion, education and whether they choose to agree or disagree.
Perception according to Mullins (2005 p1060) is �the dynamic and complex way in which individuals select information (stimuli) from the environment, interpret and translate it so that a meaning is assigned which will result in a pattern of behaviour or thought.’ This simply put is the way an individual mentally sees things and this explains why people have different views because they perceive things differently. This is why communication within the organisation has to be clear so that every one receives the same core intent of the message.
Finally the last factor that will be explained is that of an individual’s personality. A trait is the inclination for a person to behave in a particular way, they are consistently recognizable properties. �Personality is the total pattern of characteristics ways of thinking, feeling and behaving that constitute the individual’s distinctive method of relating to the environment.’ EDEXCEL HNC & HND Business Organisations and Behaviour Course book, (2004 p116). An individual’s personality are groups of particular traits, personalities are categorized according to similar trait clusters. This is represented by the acronym OCEAN: Openness to experience, Conscientiousness; their driving factor to pursue life’s goals, Extraversion; their level of activity/ assertiveness, Agreeableness: their outlook towards others and Natural reactions; the way they react emotionally to pressure and stressful situations. It is these factors either lack of or specific combinations of each that determine the type of personality an individual possesses, example someone who is not open to experience, is not very active, and is not extremely motivated can be referred to as an introvert, because of their particular grouping of traits.

Analysis of theoretical framework and application to business performance

Organisations must have some sort of formal structure in order for work to be carried out efficiently. As previously explained this is necessary to divide work into groups or sections of particular functions to prevent duplication of efforts in order to maximize their limited resources. Because an organisation comprises of people there is also an informal organisation with different interlocking relationships, which gives rise to different behaviours, attitudes, individual perceptions and levels of ability and aptitude. When people in a particular group deliberately come together to fulfill a specific goal (formal organisation) there are particular accepted ways to behave, speak, and interact. This gives rise to organisational culture where it may be formed intentionally or unknowingly to its members by the behaviours of influential members, not necessarily personnel high up the hierarchy but by members who exercise different forms of power within the organisation.
The above mentioned are the main factors that influence business performance, they are closely interdependent on each other for the maximization of overall productivity hence the reason for human resource management. This relationship will now be individually examined in the different types of Organisational structures associated cultures and their influence on their employees resulting in their level of business performance.
Business performance in a Tall organisation structure can be affected by the length of time it takes for the flow of information through the varying levels of the hierarchy making the organisation inflexible slow to adapt too the Political, Economic, Socio-cultural, Technological .Environmental and Legal factors. It has a narrow span of control causing tight control restricting individual freedom and empowerment which affects motivation. The level of motivation employees possess will affect their output affecting business performance. Employees may not have a clear idea of the big picture and may not realize the importance of their contribution. Its highly bureaucratic nature will influence its bureaucratic or role culture. Employees may have a negative perception towards work or because everything is so clearly defined and communication is limited this could result in an impersonal nature and attitude even greater affecting employee relations, affecting motivation, resulting in affecting business performance. This is why this type of culture and structure is usually bound to government ministries and institutions where there is not any need for competitiveness.
In contrast a flat organisational structure possesses greater flexibility to the P.E.S.T.E.L. factors due to its reduced levels of management, ensuring greater survival. This quick ability to change makes it competitive able to quickly adjust to consumer demands giving it greater business performance. The wider span of control and greater levels of communication may encourage creativity, initiative and ability to make decisions giving the feeling of empowerment, resulting in motivated workers, which affects business performance. This is also dependant upon the individual personalities and networking relationships within the organisation. If people refuse to work together or tend to perceive what others say or do differently it could affect employee relations and output affecting business performance. This is why employees need to be selected that will compliment the organisational culture so that there will be good working relationships. The culture typically found in flat organisation structure is that of power culture and is usually bound to small organisations, such as entrepreneurs and partnerships.
Being one of the newer organisational structures, it is a shift from the old belief of one man one boss; it also replaces the concept of hierarchy status or individuals use of organisational power to make decisions but that of expertise power of employees. The task culture is reflected in the matrix organisation and there is no clear leader within each team. These shifts give rise to employees’ high job satisfaction because of individual participation and the group identity thus affecting business performance, simply because motivated employees work harder. Usually team members do belong to a functional unit in the organisation example sales, marketing or engineering where they will return to upon completion of their tasks and when their team is dismembered. One clear disadvantage is that sometimes teams may have more than one project supervisor assigned, in relation to each functional area affected by the project. Having more than one boss can lead to stressful situations. Each supervisor may want their department to complete their tasks favorably competing with other departments for recognition causing conflicts of interest and inefficient allocation of resources thus ultimately affecting business performance. These teams in order for them to run efficient must be comprised of individuals who suit each other. Management must conduct a personality profile and asses each member’s different abilities, aptitudes and attitudes to ascertain whether there is a strategic fit in order to create a specific project team that will ably meet the task at hand. This individual approach makes the firm flexible to market changes and multiple reporting lines/ flow of communication ensures quick responses to P.E.S.T.E.L. factors ensuring business survival, competitiveness and business performance.
The invention of the Internet and the World Wide Web, created virtual reality and commerce has ventured into this realm. This gives rise to Virtual organisations which exist in this realm. This is a new concept as previously explained; individuals can work at their homes or at small offices any where throughout the globe. Costly overheads such as structures to house employees are eliminated. Its survival depends of technical expertise (aptitude and ability) of employees and technology. Like the matrix structure teams communicate electronically and form and dissolve in strategic combinations for individual tasks. There is a mixture of task and person culture associated with this structure. To a point Virtual organisations are only partly virtual, they are made up of people who form relationships and are affected by culture. There is sometimes the need for physical meetings which is essential for maintaining good working relationships and forming new ideas. This type of organisation requires control and discipline for work to be coordinated through the different timelines globally. Teams perform task and then leave reports for incoming shifts on the net so that there is coordination and communication to prevent duplication of efforts. Employees truly need to be aware of international cross cultural differences and perceptions so as not to offend other employees, this vital for survival because a breakdown in structure will result in extinction. An example of a virtual organisation is amazon.com.
The relationship between culture strength and business performance depend on how strong-culture firms learn from and react to both their own experiences and changes in their environment. The benefit of having strong culture in the organisation is improved goal alignment between the firm and its members. It also confirms behavioural consistency so that there is less room for debate between different groups about the organisation’s goals. Strong cultures increase employees’ motivation and performance because they believe that their actions are freely chosen. Edgar Schein postulated that culture ultimately reflects the group's effort to cope and learn. Adapted from http://www.onepine.info/phand.htm. As explained in the learning cycle an individual’s ability to learn from situations and experiences will affect their relationships, ability to perform and understand thus affecting perception and attitude. This affects individual behaviour and social interactions. Organisational culture is also a major determinant in employee behaviour. Does the organisation recognize merit? Does culture promote communication? And does culture promote problem solving? Also the level of economic success and cash flow will affect the organisation’s job enrichment and training such that, organisations that can afford to further train their employees investing in their human capital will promote a culture for personal development and higher physiological needs as compared to an organisation who cannot afford such training.

Recommendations

Upon analysis of the different types of organisational structures and cultures these are the following recommendations: With reference to tall organisations there is the trend in modern times to make the organisational structure flatter, that means delayering or removal of some middle management levels. This can be accomplished by decentralisation both geographically and authoritatively giving individuals and groups a greater sense of autonomy and increasing the organisation’s flexibility.
Culturally there is need for tackling the impersonal nature associated with bureaucracy, by the organisation tackling the informal structure with motivation techniques, removal of office spaces and physical barriers, also by promoting social events and workshops fostering communication. The implementation of reward systems and career management workshops that align individual interests and that with the organisation so employees see the bigger picture and the evolution from set out job descriptions as with scientific management and bureaucracy to more meaningful jobs with more flexible and multidimensional work.
Overall there is need to intentionally apply the structure that strategically applies to the nature of the enterprise because a badly designed structure can have a number of adverse effects such as low employee motivation, morale, untimely and in appropriate communication and decisions resulting in costs.
The organisation should also adopt the human resource approach and not the personnel management practices of yesteryear, treating employees as their most valuable resource. It is critical that organisation select the right type of employee suited for the job and the organisation’s culture choosing the best fit, who is able to adapt, increasing the flexibility of the organisation to the P.E.S.T.E.L. factors and internal change paying close attention to employees’ behaviours, attitudes, aptitudes and abilities their strengths and weakness and choosing personnel to compliment that of existing staff.
Culture should also be intentionally shaped to suit that of the organisational structure, nature of the enterprise and management’s objectives. Culture should be influenced to promote communication, motivate and increase morale, learning and personal development giving employees a sense of empowerment in making decisions and to amicably diffuse conflict situations and work related stress. With these recommendations any organisation adopting these practices should experience enhanced competitiveness and business performance, even through rough times, the structure and �strong culture’ with the properly selected employees will realign the organisation path and use the experience as a learning experience and adapt accordingly.
Conclusion

In conclusion this paper has discussed how organisational culture and structure affects business performance and also that of individual behaviour within organisations. Organisational structure was defined and some of its different types were explored. Culture and business performance was also defined and the varying types of culture according to Charles Handy, Terrence Deal and Allan Kennedy were cited. The dimensions of culture according to Geert Hofstede were discussed and David Kolb’s learning cycle and individual factors affecting work were highlighted. This information was then analysed to the specific mentioned organisational structures and associated organisational cultures along with individual behaviour in relation to its effect on business performance. Upon analysis recommendations were made to improve business performance by adopting best fit practices to structure culture and selection of staff.


Bibliography

EDEXCEL HNC & HND Business Organisations and Behaviour Course book, 2004, London: BPP Professional Education

Handy, C., (1987), Cited in EDEXCEL HNC & HND Business Organisations and Behaviour Course book, 2004, London: BPP Professional Education

Hofstede, G., (1980) Cited in Mullins, L. J., 2005, Management and Organisational Behaviour, Seventh Edition, Financial Times, Prentice Hall

Kolb, D., (1985), Cited in Mullins, L. J., 2005, Management and Organisational Behaviour, Seventh Edition, Financial Times, Prentice Hall

Mullins, L. J., 2005, Management and Organisational Behaviour, Seventh Edition, Financial Times, Prentice Hall

Thomson, R. and Mabey, C. (1994) Retrieved January 13, 2008, from http://www.hrmguide.co.uk/hrm/chap4/ch4-links4.htm


Trompenaars, F., (1999) Cited in Mullins, L. J., 2005, Management and Organisational Behaviour, Seventh Edition, Financial Times, Prentice Hall

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