Entrepreneurial & Hierarchical Structures

Comparison of characteristics of the Entrepreneurial & Hierarchical Structures

Although the entrepreneurial structure works well for the small business, as the business grows, that structure can cause inefficiency as much of the work load is placed on those in decision- making. The hierarchical structure allows the large business to reap the benefits of economies of scale through specialization. However it has also been ‘criticized for its inability to meet new demands” Hall et al (2008). An organization’s structure must be chosen carefully. The wrong structure could lead to poor co-ordination, rising costs, slow decision making, and a failure to share ideas and decreased motivation as employees are unaware or what’s happening and why.

Organizations may adopt one of the four main types of culture namely; power, role, task, and person culture. Each of these cultures in turn will affect the performance of the organization and personnel differently.

Within a power culture, the main element is control and decisions are centralized around one person. It creates an atmosphere of competition amongst employees as they compete to gain power as an achievement of their own objectives, thus a political atmosphere in the business. The lack of consultation can lead to staff feeling undervalued and de-motivated.

In role cultures, unlike power cultures, power is associated with a role rather than an individual. Employees are focused on their job descriptions and are somewhat specialized, thereby increasing productivity for the organization.

Task cultures, on the other hand, utilize team working. Staff is motivated since they are empowered to make decisions within their teams. They feel valued because of their selection on the team and have the responsibility of driving their teams to successful completion.

Person cultures involve individuals who don’t necessarily work closely together. They look toward to organization for support, since most of them would be partners and share management. For example, a group of lawyers.

The culture best suited to the entrepreneurial structure is the power culture as it is centralized around one individual, control is the key element. The hierarchical structure on the other hand can best be linked to the role culture as the organization is split into functions and each individual within the function is assigned a role.

Task 2 – Approaches to Management and Leadership

Briefly describe two different management approaches and explain how these management approaches could be implemented in an organization.

“Management” may not easily be defined; however it basically describes the process of getting things done in a coordinated manner.

The idea of “scientific management” was set out by Frederick Taylor, and refers to a management approach in which it was believed that a task should be complete in the “best way”. It was designed to reduce inefficiency and regarded money as the only motivating factor to work. The “best way” is a method using selected skilled workers to complete tasks in the quickest time, following a sequence that does not allow for change. Workers are supervised to ensure that methods are carried out as directed and would consequently be rewarded or punished based on performance. It is directly linked to output and follows the old saying, “a fair day’s work deserves a fair day’s pay”. Workers underperforming therefore would lose earnings whilst those overachieving would earn bonuses.

This scientific management approach can best be applied in mass production industries where labor is extensively specialized for instance, vehicle assembly lines. It can also be applied locally to Harris Paints Dominica Limited, a paint manufacturing company, in its production department as mass production occurs there. There is a clear division of the task and responsibility between the technical manger, also head of that department, and the production workers. There is only one way- the best way- of paint production; scientifically tested and proven formulae. These are to be followed on a precise order to achieve a final product within particular specification limits. Workers are hand selected for particular tasks like tinting and trained accordingly to perform these jobs. They co-operate along the production lines in accordance with the formulae and job instructions for making paints. They are rewarded with economic incentives.

Though Taylor’s approach seemed appealing in early years, it later became clear that factors other than money affected motivation. This new trend of thought was called the Human Relations School. This approach was founded after experiments conducted between 1927 and 1932. They were initially based on “scientific management” – the belief that productivity was affected by work conditions, skills and financial rewards. It however proved that these changes really didn’t affect productivity, rather greater cohesion and communication through group interaction motivated workers, consequently increasing output. It further explored the truth that individuals need to be given opportunities to influence their work environment and be continuously provided with challenges and interest. They were also motivated by the interest displayed in their work. Overall, the Human Relations School implies that a “business aiming to maximize productivity must make sure that the ‘personal satisfaction’ of workers are met for workers to be motivated.” Hall et al (2008).

The Human Relations School approach can also be applied to situations at Harris Paints Dominica Limited. For instance, employees are allowed to design promotional campaigns, generate ideas for, and produce activities that are used at business fairs and trade expos as well as to represent the company at these events. One such occasion is the National Independence Expo hosted by the Dominica Export Import Agency (DEXIA) during Dominica’s 30th Independence anniversary in October 2008. This generates interest and motivates employees to represent the company. Another would be employees are given opportunities to use their voices for audio and TV adverts and event to design the interior of the company’s administrative office. Generally, if employees are allowed to give ideas and to some extent participate in decision making they feel more motivated even if there may not be a monetary reward. Unlike the “scientific management” approach focusing on productivity solely, the Human Relations School also focuses on social relations in the organization.

Using examples from your own experience, or from an organization of your choice, discuss how managers adopting these management approaches would use power and authority in order to manage their staff.

Power in an organization can mean a way of managing others. Authority on the contrary, would be the ability to carry out a task, and can be an example of power. There are four major sources of power that one can acquire. Power can be acquired through activity, personality or situation.

Sources of power

Legitimate

Expert

Personal

Political

Fig. 2 Sources of power

Various types of power would be used when adopting management approaches. The “scientific management” approach would no doubt use the expert and legitimate sources of power. Legitimate power would be applied in such a way that decisions would be passed on without consultation. This is reflected in the “right way” idea, since there can be no changing of methods by employees, just instructions to follow as delegated. Expert power is also applicable to that situation in the sense that it is based on specialist knowledge. For example, the technical manager at Harris Paints is educated and trained in his particular field and he through tried and tested scientific formulae instructs the production workers as to what they do, and how to go about doing it.

The Human Relations approach alternatively, can be associated with personal power. The Human Relations School approach takes into account the social environment or workers and allows opportunity for decision; the personal power theory claims that the charisma of managers allows for building of personality cults, drawing employees to them. It would mean therefore that the use of this source of power would favor effective communication and positive interaction between managers and staff. Managers would be better able to communicate their interest in employees work. As relating to the same example of the expo, employees may be willing to suggest ideas and volunteer to participate without even being asked, because of the existing environment between workers and managers.

Task 3 – Motivational Theories

Identify two different motivation theories and describe how they could be observed in practice. Include specific examples from an organization, or organizations, with which you are familiar.

The various theories of motivation aim at either explaining the specific factors motivating people or are concerned with the thought processes that influence behavior.

Maslow’s hierarchy of needs is a motivation theory aimed at explaining specific factors motivating people. His theory consists of two parts: the classification of needs, and how these classes relate to each other. The hierarchy is generated as a pyramid, each level depicting a class of needs.

SELF-ACTUAL-ISATION

ESTEEM NEEDS

-recognition for jobs done e.g. annual awards

LOVE & BELONGING

-support from co-workers

-effective teamwork

-interaction & communication

SAFETY NEEDS

-secure jobs

-work conditions are safe (safety equipment & clothing available)

PHYSIOLOGICAL NEEDS

wages enough to meet bills, food & other basic needs

employees have good working conditions

-promotions at work

-new and challenging tasks occasionally

-increase in authority

Fig.3 Maslow’s Hierarchy of needs in practice at Harris Paints

The needs at the pyramid’s base are basic needs and must be satisfied before an employee can move to the next level, as each level is dependent on the level below. Once a level is satisfies it becomes of less importance. For instance, an employee would not be too concerned about being part of the Harris Social Club if he cannot provide meals for himself. Self – actualization is the very top level, Maslow believed that though everyone may be capable, very few get to this level. Generally in practice, “there’s always room for improvement”. If one therefore, is currently the country manager, he may as well strive to become regional general manager or even C.E.O. The main issues with this in practice at Harris Paints Dominica Limited is that some levels don’t exist for certain individuals – love and belonging, for example would not mean anything to the anti-social individual as he would not care to belong to a group or even those who just prefer being alone. Another would be deciding when a level has actually been satisfied. It may be true that a person has shelter, but he may be renting and would actually have to own his own home before he is actually satisfied.

The Reinforcement theory is another motivation theory. It seeks to analyze how individuals become motivated and believes that rewards and punishments can be used to reinforce or modify behavior. There are four types of reinforcement that can be applied to employment at Redi-Mix Concrete Ltd, a pre-mixed concrete supplier in Dominica.

Positive: this involves using pleasant rewards to encourage a desired behavior. Employees are paid annual bonuses, because they see to it that customers’ concrete needs are delivered at the desired location at the customers’ time request even if it means going beyond normal working hours, sometimes much earlier than start of their work day or later than day end.

Negative: an attempt to remove a stimulus by supplying an unpleasant stimulus that generates desired behavior. Employees are generally given free dinner when working overtime past 7:00 pm. That hour could be shifted to 8:30pm so as to discourage employees from loitering just to meet the 7:00 pm timeline in order to enjoy dinner.

Extinction: total withdrawal of a consequence associated with the behavior in order to decrease it. Employees are no longer paid for sick days unless they present a medical certificate. This will discourage deliberately calling in sick and still getting paid for the day, as employees would not really want to spend money going to the doctor to obtain a certificate if they’re not ill.

Punishment: in order to curb undesirable behavior, promote negative consequences. In this instance, employees are terminated for actions like theft. Particularly, a case where extra concrete than the amount paid for would be delivered to the workers’ friends in exchange for other deals or free for relatives.

Identify an operational change that has taken place in an organization of your choice. Select the leadership style which was (or would have been) most appropriate in order to manage and implement the change and explain why.

Until recently, there were five companies operating individually under the Harris Paints name in the Caribbean. The owners decided to make it a regional company with operating branches in these islands instead. The change was implemented to gain competitive advantage across the region, for instance in terms of shipping – the island nearest would ship to the distributor to save freight costs, as well as to ensure continuous supply to distributors. In the event that their regular supplier was unable to supply for some reason, a sister company would then be able to send off that shipment and avoid any lost sales. They would also have capitalized on savings through bulk purchases of raw materials and employees would enjoy equality throughout the board, in terms of pay and movement of labor between branches. Though somewhat independent, there are some processes that must be done through its regional head office.

The leadership style that was used to implement such a change was the autocratic leadership style, one in which decisions are made by top management, or owners and in turn passed down through the organization. It was the best method of implementing that change because consultation with each company’s Board of Director’s and shareholders would eventually have led to confusion and delayed discussion process. Furthermore, the discussion would have generated ideas, but the final decision would still have been in the hands of the owners. It was therefore; best to just go ahead with the change.

Task 4 – Working with others, teamwork, groups and group dynamics.

What do you understand to be the difference between teams and groups within an organisation? How does the role of teams differ in large and small organizations?

The difference between teams and groups in organizations is that, a team is usually a group with members who possess complementary skills put together for a purpose. Teams are specifically necessary to conduct complex tasks and may have independent subtasks. Through coordinated effort, teams allow members to maximize their strengths and minimize their weaknesses. A group, in contrast, can be termed a number of persons considered together sharing some relation, more specifically goals, or a common purpose. Consider the following examples: Team – employees in an accounts department preparing budgets for the next financial year with a specific deadline. These same employees could meet and discuss daily news events during the lunch time hour; that making them a group. By and large, both teams and groups have common purpose; a team is usually set to achieve a task whilst groups are committed to common purpose, similar working approach. A team comprises a group but a group does not necessarily constitute a team.

Team roles differ in large and small organizations. The team structure may define the entire organization in a small business. This is highly possible as there are few employees and all efforts may be needed to achieve the set task. Large organizations like Harris Paints, paint manufacturers, are composed of departmental teams each self managed; team leaders in each store/ factory are also in turn part of a regional team. Tasks may be allocated to teams with team leaders reporting to a main team for decision making.

Apply the Tuckman and Jensen team development model to your role in an organisation.

“Groups do not come into existence fully formed. B. Tuckman and N. Jensen (1977) suggested that groups pass through stages of development” Hall et al (2008)

The following shows stage development for the Harris Social Club at Harris Paints according to Tuckman and Jensen:

Forming – employees suggest the idea of a social club; word is passed around, persons demonstrate interest in pursuing the initiative. Ideas are generated as to what the club will be like.

Storming – employees meet and reveal personal goals and group goals and try to reach an agreement on what will be the club’s objectives and strategy. Conflict and disagreement is experienced as people’s goals are different.

Norming – An executive committee is voted in and rules standard rules are established. Ideas are continue to be shared by members, and final decision is processed by the executives. Information is then passed on to other club members through an appropriate medium.

Performing – The group is finally formed, an executive, rules etc. are in place. Club members now work to achieve its objectives. Members know their roles and live up to them. Activities fall in place.

Explain how communication methods can affect team performance in a large multi national organization.

Communication takes place in various ways among organizations:

Bavelas (1948) and Leavitt (1951) identified four main types of communication network, which are illustrated below.

Types of communication networks

Large multi-national organizations can be considered generally centralized groups – meaning its members or employees share very little in the decision making of the entire organization. Nevertheless, within branches and stores employees may be able to partake in decision making; these smaller groups are decentralized. The centralized groups follow the wheel and chain methods of communication as shown above. Decision making is highly effective, particularly if tasks are simple, for instance “deciding on the recruitment policy for a particular job, centralized groups like the wheel are faster and make fewer errors” Hall et al (2008). Members however are more likely to have lower satisfaction levels. When tasks are more complicated, like “putting into practice a recruitment policy for a particular job, decentralized groups may be more suitable.” Hall et al (2008). These decentralized groups normally use the circle and network methods. These methods share responsibility and however may not be a truly effective mechanism as they don’t ensure that decisions are always made.

References

Hall D, Jones R, Raffo C, Aderton A (2008) 4th Edition Gray D, Chambers I.

Business Studies. Pearson Education, Edinburgh Gate, Harlow Essex CM202JE. Chapter 59 pg.335, 337 & Chapter 72 pg.416, 417

Bavelas, A., (1948). A Mathematical Model of Group Structure. Applied

Anthropology, Volume 7.

Business teacher (2009)

http://www.businessteacher.org.uk/people-in-business/organisational-structures/ [Accessed on June2009]