Examining the Organisational Structure and Culture

Abstract

In this report I aim to objectively examine the Organisational Structure and Culture by using three different organisations from different sectors within the UK and how it could affect the business. Furthering my report I will analyse the impact of staff behaviour on the three businesses. I will conclude my report by carrying out a detailed analysis on specific job roles within an organisation. I would be using McDonalds, Sainsbury’s Plc and Sony Corporation as part of my case study.

Task 1

Introduction

Organisational culture and structure

Organisational Culture also known as Corporate Culture comprises the attitudes, experiences, beliefs and values of an organization. According to author Afsaneh Nahavandi, organisation culture has been defined as “the specific collection of values and norms that are shared by people and groups in an organization… [Which] control the way they interact with each other and with stakeholders outside the organization.”

Every organisation with more than one person needs a structure so that workers have clearly defined roles and are clear about the roles of others. As such, organisational structure is often presented as a chart which clearly identifies how management is organised vertically with layers of hierarchy and horizontally by function, product or division. The chart will make clear who is responsible for what, who is responsible to who and who to go to with problems and queries.

There are three main types of organisational structure: tall hierarchical, flat hierarchical and matrix.

McDonald’s Plc and their structure

McDonalds is the world’s largest fast food chain restaurant with over 31,000 outlets in 118 countries and employing over 1.6 million people globally. Out of the 31,000 outlets, 1000 of them are in the U.K. McDonalds serves over 47 million customers daily in the 118 countries they operate in and have a market capitalisation of $60.08bn in the financial year of 2008. 78% of the McDonalds are owned by the franchisee’s and the remaining 22% are owned by the corporation itself.

Structure in simple terms, can be defined as the way things are set out in an organisation. Therefore, all businesses including McDonalds have their own organisational structure which consists of groups and individuals working together to achieve the same aims/objectives of the organisation.

Organisations are structured in a variety of ways, dependent upon their objectives and culture. The structure of an organisation will determine the manner in which it operates and its performance. Structure allows the responsibilities for different functions and processes to be clearly allocated to different departments.

The wrong organisation structure will reduce the success of the business. As a business expands the spans of control will widen. The higher the level of skill each employee has the more the business will make use of these skills across the organization and hence save costs. Internal factors such as size, product and skills of the workforce also influence the organizational structure.

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Source: Online http://www.learnmanagement2.com/hierarchical%20structure.htm

An example of a hierarchal organisational structure is given above for reference;

The figure published according to McDonalds websites tells us that 78% of the stores are franchised; whereas the remaining 22% are owned by the corporation itself. My assumption is McDonalds as a corporation have adopted a hierarchal structure; but each store would be following a different yet similar structure within the framework of the hierarchal structure. All the stores would carry out exactly the same process but the way in which they deliver the service could vary. It would depend on the franchisee on how she/he controls their business; however there are certain aspects which the franchisee cannot alter i.e. the McDonalds logo, shop appearance and etc. As the above diagram shows, the most highest or influential person in any organisation is the Chief Executive officer/director (CEO) who takes all strategic decisions because they are on the top of the hierarchy and below him are his/her subordinates i.e. area regional managers, department managers who then report back to him/her about the company’s progress or any other important issues that needs their attention.

However, every staff’s responsibility is clearly defined and the business itself seems to be centralised e.g. important decisions being taken by the senior management centrally. Within this structure, the path to promotion is clearly defines i.e. a person will initially start from the bottom e.g. counter sales assistant and then they will have to ‘earn’ their way up to the top to get a authority. It is considered employees of this type of structure are likely to be loyal to the business.

However, franchised stores of McDonalds are likely to have a flatter structure. There is one manager, who is in control of the assistants and employees; who takes all the decisions for that particular store and he/she who is in charge of the main functions, carries them out. But the McDonald’s corporation is likely to have a hierarchical structure. McDonalds is a big company with lots of different departments which need to be organized very well, because if the employees aren’t directed in the right way they won’t perform their jobs uniformly.

McDonald’s culture

On the other hand, according to author Afsaneh Nahavandi; organisational culture can be defined as “…. set of beliefs, customs, practices and ways of thinking that they have come to share with each other through being and working together. Culture varies greatly between organisations and some business can be ‘warm’ and ‘friendly’ whereas some can be ‘hard’ and ‘unfriendly’.”

McDonalds operates according to four values; quality, service, convenience and value. Part of their organisational culture is the delivery of uniform quality of food and service wherever the branch is located.

These are some of the cultures associated with McDonalds;

McDonalds place the customer experience at the core of what they do.

McDonalds are committed towards their stakeholders.

They believe in the McDonald’s System.

McDonalds operate their business ethically.

McDonalds give backs to the community.

McDonalds grow their business profitably.

McDonalds strive continually to improve.

Their mission/vision/aims/objectives of McDonalds will affect the culture of McDonalds to an extent. Initially, McDonald’s key objective of serving the customers good quality food links in with their culture (values) which is that McDonald place customer experience at the core of what they do. This will result in repeat business and hence improve the profitability of the business which is another value (culture) of McDonalds. Another key objective of McDonalds is to be a socially responsible company; this has again affected their culture to a great extent. McDonalds gives back to the community via their own set up charity e.g. Ronald McDonalds House charity; however the franchised store have their own decision on it.

It is clear that McDonald’s investment is carefully considered. This again is reflected in their culture, which shows us that McDonalds are committed towards their shareholders and stakeholders. Another aim of McDonald is to provide customers with outstanding quality and make every customer smile; this is again reflected in their culture (values) as the website informs us that McDonalds strive to improve continually. Therefore, as the company is innovating and continually making improvements, it would satisfy more customers who were maybe previously dissatisfied with a particular aspect.

In order for McDonalds to ‘comply’ with their mission/vision statement identified previously, they would need to set their structures accordingly i.e. as McDonalds want to be their customers favourite dining out restaurant, they have ensured that staff and the management are working together effectively in order to prepare a meal for a customer quickly without any kind of mistake e.g. giving a customer a wrong product.

Moreover, from the vision/mission statement of McDonalds it is clear that the company’s main focus of attention is the customers and therefore in order to facilitate the demand of customers; this means that McDonalds needs to hire more staff and hence their mission links with the structure.

Sainsbury’s Plc and their structure

Sainsbury’s PLC has implemented the notion of making a clear organisational chart available to all employees and workers throughout the stores. This is the key to the success of the company as the more qualified workers in the store can speak to their subordinates directly. This however is not the case if the subordinates want to communicate with their seniors as they will have to refer to the organisational structure in order to speak to the relevant person. The system is efficient as the workers know who, where to go and seek advice from a member with more control and power of them. Moreover, the system enables employees to communicate with others efficiently and conveniently. An example of this is when an employee within a particular department such as Electronics wants to query something to a supervisor; it is through the organisational chart that the employee will know to communicate with the supervisor or the department manager. Organisational charts within larger companies such as Sainsbury’s Plc essentially provide its employees with a guide to the organisation and its key contacts.

As such the organisation of the business allows all employees to recognise who is responsible for what. This is done for a number of reasons; the chain of command lists all employees and their role within the organisation. By implementing this strategy throughout their store, Sainsbury’s Plc reduces confusion around the hierarchy of the organisation by informing all employees about their own role, power and authority as well as the role of others and their responsibilities. An example of this is if an employee is unsure about his/her power over any subordinates, they can refer to the organisational chart. Another advantage to having an organisational chart is that everyone who work, liaises or partners with the company is aware of the span of control power, influence or authority an employee has over his/her subordinates.

If the person is higher up they could clearly see that they have a wide span of control in a Sainsbury’s store as it is a flat structure which consists of many workers who have to be controlled by supervisors or managers; who in turn are controlled by their deputies or department managers. An example would be that a supervisor was unsure of how much span of control they have over his/her employees; they would check the structure of the business which would outline their own role and responsibilities… In which case will be a lot as a checkout supervisor has a larger responsibility and trust within the checkout team. Although the organisational structure outlines each role and the responsibilities, communication between employees and their superiors can also help in clarifying responsibilities, as power has been delegated by high levels of authority the employee will know how much power they have received and what changes or decisions they can immediately carry out to take effect on their subordinates.

This method of organisation of the business allows employees to work together effectively. This is because any disputes over power and decision making are brought up the organisation chart can help prevent and resolve issues regarding the power and status of especially higher people in the chain of command.

It is through the company’s organisational methods that that the success of Sainsbury’s will reflect how this is effective as all functional areas work within this structure. Using Sainsbury’s Plc as an example can identify how its employees can challenge and confront their superiors in terms of negotiating the power that each member of the store has. The structure of the organisation will be put to use here as it will clearly display where each person is in terms of accountability and power. This will indefinitely resolves the problem and help them work together and communicate effectively. This also applies to other employees, who can check their position in the hierarchy and their subordinates before confronting and starting disputes. These are some of the ways organisation in a business can allow workers to co operate efficiently.

Sainsbury’s Culture

The culture of Sainsbury’s describes the typical approach within the organisation. It essentially means the organisation’s universal beliefs, policies and procedures that determine the way the organisation is run. This culture is also reflected in Sainsbury’s employees and shareholders as well as the company’s strategy. As such it is these elements that shape and determine the organisation’s success and at times its failures.

Although a large corporation, Sainsbury’s much like Tesco, M&S and Asda takes shape as a bureaucracy. Much like the above corporations, Sainsbury’s hierarchical structure and its ‘top-down approach’ suggests that the company heavily implements the ‘Top Hierarchal Culture’. This means that communication is essential in the running of a successful company as each role is defined by the hierarchy up until the bottom of the hierarchy. To ensure that this structure is kept, Sainsbury’s have invested in ensuring that communication and the structure of the organisation is available to all its employees. An example of this is the centralisation of decisions, policies and roles and responsibilities of each individual belonging to the company. These are often outlines at the beginning of employment contract and often reiterated via email, circulation lists, newsletters etc; all of which are essential methods of communication.

Due to the large nature of the organisation, Sainsbury’s is divided into sub-departments such as accounts, marketing and Communication to Electronics and Production department. It may be easier to visualise Sainsbury’s as two businesses; one being the top part of the hierarchy entailing more senior positions such as production director which involve the strategic management of the organisation. The other aspect is the wholly retail element, found on the shop floor. In this case one can see that power is hierarchical and often stems from the employee’s position. This is a primary reason as to why roles are defined via job descriptions; to essentially avoid the breakdown of the hierarchical structure.

It is clear that Salisbury’s works within a bureaucratic culture, unlike the Co-Operative which works on person’s culture. An advantage of which is empowering all parties who have connections with the organisation.

Sony Corporation’s culture

Sony known for its renowned innovation, technological gadgets and electronics it has created a multibillion, multinational electronic empire with products such as the transistor radio, the Trinitron, the Walk-in and the VTR. All of which have transformed life in the twenty first century.

It is Sony’s consumer targeted quest for excellence and constant innovation that have made them so successful. However, one must consider the company’s recent profit loss as being a result of the constant innovation and production of new electronics as these have taken focus rather than concentrating on profit and loss statements have always been a part of Sony since its beginning days.

For every successful product (i.e. transistor radio and Trinitron), R&D cost often ran excessively high that they pushed the firm to the verge of bankruptcy. The company managed to bring back its losses by introducing a new culture. For every new product a project was created which was funded by Sony and overlooked by a senior member. This allowed Sony to expand its enterprise whilst allowing new projects authority and most importantly autonomy to manage and control each business unit. It was this new method of management that enabled Sony to create both a wider enterprise as well as a new business culture.

Sony Corporation’s structure

As mentioned earlier, the changes to Sony’s business structure announced in early 2003 meant that Sony’s profit margins were redesigned to maximise the effectiveness of their investment in each business category.

In addition, a CFO position was established in each network company which became responsible for the monitoring of each business operation. This meant that all networks operated with a degree of autonomy whilst maintaining close strategic links to Sony’s global hub. The result of Sony’s business culture established a universal monitoring system within the company and its network companies which allowed Sony to analyse and manage the company’s entire business.

Task 2

Affects of organisations structure and culture to the business

Organisation Structure is a key element in the running of a business as it applies to both the employers and its employees. Its importance also lies in that it gives a clear indication of how information can be shared or passed down within the organisation; in order for this happen there must be a link of communication between the senders and receivers. This is achieved by communication flowing up or down the hierarchy. Having an organisational chart makes this process easier as it clearly shows the hierarchy within the organisation, so that communication can be made more effective as the sender/receiver will be able to control their own communicational methods thus avoiding confusion. This enables the business to make communication more convenient and effective for all staff thus allowing departments to inter-liaise and continue information sharing in an effective manner. These are just a few of the benefits an organisation chart has on the business.

On the other hand, according to author Afsaneh Nahavandi; organisational culture is defined as “…. set of beliefs, customs, practices and ways of thinking that they have come to share with each other through being and working together. Culture varies greatly between organisations and some business can be ‘warm’ and ‘friendly’ whereas some can be ‘hard’ and ‘unfriendly’.”

These theories are proved constantly in today’s businesses. For e.g. the structure Sainsbury’s have implemented within their organisation, allows each of their departments to work individually to achieve some of its various objectives such as:

“To provide shareholders with good, sustainable financial returns”.

(Source: www.j-sainsbury.co.uk)

It is clear from this objective that Sainsbury’s plc is keen about keeping their shareholders happy by providing them with sustainable financial returns on their investment. And due to its structure in place their accounts and finance department is able to deliver this objective by implementing a good financial strategy and doing the job well.

Sainsbury’s plc’s decisions in terms of culture and their structure also impacts on the company’s business performance to an extent. The tables below demonstrate the level of achievement in sales, underlying operating margin and underlying profits before tax over the last five years.

Sales figures of Sainsbury’s plc between 2005-2010 [%]

Like-for-like sales (%)

Operating cost margin (%)

Underlying operating margin (%)

Profit before tax (£m)

Underlying profit before tax (£m)

(Source: www.j-sainsbury.co.uk)

The company’s directors explain, “Despite year on year of challenging market conditions, Sainsbury’s has delivered continued strong performance against its targets in 2009/10. The retail sector continues to be one of the most fast-moving and highly competitive in the UK. However, Sainsbury’s stable and experienced leadership team has consistently achieved growth since 2005.”

Task 3

Job roles

Employees working for any organisation are enlisted to perform a specific role. These roles vary depending on the individual’s skills and experiences, as listed below:

The task or activity

The amount of responsibility

The job security

The decision they have to make

The payment they get

The skills, knowledge and qualities they have

There are four main types of job roles in a business:

Directors: they are responsible for the overall direction of the business

Managers: They are responsible for one area of the business for example marketing area

Supervisors or team leaders: Has the responsibility to look after a team

Staff: They are responsible for carrying out basic functions of the business

If you look at an organization chart you will see that the person with the most authority is at the top. Individuals with the least amount of authority are placed at the bottom of the hierarchy; this is often referred to as the chain of command.

Specific job roles and their responsibilities

Directors

The Directors typically create the business plans. Directors sit on the board because they have specialist expertise in a particular line of business, or because they have generalist experience, or sometimes more importantly, good contacts.

The Managing director

The Managing Director is the figurehead of the organisation. Managers have the job of organising and controlling resources. For example at Mcdonalds the managing director will have to look at the applications that come in and decide who to employ and who not.

Senior managers

Senior Managers make top level decisions concerning operational strategies. These decisions require detailed analysis and skilled judgement.

Middle managers

Middle Managers organise and control the resource of an organisation within established guidelines.

Junior/supervisory management

Junior/supervisory management is usually concerned with short-term supervisory activities – making sure the operations are carried out in a nice smooth process and all resources is in place for it to happen.

Supervisors

Supervisors are quite often the backbone of the organisation. They are people who know how things should be done at ‘ground level’. They work with managers to put plans into action at operational level. They manage day-to-day resources including the supervision of staff.

Operatives

Operatives are at the ground level but their work is still very important. It needs to be carried out with care and precision. E.g. In a supermarket the operatives would be the shelf stackers, checkout operatives and etc…

Employees Personal attributes and how they affect the business

The reason why personal attributes are important to the employee and the business is:

Personal presentation: includes the individual’s physical presentation, personal hygiene, and presentational skills. In addition to this, communication and ability to work with others are essential requirements for many jobs. It is important for the business because if they have staffs that are taking care about his personal presentation it will make the business look good and also the customers will feel comfortable talking with the staff. For example a customer service advisor must have good personal presentation skills as well as being a good communicator. These types of skills vary depending on the role, the position of the role and the skills of the individual and positive approaches increase on the business sales ultimately.

And if they are not smart in these areas the business may even loose customers on that bases resulting in loss of business.

Verbal communication skills: these skills are essential to any individual working in customer service, in contact with clients and partners. Having good verbal communicational skills means that the individual has the ability to make him/herself clear and has the ability to coherently vocalise their message. This is important for the employee so that if a customer asks him about information, he will able to answer so the customer understands them and it is also important to the business so that the customer can give good customer feedback.

Following instructions: This element is essential to any role which an individual may apply for. It is natural to follow the hierarchal order, even if taking orders may be the case as stated in the individual’s employment contract. It is the employer’s right to take any grievance, disciplinary action against the staff member if she/he refuses to complete a task stated on their contact as this has been agreed both contractually and verbally at the beginning of the employees contract.

For example, if every member of staff does not follow what has been asked from them, the business could lose out on precious time and money.

Conclusion

Organisation Structure is a key element in the running of a business as it applies to both the employers and its employees. Its importance also lies in that it gives a clear indication of how information can be shared or passed down within the organisation; in order for this happen there must be a link of communication between the senders and receivers. This is achieved by communication flowing up or down the hierarchy. Having an organisational chart makes this process easier as it clearly shows the hierarchy within the organisation, so that communication can be made more effective as the sender/receiver will be able to control their own communicational methods thus avoiding confusion. This enables the business to make communication more convenient and effective for all staff thus allowing departments to inter-liaise and continue information sharing in an effective manner. These are just a few of the benefits an organisation chart has on the business.

On the other hand, Organisational culture has been defined by Afsaneh Nahavandi as “…. set of beliefs, customs, practices and ways of thinking that they have come to share with each other through being and working together. Culture varies greatly between organisations and some business can be ‘warm’ and ‘friendly’ whereas some can be ‘hard’ and ‘unfriendly’.” And this is proved over and over again by looking at some of the above case study’s and how it this can affect the performance of the business itself.

Finally we looked into various job roles within any business and their significance. And we also looked into various personnel attributes of an employee and their significance to the employee himself/herself and their employer too. One of those simple example being

If an employee not bother about his personal development then:

The employer will not be able to help employee to plan his or her career.

The employer will not be able to assess future potential or suitability for promotion.

The employer will not be able to identify training and development requirements for that employee.

The employer will not be able to assist the employee to create a personal development plan for the next period and set key targets for achievement.