Organisational structures and cultures

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Introduction

Case study:

This case study is about Mr Smith's restaurant. Mr Smith is a foreigner who has lived in the UK for many years. His family in Africa operates a chain of restaurants across the continent and he is therefore familiar with this kind of business. At present the Smith Restaurant has a central location in London, close to many attractions and is easily accessible by public transport. His restaurant is a small family business - he is the founder, owner and also the Managing Director. Although he has two Assistant Managers and three Supervisors, he has a direct control over management and operational issues such as hiring of staff, marketing, sales promotion, accounting and finance department. The restaurant has fifty employees mostly made up of international students who work part time. These students are attracted by the flexible working conditions that Mr Smith offers. This allows them to work part time during term time and full time during vacation.

Recently the restaurant has seen a big increase in its customers due to the popularity of its European and International cuisines. These factors have convinced Mr Smith of the wisdom of opening similar restaurants throughout the UK. Mr Smith is the one who makes all decisions and he has a direct control over management and other operational issues.

The current issue at the restaurant is that Mr Smith is reluctant to recruit new staff and to cope with the increased activity in the restaurant he has reduced staff lunch time. Some staff felt that these changes should not have been introduced without their consent. When one employee complained about the situation, he was sacked. The rest of the employees are unhappy but they are afraid to voice their concerns for fear of loosing their jobs. According to Mr Smith, he pays his employees very well and therefore they will be happy with his decisions; his decisions are not for debate; managers should make the decisions and subordinates must obey. He does not believe in consulting staff when he has to make important decisions.

As a result, a feeling of helplessness, alienation, and fear have developed amongst staff. The recent changes in employees' working conditions have increased the levels of absenteeism and lateness. Mr Smith is now very concerned that if such trends continue, the restaurant may not be able to cope with the increased customer demand.

Being one of the longest serving employees, Mr Smith asked me to consider the above issues and advise him in light of the expansion and recent developments of the business. My task is to advise him on the followings within the chain of new restaurants.

• Organisational structures and cultures;
• Approaches to management and leadership styles;
• Motivational theories and their application;
• Group behaviour, teamwork and technology

TASK 1:

Organisational structures and cultures within the UK restaurants

Organisational structure creates a framework of order and command through which the activities of the organisation can be planned, organised, controlled, and directed towards the goals and objectives of the organisation. The structure defines tasks and responsibilities, roles, relationships and communication.

Within the UK, most restaurants have entrepreneurial, functional and geographical structures.

• Entrepreneurial Structure: This structure is appropriate for small owner managed companies, for examples: a small restaurant, a small-scale industrial unit, or a small proprietary concern.
• Functional Structure: This is the most commonly used basis for grouping activities according to specialisation that is organising the business according to what each department does. Specialised skills and delegation of authority to managers are needed to look after different functional areas.
• Geographical structure: Activities are grouped according to location. Different services are provided by geographical boundaries according to particular needs and demands, the convenience of consumers, or for ease of administration.

Advantages and disadvantages of organisational structures

The UK restaurants may have hierarchical, tall or flat structure

Hierarchical structure: Refers to

• Authority: the right to exercise powers such as hiring and firing or buying and selling on behalf of the organisation

• Responsibility: the allocation of tasks to individuals and groups within the organisation

• Accountability: the need for individuals to explain and justify any failure to fulfil their responsibilities to their superiors in the hierarchy

Tall and flat hierarchical structures:

In the tall structure there are narrower spans of control and more levels of command - that is many managerial levels and fewer staff.

In the flat structure there are broader spans of control and few levels of command - that is few managerial levels and many staff. For example, the McDonald's restaurants all have a flat structure. The manager in each place of business controls the other assistants and employees. He takes all the decisions and he is in charge of the main functions like, R & D, marketing, finance and human resources and the other staff do the selling.

Advantages of tall and flat structures

Organisational cultures

Charles Handy defined it as: 'The way things are done around here'

Every business is made up of different cultures, and the cultures that are present within the business depend on the management styles and organisational structures that are used. Handy's four types of cultures are:

Power culture: Best suited for small entrepreneurial organisations and relies on trust, empathy and personal communication for its effectiveness.

Role culture: Emphasizes on power and position within the organisation. This type of culture applies when organisations are big and inflexible.

Task culture: Job-oriented or project-oriented. This works well in a matrix organisation structure.

Person culture: Works around educated individuals. Examples are groups of barristers, architects, doctors or consultants.

Looking at Handy's four main types of organisation cultures it can be seen that most of the UK restaurants adopt the power culture.

Organisational structure and culture of Mr Smith's restaurant

After analysing Mr Smith's case study and the latest issues, it is clear that his restaurant is adopting an entrepreneurial and hierarchical structure, and a power culture since it is a family owned business where there is excessive reliance is on the owner-manager; Mr Smith has authority, responsibility and accountability within the organisation. The distribution of tasks, the definition of authority and responsibility, and the relationship between members of the organisation are established on a personal and informal basis. Therefore I am convinced that the management style, organisational structure and culture are influencing employees' behaviour within organisation.

However, with Mr Smith's plan to expand and develop new restaurants across the UK, there is need for a formal organisational structure and culture, which has to be carefully designed, so as to avoid conflict and encourage the willing participation of staff for effective organisational performance. I believe that Mr Smith business should have a flat structured along functional lines with major areas including, Sales and Marketing, Human Resources, Accounting and Finance, and Purchasing Departments. With a flat structure the business will have:

• A wide span of control encouraging delegation and motivation through job enrichment.

• Lower management overhead costs.

• Better communications as horizontal and lateral communication is encouraged.

• Real and meaningful promotions.

• Closer contact between top management and lower levels

Factors that may influence individual behaviour of Mr Smith's employees

The individual: The individual is a central feature of organisational behaviour. When the needs of the individual and the demands of the organisation are incompatible, this can result in frustration and conflict. Then it the work of the management to integrate the individual and the organisation and to provide a working environment where individual's needs is satisfied as well as organisation goals are achieved.

The group: Group exists in all organisations and are essential to their working and performance. People in groups influence each other in many ways and groups may develop their own hierarchies and leaders. Group pressures can have a major influence over the behaviour and performance of individual members.

The organisation: Individual behaviour is affected by patterns of organisation structure, technology, styles of leadership and systems of management through which organisational processors are planned, directed and controlled. Therefore, the focus of attention is on the impact of organisation structure and design, and patterns of management, on the behaviour of people within the organisation.

TASK 2:

How organisational theory underpins principles and practices of management, how this would impact on the new restaurants?

The study of management theory (also termed management thinking) and its application in organisations brings changes in behaviour. It helps to understand the principles underlying the process on management. It helps to understand the interrelationship between management theory, principles and practices of management, and behaviour in organisations. Managers learned about how they should behave. This will influence their attitudes towards management practice. The different approaches to management theory are: Classical approach; scientific management; Bureaucracy; Human relations approach; Systems approach; and Contingency approach.

These various approaches underpin the common principles of management that organisations should practice in their business, which mean they are based on views of organisations, their purpose and responsibilities, structure, division of work, hierarchy of management, technical requirements, rules and regulations and behaviour.

Fayol 14 Principles of Management:

1. Division of work: Specialisation increases output as employees become more efficient.

2. Authority: Gives managers the right to give orders.

3. Discipline: Employees must conform to respect the rules that govern the organisation and the use of penalties for breaking the rules.

4. Unity of command: Only one superior should give orders to employees.

5. Unity of direction: Organisational activities having the similar objective should be directed by one manager using one plan.

6. Subordination of individual interests to general interest: The organisation interest should dominate employees' or group interests.

7. Remuneration: A fair wage for workers and their services.

8. Centralisation: The degree to which subordinates participate in decision-making.

9. Scalar chain: Communications should follow this chain.

10. Order. People and materials should be in the right place at the right time.

11. Equity. Managers should be kind and fair to their subordinates.

12. Stability of tenure. High employee turnover is inefficient. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies.

13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort.

14. Esprit de corps. Promoting team spirit will build harmony and unity within the organisation.

Suggestion: Mr Smith should follow these principles of management. Managers will have to perform these five functions (by H Fayol): Plan and forecast; organise; command; coordinate; and control.

The different approaches to management theory

Classical approach:

• Emphasis on purpose;

• Formal structure;

• Division of work;

• Hierarchy of management;

• Technical requirements;

• Common principles of organisation.

Scientific management and Bureaucracy are the two sub-grouping of the classical approach.

Scientific management - F .W Taylor (1911):

• Scientific selection and training of workers;

• Development of a true science for each element of an individual's work;

• Co-operation with the employees to ensure work is done as set;

• Division of work and responsibility between management and the employees;

• Improve production efficiency through work studies, tools, economic incentives.

Bureaucracy - Max Weber (1947):

• Formal hierarchical structure;

• Organisation by functional specialty;

• Rules and regulation;

• Impersonality;

• Employment based on technical qualifications.

Human relations approach:

• Elton Mayo and the Hawthorne Studies (1933) discovered that the informal organisation, social norms, acceptance, and sentiments of the group determined individual work behaviour.

• Maslow, McGregor, Herzberg, and many others stressed the importance of social relations in organisations, understanding workers and managers as human beings with social and emotional needs.

Systems approach: Organisations are open systems that constantly interact with the external environment: Inputs (resources and information) transformation process outputs (products, services, information) feedback

Contingency approach: Contingency theory does not identify or recommend any particular approach to organisation and management. Appropriate management approach depends on situational factors faced by an organisation.

Suggestion: After comparing the above managerial approaches I believe that the classical approach will best suit Mr Smith restaurants. The classical approach centres on understanding the purpose of an organisation and then examining its structure. They play emphasis on the planning of work, technical requirements, principal of management and behaviour. Attention is given to the division of work, duties, responsibilities, maintaining specialisation and co-ordination, hierarchy of management and formal organisational relationships.

TASK 3:

Different leadership styles and their effectiveness

Definition: Leadership in an organisation is to lead employees to work in a given direction to achieve its goals and objectives.

The three styles of leadership are:

Autocratic leadership: All authority is centred on the leader and decisions are enforced by means of rewards and the fear of punishment. Communication is one-way, from the leader to the followers.

Advantage: Quick decision-making.

Disadvantage: Its effect upon group morale; creates conflict.

Democratic leadership: In contrast, democratic takes into account the suggestions of the members and of the leader. It is a human relations approach, in which all members of the group can participate and contribute to improve the quality of the final decision. Advantages: Increased morale and support for better decisions through shared ideas among group members.

Disadvantages: Slower decision-making and diluted accountability for decisions.

Laissez-faire leadership: The leader exercises very little control over group members. A member is given a goal and mostly left alone to decide how to achieve it. The leader functions mainly as a group member, providing only as much advice and direction as is requested.

Advantage: Opportunity for individual development offered to group members. All persons are given the chance to express themselves and to function relatively independently.

Disadvantage: Lack of group cohesion and unity toward organisational objectives. Without a leader, the group may have little direction and lack of control. The result can be inefficiency or even worse, chaos.

Suggestion: Mr Smith is applying an authoritative leadership in his first restaurant because his business is small. But now that he wants to expand his business he has to adopt a different style of leadership. I would suggest that he has to adopt the democratic leadership within his new restaurant. This is because the democratic style is a human relation approach in which all staff participates and contributes in the decision-making. This will prevent conflict between staff.

Different motivational theories and their application

Definition: Motivation can be described as the direction and persistence of action. It is concerned with why people choose a particular course of action in preference to others. The purpose of motivational theories is to predict behaviour. The difference theories of motivation are:

The hierarchy of needs are shown as a series of steps in the form of a pyramid; it implies a thinning out needs as people progress up the hierarchy. Based on Maslow's theory, once the lower-level needs have been satisfied (physiological and safety needs) people advanced up the hierarchy. Therefore to provide motivation for a change in behaviour, the manager must direct attention to the next level of needs (love or social needs) that seek satisfaction.

McGregor - Theory X & Y

Theory X assumptions:

- People inherently dislike work.

- People must be supervised to do work to achieve objectives.

- People prefer to be directed.

Theory Y assumptions:

-People view work as being as natural as play and rest.

-People will exercise self-direction and self-control towards achieving objectives they are committed to.

-People learn to accept and seek responsibility.

Herzberg's Two-factor theory

McClelland theory:

Need for achievement: Personal responsibility

Feedback

Moderate risk

Need for power: Influence

Competitive

Need for affiliation: Acceptance and friendship

Cooperative

Suggestion: Mr Smith does not delegate; does not give employees responsibilities; employees are not considered part of the group; they feel insecure in the employment; they cannot voice their opinions; he imposes his rules and regulations on employees. In addition he has reduced employees' lunch-time. Here Mr Smith is using McGregor's Theory X; employees are unhappy and de-motivated to work as their lunch-time has been reduced but their wages have not increased. Therefore, since he wants to expand his business throughout UK, I will recommend the Maslow's hierarchy of needs theory to Mr Smith. Managers will have to provide motivation for a change in behaviour by satisfying the lower-level needs so that the employees' basic salary, safe working conditions (need to stay alive, have food, shelter) and job security, fringe benefits, protection against unemployment, illness are satisfied. This will encourage the willing participation of employees for effective organisational performance.

The relationship between motivational theory and the practice of management

The purpose of motivational theories is to predict behaviour; and behaviour of people in organisations depends on practices of management. If managers practise Fayol's 14 principles of management, then employees at all levels are motivated to work. People generally respond in the manner in which they are treated. Therefore, to control human behaviour a heavy responsibility is placed on managers and the activity of management, where attention must also be given to appropriate systems of motivation, job satisfaction and rewards.

Accordingly, Mr Smith must understand how good management practices will motivate staff to work. Managers should plan and forecast, organise, command, coordinate, and control appropriately in an attempt to satisfy employees' needs so that they are motivated to work. This will create an organisational climate in which employees can work willingly and effectively to achieve the goals of the organisation. Managers should get the best performance from employees to attract more customers.

Managers should apply this policy: The needs, wants and rights of employees to be treated fairly and with dignity.

TASK 4:

Nature of groups and group behaviour within organisations

"A group comprises two or more individuals who interact in the collective pursuit of a common goal. They share values and goals, are involved in regular activities together, and identify themselves as members of the group and are identified as such by others". (From lecture notes - AJ).

Another useful way of defining group is a collection of people who share most, if not all, of the following characteristics:

• A definable membership;
• Group consciousness;
• A sense of shared purpose;
• Interdependence;
• Interaction;
• Ability to act in a unitary manner.

Formal groups (official groups): Created to carry out specific tasks set up by the organisation to complete assigned tasks.

Formal groups may be divided into two categories:

1. Functional groups: Consist of varying size of work units, with a manager and subordinates who are responsible for a range of duties and functions within the organisation, for example: the finance department, the salaries section and the revenues section.

2. Task groups: Created for the dispatch of specific business or operations, such as a project team, management team or co-ordinating committee.

Informal groups (unofficial groups): Created by the individual members for the purpose of sharing a common interest.

Importance of informal groups:

• The spread of information through informal networks - the grapevine - is often much faster and more influential than through formal groups.
• There is the potential for conflict between roles held in formal and informal groups particularly in respect of leadership, where the informal leader may not be the same person as the formal leader.

Two informal groups:

1. Interest groups: develop around the shared pursuit of a specific goal by certain employees, which may or may not be related to the organisation.

2. Friendship groups: Individuals joining together for various social activities

The factors influencing Group Behaviour: Cole (1996)

1. Size of the group
2. Leadership and management style
3. Group cohesiveness
4. Motivation of group members
5. Norms of groups
6. Group/team roles
7. The work environment
8. The group task

Factors leading to effective teamwork within the new business

Peters and Waterman defines five factors for effective teamwork:

1. The numbers should be small: each member will then represent the interest of his or her department.

2. The team should be of limited duration: Exist only to resolve a particular task.

3. Membership should be voluntary.

4. Communication should be informal and unstructured.

5. It should be action-oriented. The team should finish with a plan for action.

The influences that threaten success of teamwork

• The team does not work around the unreliable people.
• A smaller group of people does most of the work and a larger group pretends to help.
• Sometimes team members do not work well together and may work against each other. This may result dysfunctional teams, caused by:

- Lack of trust is the most common problem afflicting teams;

- Lack of team cohesiveness

- Lack of a clearly defined purpose

Impact of technology on team functioning

Technology: Technologies such as e-mail, mobile phones, blackberry, groupware and computers can improve and in some cases delay team functioning. To be able to function effectively, teams must be kept up-to-date with knowledge as technology changes.

Communication: Successful teams communicate successfully by email, mobile phone, phone technologies such as blackberry and 3G data cards and 3GB USB dongles, groupware and personal computers.

Change: Successful teams can successfully bring-up change. Teams will become less effective and efficient if they do not respond to changing internal and external factors. In contrast, responsive teams are more effective, efficient and, are able to rise to the challenges of the modern business world.

Networks and virtual teams: In the modern connected world, it is easier for teams to communicate and network. It is possible to create virtual teams which never (or rarely) meet in physical locations and use a range of web tools to communicate and collaborate.

Global and cross-cultural teams

Task 5:

Strategies for the restaurants stakeholder's needs

Employees:

• Mr has to adopt HR practices to ensure that the organisation is able to achieve success through people.

• Staffing the organisation: Sufficient numbers of the right people in the right place, at the right time, and at the right cost for the organisation.

• Reward and recognition: Creating structures that maximise recruitment, retention and motivation; obtaining the best performance from the people available.

• Performance improvement throughout the organisation, for individual, team and organisational effectiveness

• Managing behaviour - ensuring that individuals are encouraged to behave in a way that allows and fosters better working relationships.

Customers:

Mr Smith and his area managers should monitor the changing requirements and expectations of its customers, and the quality of service they require.

Conclusion and recommendations

1. With Mr Smith's plan to expand and develop new restaurants across the UK, there is need for a formal organisational structure and culture, which has to be carefully designed to encourage the willing participation of staff for effective organisational performance.
2. Mr Smith should follow the principles of management - managers will have to perform these five functions (by H Fayol); plan and forecast; organise; command; coordinate; and control.
3. The classical approach will suit his business as it plays emphasis on the planning of work, technical requirements, principle of management and behaviour.
4. Alongside he has to adopt the democratic leadership in which all members of the group can participate and contribute to improve the quality of the final decision.
5. Area managers will have to provide motivation for a change in behaviour by satisfying the employees' needs through rewards.

Reference

Websites:

1. http://ezinearticles.com/?id=1269812

2. http://choo.fis.utoronto.ca/FIS/courses/LIS1230/LIS1230sharma/history6.htm (Maslow's hierarchy of needs)

3. http://www.hnc-business.co.uk/unit3.html

Module Tutor Lecture notes and emails:

Dhlamini S., 2009. Organisations and Behaviour (unit 3) H1, HND in Business. London: Guildhall College

Bibliography

Book:

Mullins L J ., 2000. Essentials of Organisational Behaviour. Essex: FT/Prentice Hall