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TMA1 QUESTION 1

XYZ EQUIPMENT AND THE EXTERNAL ENVIRONMENT

From: Date: 25 August 2008

Word count: 1968

CONTENTS

1. 2. 3. 4. 5.

Introduction The External Environment Organizational Structure Organizational Culture Recommendations

3 3 5 7 10

References Please note, information used in this document could be of a sensitive nature and as such should not be divulged to third parties.

INTRODUCTION To be successful, organizations must anticipate possible changes and position themselves to deal with opportunities and challenges in a proactive rather than a reactive way. (Morgan, 1988) In analysing the above statement it is clear that for XYZ to succeed in todays environment, it is important for managers to understand both the internal and external environments of XYZ and how changes to these environments will affect the way they manage. These changes will have a direct impact on the structure and culture of XYZ. This report will attempt to establish the effects this changing external environment has on the structure and culture of XYZ. By analysing the structure, culture and boundaries of XYZ it will become clearer as to what relationship exists between them. This will be done by developing each topic through theoretical and practical examples. The information garnished from this report will help managers grasp the inter-relationship between structure, culture and the external environment. This knowledge can thus be used by the manager in a proactive way to make effective decisions. 1. THE EXTERNAL ENVIRONMENT XYZ Equipment does not exist in isolation and is part of a large complex network of customers, suppliers, competitors and regulators. In addition it is also subject to changes in the economy, social trends and technology (Open University, 2005: 85). This complex network can be represented by three environments namely: The internal environment - this comprises staff, resources and facilities. It is one the manager can control. The near environment this includes customers, clients, suppliers and competitors. Managers cannot control it but can influence it. The far environment this refers to factors that can neither be controlled nor influenced from within the organization. The near and far environments are commonly referred to as the external environment.

In developing the corporate strategy XYZ decides where to set the boundaries. These boundaries will however change over time. The choice of carrying out activities in-house or alternatively outsourcing determines these boundary limits. Each option has its advantages and disadvantages and will ultimately affect the structure and culture of XYZ (Open University, 2005: 88). An example of this is current to production components. Traditionally XYZ wanted to manufacture all components in house due to its machining capability but this has all changed as build rates have increased. Today non-current to production components are being outsourced while the profitable current to production components that were initially outsourced have been brought back in house. One of the more important aspects of XYZs near environment is the competitive situation. This competition will be for customers, market share, funds and staff (Open University, 2005: 91). Attracting competent staff has become big business. Labour brokers are constantly looking for qualified staff or training staff up to place them within the organization as they fetch a higher price. The reality is as you train them, so too do you lose them. Lastly there are five factors that influence XYZs external environment and they are: Sociological factors this has far reaching effects within the culture of society Technological factors the implementation of SAP throughout the organization Economic factors the increased interest rates have affected borrowings, steel supply and demand have dramatically affected growth Environmental factors introduction of ISO13000, international legislation on truck emissions Political factors increased union activity within the organization

These five factors are more commonly referred to as the STEEP factors (Open University, 2005: 99). 2. ORGANIZATIONAL STRUCTURE Organizations are necessary and important because they enable people to accomplish what cannot be efficiently accomplished by individuals acting on their own. The maintenance of complex industrial societies is inconceivable without the existence of large-scale organizations, together with a great number of very small organizations. 4

(Aldrich, 1979: 3) What Aldrich is saying is without a network of customers and suppliers XYZ would not exist. This is a fact of life. Although XYZ is evolving, its humble beginnings were based on what is known as the agency theory. This views organizations as rational, unitary and goal seeking (Open University, 2005: 9). Rational XYZs incredible growth is based on Ervin XYZs original trailer design.

The organizations culture and structure have developed from this and thus have not been rationally designed.

Unitary XYZ is not self supporting and thus depends on the network it builds

outside its boundaries. Goal seeking XYZs mission statement can be defined as a goal of the

organization. XYZs mission is the foundation on which strategy is built and encompasses the purpose and values of the organization (Open University, 2005: 16). Within XYZ there is a hierarchy (or pyramid) of purpose as shown in Figure 1. At the top of the pyramid is the mission which explains why the organization exists and below this there are increasingly specific statements of how things will be done (Open University, 2005: 16). As XYZ has grown it has gone through a process of differentiation with different groups of people becoming responsible for different tasks. This has created the need for a process of integration where these groups and activities are co-ordinated and controlled (Open University, 2005: 23). XYZs organizational structure can therefore be thought of as two sub-structures, namely differentiation and integration (Lawrence and Lorsch, 1967: 23). For managers, differentiation means figuring out how to break tasks down into individual jobs or roles and how to group similar tasks into departments or divisions. These groupings are either vertical or horizontal. Vertical addresses the tiers or levels thus the overall height of the organogram while horizontal differentiation addresses the structural choice or basis on which responsibilities will be allocated (Open University, 2005: 23).

Why?

Mission and values

Broad purpose

What?

Aims or goals

Objectives How? Specific and immediate purpose

Targets

Figure 1 The pyramid of purpose

XYZs organizational structure is bureaucratic. Bureaucracies are characterized by the belief that rules and legal order legitimize the authority of managers (Open University, 2005: 27). According to Max Weber (1947) bureaucracies were the most efficient form of organisation offering co-ordination and control. Ironically, in todays society bureaucracy is synonymous with inefficiency with emphasis on red tape, excessive writing and recording. To overcome these problems there needs to be clarity of authority and clear structures for taking decisions (Open University, 2005: 28). Structural problems that do exist may not be easy to identify. Child (1984) identified some of the warning signs as: Morale and motivation being low Employees are unclear about expectations Individuals are overloaded as a result of absenteeism or shirking Decision making is delayed and inconsistent due to late or incorrect information Procedures for evaluating the similarity of results for decisions made are not in place There is conflict due to a lack of co-ordination

The success of XYZs structure depends heavily on the quality of management in place. This leadership needs to be accountable, operate within the appropriate structure and have clear lateral relationships (Open University, 2005: 30). 3. ORGANIZATIONAL CULTURE One of the easiest ways to grasp and see the nature of an organizations culture is to try to view it as if you are a visitor from a foreign land. As one tries to look at the organization with fresh eyes, one can see the intangible social glue that holds everything together: how the language, norms, values, rituals, myths, stories and daily routines form part of a coherent reality that lends shape to how and what people do as they go about their work. In understanding this social glue (which like all glue sometimes does not stick as well as it might, producing a fragmented or divided culture) other ways of thinking about culture may be appropriate. (Morgan, 1989: 157-8) To study and analyze XYZs culture would be very difficult as it concerns the values and assumptions which affect the interpretations employees put on events. The reality is that most values and assumptions are invisible (Open University, 2005: 50). One way of looking at culture is through the symbols in which it manifests. High-profile symbols are those designed to create an external image: the mission statement the logo corporate dress code

Low-profile symbols are the less tangible manifestations of what actually goes on to get the job done (Open University, 2005: 50). Trice and Beyer (1984: 51) suggested that low-profile symbols could be divided into four categories: Practices the annual shut down party Communication why change, we have always done it like that

Physical forms the watering hole, the XYZ farm, Jet Park A common language r-men, fettlers, SHEQ team

One of the most widely quoted models of culture comes from Handy (1988: 59) who identified four groups of behaviour. Each of these groups of behaviour is evident in the XYZ organisation. Power culture this would centre around the XYZ Family. Here personality is more important than formal structure. Task culture this is typical of R & D as the dominant feature here is its job or project orientation. Person culture marketing and sales displays these characteristics as this puts individuals and their interests first and sees the organization as a means to an end. Role culture this is typical of the factory environment as it is the classic bureaucracy.

Deal and Kennedy (1982: 49) suggested that the biggest single influence on a companys culture was the business environment it operated in. The corporate culture embodies what is required to succeed in that environment. The two key dimensions are the degree of risk associated with the companys activities and the speed at which companies and their employees get feedback on whether decisions or strategies were successful. They admit that this is simplistic and that a mix of all four can be found within a single organization. Figure 2 shows the four generic cultures.

Feedback

Tough guy, macho culture

Bet-your-company culture

High

Risk

Figure 1 Deal and Kennedys model of organizational culture 8

Low

Work hard/play hard culture

Process culture

As XYZ expands its international operations and employees move between them they will be exposed to a national culture. Hofstede (1980) has attempted to make sense of this diversity and suggested that four dimensions discriminate between national cultures in the work place. These can be described as: Power distance Uncertainty avoidance Individualism Masculinity

To change XYZs culture you will need to understand it. The high-profile symbols can be manipulated but the underlying culture will be far more difficult (Open University, 2005: 70). Hendry and Hope (1994) pointed out that managers often proclaim that culture change is essential but are unable to or cannot control the change. They identified the following problems a manager would face when engaging organizational change: Resilience of the existing culture Complexity of culture change Contradictions in the desired culture Mismatches between individual and organizational values

Culture needs to be compatible and the differences need to be managed. They also need to be consistent with structure, strategy and managements policies and behaviour (Open University, 2005: 70). 4. RECOMMENDATIONS The next 5 years at XYZ Equipment will be both interesting and challenging. The launch of the new e-series, striving for world class accreditation, raw material shortages and staffing will all present their own problems. Shop floor management will need to be at the peak of their game. They will need to develop their management skills through study to understand this change and the impact it will have on future decisions.

Information flow will need to be electronically controlled with feedback loops to improve accuracy and speed of delivery.

Productivity will need to be monitored closely in order to overcome a culture of tardiness. There will be resistance at first but honesty, openness and union buy in will improve understanding

Lean manufacturing and 5S will need to be implemented in order to stabilise structure and procedures.

Old philosophies will need to be challenged and replaced when required. Staff development will be critical. Revaluation of the old structure must take place and rational thinking used for the new requirements.

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REFERENCES Aldrich, H.E. (1979) Organization and environments, Englewood Cliffs, New Jersey, Prentice Hall. Child, J. 1984 The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Deal, T. and Kennedy, A. 1982. The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Handy, C. 1998. The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Hendry, J. and Hope, V. 1994 The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Hofstede, G. 1980. The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Lawrence, P. R. and Lorsch, J. W. 1967 The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Morgan, G. 1989. The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Open University. Open University Business School. 2005. The context of management. Milton Keynes: Open University Trice, H. M. and Beyer, J. M. 1984. The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University Weber, M. 1947 The context of management: studyguide for MBA 713B. 2005. Milton Keynes: Open University

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