Block 1: The perspectives - Organisational Behaviour

THREE KEY THEMES: Stakeholders, contingency theory and external environment

Key points:

• Organisational behaviour depends on it structure, sector, nationality, control systems, organisational culture, size, environmental change and strategy. These factors also determine the level of differences between different organisations.
  

Environmental Determinism

Traditional argument that external environment is uncontrollable, that organisations simply need to adapt as and when external forces change. More contemporary opinions suggest that it is possible for organisations to predict what could happen 10, 20 years down the road, and therefore do the necessary preparations. Thus, it is important for managers to allocate sufficient time looking at the external environment to understand the behaviour and potential change of course.

Environment Volatility

The more we understand the behaviour of external environment and its level of volatility the more we could prepare ourselves for and impacts coming from it. It is argued by academics that rationality, and structured approach to business and organisational management is not a competitive advantage within environment that is volatile. In fact it is a hindrance to success. It should also be noted that environment changes and volatility offers threats as much as opportunities. Good managers are able sense and detect opportunities as well as threats resulting from external changes early enough to make the right decisions.

In ATS, the business division of AP I work with, the business in strong anticipation of business opportunities in some key markets such as Russia, China and Asia Pacific (Malaysia and the surrounding), decided to either open new offices or expand the existing units. Many new engineers as well as other support personnel were hired. To this point, none of these locations have won any new projects. Malaysia has gone from around 150 employees in 2006 to close to 800 today - in 6 months if they remain without any project, chances are that some people will need to go. Likewise Russia and China continue to exist with minimum number of people, hoping to hit a small jackpot some day.

Working environment is essentially a system consisting of environment, people, technology and organisation. It cannot be look at solely as either technical system or social system - the combination of the two that makes it work, i.e. socio-technical.

Emery and Trist (1965) produced 4 classifications of environment:

• Placid, randomised - relatively unchanging and homogeneous whose demands are randomly distributed.
• Placid, clustered - relatively unchanging, but its threats and rewards are clustered. Example, monopoly whereby its existence is dependent of ability to hold over the market it serves.
  
• Disturbed, reactive - there are competitions between organisations including hindering tactics
• Turbulent field - dynamic and fast changing environment in which organisations must adapt fast to survive

Today's world is in general "turbulent field" - organisations need to adapt fast and any with too formal, rigid, highly bureaucratic structure will not be able to cope, and might not survive long.

Contingency Theory and Organisational Structure

Contingency theory says that there is no one best solution to every management problem and needs. It all depends on the industry, forces of external environment, organisational structure, dominant nationality, strategic direction of the organisation and various other factors. There are debates on whether organisations aligns its structure of the external environment or to its strategy. The traditional view of organisation structure classifies into two - mechanistic structure and organismic structure. The former is used by organisations that exists in a stable environment whereas that latter in fast changing world (more about the two structures is explained in this post).

Sector

Every organisation is different. For small organisations, the role of managers is more loosely defined, and responsibilities are quite broad. In larger organisations, this is more specifically linked to narrower defined responsibilities. Although there are arguments that every sector and every organisation is different and therefore management theories cannot be applied to all, there are however common problems across all organisation irregardless of size and sectors that can be addressed by the same management theories and frameworks.

Nationality

This simply says that culture of nationality of the people in an organisation could influence the way it is organised and operates. In Germany, the labour law is strong and pro employees that the personnel development plan and performance management system (PMS) simply cannot be implemented. Taking an example of restructuring the IT entity of A in 2008, we could see that it is not easy to change the status quo because there are so many of the employees based in France - and the Workers Union did not make it easy for A. Specifically on culture, it's clearly observed in A that French managers are more relaxed and take more time to complete tasks than the Swiss. Organisation structures in in French units are less flat than those in Switzerland.

Control Systems

Control systems range from totally personal such as supervisor closely monitoring his subordinate, semi impersonal such as through KPIs and balanced scorecards, and totally impersonal through control of machines in an assembly lines. Control systems are also either integrated or fragmented. An example of the former is set of bottom up KPIs or balanced scorecards that are based on a single framework. With the latter, each department may have its own way of managing KPIs and measurement of performance; this will require some sort of consolidations and alignment of tasks report them to top management. The problem with fragmented control systems is that they usually cause conflict with each other. An example in ATS is the recent split of the supplier monitoring group into expediting and quality control. In the past the two functions were done by the one person belonging. Today, we need two persons, each will fight to get his priority and objective done - one will fight to get parts released ASAP by supplier to meet project deadline and the other will do his best to check and make sure only with the right quality can it be shipped (this may need more time than the expeditor could allow). So, who will win ?

A system takes inputs, execute some processes for conversion and produces output and releases it to environment. There are also some systems that take some parts of the outputs and feedback to the input and conversion process - this is called closed loop system. Example of this is budget process.

A closed system does not interact with its external environment whereas open system does. An example of a closed system is the old China that was self-sufficient, not depending on others to survive. Many other systems are open, depending on the external environment for input and use of the output.

Katz ajnd Khan identified 5 sub systems in an organisation:

• Production or technical - basically sub systems directly involved in productions; in the context of A, these are engineering and construction / commissioning
  
• Supportive - these are supporting functions such and procurement and logistics, HR.
  
• Maintenance - sub-system supporting breakdowns of activities of production and technical (or even support)
• Adaptive - sub-system concerned with future (looking what future would hold, challenges etc and prepare the organisation to face it.
• Managerial - controlling and coordination. In the context of A, the sectors are essential managerial sub-system.

Managing Conflicts

Conflicts can happen because of diversity (in terms culture, nationalities, gender etc.) and also authority, power. Although diversity usually promises better chance of finding solutions to problems as we tend to have higher level of creativity and many ways of thinking, it also often causes arguments and frictions in a team especially when time is essence and other pressures involved.

Conflicts don't usually show themselves. In most cases these are clear from exchange of strong words, body language, foul language in some cases etc.. But there are situations when conflicts are suppressed - this is dangerous and it's important for managers to be able to detect them (read between the lines? perhaps). Factors why some conflicts are not disclosed or shown are 1) Fear of consequences, 2) Ideas of legitimacy (i.e. one side thinks the other acting legitimately), 3) Exclusion (stakeholders having interest in the issue are not included in discussion), 4) Taken for granted assumptions (i.e. the unhappy person decide to simply go with the decision made as he thinks it's not critical to interject).

Residential is nearing

Five more days and I will be in attending the residential school for B713 in Dublin. It shall start on Friday after lunch and finish Monday mid-day. Some of the guys who went to the one in Brussels just returned a few days ago. I heard it was good. Hopefully Dublin will be as good.

Looking at the schedule for the four days, it looks very hectic. After registration on Friday, it's pretty much non-stop activities, workshops, presentations, discussions until the very last day. And days start at 9 AM and finish 9 PM or later.

It took my quite some time to understand how the groups are structured. Only after reading a number of times that it clicked. Each student will be assigned to a group of 8 persons, representing the management members of the Gelati ice cream company. Within the group, there will be four pairs - each pair will take up the role of a functional department within the company. Each pair will need to work on tasks assigned to the department. At certain points of time, the pairs are required to present their deliverables to other departments (i.e. to the 8-persons management group). On the final day, the management group will be required to present to 2 other 8-persons management group. Sounds confusing .. indeed very confusing.

The case study: Gelati Ice Cream Company

The business was set up in England by two Italian brothers Remo and Mario Lucca in the 1930s. By 1939, the managed to have had opened 6 ice cream parlours cum cafe in a town called Branwick and the surrounding areas. The ice cream was special that it was made on site and thus fresh and had the special touch of "home made". The family recipe was also special and became the talk of the towns and very popular. The company until today is called Gelati.

Organismic vs Mechanistic Control Systems

Extract from http://www.change.freeuk.com/learning/business/mechorga.html:
In organismic control system, a continual adjustments and flexibility in individual tasks is emphasised. Knowledge is collaborative rather than restricted into specialisms. Communication is horizontal, vertical and diagonal as required by the types of work involved. An organisation chart would depend on the job being done and what process it involves, and it may not last long. Everyone should consult and consider the overall aims of the company as the situation keeps changing.

Here - http://www.bookrags.com/research/mechanistic-organizations-eom/, there is a clear explanation of mechanistic control system minus comparison with organismic control system. The term mechanistic suggests that organizational structures, processes, and roles are like a machine in which each part of the organization does what it is designed to do, but little else. What's interesting here also is that it explains why mechanistic organisation is not synonymous to bureaucratic organisation despite very close similarities. A mechanistic organisation is usually bureaucratic, but a bureaucratic organisation is not necessarily mechanistic. Mechanistic implies efficiency; but most bureaucratic organisations are far from efficient. Here, there are more explanations about the difference.

Related links:

Mechanistic Organisation: McDonald

Resource based approach to strategy

Resource based approach to strategy takes a look at the strengthening the internal resources of an organisation and how the resources could be transformed into a competitive edge that is not easily copied by others. It is argued in the topic that there are five attributes of resources that could lift an organisation to the level of internal strength - The resources collectively should be able to form capabilities that are:

1. Inimitable (not easy to imitate)
2. Durable (that could last very long)
3. Relevant (that is relevant in the context of current time)
4. Appropriable (this one I'm not sure what it exactly means)

Market based approach to strategy

This topic of block 3 of B713 touches on how strategy can be put together based on the understanding of the forces in the market. This is the case if an organisation intends to venture into a new market segment or region. There are two key theories relevant to this; the Porter (1980) market five forces and an extension of it by David McKevitt (2000) that takes a slightly extended view on public organisations, in particular those that have direct interaction / interfaces with the people.

Porter theory is most relevant in the context of free market. Understanding the forces - existing competitors, (bargaining power of) suppliers, (bargaining power of) customers, (level of) barrier of entry, and (potential) new entrants provide - allows an organisation to come up with the right strategy. For example, in a market that is highly driven by brands, it is important that the right level of investment is allocated to introduce a new brand.

In this topic of market based strategy approach, what is most key is that how an organisation is adapts to the changes in the market and alter and align its strategy accordingly. What is more important is its sensitivity to indicators of these changes to react early enough.

online discussion ... "First Class"? far from it

Thanks to Adr for reminding me about the online discussion started to today. For some reason I thought the first session was to take place tomorrow.

I have to say it was done in a funny way, using email with everyone posting replies to the question. Not the right way to do it, let alone effective way. From the beginning I hated it. It's not even forum tool. You will be lost half way through the discussion not knowing where it began and where it progresses to. Apparently there is proper tool for such a discussion, including voice feature available and we can use it for our third session on Wednesday. It puzzles me why this was not used today.

The topic discussed revolved around organisational performance and critique of balance scorecard (BSC). I had a few ideas in mind having seen BSC used in my organisation and had met with the person responsible in rolling it out and managing it this afternoon. The key question I posed was if the BSC was created based in cascaded objectives coming top down. The answer to this was Yes, indeed the case. Corporate sent a challenge letter to Sector, and Sector down to business. Based on this, KPIs were chosen to be the basis of the BSC covering four areas namely processes, finance, people, and ... I don't remember the fourth. The use of the BSC is no more than to provide a quick, simple way of monitoring mainly key operational areas. This can be used to be proactively anticipate and handle issues in projects or organisation.

TMA03 Marks

Today I got back the marks for my fourth TMA - number 3. I knew it wasn't gonna be good, having rushed to complete it in the last minute. let me see .... fewhh!! Thank god. Not that bad.

Mr Tutor commented that I did not use enough the principle of Theory - Interpretation - Evaluation in question a on organisational performance. Precisely what went wrong. I wouldn't disagree a single bit. I mentioned very little of the theory, hence no interpretation of it. Evaluation was quite poor. In terms of collaboration, I got involved a lot in the TGF but did not make use of it so much in the answer. To be honest I got a lost in the forum --- the forum tool is to be blamed. Extremely poor functionality and miles from being user friendly.

Question 2 on financial ratio which I thought I was gonna do pretty good did not turn so ... darn it! The comment: "you probably needed to thin down what you offered, as the extent of what you contributed somewhat obscured the detail of what the anser needed - a case of too much, basically.". I went over board in my rationale of the ratios? Hard to believe. I've asked Mr Tutor to provide clarification.