Assessing the Organizational structure and culture


Today organizations have to adjust too many dramatic changes, ranging from fundamental restructuring to revolutionary shifts in traditional values. These required changes are largely attributed to drastic changes in the way in which organizations respond to the environment in which they operate (Benecke R, 2009). Globalization and the resultant advancements in information technology are the two main contributors of modern organizational structuring, both of which pertain to highly complex communication activities and considerations that have become part of the organizations enactment with micro (i.e. inter-organizational activities) as well as the macro systems (i.e. transitional synergies, strategic geographic positioning, etc.). This reflects a paradigm shift from traditionally "closed" operating procedures (characterized by one-way hierarchical inter-organizational communication) to highly flexible and innovative contemporary organizations which. The paradox here is that organizations need existing paradigms in order to make sense of the current situations and this can trap organizations in current paradigms (Verwey & Du Pooly-Cillers, 2003).

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In order to improve the performance, organizational structure and culture is important. Organizational structures have typically been classified as either centralized or decentralized, with a centralized approach, one or a very few top managers retain most of the decision making authority. Centralization is negatively associated with performance, because decision-making is removed from day-to-day activities, critical decisions may be delayed. Decentralized structures tend to allow faster response to events and opportunities (Autry, C.W, 2001).

Culture has been characterized by many authors as "something to do with the people and unique quality and style of organization" (Kilman et al, 1985), "the way we do things around here" (Deal and Kennedy, 1982), or the "expressive non-rational qualities of an organization". From the anthropological school, culture is conceptualized either as a system of shared cognitions or as a system of shared symbols and meanings (Siew K.J.L & Yu K, 2004).

Until recently, culture has been examined with performance and effectiveness. Nohria et al (2003) suggest that building the right culture is imperative to make the operation successful. These high-level performance organizations design and support a culture that encourages outstanding individual and team contribution, one that holds employees responsible for business.

According to Akkermans et al, (1999) International dimension was not identified as a major obstacle on the road to effective operational management. But Ghemawat (2001) argues that globalization of a business, if not approached carefully may lead to expensive mistakes. He pointed out culture differences, which means difference in work culture, are an important factor to consider in operational management. According to Smagalla (2004),, in Japanese-owned logistics companies in Europe, Japanese managers and their domestic work force have difficulty reconciling their conflicting philosophies. That contributes to the weak performance. Non-Japanese staffs were frustrated that, among other things, proposals moved slowly through multiple channels before decisions could be made. Hence, in order to reduce the negative impact due to the culture distance, contemporary organizations should encourage innovative organizational culture to manage any eventualities in order to have effective operational management.

Taking the example of supply chain management, according to Mello and Stank (2005), a firm must establish a culture orientation to guide decision-making and problem solving both inside the firm and within the boundaries of a supply chain prior to successfully implementing supply chain management. A supply chain cultural orientation espouses the management of intra-and inter-firm supply chain flows in a synchronized way to create customer value, viewing the supply chain as a whole rather as a set of fragmented parts performing their own function (Mentzer et al, 2001). For example, with its enormous size, Wal-Mart's organizational culture and supply chain strategy impact how its suppliers and distributions share relevant information and do business with one another. Procter & Gamble was successful as one of the early logistics innovators in part because its logistics and supply chain leaders had strong vision, were creative and innovative, and were willing to change the way the game was played (Harps, 2003).

2.2 Culture and change

Organizational culture has become an essential element in our understanding of organizations. There is interrelatedness between this and other concepts such as leadership, organizational structure, motivation, power and strategy (Linstead, et al, 2009). More recently, there has been a growing recognition that it is impossible to extricate culture as a 'variable' from other elements of the organizational context. Nevertheless, one of the main reasons for the rise in interest in organizational culture was to understand how it impacts on organizational change: for a time it was seen as the hidden obstacle to success (Linstead, et al, 2009).

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Nowadays, the business environment is changing fast. The changes in technology like computerization and e-commerce have created a quantum leap in data communication, work processes and the way of doing business. With the impending move toward globalization and liberalization of markets, organizations have to be prepared to cope with the rapid changes in the business dynamics. Every organization must submit to the varying demands and changes in the environment. Changes within an organization take place in response to business and economic events and to processes of managerial perception, choice, and actions where managers see events taking place that indicated the need for change (Rashid, et al, 2003).

Many organizations found change to be a real challenge. The change process in each organization is unique in each situation, due to the differences in the nature of the organization, the nature of the business, the work culture and values, management and leadership style, and also the behavior and attitude of the employees. Further, the risk of failure is greater as people are generally resistant to changes. For some, change may bring satisfaction, joy and advantages, while for others the same change may bring pain, stress and disadvantages. Cao et al (2000) believed that organizational change showed a diversity of the organization in its environment, and also the interaction of the technical and human activities that had interrelated dimensions in the organization.

Organizational culture refers to a set of shared values, belief, assumptions, and practices that shape and guide members' attitudes and behavior in the organization (Wilson, 2001). According to Rashid et al (2003) organizational culture plays an important role in the successfulness of the change process. If organizational culture promotes single-minded dedication to the organization's mission and goals, quick response to changes in the environment, and an unwillingness to accept poor performance, people are much more receptive to change. Meanwhile, people are less tolerant to change if the organizational culture promotes a tolerance of poor performance on the part of friends, an "exaggerated concern for consensus" when friends are reluctant to disagree with or challenge or criticize one another, insufficient focus on mission, strategy, and goals.

2.3 Culture and learning

Organizations, as a consequence of technological changes and wider knowledge attached to them, are nowadays facing an environment characterized by increasing levels of complexity, globalization and dynamism. Therefore they need to pay greater attention to the development and preservation of internal skills and capabilities, which means changing both the knowledge base within a firm and the way the firm uses its existing knowledge to compete (Susana, et al, 2004). Consequently, the establishment of a knowledge strategy may be considered the best way to channel the organization's efforts to this end. Many companies, being aware of this fact, build up technical infrastructures which support knowledge acquisition and distribution at the same time as they focus their attention on quality control, inventory control and job design, among others. However, an excessive focus on technical problems rather than on social aspects results in failure among most of these companies (Cross and Israelit, 1999).

Susan et al (2004) stated that the collaborative culture encourages the development of organizational learning, which at the same time, has a significant effect on business performance. Nowadays, there is an increasing consensus on the idea that organizations making the effort to introduce a culture which encourages communication among their members, experimentation and risk taking, and motivates employees to question fundamental beliefs and work patterns, will achieve a favorable working atmosphere for the development of their capacity to learn. For example, Google recognizes that it is not enough to allow anyone at the firm to post thoughts for new technologies and businesses to mailing lists. They have instituted supporting processes that are led by management. Marissa Mayer, the Director of Web Products at Google, has open office hours much like a college professor where employees can talk through ideas. Google's personalized home page came out of this process (google's culture of innovation, 2005).

3. Organizational control

Control was viewed simplistically as a series of techniques for measuring the effectiveness of other management functions such as planning, organizing and leading, and as the basis for taking appropriate corrective action when that effectiveness was seen to be lacking (Linstead, et al, 2009). It is necessary for management since the primary role of management is to ensure the perpetuation of order and organization, to keep an organization in existence by keeping it under control. However, management control is a particular form of control which associated with maintaining a social order, since management involves getting things done through other people. These people cannot be told, in advance, how to do every single thing or how to respond to every particular situation that may confront them in their organizational lives. Instead, management control must work by engaging employees in such a way that they are still willing and able to deploy their initiative to ensure that the job gets done successfully.

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There are two dimensions of organizational control. Formal controls tend to be those associated with the rights and responsibilities delineated for a bureaucratic office, the clearly spelt-out, often written, rules and procedures intended to govern individuals' conduct and their interrelations at, and between, particular places in an organizational hierarchy (Linstead, et al, 2009). While, informal control are those associated with custom and practice and the culture norms that pertain in a particular location. Nevertheless, consideration of the ways in which formal controls combine into control systems does provide a useful way in to analysis of how control is exercised in organizations. Thus, formal control has become important in contemporary organizations. The key essential elements of such a system and its control are represented schematically in Figure 3.1.

Figure 3.1 Control System

The productivity of an operation is related to how effectively the resources that are input in a process (manufacturing process, service process) are transformed into economic results for the services provider and value for its customers. The control system goes through cycles in which performances are compared with expectation and if expectation is not being met, then corrective action is taken.

Managers always try to improve the competitive advantage of their companies by implementing a succession of organizational change initiatives. However, with the uncertainty, complexity, and instability caused by rapid technology change and intensified competition arising out of globalized systems of trade, finance and production, organizational, control system and performance evaluation are needed for corporation in order to ensure the effective implementation of company's strategies.

Performance evaluation and control systems may be defined as any combination of social and technical arrangements which, in the light of having assessed any member's past, current or future task performance, generates and implements actions that attempt to either reinforce or correct that level of performance. Examples would include: budgets, MBO, systematic approaches to recruitment and selection.

Budgeting is an organization process that involves making forecasts based on the proposed strategy and programmes. The forecasts then are used to construct a budgeted profit-and-loss statement (i.e. profitability). The budget plays a key role in an organization (Hollensen, 2006). It moves the organization from an informal reaction method of management to a formal controlled method of management. It can also act as a motivator and communicator, as well as assist in functional co-ordination and performance evaluation.

According to Johnson et al (2001), employees are aware of what performance evaluation and control systems reward and modify their task behaviors to suit this. They may become unwilling and unable to challenge the continuing relevance of the objectives which are operationalized by a system infrastructure even where such objectives are no longer relevant to their effective job performance. If individuals fear that the control process will be used not only to judge their performance but as a basis for punishing them, then it will be feared and reviled. Hence, management increasingly seeks to manipulate what employees' value by various attempts to manage organizational culture. As Ouchi (1980) has observed, where controllers have neither expert knowledge about how task performance should be performed, nor the ability to measure task performance outputs in a valid and reliable manner, a viable alternative means by which goal congruence might be established is through operatives' commitment to the organizational collectivity on the basis of shared beliefs and values, for instance, culture control. For Kanter (1989), if the appropriate values and attitudes are internalized, a common sense of purpose or "moral involvement", activated through emotion and sentiment, develops which makes the constant surveillance of employees, as a form of control, redundant since operatives will proceed to exercise self-discipline in a manner commensurable with managerial aims and objectives.

3.1 Organizational control and corporate culture

Corporate culture is a form of normative control (Wattle, 2000). Normative control can be describe as a system of control that "works internally by engendering people with subjective attributes and dispositions, which are compatible with the maintenance of certain types of work organization" (Fleming & Stablein, 1999).

Corporate culture is increasingly recognized as an important means of controlling workplace activities. Corporate culture as a form of normative control is amazingly effective for promoting teamwork in organizations. Proponents argue that culture building cultivates a shared meaning and purpose among team members (Fleming & Stablein, 1999), harnessing their commitment and energy towards efficiency and productivity. As a result, members are more willing to share their experience and knowledge with their counterparts, facilitating cooperation and mutual accountability. Promoting teamwork requires the manipulation of team values, norms, and beliefs, so that members become much more loyal and devoted to the team and organization (Fleming & Stablein, 1999). This manipulation is achieved through designing workplace activities, ranging from daily communications to corporate meetings, training sessions, and peer gatherings. Managers design the ways in which these activities are performed and employees are responsible for the maintenance of those activities. They learn about team values through their participation in socializing with others. Once members have internalized these values, they come to discipline themselves in teams without the need for managerial control.

However, this form of control is not as perfect as it has been generally envisaged. Although corporate culture is effective in fostering team spirit in organizations, members nonetheless experience intense peer pressure among themselves (Ezzamel & Willmott, 1998). Not only are members under constant supervision by their counterparts, but also are required to actively monitor their own team performance (Ezzamel & Willmott, 1998). Peer competition is intense. Some people argued that team members, in fact, do not gain a sense of empowerment, ownership, and participation. Rather, they often experience negative emotions such as ambivalence, anxiety, fear, and pressure (Wattle, 2000). Further, employees' resistance to managerial practices of team building is a common phenomenon in the contemporary workplace. Depending on different situations, the intensity of their resistance can range from a simple tactic of indifference to an active endeavour of manipulating critical information. These issues raise doubts about its effectiveness as a form of normative control. Hence, informal control, for example, emotional control is needed sometimes.

3.2 Organizational control and managing knowledge

According to the knowledge-based view of the firm, the uniqueness of a firm's knowledge plays a fundamental role in its sustained ability to compete (Turner & Makhija, 2006). Building competitive advantage involves creating and acquiring new knowledge, disseminating it to appropriate parts of the firm, interpreting and integrating it with existing knowledge, and, ultimately, using it to achieve superior performance.

Organizations in dynamically changing environments should behave experimentally. Since they will come across few lasting optima, they ought to gear themselves to impermanency and plan as if their decisions were temporary and probably imperfect solutions to changing problems (Lamb et al, 2006). Knowledge management systems should be set up for experimenting, emphasize evaluations, and be easy to re-arrange and adapt with changing business environment. Although dynamically changing business environment defies prediction, however, such organizations are more aware of the inadequacy of the forecasts based on historical data and are thus better prepared to adapt accordingly.

According to Turner & Makhijia (2006), despite the unobservable nature of knowledge, the firm has other more readily observable features that can be used to illuminate both the properties and use of its knowledge. A particularly useful feature of the firm in this regard is its organizational control systems.

Two particular features of controls play an integral role in the firm's ability to manage its knowledge. First, control mechanisms have inherent information processing properties. Such mechanisms, whether they encompass routines, coordination mechanisms, or organizational norms, mandate specific relationships between individuals and groups that influence how information is shared and knowledge is disseminated within the firm (Makhija & Ganesh, 1997).

Second, controls create incentives and disincentives for organizational members to behave in a manner consistent with firm goals and objectives (Turner & Makhijia, 2006). Since meeting goals and objectives requires the use of knowledge by organizational members, the purposeful structuring of control mechanisms by a firm in turn directs the type of knowledge management behavior exhibited.

According to Malhotra, Y (2002), organizational goals and outcomes are interpreted in terms of not only achievement of such intermediate outcomes, but also in terms of how actors' knowledge behaviors and actions relate to organizations' competitive advantage. Existing research has implicitly assumed that the controlee would modify ones behavior to conform to the organizational outcome or performance measures specified by the controller. The implicit assumption in this model is that the controllee's regulation is governed by one's fear of punishment or anticipation of reward and the compliance of the controlee has been considered a given. This framework of management has dominantly interpreted knowledge management in terms of control by compliance of those entrusted with utilization, processing, creation, dissemination and sharing of knowledge. Example of operational measures often recommended for facilitating knowledge management, such as bonuses and incentives, illustrate such enforcement of knowledge management by fiat.

3.3 organizational control and organizational development

The traditional control approach has stressed individual control, centered on principal agent (management-subordinate) relationships, hierarchy of authority, chain of command, and bureaucratic control. However, these mechanistic approaches are currently being substituted or replaced by organic-based processes and structures of team-based control systems.

Accordingly, team-based management controls, a form of normative control, are being used in manufacturing organizations to monitor production quality and cost control, manage incentive systems, design and implement process innovation changes in management accounting systems such as activity-based costing (ABC). Based on the view of Sisaye (2005), many organizations have implemented new or emerging management control techniques that emphasize group/team control structures such as TQM and business process reengineering (BPR) and accounting control systems, for example, activity-based costing, since organizational development's structural change approach has advocated simultaneous changes in all organizational control system. TQM, BPR and ABC are implemented to support more flexible organizational structures and systems to manage teams and process innovation changes (Sisaye, 2001, 2003). These organizational control techniques have shifted the basis of management control systems from meeting separate, individually based budgetary goals to a team based performance measures that are dependent on the achievement of organization wide goals.

Meanwhile, another form of formal control, input control, which refers to the observable and formal bureaucratic human resource management practices such as selection and training, was suggested by YU et al (2008) that it is an important factor in creating positive organizational changes and there is an interaction between task characteristics in terms of programmability, control mechanisms and the capacity for improvement in organizational development. It is the most appropriate strategy when information about what should be performed in a job is incomplete and the standards of desirable performance are ambiguous (Ouchi, 1979). It relies heavily on the selection process as an effective control. In international joint ventures, the selection of general managers and the management team is crucial to the success of businesses because it has a direct implication in organizational performance as well as improvement (Petrovic and Kakabadse, 2003). Experiments showed that training intervention creates desirable changes in performance (Lanigan and Bentley, 2006).


Recently, the arrival of growth in international competition has given prominence to the importance of cost as a competitive tool and the need to undertake changes in organizational structures and systems. Organizational culture and formal control need to be considered when organizations have to adjust many changes to adapt the environment. Playing attention on culture can emphasize the communication in the international business as well as knowledge learning for employees to improve their working effectiveness. Meanwhile, organizational culture plays an important role in the successfulness of the change process.

A better control system can keep the companies' operations in control and without big mistakes. Formal control like budget, TQM, ABC or team-based management control provides a useful way in to analysis of how organizations operate in daily life. Hence, it is important for contemporary organizations to pay attention on organizational culture and formal control in the operation.

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