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The purpose of this study was to investigate the relationship between organizational structure of a company and how it can be applied or beneficial to the company that have chosen. Supporting research and statements are clearly explained throughout this report. Here, Carlsberg Brewery Malaysia has been chosen as the main subject of this study.
Carlsberg Group was founded by J.C. Jacobsen in 1847. Since then, it has made its prestigious position to the world's fourth largest brewery group. The headquarters of the Carlsberg Group is at Copenhagen, Denmark.
Carlsberg Group extended their business to others market areas. Currently, there are more than 50 Carlsberg breweries around the world, and Carlsberg Brewery Malaysia is one of it. Carlsberg Malaysia has incorporated in December 1969. Its expanded brand portfolio includes Jolly Shandy Lemon, SKOL Super beer, Carlsberg Green Label as well as non-alcoholic drinks. Due to the high quality of beer products, Carlsberg Malaysia has led the Malaysia Sales Market and left an effective impact on the economic growth.
Organization structure is important to deal with in the organization's development. And yet, a clear and an effective organization structure is the major factor and force to lead Carlsberg Malaysia in their business's development and growth.
Designing Organizational Structure
Management is the major issue in operating a business, it involves four functions: planning, organizing, leading and controlling whereas organizing is an indispensable step to lead a business to grow. Organizing is an important process for the managers to design a formal organization's structure.
As stated by Schermerhorn, Jr. (2011), the way in which the various parts of an organization are formally arranged is usually referred to as the organization structure. Organization structure identifies roles, responsibilities and tasks of each job position and the relationships among these positions. It must be coordinated and grouped in a logical manner in order to achieve the organization's objectives.
Organization structure can be shown visually in an organizational chart. Drawing an organization chart is beneficial to the top layer management of Carlsberg Malaysia. When drawing it, those managers are forced to analyze the relationships between each job position and this may help them to make improvements.
Figure 1: Organizational Chart
Figure 1 shows the vertical organization chart of Carlsberg Malaysia. This diagram illustrate the relationships and arrangement of work positions within Carlsberg Malaysia.
When managers design or create their organization structure, they must engaged in six key elements: work specialization, departmentalization, span of control, chain of command, centralization and decentralization, and formalization.
The term work specialization, is to describe the process of dividing work activities in an organization into separate job tasks. It's also known as division of labor.
Managers of Carlsberg Malaysia have put so much efforts on this step to design the effective organization structure. In order to increase the work output, they specialize each employee in doing a particular task rather than entire task. Moreover, there are some tasks that require highly-developed skills whereas some tasks only require lower skills, the managers use work specialization to make efficient use of the difference of skills that the employees or workers own.
This approach is obviously beneficial in the manufacturing department of Carlsberg Malaysia. There are various types of brands manufactured under the organization. With this approach, every worker only participate in a single task or aspect of the production. For instance, one worker participates in the production of the SKOL Super Beer, another works for the Carlsberg Green Label, and so forth. Each worker could increase productivity and perform the maximize efficiency because they concentrate on their job task.
After job tasks have been separated through work specialization, they are grouped together so that common or related work activities can be done in an integrated way. The basis of how jobs are grouped back together is called Departmentalization. Some of the standard and common forms of departmentalization used include functional, geographical, product, process, customer and etcetera. The way that Carlsberg Malaysia utilized to group activities is by functions and it can be evidently seen in the organization chart. The chart shows the functional structure of the organization, with top management followed by the functions of business development, marketing, human resources, financial and so on.
In Carlsberg Malaysia, people with similar skills or performing the similar job tasks are grouped into work units. Each department will have the experts and the experts will be given the authority to make decisions within their areas of expertise. Following are the benefits of functional structure towards the organization:
High level of efficiency and productivity performed by the employees because they experienced the same job tasks.
Employees are easier to train because they only concentrate on specific and narrow areas.
Job tasks tend to be done consistently because common knowledge share within the experts and specialists.
Chain of command
The organization chart that declared before in the report shows the well-structured chain of command, which identifies the relationship between the superior and subordinate. Robbins & Coulter (2012) commented that chain of command is the line of authority extending from upper organizational levels to lower levels, which clarifies who reports to whom. When the organization grow in size, the chain of command tend to become taller and there will be more layers of management.
Suppose an employee from Sales Department had a problem. He or she may come up with the question like: Who would help him or her to resolve the issues? This question can be solved by the following principle. Chain of command has underlying principle, which is the unity of command. The principle of chain of command states that an employee should report to only one manager. Working in Carlsberg Malaysia, each employee understand whom to report or responsible to. They are assigned to the respective managers. For example, salesperson only will report to the head of the Sales Department.
Span of control
Span of control can be defined as the number of subordinates that report directly to and effectively manage by a manager. It is an important consideration in how efficient Carlsberg Malaysia will be. The appropriate span must be concerned in management because it affects coordination. Tall organization structure has narrow span of control, while flat organization structure has wide span of control.
Management of Carlsberg Malaysia classified as narrow span of control. Each manager has fewer subordinates to supervise. The managers are able to administer and control the subordinates closely, thus they will have more time to train their underling. However, narrow spans have certain drawbacks such as vertical communication will be become more complex and hence the decision making will be slow down, higher costs due to high level of management hierarchy, and others.
Centralization and Decentralization
"Should most decision be made at the top levels of an organization, or should they be dispersed by extensive delegation throughout all levels of management?" (Schermerhorn, Jr. , 2011, p.251) Centralization refers to the degree of authority for decision making at the upper levels of an organization, decentralization is the distribution of authority for decision making to the lower-level employees. Generally, small firms or company that started off in the hands of a founding family often use centralized organizational structure. Each conception offers pros and cons for the organization.
Carlsberg Malaysia is a decentralized organization. The top management offers the employees authority to make decision as they are closer to the problem and they have more detailed knowledge and experiences about it so that they can act more quickly to give solution to the problem. For example, Carlsberg Malaysia offers their sales department adequate authority on choosing what method to promote the new product rather than enforce them to promote in traditional ways. Decentralized structure takes some burden of day-to-day "non-important" problem solving off the top management, so they are left free to put more effort on their strategic planning, higher-level decision making and important financial decisions. Moreover, decentralization provides low-level employee with crucial experience in making decision. With this experience, they would be well prepared to act decisively after they are promoted into higher-level positions.
Nowadays, employees are expected to deal with the same input in exactly the same way and provide a consistent output. This is a highly formalized organization's expectation. As indicated by Robbins & Coulter (2012), formalization refers to how standardized an organization's jobs are and the extent to which employee behavior is guided by rules and procedures. When formalization is high, the organization offers specific job descriptions, many organizational rules, and clear work processes. Conversely, in a low formalized organization, the employee will have more freedom in how they do their work.
To make a more flexible working environment, Carlsberg Malaysia tends to become low formalized organization although formalization is needed for consistent control. Rules may be too restrictive in some situations. Thus, they give the employees sufficient independence to make decisions that they feel the best under the circumstances and would not affect the organization's reputation. However, it does not mean the employees do not need to obey the organizational rules and regulations since there will be some important staff policies such as not to use company computer to view social network like Facebook.
Employee satisfaction will be increase by working in this freedom and positive working environment and employee turnover's rate will be reduced.
A well-organized internal structure is important for every organization to operate and run their business. Additionally, the size of the organization indicate the degree of work specialization, departmentalization, span of control, chain of command, centralization and decentralization and formalization required. Therefore, the management of Carlsberg Malaysia need to determine which structure will be the most effective for them.