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This report focuses on the background to change that highlights Internal and External factors that influence change in an Organisation.
It then further illustrates the types of change that an Organisation can face and its impact on ones Organisation.
Since Buildco Plc has a bureaucratic form of structuring, this report looks closely into the bureaucratic form of Organisational structure and its negative and positive impact on Buildco Plc.
Further it discusses different types of Organisation Structure available for Buildco Plc to adopt so that it can plan its change process through expansion.
Lastly, this report suggests Matrix Form of Organisation Structure for Buildco with suitable reasoning to the Board of the company.
Buildco Plc is a construction company that has been in business for about 20 years. The company has a typical bureaucratic type of structure and now it plans to expand its operations in European territory after having secured successful contracts in New Zealand and South Africa.
Currently Buildco Plc operates in Commercial and Housing construction and wishes to expand its operations in Industrial building as well. However before it can take this step, it's important that it reviews its current Organisational Structure and its strengths and weaknesses.
Background to Change
In the words of Alvin Toffler the only constant in today's world is Change. With the current global situation no Organisation can follow one strategy, one organisation structure and one set of employees with similar ideas. Thus in order for an Organisation to progress it needs to adapt to the changing environment efficiently and effectively to gain competitive advantage over its competitors.
According to Ackerman(1997), there are three types of change, refer figure 3.0.
Table 3.0. Types of Change
Either Planned or Emergent and mainly focuses on improving the process or a particular skill.
Refers to the change process where an Organisation plans to change from an existing state to a planned state. It could be planned or episodic type of change process.
This type of change refers to change in structure, culture and processes that believes in transforming an Organisation through continuous improvement.
Whenever there are changes happening in and around an Organisation, they give reasons to an Organisation to change or adapt to the situation. These reasons are classified as Internal and External Driving Forces.
3.1. Internal Factors Affecting Change
Internal Driving Forces include those issues that force an Organisation to change in order to survive and progress. The Internal forces are under the control of the Organisation.
Table 3.1. Internal Factors and its Impact
Impact On Buildco
Related to employees, their impact on the productivity and progress of an Organisation
Lack of authority at various levels in Buildco has created low employee morale, lack of ownership which eventually can affect the efficiency and productivity. The company's bureaucratic structure might pose a threat in its expansion process hence considering a different Organisation structure that will eliminate the bureaucracy and improve overall efficiency.
Related to Process and its improvement, Internal policies, structure and protocol
The need for expansion in Europe requires aligned processes, structures and procedures so that Buildco can maintain its USP of building different variety of building with innovative designs.
3.2. External Factors Affecting Change: PEST Analysis
External Forces or Pest Analysis give us a broad view of various external forces acting on an Organisation. The Organisation has no or minimal control over such external forces.
Table 3.2. External Factors and its Impact
Impact on Buildco
Relates to EU legislation, Government policies, Culture, directives.
Buildco's plan to get into industrial construction by expanding its operations in European countries would create the need to understand various government laws of different countries on construction Industry.
Culture and infrastructural development in those countries.
Relates to Entry Requirement and procedure in a new market, Consumer purchasing power, spending habits, competitors, how often a new product is launched in a particular market.
Buildco would need to overview the entry criteria and how easy and difficult is it to get into a market.
Before selecting the relevant countries to expand, it will have to analyse the consumer behaviour,
level of development and
the tightness or looseness of each market.
It would need to identify its competitors and their hold in that market.
Relates to the level of technology used in different markets, by competitors.
Buildco as a company has immense potential that it showcases through its innovative designs however before Buildco plans to expand its operations into a new market with a new product i.e. Industrial Construction, it needs to study the level of technology permissible in that market and available with the competitors.
Another recent issue it might face is that of climate change. Places prone to strong climatic changes due to global warming needs to be addressed and this should be incorporated in the
Bureaucratic Form of Organisation Structure
Looking at the Organisation Structure of Buildco Plc, we know that they follow a mechanistic structure which is more on the bureaucratic form.
It has one reporting authority, which takes care of all projects at hand, which is handled by each Project Manager and their respective team.
It highlights the fact that the senior managers are solely responsible for formulating strategies and making policies. The middle management is responsible for specific Projects and the Project team.
4.1.Strengths and Weaknesses of a Bureaucratic Form
Every form of Organisational Structure has its pros and cons. It helps a company to focus on the strengths and improve on or avoid the weaknesses of a particular form.
Figure 4.0. Strengths and Weaknesses of Bureaucratic Form
4.2. Its impact on an Organisation (Buildco Plc)
Buildco Plc has been in business for over 20 years with the head of the company being an heir of Lampton family. The company has taken pride in a lot of its construction designs and contracts.
The senior management forms the board and takes all relevant decisions. Project Managers report to one of the directors in relation to their respective projects. This type of structure has formed a bureaucratic form that impacts Buildco in both positive and negative way. Its impact on Buildco could be manifold:
Authority and decision making is vested with Top Management only. This can create lack of ownership, low motivation levels and dedication towards the company amongst the middle and executive levels. This may also lead to inferior decision quality.
Divisions have been created through various projects with no or minimal interaction or assistance between different Projects. This can create each Project Manager to pitch for and obtain maximum project resources for their Project overlooking the others Projects.
In order to gain maximum interests of the stakeholders i.e. the Top Management, individual Project Managers might get into unfair means like projecting incorrect figures in front of the management.
Communication clearly is driven from top to bottom that blocks an employee's creativity and innovative ideas. This might also restrict Buildco's ability to respond innovatively to any change.
Every individual in Buildco is aware of his/her role and responsibilities, which helps to proceed towards the objective as planned.
Divisions based on functions helps to identify specialists in their own area.
Employees are aware about their career path within the company.
Types of Organisation Structure
Different theorists have different views on the structure of an Organisation however each reflects a sense of similarity. Some of the common forms of Organisational Structure are:
Functional Structure groups similar departments or expertise under one section (refer Appendix 5.3.1). For e.g. all human resource activities would be combined under one function and Operations related positions or expertise under another.
Figure 5.0. Pros and Cons of Function Structure
Divisional Structure is a type of departmentalisation where different groups are divided according to market, product or type of service provided (refer Appendix 5.4.1.).
There are three main types of divisional structure : Product Division, Geographic Division and Customer Division. Such a type allows some level of independence at all levels unlike in a Function Structure.
Figure 5.1. Pros and Cons of Divisional Structure
Matrix Structure is a form of departmentalisation which has functional or bureaucratic form alongside different temporary projects at hand (refer appendix 5.5.1.).
This form advocates dual reporting, one at Function level and the other at Project level. Depending on the requirement of an Organisation, such a structure can either have greater responsibility at Project level or Function level or both levels can have equal authorities over the staff reporting to them.
Figure 5.2. Pros and Cons of Matrix Structure
As the name suggests, a Hybrid Structure is a combination of two forms mainly Functional and Divisional Structure at the same management level.
Many Organisation adopt this form to gain the maximum of these two structures, the specialisation of each function at the same time gaining focus on Product, services, market.
Figure 5.3. Pros and Cons of Hybrid Structure
Suggested Organisation Structure for Buildco
After understanding the current organisation structure of Buildco and their plan for further development into various areas and expansion in different markets, it gives us an insight on how this Transformational Change will benefit the company.
Buildco should re-structure its Organisational structure into a Matrix Structure.
Reasons for selecting this form:
The environment in which today's businesses operate is quite uncertain and volatile. A Matrix Structure helps to cope well with uncertainty through a divisional form, in which, as and when Buildco can react to the changes occurring in either at product, market or client level.
While the divisional section handles the environmental changes, the functional level can concentrate on developing skills and expertise within each function to cope with planned changes within the company like the plan to expand in Europe or to get into Industrial Construction or to get insight on the entry criteria and government laws in a particular region.
This structure will help utilise the maximum use of resources available and employees will feel motivated to contribute towards the business development plans of Buildco.
Due to the complexity of the business, Buildco needs to share its resources, hence the functional resources can be flexibly utilised amongst various Projects and regions without clashes of interests.
Below is a suggested graphical representation of Matrix Structure for Buildco as to how it may look like.
Figure 6.0. Suggested Matrix Structure for Buildco Plc
CEO/ Managing Director
Senior Executive Industrial Contracts
Senior Executive Housing Contracts
Senior Executive Commercial Contracts
Senior Executive Business Development
Based on the situation and requirement, it is suggested that Buildco Plc should adopt the Matrix Structure of Organisation. Its plan to expand geographically and product wise prompts a structure that can handle regional requirements along with functional. Although it wouldn't be an easy task as this would involve providing specific training like interpersonal training for all employees to support and facilitate smooth decision making.
Appendix 5.0. Function Structure
CEO/ Managing Director
Adapted from http://www.colourtex.com/organisation.htm
Appendix 5.2. Divisional Structure
CEO/ Managing Director
Country Head Europe
Country Head Ireland
Country Head India
Country Head UK
Appendix 5.3. Matrix Structure
VP (Project A)
VP (Project B)
VP (Project C)
VP Marketing Manager
Adapted from 'Matrix' ing your operations - A lesson in organisational structure, <http://www.prophix.com/pdfs/The_Matrix_Model.pdf>