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Introduction to the case:
KBR (Kellogg, Brown and Root) is a global Infrastructure business Venture. With 57,000 employees operating worldwide, it’s a leading engineering, construction and services company. Supporting the hydrocarbon, energy, civil infrastructure sectors and government services, its business is based on project management activities. Headquartered in Houston, Texas; it operates from its locations in Australia, Africa, UK, Asia and the Middle East. It enjoys an eminent and one of the leading market positions in the infrastructure sector.
KBR serves its customers through six strategic business units:
• Upstream – offers engineering related services for energy
• Downstream – serves business clients in the petrochemical coal gasification markets
• KBR Services – provides construction and maintenance support services
• KBR Technology – Manages Intellectual Property Rights.
• KBR Ventures – Provides Financial and management services to its partners.
• Government and Infrastructure (G&I) – offers construction, engineering and project management services.
Leveraging from its G&I business expertise, KBR formed a Joint venture with Carillion, another company, creating Aspire Defense. Aspire Defence is to deliver Project Allenby/ Connaught. Project Allenby happens to be the largest infrastructure project, in scale, to be awarded by the Ministry of Defence to the private sector.
Aspire defence has three business wings:
* Aspire Defence Limited (ADL), responsible for Service Delivery.
* Aspire Defence Capital Works (ADCW) delivers the construction.
* Aspire defence Services Limited (ADSL) delivers facilities and provides service management support to the project.
Our study is to analyse the organization of such a diversified business venture. The report is to study the Organizational behavior and change management systems in place. Our focus would be on Aspire defence.
Q1). Leadership and the leadership style used by the company and its relationship with the leadership theories you are familiar with?
Leadership is amongst the most important things by which an organization is run. It’s the most celebrated of the management traits. “Effective leadership is the ability to successfully integrate and maximize available resources within the internal and external environment for the attainment of organizational or societal goals” (Ogbonnia, 2007).
Leadership styles refer to the leader’s decision making behavior, which is resultant of the philosophy, experience and personality of the leader. Leadership styles may be classified as follows (Lewin, Lippitt,and White, 1939):
* Dictator: Leader uses fear and threats to impose his decisions.
* Autocratic : Centralised decision making.
* Democratic : Partcipative decision making.
* Free Rein : Maximum liberty allowed to individuals.
KBR follows a flat organizational structure, meaning there are only a few layers between the line workers and ownership. Modern Organizations are continuously becoming flatter, with the leadership shunning their “lazy” dependence on the hierarchy to get the management data together and then disseminating the leadership decisions down the vertical. KBR’s hierarchy suggests a Senior Management Team which wants to be involved in the minutest of the business functionalities. They are dynamic enough to control costs and to increase speed of response to customer desires and market changes.
Over the years, KBR has done very well to grow from a small fabrication business to one of the most respected, diversified conglomerates of Britain. Its success suggests that the leadership has been effective to maintain the balance between becoming flatter and the social distance required in order to take the big-picture view; to make structured business decisions.
ADSL seems to follow a democratic leadership style. Due to lesser hierarchies, employees tend to be self directed, taking initiatives and applying intuition to their daily operations. With ADL solely responsible for service delivery ; ADSL and ADCW entrusted with project execution, the set up provides a framework where each and every role is involved in the decision making process. With the organization slowly moving towards a matrix structure, the management has a very quick access to the cross functional teams. These teams with specific knowledge of different areas of the business venture, provide important inputs to decision making.
As with many modern organizations, the leadership style can be explained by the Situational Leadership theories, wherein the management acts on contingency and takes on a leadership style which a particular situation demands. They are completely flexible.
Examine the source of the organization’s culture and its implications on the workforce and the organizational performance.
Cooke and Rosseau define Organizational culture as “The ways of thinking, behaving and believing that members of a social unit have in common”.
Organisations are viewed as independent, its goals differing from those of its members.
There are three main sources from which an organization derives its culture:
* The national culture
* The Vision, Management style of its founder.
* The nature of Business.
Matching individuals to organizations is an important part of success to any business. The match between people and the organizations they work for, is determined by the type of organizational culture that exists. The extent to which an organization’s values match with that of an individual is the prime determinant of the employee’s work.
An organization’s culture basically defines an employee’s role. Being aware of the organizational culture at all levels is important because it is the culture that defines appropriate and inappropriate behavior. In some businesses, for example, creativity is stressed. In others, the status quo is valued. Some cultures are more socially oriented, while others insist task-orientation.
Corporate performance depends a lot on this match between the individual and corporate values. Effective management involves maintaining a balance between the two.
The core values of KBR are intrinsic to its organizational culture, built upon the highest standards of safety, transparency, disciple, financial accountability among others.
KBR has developed an organizational culture where its fundamentals are based on delivering benefits to its customers, shareholders, communities it serves and to its employees. Such an organizational culture has helped KBR to be premier organization delivering projects and services to a global marketplace. Culture acts as a constraint on the actions of managers and workers.
Explore how the culture of an organization has impact on both the leadership and the organization structure of the organization.
Culture within a company has a huge impact on leadership and the decison making process. Of all the implications, an organization’s culture determines the leadership styles and whether the decision making is top down or bottom up. In a top down approach, the leadership is autocratic. Decisions are taken and merely passed down the channels without any inputs from the technical experts who, mostly, are at the bottom of the organization structure. In a bottom up culture, decisions are partly taken by the actual job floor, within their scope. In such a set up, innovative ideas are generated and the company usually fares well because it harnesses the power of many.
Entrepreneurial setups, like KBR tend to have a flat organizational structure. Organizational cultures derived from the nature of businesses also define the organizational structure. Heavy equipment manufacturing set ups and Investment Banks usually tend to have flat structures. This is so to allow the management to control the dynamically changing market trends and customer preferences which are very important for them. On the other hand an FMCG company usually has a tall structure. Primarily because of their long distribution, acquisition and logistics chain; and because the customer preferences are fairly stable.
Explain the issue of motivation theories, the motivational policies used in the case and its impact on the individual and organization performances.
Stephen P. Robbins defines motivation as “The processes that account for an individual’s intensity, direction, and persistence of effort toward attaining a goal.” Motivation, in the modern Organizational context is one of the most important and underlying factors which drives every employee performance. Different scholarly theories have been put forward in the understanding of motivation and its effects on organizational efficiency. The most recognized of these are the Maslow’s Need Hierarchy Thoery, Douglas Mc Gregor’s Theory X and Thoery Y, Frederick Herzberg’s Two Factor Theory.
Maslow states that innate in every employee is a hierarchy of needs- Physiological, Social, Esteem, and Self- Actualisation; in order. He explains that as and when each need is substantially fulfilled, an employee looks to satisfy the next need on the Grid. To retain the most able of its talent, an organization has to dynamically map its personnels’ competency and their satisfaction levels. Calculated incentives have to be offered to satisfy the next level. Douglas Mc Gregor states that there are two states of human psychology and every compensation structure has to be devised keeping them in mind. Theory X is to be followed by the management when it feels that its employees pessimistic- they dislike work, avoid responsibility, have little ambitions and must be conyinuously supervised. Theory Y is to be used when the employees are optimistic – they like work, are self directed, need little supervision. Frederick Herzberg states that certain factors result in job satisfaction, the absence of these result in job dissatisfaction. He distinguished them as Motivators – responsility, recognition, challenging work, among others and Hygiene factors – such as salary and job satisfaction. Motivators give positive satisfaction and hygiene factors do not motivate. But, if absent result, they lead to dissatisfaction.
KBR and ADSL have good motivational practices in place. Firstly, it offers its employees a place in an organization that has been growing at a very impressive pace. This results in the employees being secured of their jobs and a chance to grow along with the organization. In tough economic conditions, like the present, job security is amongst the most important motivator which drives an employee performance. It offers a wide range of career opportunities. With clearly defined job specifications and responsibilities, it allows the employees to work in their areas of excellence. KBR recruits the most competent of the managers. Many a times, the primary reason for high attrition rates is the management. With high caliber people in the management, its employees will have the right direction.
Such motivators, amongst others, have resulted in KBR being a place where employees work to their full potential. Efficient workforce has resulted in KBR now being one of the most admired business conglomerates.
Examine the nature of a team, its structure and how it has an impact on the organization performances.
A team in an organizational context is simply, individuals working together towards a common business goal. There are a number of factors that define a team’s structure and its success.
Leadership: An effective team leader should possess the management skills to establish and maintain a positive working environment; motivate the team to take a positive approach towards the goal.
Communication: Clear communication without any ‘noise’.
Established roles: The team should have clearly established goals and each member’s role within the framework.
Teamwork is an important asset to any organization. Effectively managed teams improve business efficiency. The postulate that “whole is more than the sum of its parts” works well in a team space. Some of the positive outcomes of effective teamwork are:
* Absenteesim becomes a lesser problem.
* Decision making is quick.
* Tasks are completed in a harmonious way.
* Morale remains high.
How effective do you think the company approach to people management will be in ensuring improved results and enhancing the change management process?
ADSL and KBR have good human resource practices in place. With a global presence and diversified role offerings, it is amongst the most admired work places. The KBR culture nurses autonomy and independent thinking. At the same time, all its projects being team based, it is a place to excel in collaborative, team based activities. It has systems and practices in place for managing change in a systematic and planned fashion.
The company treats its employees as its main assets. This is evident from its sophisticated people management culture. Historically, the biggest resistance to change has been the workforce. By managing its people well, it is assuring them continued growth and prosperity within the organization. This will result in change being implemented in a smooth fashion.
Explain the way individual and organization behaves, linking this with the relevant theory that you are familiar with. How would these impact on any organisation’s change process?
Individual and organizations are both separate entities. For an organization, its primary goal is the maximization of its stake holder’s value. For an individual, the personal goals could be earnings, social status, comfort, among others. These goals are naturally conflicting in nature. Individuals perceive Organizational goals, culture and values as impeding to their own goals.
Organizations are ultimately made up of individuals, whose behavior and goals will ultimately affect organizational behavior. Individual traits that usually influence organizational behavior are the individual values, ethics, attitudes, personality and culture. These traits may influence organizational behavior, particularly inert in people responsible for creating the corporate culture, for example, the top management (Robbins and Judge, 2006).
Individual values and ethics are one of the biggest determinants of organizational behavior. Individual personality is also one of the determining factors. Some of the personality factors which may influence organizational behavior are positivity/negativity, optimism/pessimism, work/social (Penner, Midili, & Kegelmeyer, 1997). Cultural differences as well, affect organizational behavior. All these behavioral traits have negative/ positive impact on the Organization. For instance, an Asian employee, who expects a high power distance from their direct line might not work well under a Europeon management, which is more democratic. On the other hand, due to many caste systems in their home countries, they work well with teams of diverse backgrounds.
The individual traits described above affect organizational behavior, the larger effects of these are likely to be from the top management. Effective management requires an understanding of these influences at workplace and to absorb them.
Workforce is, perhaps, the biggest resistance to organizational change. Organizational change generates anxiety and resistance in employees, making it difficult to implement organizational change (Folger and Skarlicki, 1999). Any management personnel’s ability in achieving maximum benefits from change depends majorly on how effectively they create and manage an environment that minimizes resistant and encourages acceptance (Coetsee,1999).
In order to facilitate a smooth migration from the old to the new, organizations must be competent in effective change management. The process of change management mainly involves in having those involved and affected to accept the proposed changes.
Explain how the company has managed its change process and how it has benefitted from this management process?
KBR has been responding to change quite well. The firm has undergone drastic changes to its approach since it began operations in 1901. It has diversified in scope and in scale. The business has changed from a small pipe manufacturing firm to a manufacturing conglomerate.
The firm has been receptive to change in line with the changing market trends and business needs. Looking back at the number of acquisitions and divestments that KBR has made, it can be said that change management has been a planned and phased transition at KBR.
The firm has benefitted from this change. It has been able to tap the growing manufacturing industry and establish itself as a premier enterprise in the area.
Put forward some recommendations for future improvement
The recent economic downturn has been amongst the most dreaded global disasters of recent times. The fundamentals of many established companies have been questioned and quite a few have failed in these testing times. Infrastructure, after financial services, has been the worst hit. There will be an enhanced pressure from the stake holders for better performance. Competition will be intense and businesses will be on the look out for innovative ways to help raise business. Risk management is of utmost importance.
I believe ADSL has to beef up its risk management team. With a deal as long as 36 years, the business will surely see even more volatile periods.
Firstly, ADSL has to concentrate on managing its partners better. It has to look to strike deals with its suppliers and hedge its risk exposures. Oil is one such example. There were times when Crude Oil prices rose to as high as over $50 a barrel. An year later, these prices softened by around 40%. Surely, if it had signed a forward delivery contract with its suppliers, it could have absorbed such a massive price change. It has to re engineer its financial flows of the deal. With 36 years of cash flows to happen, there is a high exposure to exchange volatility and inflation. It has to start implementing change in its Network management.
A lot of companies, especially the banks, have been laying off its staff in big numbers. With the economy set to get better over the next two quarters, these companies have started a hiring spree; all at huge costs. ADSL should concentrate more on retaining its most able talent and not respond to short term market implications.
KBR and ADSL have been responding to change, whether triggered by internal or external factors, quite well over the years. But, there is scale for improvement. The company, with its geographical spread, has leveraged the economies of scale. But there are a lot of economies of scope that it could exploit. Its been in existence for over a century and with its cash rich treasuries, it could diversify into a much bigger conglomerate.
KBR’s recruiting policy allows entry to all levels of the company. Though this might work good for junior and mid level management roles, it does not hold good for senior management. KBR has to change its behavior towards this area and concentrate more on succession planning. Successful companies have firm succession plans and many huge conglomerates do allow outsiders to take on senior level positions. The same has to be adopted at KBR. This becomes even more profound in the current scenario when information and data security is of prime importance.
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