Foundation Degree in Accounting and Finance Essay

Introduction There is a radical change after the privatisation of Atlantic Water. The change not only affects the organisation’s objectives and strategic planning, but also its structure and culture. B Burnes (1996: 115) cited writers such as Handy (1986), Allaire and Firsirotu (1984) argued the issue as follow: ‘†¦to operate effectively and efficiently, an organisation’s culture need to match or be appropriate to its structure. Given that an organisation’s environment can change rapidly, as can its structure, situations will arise in the environment, structure and practices of the organisation.’ Observing organisational behaviour is not enough, we need to understand the meaning of the behaviour, and therefore, it is important to identify the culture and structure of an organisation, to enable management to react quickly for any external or internal change. 1. Defining Culture It is difficult to define culture, usually it is defined as ‘how things are done around here’ or ‘this is how we are’. Culture within an organisation is influence by the personality of an individual, pattern of communication, work performance, behaviour of management and subordinate as a role. Schein (1983) defines organisational culture as: ‘†¦ the pattern of basic assumptions that a given group has invented, discovered or developed in learning to cope with its problems of external adaption and internal integration and that have work well enough to be considered valid, and, therefore , to be taught to new member as the correct way to perceive, think and feel in relation to those problems.’ Schein views culture as not being over behaviour or values, but the assumptions that underlie them. Here are the views based on three level of culture: * Level 1: The visible artefacts and creations, which are easy to observe, but do not explain why a group behaves the way it does. * Level 2: The values which can be inferred from interview, but which manifest the espoused reason for behaviour, not the underlying unconscious reason. * Level 3: The underlying assumptions which are typically unconscious, but which actually determine hoe people perceive, think and feel. The meaning of Organisational Culture was also defined in Oxford Dictionary of Business (2003) as follow: ‘Organizational Culture: The values, customs, rituals, and norms shared by all the members of an organization, which have to be learnt and accepted by new members of the organization.’ Culture impacts most aspect of organisational life, such as how decision are made, who makes them, how rewards are distributed, who is promoted, how people are treated, how the organisation responds to its environment etc. This particular set of values, beliefs, customs and systems are unique to the organisation. 1.1 Organisation culture R Harrison suggested that there are four main types of organisation culture. They are the following: Power Culture is where the authority and control within the organisation are centralised. The control is passing from the central to key individuals. The power of members is based on control over resources and personal influence with the centre. Role Culture is where work within and between departments is controlled by procedures, role descriptions and authority definitions. Job position is central to this, not necessarily the job holder as a person. People are appointed to a role based on their ability to carry out the functions and to satisfy performance of the role. R Harrison (1972: 119-128) cited Role Culture as follow: ‘Role culture often referred to as a bureaucracy, it works by logic and rationality.’ Task Culture is job or project oriented and the main purpose is to complete the task or project. This might involve getting the right people to work as a team, giving them decision making power to complete the task. Person Culture is when the individual is focus on. This includes their personality and personal feeling etc. For example if a group of people decided to do their own thing and other members of staff help, this is a person culture. It only existed for the people concerned. Many organisations have a mixture of the above culture, it is important to understand the concept of each of the above culture and to establish an appropriate structure. 1.2 Culture of the old Water Authority The old Water Authority had a complex grading framework, narrow spans of control and more level of authority, this resulted in a high hierarchical structure, and this indicated that the organisation had a strong power culture. It was mentioned in the case study that the old Water Authority called their managers ‘officers’ and administered the organisation and ran almost along a military line, where the authority and control were centralised. The employees were job oriented where they can only carry out the job they were originally employed for, there was no need to re-organise their position, where they just followed the day to day procedures. Management saw their jobs as minimising external interference rather then seeking for some change to improve the performance of the employees. Employees in the old Water Authority had a certain level of job security where they could work extra hours where needed, which would give them an extra income. Due to the high hierarchical structure of the organisation, there would be a difficulty for employees’ career progression, this affected those who are seeking for career improvement and lower their motivation and morale within the organisation. Management did not offer new training skills nor did subordinates look for self improvement. From these evidents the old Water Authority had a mixture of the all the culture which R Harrison suggested. 1.3 Culture of new Atlantic Water Plc In the new Atlantic Water Plc, they re-structured their grading framework, the spans of control reduced the level of hierarchical structure and the result of this, employees had more opportunities to progress within the organisation. The organisation also decided to empower their managers to take more responsibility, the decentralization enabled decisions to be made closer to the operation level of work. In the result of job cuts after privatisation, Atlantic Water offers their employees a chance to gain qualifications and ensured they are cross-skilled. Not only the employees offered to gain new skill, managers are also sent on a training course, where they will have a clearer focus on the organisation’s objective and to create a new relationship within the organisation. Since Atlantic Water had a large number of jobs cuts, employees suffered from the job insecurity after the privatisation. Although the organisation encouraged them to gain new skills, the main reason will probably be for them to keep their job rather than looking for self improvement. On the other hand, the organisation introduced a new salary structure leaving many employees worse off financially. Since the employees are not gaining any benefits financially and suffering from job insecurity, this impacts the employees’ morale and their commitment to the organisation. 1.4 Comparison of the old Water Authority and Atlantic Water The old culture of Water Authority was inappropriate to their competitive needs. Atlantic Water changed the culture by shaping the value, beliefs and attitudes of their employees. They started by changing the recruitment, selection and redundancy policies. Managers were recruited from private sector, this effected the composition of the workforce so that promotion and employment prospects are dependent on those concerned possessing or displaying the beliefs and value the organisation wishes to promote. The introduction of the flatter hierarchical structure and decentralisation is an advantage of a private company. The managers can work closely with the working operational level and it will reduce the time it takes to make decision. This also demands a greater involvement of the staff and creates opportunities for employees developing their career. The encouragement of staff training is vitally important to the change of an organisation, this will not only benefit the organisation’s productivity, but will also improve the level of employees’ morality and to make them understand their value to the organisation. 2. Defining Structure P Drucker (1974: 52) defined structure as follow: ‘Structure is a means for attaining the objectives and goals of an organization.’ An organisation existent is to achieve its goal and objectives, the work within an organisation has to be divided among its members. It provides the framework of an organisation and makes all process and application possible. The effectiveness and efficiency of the organisation will be influenced by the structural design and the behaviour of the people who work within the structure. 2.1 Organisational Structure An organisation’s structure is designed to ensure that rules and procedures are used and followed, it contains four frameworks of relationships within an organisation: the individual’s job description, job specialisation, its lines of communication and its hierarchy. Organisational structure can be layered into three hierarchical structures: the technical level, the managerial level and the community level. It is important to have clear objectives within the organisation, good communications both horizontally and vertically can enable an organisation to perform effectively and efficiently. The correct grouping of individuals and work is also important to maintain a high level of performance. 2.2 The old Water Authority’s structure The old Water Authority was a public service organisation, its main objective was to provide a service to local communities. Job description was clarified to individuals and the working pattern was not flexible. The division of work was based on the employees’ skills, i.e. operation of clean water side and the dirty water side. It had a narrow span of control and more level of authority, this result in a ‘tall’ hierarchical structure and there are a few problems with this structure. It restricts the decision making process and information is difficult to pass on from either level to another. It is not cost effective since there are more middle managers within the organisation and there could be a conflict between management if the objective was not clarified between departments. The old Water Authority was a centralised organisation where the decision making retained in the top level of management. There are advantages of centralisation, some of which applied to the old Water Authority. The decisions are fitted to broad organisation’s objectives and it is easier to coordinate the activities within the organisation. But the problem occurred when the decisions were not made close enough with the operational level, it might not be appropriated to the lower level of hierarchical structure. ‘Line and staff management: A system of management used in large organizations in which there are two separate hierarchies; the line management side consists of line managers with responsibility for deciding the policy of and running the organization’s main activities, while the staff management, and its separate staff managers, are responsible for providing such supporting service.’ Oxford Dictionary of Business (2003: 300) This explanation suited the structure of the old Water Authority, each operational department running parallelised and having advisory department across them (See Diagram 1). The mechanistic organisation theory applied to the old Water Authority, where employees had specified roles and definitions of the authority within the hierarchical structure. Communication and interaction are vertical, the structure of the old Water Authority was appropriate as the external environment was stable. 2.3 Atlantic Water’s Structure The privatisation changed the Water Authority from a public service organisation to an economic organisation. The objective is no longer just to provide service, but to make a profit and to survive in the competitive market. Atlantic Water re-structured their grading framework, it reduced the level of management, the wider span of control resulted in a ‘flatter’ hierarchical structure. It reduced the bureaucratic costs, i.e. less middle managers, less coordination problem and reduced the chance of information distortion. Decentralisation is another result of down-sizing the hierarchical structure, this allows decisions to be made closer to the operational level and reduces information overload on upper managers. Managers have more free time to do something else, i.e. provide personal care for its subordinates. The line and staff organisational structure also changed, it became a matrix structure, where there is more than one critical orientation to the operations of the organisation, such as they introduced the pay negotiations in house and fixed-term contractors. Atlantic Water encouraged their employee to gain qualification to enable them to be cross-skilled, so they can be deployed by their manager where and when they are needed, the flexibility of the working pattern is essential. The mechanistic organisation is no longer applicable in the lower level, it combined both the mechanistic organisation at the top of the hierarchy and the organic organisation at the bottom of the level. Organic organisation has a flexible system and structure which is characterised by the adjustment and continual redefinition of tasks. Communication and authority does not necessarily coincide with positional authority. 3. Organisational Change L Mullins (2002: 798) suggested organisation development is a key to organisational change. ‘Organisation development is concerned with the diagnosis of organisational health and performance, and the ability of the organisation to adapt to change.’ In order to change the organisation effectively, organisation development is essential to have the correct strategies: survey research and feedback, T-group and team building. Survey and feedback involves using questionnaires to help identifying the attitudes of individuals within the organisation. Top management can analysis the feedback and discuss the problems, and the action to be taken to help to improve performance. T-group is also known as sensitivity training, it involve informal groupings to discuss the individuals’ feeling toward the organisation and to understand their abilities in themselves. Team building is identifying the task procedures and the pattern of interaction within the work group. The aim of this function is to improve overall performance of the organisation through the effectiveness of the team. Organisational development is not only about improving the organisation effectiveness and efficiency, but also improve the morality and commitment of individuals. 3.1 Strategies for Change and Innovation There are different strategies approaches to changes in the organisation, however it has to be carefully design and apply. From the strategic management point of view, organisational change has four main facets which need constant re-appraisal and planned action: * Human resource implications – This involve training, personal skill development, the culture needed to be accepted. The organisation needs to encourage and motivate their employees by providing opportunity for improvement. * Functional implications – Communication need to be improved between departments, the understanding of how the department works is also important, different area of organisation has their own way of working method. Decentralise the authority and appraisal system should be introduced. * Technological implications – Increase use of technology can improve the productivity and administration of an organisation. Although there is a cost of the installation and operational cost, but it actually reduce overhead cost in long term, i.e. less manual labour and improve accuracy. * Organisational implications – This involve change of relationship, work groups, routines and practices. There will be a new requirement of communications between departments and the management skills need to be improved to compromise within the organisation. 3.2 Atlantic Water’s Approaches After the privatisation, Atlantic Water applied the organisation development techniques. They are role analysis, life and career planning, quality of work life and counselling. Role analysis – Employees are trained to be cross-skilled so they can be deployed by their manager where and when they are needed, so their tasks are more flexible than before. Life and career planning – The organisation encourages their employees to gain qualifications, this will not only benefit the individual, but also the performance of the organisation. The organisation also invested heavily in management development so the managers have a clearer commercial focus and a new relationship with its workforce. Quality of work life – The new grading framework of the organisation creates opportunity for many employees who wish to develop their career. The organisation introduced a new salary structure, but it leaves many employees worse off financially, Atlantic Water failed to provide a better quality of work life. Counselling – There is a programme to help individual to deal with stress which are caused from job insecurity. This will help and assist individual to attain their goal and to re-build their confidence. Atlantic Water has improved their performance in general by investing in training programmes for both the management and their staff, but they did not consider their employees’ feeling. The morality and commitment level had dropped significantly due to the amount of work load and insecurity of their job. Although they offered a counselling programme, their employees are not being awarded for the extra efforts they put into the organisation. The low level of morality and commitment has major influence on the level of work performance. Atlantic Water should try to re-build the relationship with their employees by re-viewing their salary structure. The employees should be informed at a reasonable level of the activity within the organisation, sharing the success of the organisation will also boost the level of confidence for the individual. The management training should not be limited to the knowledge within the industry, it should includes counselling, coaching and leadership skills. Managers have a major influence on the motivation and behaviour of employees. 4. Conclusion The change has a massive impact upon Atlantic Water, the structure, culture and organisational climate had changed significantly. They have taken a certain level of approach but the results are not all positive, they need to carefully re-build relationships with its employees. The organisational climate is an indication of the employees’ feeling and beliefs, obviously Water Atlantic’s climate needs to be improved. It must develop new ways to increase the loyalty and commitment of employees. This includes attention to reward strategies based on recognition of contribution rather than status or position. The management of organisational climate is an important means of improving productivity and standard of work performance. Diagram 1    Bibliography Burnes B. (1996) 2nd Edition, Pitman Publishing, London Drucker P. (1974), ‘New templates for today’s organizations’, Harvard Business Review, London Huczynski A. & Buchanan D. (1991), Organizational Behaviour, 2nd Edition, Prentice Hall, London Mullins L. (2002), Management and Organisational Behaviour, Prentice Hall, Essex Schein E. (1997), Organizational Culture and Leadership, Jossey Bass Wiley, London Schneider S. & Barsoux J. (2003), Managing Across Culture, 2nd Edition, Prentice Hall, London Reference Burnes B. (1996), Managing Change, 2nd Edition, London, Pitman Publishing, Drucker P. (1974), New templates for today’s organizations, Harvard Business Review, London Mullins L. (2002), Management and Organisational Behaviour, Prentice Hall, Essex Schein E. (1997), Organizational Culture and Leadership, Jossey Bass Wiley, London Oxford University Press (2003), Oxford Dictionary of Business, 3rd Edition, Market House Book Ltd, London