1. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.1 1 Leadership & Change Management Lecturers :- Lecturers :- Jim Bowes Jim Bowes Reading Materials :- Reading Materials :- Bernard Burnes Managing Change 5 th Edition. Pearson Bernard Burnes Managing Change 5 th Edition. Pearson Senior & Fleming : Organisational Change 3 rd Edition. Pearson Senior & Fleming : Organisational Change 3 rd Edition. Pearson David Boddy : Management An Introduction 4 th Edition. Prentice Hall David Boddy : Management An Introduction 4 th Edition. Prentice Hall

2. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.2 2 Lecture 1 Learning Outcomes An appreciation of the factors driving globalisation An appreciation of the factors driving globalisation The ability to utilise the PESTEL model in an international context The ability to utilise the PESTEL model in an international context Hofstede’s comparative analysis of National cultures Hofstede’s comparative analysis of National cultures The importance of organisational structure and the various structural forms available to an organisation The importance of organisational structure and the various structural forms available to an organisation The influence of contingencies on structure The influence of contingencies on structure The learning organisation The learning organisation

3. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.3 3 GLOBALISATION Managing Internationally The growth of international business The growth of international business Ways of doing business internationally Ways of doing business internationally An international PESTEL An international PESTEL Comparing national cultures Comparing national cultures Globalisation – arguments for and against Globalisation – arguments for and against

4. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.4 4 An overview of the themes

5. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.5 5 Why study international aspects? Growing value of business across national borders Growing value of business across national borders Raises management issues other than distance Raises management issues other than distance About inputs, transformation and outputs About inputs, transformation and outputs National contexts imply different ways of conducting management tasks National contexts imply different ways of conducting management tasks Planning, organising, leading, controlling Planning, organising, leading, controlling Management practices also affect nations Management practices also affect nations Globalisation debate Globalisation debate

6. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.6 6 Factors driving globalisation in an Industry

7. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.7 7 Exporting and importing Exporting and importing Transporting goods or delivering services Transporting goods or delivering services Licensing Licensing Gives right to make and sell products Gives right to make and sell products Joint ventures and strategic alliances Joint ventures and strategic alliances Firms share risks and resources Firms share risks and resources Wholly-owned subsidiaries overseas Wholly-owned subsidiaries overseas Costly, but retains control Costly, but retains control Ways of doing business internationally

8. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.8 8 Alternative business structures Multinationals Multinationals Based in one country, operate in many (Intel) Based in one country, operate in many (Intel) Transnationals Transnationals Operate in many, but decentralise (while maintaining consistent image) (Coca-Cola) Operate in many, but decentralise (while maintaining consistent image) (Coca-Cola) Global companies Global companies Closely integrated operations across many countries (Nestlé) Closely integrated operations across many countries (Nestlé)

9. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.9 9 Using PESTEL internationally

10. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.10 10 Political and economic Political Political State involvement in business and its regulation? State involvement in business and its regulation? Firms in networks (Japan) or isolated units (US)? Firms in networks (Japan) or isolated units (US)? Corruption – arbitrary/pervasive Corruption – arbitrary/pervasive Economic Economic Stage of development Stage of development Poorer countries with cheap labour as sources of supply Poorer countries with cheap labour as sources of supply Markets Markets Companies target countries with high demand for their products (tobacco, alcohol, media) Companies target countries with high demand for their products (tobacco, alcohol, media) Differences in consumer preferences Differences in consumer preferences

11. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.11 11 Social and technological Social Social Technological Technological Physical infrastructure Physical infrastructure Ports, airports, local transportation Ports, airports, local transportation Communications technologies Communications technologies wireless links, Internet access wireless links, Internet access Poor infrastructure is also a business opportunity Poor infrastructure is also a business opportunity

12. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.12 12 Environmental and legal Environmental (natural) Environmental (natural) Natural resources available in an economy Natural resources available in an economy Renewable or not Renewable or not Pollution and its regulation Pollution and its regulation Conflicts between business and communities Conflicts between business and communities Legal Legal Trade agreements and trade groupings Trade agreements and trade groupings WTO, European Union, Asean, Nafta … WTO, European Union, Asean, Nafta …

13. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.13 13 Using PESTEL Focus NOT on drawing up a long list of factors, but agreeing on critical ones that seem most relevant to specific situation Focus NOT on drawing up a long list of factors, but agreeing on critical ones that seem most relevant to specific situation People interpret factors subjectively, as well as noting objective realities People interpret factors subjectively, as well as noting objective realities Many pay particular attention to socio-cultural factors, and how they differ between nations Many pay particular attention to socio-cultural factors, and how they differ between nations

14. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.14 14 The socio-cultural context (1) Meaning of culture Meaning of culture Patterns of basic assumptions and ways of behaving that groups (including nations) develop and transmit to new members Patterns of basic assumptions and ways of behaving that groups (including nations) develop and transmit to new members Context and culture Context and culture Low-context – meaning is clear and explicit Low-context – meaning is clear and explicit E.g. US, Germany, Scandinavia E.g. US, Germany, Scandinavia High-context – meaning depends on shared experience and understanding High-context – meaning depends on shared experience and understanding E.g. Japan, Arab countries, Southern Europe E.g. Japan, Arab countries, Southern Europe

15. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.15 15 The socio-cultural context (2) Attitude to conflict Attitude to conflict Some countries see dissent as normal and healthy, and expect people to discuss conflicts (The Netherlands) Some countries see dissent as normal and healthy, and expect people to discuss conflicts (The Netherlands) Others value harmony, especially that junior staff accept views of seniors (East Asia) Others value harmony, especially that junior staff accept views of seniors (East Asia) Attitude to change Attitude to change The result of positive human action, or of events beyond human influence? The result of positive human action, or of events beyond human influence? Attitude to time Attitude to time An infinite resource or a scarce resource to manage? An infinite resource or a scarce resource to manage?

16. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.16 16 Hofstede’s comparative analysis (1) Distinguished five dimensions Power distance (high or low) Power distance (high or low) High – accept inequality of wealth and power: e.g. France, Brazil High – accept inequality of wealth and power: e.g. France, Brazil Low – do not accept inequality – e.g. Sweden, UK Low – do not accept inequality – e.g. Sweden, UK Uncertainty avoidance Uncertainty avoidance High – tolerate ambiguity - e.g. US, Australia High – tolerate ambiguity - e.g. US, Australia Low – uncomfortable with uncertainty, prefer clarity – e.g. Latin America, southern Europe Low – uncomfortable with uncertainty, prefer clarity – e.g. Latin America, southern Europe

17. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.17 17 Individual/collectivism Individual/collectivism Individualist societies stress individual responsibility and success – e.g. US, UK Individualist societies stress individual responsibility and success – e.g. US, UK Collectivist societies stress loyalty to group in return for support – South America, Asia Collectivist societies stress loyalty to group in return for support – South America, Asia Masculinity/femininity Masculinity/femininity M. societies show assertive behaviour, e.g. Japan, Italy, Arab countries M. societies show assertive behaviour, e.g. Japan, Italy, Arab countries F. societies show modest behaviour, interest in quality of life – e.g. Sweden, Norway, Denmark F. societies show modest behaviour, interest in quality of life – e.g. Sweden, Norway, Denmark Hofstede’s comparative analysis (2)

18. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.18 18 Long-term/short-term orientation Long-term/short-term orientation High LTO societies value rewards that will come far into the future, e.g. China, Taiwan, Hong Kong, Japan High LTO societies value rewards that will come far into the future, e.g. China, Taiwan, Hong Kong, Japan Low LTO societies value the past and the present, a respect for tradition, e.g. UK, Australia, US, Canada Low LTO societies value the past and the present, a respect for tradition, e.g. UK, Australia, US, Canada Hofstede’s comparative analysis (3)

19. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.19 19 Globalisation Globalisation of markets (Levitt, 1983) Globalisation of markets (Levitt, 1983) “needs and desires irrevocably homogenised” “needs and desires irrevocably homogenised” Implied standard production and marketing Implied standard production and marketing Or going local? Or going local? Local tastes vary, local brands outsell global Local tastes vary, local brands outsell global Much variation to suit diverse tastes (e.g. Starbucks, Coke, Nestlé) Much variation to suit diverse tastes (e.g. Starbucks, Coke, Nestlé) Globalisation of production Globalisation of production High-wage countries outsourcing supply to cheaper sources – India, China, Eastern Europe High-wage countries outsourcing supply to cheaper sources – India, China, Eastern Europe

20. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.20 20 The globalisation debate Benefits Benefits Growth in trade brings wealth, wider choice and probably better value Growth in trade brings wealth, wider choice and probably better value Costs Costs Trade liberalisation supports rich countries Trade liberalisation supports rich countries May disadvantage small producers, leading to social unrest May disadvantage small producers, leading to social unrest Perception of multinational political domination in some areas Perception of multinational political domination in some areas

21. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.21 21 Organisation structure Structure and performance Structure and performance Elements in structure: the design options Elements in structure: the design options Dividing work into functions and divisions Dividing work into functions and divisions Coordinating work: alternative ways Coordinating work: alternative ways Mechanistic and organic structures Mechanistic and organic structures Learning organisations Learning organisations

22. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.22 22 Structure and performance Figure 10.1 Alternative structures and performance

23. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.23 23 Why study structure? Evidence that a company’s structure affects whether it adds value to resources Evidence that a company’s structure affects whether it adds value to resources e.g. how to divide and coordinate tasks e.g. how to divide and coordinate tasks Current structure reflects assumptions Current structure reflects assumptions Knowledge enables us to question Knowledge enables us to question assumptions in a structure, and its context assumptions in a structure, and its context alternatives available alternatives available limitations of any structure limitations of any structure

24. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.24 24 Structure and performance? As a business grows, those running it divide the work and coordinate the parts – they create a structure within which people work As a business grows, those running it divide the work and coordinate the parts – they create a structure within which people work When an organisation is not performing well, managers often change the structure When an organisation is not performing well, managers often change the structure Reflect the belief that structure affects performance Reflect the belief that structure affects performance Clarifies expectations and enables monitoring Clarifies expectations and enables monitoring Avoids confusion and waste of poor structure Avoids confusion and waste of poor structure What kind of structure works best?

25. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.25 25 5 Types of Structure

26. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.26 26 Strategies and structures Figure 10.9 Relationship between strategies and structural types

27. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.27 27 Influences on structure ( Senior & Fleming) Stability/Turbulence PEST Environment Strategy Technology Size Culture Creativity Politics Leadership Structure

28. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.28 28Contingencies STRATEGY STRATEGY e.g. cost leadership or differentiation – what structure to encourage relevant behaviour? Cost leadership requires efficiency. Differentiation needs innovation e.g. cost leadership or differentiation – what structure to encourage relevant behaviour? Cost leadership requires efficiency. Differentiation needs innovation TECHNOLOGY TECHNOLOGY What structure best supports technologies used to transform inputs, in manufacturing or services? What structure best supports technologies used to transform inputs, in manufacturing or services? BUSINESS ENVIRONMENT BUSINESS ENVIRONMENT What structure best supports people as they cope with different environments? ` What structure best supports people as they cope with different environments? ` SIZE & LIFE CYCLE SIZE & LIFE CYCLE What structure best supports an organisation as it grows What structure best supports an organisation as it grows

29. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.29 29 Contingencies or management choice? Contingency Contingency Effective performance depends on managers adopting a structure suited to the key contingencies of the environment in which it is operating Effective performance depends on managers adopting a structure suited to the key contingencies of the environment in which it is operating Management choice Management choice Managers have greater degree of choice over the structures they adopt Managers have greater degree of choice over the structures they adopt Standards of performance not always rigorous Standards of performance not always rigorous Preferred choices may have limited effect on performance Preferred choices may have limited effect on performance Political interests and ambitions shape choice Political interests and ambitions shape choice Implications for role of managers? Implications for role of managers?

30. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.30 30 Consequences of deficient organizational structures – Child 1988 Motivation and morale may be depressed Motivation and morale may be depressed Decision making may be delayed and lacking in quality Decision making may be delayed and lacking in quality There may be conflict and lack of coordination There may be conflict and lack of coordination An organization may not respond innovatively to changing circumstances An organization may not respond innovatively to changing circumstances Costs may rise rapidly, particularly in the administrative area Costs may rise rapidly, particularly in the administrative area

31. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.31 31 Learning organisation Features

32. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.32 32 Organizational structure and change ( Senior & Fleming) There are many influences on the way an organization might structure for successful performance and to cope with change There are many influences on the way an organization might structure for successful performance and to cope with change Organizations do need to consider the internal and external environments in relation to the need for change, whether it was structured along strict bureaucratic, mechanistic lines or as one of the newer network forms Organizations do need to consider the internal and external environments in relation to the need for change, whether it was structured along strict bureaucratic, mechanistic lines or as one of the newer network forms If organizations are able, to some extent, to manipulate their environments to suit their strategies and structures, this will enable them to preserve existing structures and operational arrangements If organizations are able, to some extent, to manipulate their environments to suit their strategies and structures, this will enable them to preserve existing structures and operational arrangements

33. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.33 33 Conclusion PESTEL model enables analysis of the potential issues when managing across national borders PESTEL model enables analysis of the potential issues when managing across national borders These may affect the way managers choose to structure international operations These may affect the way managers choose to structure international operations Research on national cultures implies recognising differences, while balancing these with company cultures Research on national cultures implies recognising differences, while balancing these with company cultures Management practices will affect the outcomes of the globalisation debate and hence the future context Management practices will affect the outcomes of the globalisation debate and hence the future context

34. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.34 34 Conclusion (Cont’d) Organizational structure can be likened to the skeleton of the organization supporting the implementation of strategic decision making and operational processes Organizational structure can be likened to the skeleton of the organization supporting the implementation of strategic decision making and operational processes Redesigning an organization’s structure has to be carefully planned with change taking place as current business performance has to be sustained. This implies a mixture of incremental and transformational change Redesigning an organization’s structure has to be carefully planned with change taking place as current business performance has to be sustained. This implies a mixture of incremental and transformational change

35. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.35 35 Supplementary Material

36. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.36 36 Mechanistic and organic structures Table 10.3 Characteristics of mechanistic and organic systems Source: Based on Burns and Stalker (1961)

37. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.37 37 Contrasting forms Burns and Stalker identified alternative forms Burns and Stalker identified alternative forms Each appropriate to certain conditions Each appropriate to certain conditions mechanistic – stable mechanistic – stable organic – unstable organic – unstable Fit with conditions led to high performance Fit with conditions led to high performance Later work (Lawrence and Lorsch 1967) focused on differences between units within the same organisation Later work (Lawrence and Lorsch 1967) focused on differences between units within the same organisation Related differences to contingencies Related differences to contingencies

38. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.38 38 Contingencies – strategy e.g. cost leadership or differentiation – what structure to encourage relevant behaviour? e.g. cost leadership or differentiation – what structure to encourage relevant behaviour? cost leadership requires efficiency – a functional structure? cost leadership requires efficiency – a functional structure? differentiation needs innovation – matrix or team-based? differentiation needs innovation – matrix or team-based? GSK example of a new structure to support strategy – Fig. 10.8 GSK example of a new structure to support strategy – Fig. 10.8

39. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.39 39 Contingencies – technology What structure best supports technologies used to transform inputs, in manufacturing or services? e.g. production line or custom-made? e.g. production line or custom-made? e.g. information systems enable different ways of delivering services – new structures to support relevant behaviour? e.g. information systems enable different ways of delivering services – new structures to support relevant behaviour? see MIP on centralised manufacturing at RBS see MIP on centralised manufacturing at RBS

40. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.40 40 Contingencies – business environment What structure best supports people as they cope with different environments? Burns and Stalker (1961) contrasted Burns and Stalker (1961) contrasted rayon plant (stable market, few changes) rayon plant (stable market, few changes)with small electronics companies (volatile, uncertain market, many changes) small electronics companies (volatile, uncertain market, many changes) Lawrence and Lorsch (1967) showed that firms face many environments with different needs Lawrence and Lorsch (1967) showed that firms face many environments with different needs How to link differently structured departments? How to link differently structured departments?

41. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.41 41 Environment and structure Figure 10.10 The relationship between environment and structure

42. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.42 42 Contingencies – size and life cycle What structure best supports an organisation as it grows (number of staff)? Birth – informal, little division of labour, organic Birth – informal, little division of labour, organic Youth – decisions shared more widely, specialists employed Youth – decisions shared more widely, specialists employed Mid-life – extensive division of responsibility, with rules for coordination Mid-life – extensive division of responsibility, with rules for coordination Maturity – mechanistic, perhaps divisions, selling some units that no longer fit Maturity – mechanistic, perhaps divisions, selling some units that no longer fit Problem of managing the transitions

43. David Boddy, Management: An Introduction, 4 th Edition © Pearson Education Limited 2008 Slide 4.43 43 Activity Consider your own organization, or one you know well or, if the organization is large, a particular section of it. Do any of the five proposed consequences of structural deficiencies listed apply to the prevailing situation? If the answer is yes to any of the points, what does this imply for the way the organization is structured? What changes could be made? Justify your conclusions with reference to the discussions of different structural forms.