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02/24/2012

Thesis Chapter 1 - Organizational Change On managerial Roles In Petroleum Development Of Oman (PDO).


1.    Introduction

 

This study analyses the impact of Organizational Change on managerial roles in Petroleum Development of Oman (PDO).  The study explores the PDO restructuring upon the work role and work experiences, by using Mintzberg’s analytical frameworks of Managers.  This Study discusses the organizational change that happens in the company and the types of changes.

The chapter starts with introductory chapter, which briefly reviews the nature of problems, aims and objectives, scope of the study, methodology and limitation of study.

    Overview: The Nature of the Problem

Organizational Change is currently one of major domains of organizational research, and the study of organizational change has become one of the major aspects in being able and helping to measure the organization performance; efficiency and effectiveness. The effective organization must be able to meet today’s and tomorrow’s challenges, adaptability and responsiveness are essential to survive and thrive.

Today’s organizations are experiencing change like never before as a result of global competition which had created uncertainty for the organizations (Havery and Brown, 2000). Therefore business world organizations face unprecedented changes as the response to the internal and external challenges for emerging technology and market forces.

Moreover, the pace of change is so rapid, only organizations that can adapt to this changing environment can survive, getting a profile of the current problems can enable organizations to thoughtfully bring the elements of the change into alignment and move forward towards an ideal.

In thinking about the process of organization change, two questions immediately come to mind. First, why do organization change? The answer is “to survive”.  The second question, what is change? What are the various organizational factors that can be modified to help the organization adapt and grow? (Mullins, 1999).   Due to the decline of the oil production, PDO changes it structure and strategy in response to environmental forces which will help the company to secure its competitive advantage through organizational transformation.

There are some problem areas in the company and the management needed to take action to develop and to adapt a change process to improve the environment where it operates.  The finding is likely to pose a challenge in many areas within the company, such as the structure which is suffering from several problem areas occurring form the internal control process in the organization. 

PDO’s structure was a mechanistic structure with a central decision-making process and one-way flow of information.  According to Handy (1997) PDO appears to be a Role Culture where the rules and procedures dominate the internal environment bases in the exercise of authority by the Senior Management Team.  As a result there are some negative aspects, the communication and decision-making channel are not properly used, and have difficulty in adapting this structure in PDO. There are very strong hierarchy, as  the senior management exerts a tight top-down control. As a result, the staff are not allowed to act on their own initiatives and they are less willing to work cooperatively due to the lack of involvement in the decision making process. Moreover, it might be argued that the reason why some staff leave the company is because of the heavy workload.

An important aspect to PDO management vision is the change of the current structure, since it does not provide the benefits, and does not enable the company to run sufficiently and effectively.  To take advantage of positive organization structure, PDO implemented some change in their system. The company focused the individual attitude toward teamwork, personal values and ability to innovate especially in the technology and science, decision-making involvement and adapt suitable information flows across departments.

PDO change the current structure to more task culture, to enable the flexibility, and to improve communication and understanding. Also this system will enable the organization to be flexible with suitable communication channel between different functions. This new structure has a decentralization process, which will have a lower level decision, and the senior management control can be dealt with on the spot.

A number of studies (Smith 1990, Dopson and Stewart, 1990) suggests that middle managers play a key role in change implementation.  It can be argued that the effective planning and management of change require careful consideration of the impact of structure change on middle managerial work roles and work satisfaction levels – to maintain their resistance, and maximize their commitment to the containing and accelerating pace of change within Petroleum Development of Oman (PDO).

Managers not always initiate change are accept all change proposals, as especially change in authority systems (Hampton at all, 1982).  The blindness of top managements to the negative impact of their policies, practice and behavior tends to be very high (Arguis, 1970) due to the threat of loss of position power. Drucker (1995) sees managers as the basic and scarcest resource for an organization as well as the key factor for a healthy growing economy and supply, which is critical to the survival and further development of any organizations.  Drucker (1995) further regards managers in an organization as the life-giving elements in every organization in that without managers, organizations cannot possibly function properly.  Thus, a strong link is noted between manager’s efficiency and organization performance. It has been recognized that mangers are a significant power behind the progress and successful development of an organization's strategy and such success is very much dependent upon their attitudes, behavior and commitment to their specific responsibilities.

Therefore it’s important to understand the extent to which these formal changes in management systems and role prescriptions have resulted in change in work behavior and job satisfaction experienced by PDO managers.  It is thus essential, when attempting to assess the impact of formally espoused changes within PDO, to examine the extent to which, and the way in which, managers have adapted new forms of work behavior in accordance with the new managerial role perceptions.

    Aims and Objectives

The main objective of this study is to define to which extent the impact of organizational restructuring affects the managers’ roles in Petroleum Development of Oman (PDO).  Therefore this dissertation will investigate into the extent to which these formal changes in management systems and role prescriptions have resulted in change in work behavior and job satisfaction experienced by managers.  As a number of studies (Smith 1990, Dopson and Stewart, 1990) suggests that middle managers play a key role in change implementation, therefore it can be argued that effective management of change requires careful consideration of structural change on managerial roles to limit their resistance and maximize their work commitment.

The study covers the analysis of management development within the Omani national culture and organization culture of Arab management concept, and how the organizational change can influence the management roles.

    Methodology of the study

The study will include a review of literature on books and journals, and other materials about organizational change, and management roles and development.

The study will also present the review of the responses to the sample questionnaire distributed among PDO managers.  The questions are related to the Minzberg’s framework of manager’s role (Interpersonal roles, informational roles, and decisional roles).

    Limitation of the Study

This paper shall attempt to determine the impact of organisational change on managerial roles in Petroleum Development of Oman (PDO). By conducting a random sampling survey, the writer shall try to correlate the organisational change to the managerial roles.

This paper shall cover the PDO and its managers as source of data. Analysis shall be limited on the outcome of the survey that will be conducted. Moreover, the literature covering the area of business management, particularly the overview of organisational change, the nature and concept of managerial roles will be gathered and analysed using the framework of Mintzberg on managerial roles.

    Chapter Outline

This study consists of five chapters.  The first chapter introductory chapter presents the overview of the nature of the problem to be discussed in the study.  It also covers the aim and scope of the study, as well as applied methodology and provides general ideas about the way that the study is structured.

The second chapter will provide a historical background of Petroleum Development of Oman (PDO), the aim of the organization functions, discussion making system, the company structure and discuss the change in the company. In the third chapter, the writer provides the literature review of the theoretical materials related to organizational change, managerial roles, Arab management system, and the influence of culture on Omani management is analyzed.

In the forth chapter is the analysis of the result of the findings on the PDO management.  The writer addresses the impact of the organizational structure on the managerial roles, and Organizational Culture within PDO. The fifth chapter of the study will present some recommendation and guidelines offered by the writer in regards to improve the

    Summary

This introductory chapter has overviewed the nature of the problem and its formulation.  It also covers the aim and objectives, scope and methodology of the study. In the following chapter the researcher provides overviews of the company resurfaced and change.

2.    Overview of Petroleum Development Oman (PDO)

 

    History of the Company

Petroleum Development Oman (PDO) is the major oil and gas company in Oman. As per the company registration a document, the Government has 60% of the shareholders which 40% of the company’s shares are retained by private shareholders (Shell 34%, TotalFinaElf 4% and Partex 2%). PDO commenced its first oil exports in August 1967. The oil produced comes from some 2326 wells located in the arid region of Oman.

PDO’s top management has taken a decisive decision to redesign its entire core business structure and to help a line in business to be competitive and simultaneously meet the shareholders requirement.  The company faced three new governmental regulations. First to increase the oil production level than, to engage more Omanis in the workforce of the company.  Thirdly, to contribute to the development of arid areas where oil exploration and production sites are located. Therefore the need to create a new organization as described by Hastings (1993) was driven by dissatisfaction with the old traditional organization where decision process was seen to be very low.

Due to the decline of the oil production in 1998, PDO start looking for a new way of work, and therefore the company introduced a major change initiatives, “Emergent Change” (Burns, 1996) which will help the company to reduce it’s expenditures and to organise its work in more efficient way, to cope with the decline in the oil production.  According to the five-year plan devised by PDO, roughly $1.5 billion a year would be put in as capital investment to recover the lost oil production level to 800,000bbpd mark in 2007. 

 

    PDO Vision

The Petroleum Development of Oman (PDO) long term vision is “to sustainable deliver 800,000 brls/day for Oman by 2007 utilising the full potential of their people”.

 

    PDO Management Structure

In 1998, PDO have gone through reform process, this study will focus on the change of PDO structure and how it has been organised into units known as assets, each of which is headed by a manager who is directly accountable for its performance and development.  Each asset manager reports to one of seven directors, who sits in a committee chaired by the Managing Director of PDO.  The Managing Directors Committee thus shares responsibility for PDO’s overall performance and business direction.

The directors also have a "functional" responsibility, that is, they are also ultimately responsible for the development of staff in a particular discipline. In the execution of this second responsibility, they are assisted by corporate functional discipline heads, who — like the directors — generally have dual role that combines functional with line-management responsibilities.  The Board consists of nine members; five — including the Chairman — represent the Government of Oman, and four represent PDO’s private shareholders (Shell, TotalFinaElf and Partex).  And it introduced the team-leader in their structure to improve the company unit’s productivity and efficiency.

The new organization is fully based on asset management principles and provides a structure which is geared towards growth and value creation. It is focused on technical integrity of product flow assets, infrastructure and business processes. Moreover, single-point accountability for the day-to-day management, performance and development of all assets - from product flow to service provision - has been introduced and a number of management layers has been removed.

The existing PDO organization reflects the main producing assets in its Area Team structure, with an asset management team representing Petroleum Engineering, Engineering and Operations. The implementation of the new organizational structure is therefore expected to be smooth with minor or no disturbances to day-to-day activities.

Figure 1

 

 

The new organization delivers growth from Frontier Exploration and New Projects (currently Athel) under the exploration director, and from the oil-producing assets. Focus on revenue is ensured by grouping all oil-producing assets, oil-related Technical Services and Infrastructure under the oil director. The importance of Gas is reflected in a direct reporting line between the gas manager and the MDC. Business Improvement, Technology and Public Affairs will receive more management attention under the Corporate Centre Directorship.

A major change with respect to the current organization is a dedicated Frontier Exploration asset team, whilst near-field exploration will be the responsibility of the oil (Product Flow) Area Asset Managers. The mission of Frontier Exploration will be the delivery of new product-flow assets, complete with notional development plans, a declaration of commerciality and reserves booking.

Figure 2

 

 A further change is the introduction of single-point accountability for the Area Assets. The area asset management triumvirate will now report to one Asset Manager instead of the current bi-functional relationship with the Development and Operations Managers.

The new organization is expected to be a more exciting place to work for PDO staff, as it is based on staff and team empowerment. Also, it is more commercial in nature and clearly links performance to reward at every level in the organization. 

The current re-organization is a logical next step in the evolution of PDO from a functional organization towards an asset-based organization as indicated in the well known diagram below, taken from the Corporate Management Framework (CMF):

Figure 3

 

PDO has virtually become an asset-based organization "from the waist down", i.e. from the Area Team level downwards. However at the management level, there remains a long reporting line.  The new organization is based on “single-point responsibility”, and it has fewer layers then pervious structure.

 

    PDO Assets Management Group

As shown in (Figure 1) there are five types of Asset management in the company:  The Product Flow (PF), Service provider, Process Owner, Risk Adviser, and Skill Manager

 

a.    The Product Flow Assets

 

The Product flow (PF) assets comprise four elements: Frontier Exploration, the Area based Oil Product flow Assets Teams, Gas and Infra-Structure.

The PF structure is built on the traditional strengths of exploration – regional geological thinking; innovative play generation, risk-taking – whilst also promoting fully-integrated life cycle sub-surface evaluation and greater commercial focus.  New Style Exploration will be challenging and entail substantially more risk than in the old organization.

The two extremes of Oil Product Flow Assets are represented by:

-           a “bare-bone” organization: the existing triumvirates led by an Asset Mangers

-           a "bare-bone" organization: the existing triumvirates led by an Asset Manager, with all other activities (Finance, Planning etc.) contracted in from the service and corporate organizational entities, and

-           an organizational structure which represents a series of mini PDO's, i.e. with their own services (drilling, well services, human resources etc.) integrated in the Asset, as shown in the Figure 4

Figure 4

 

b.    The Service Assets

The service Assets are consist of eight different areas, as below

-           Human Resource (HR)

-           Finance

-           Contracting

-           Operation and Engineering Technical Services (OETS)

-           Drilling Services

-           Supply and Logistics

-           Computing and Communication (IT)

The old HD unit and Finance unit are fully supportive of the new organizational structure with devolved units in the Product Flow and Service groups and the larger service assets such as Drilling and Supply and Logistics.

    The Overall Organisation

The new organization places all oil-producing assets in the "Oil" directorate, together with the infrastructure and main oil-field services organization. This will ensure optimal deployment of all resources across the various assets and will allow for rapid reactions to production shortfall or other unexpected events. Moreover, one uniform face to the outside world regarding oil production is guaranteed.

Growth in the new organization is strongly driven by the Exploration Directorate which has the responsibility for Frontier Exploration, GeoSolutions and the maturation of the Athel. It is likely that new project teams, like the Athel, will be added to this organization in case of significant discoveries outside producing areas. Focus on Gas as a new business is maintained by having a direct reporting relationship between the Gas Manager and the DMD.

One new aspect of the organization is the formation of a corporate centre, the Corporate Affairs Directorate. PDO will be one of the first companies explicitly treating Technology as an Asset. It is felt that the combination of Economics and Planning, Technology Management and Business Improvement will generate significant synergy. Moreover, the company will move towards a more proactive approach on Public Affairs and HSE.

The new organization is fully based on asset management principles and provides a structure which is geared towards growth and value creation, focused on technical integrity of product flow assets, infrastructure and business processes. Single-point accountability for all assets, from product flow to service provision, has been introduced and a number of management layers has been removed.  

     

Functional Reporting Relationships

An effective functional organization will be essential to the integrity of the business conducted by the Asset Teams and to the competence development of their staff. The functional organization will be a virtual one, but with very concrete roles and responsibilities. It will require a reinforcement of the current roles of the Corporate Functional Discipline Heads (CFDH's).

The top of the functional organization is the Functional Director, and the Leadership Team will comprise a representative cross-section of EP functions. In view of its size, it is likely that one member of the Leadership Team will assume two Functional Director roles.

Each business-critical discipline will be represented by a CFDH, who is a senior technical professional in the line (i.e. in the Product Flow or Service Asset teams). Thus functional responsibilities will be discharged by individuals with a dual role, and the CFDH's will derive their authority and credibility from their position in the line.

Normally, a CFDH will not be a Product Flow Asset Manager, although this may be so initially in the transition between the old and new organizations. In some Service Assets where line and function coincide (e.g. Drilling, IT), the role of Asset Manager and CFDH may be combined.

The CFDH's will fulfill four distinct roles, which are elaborated in the Mandate and Service level agreement (Appendices 7 & 8):

-           providing risk advice to management in his discipline;

-           staff resourcing and development;

-           documenting & updating technical standards and ensuring the integrity of business processes;

-           planning for, introduction and promotion of, discipline-specific technology

     Role of the Leadership

The Directors form a Leadership Team with shared responsibility for PDO's total performance and business direction. The accountabilities and responsibilities of the Leadership Team can be summarized as: 

-           Being accountable for PDO total performance

-           Setting strategic direction for the various components of PDO's business

-           Promoting integration across Assets

-           Seeking new business opportunities

-           Reviewing the effectiveness of the organizational architecture

In view of the size of the PDO organization (10 Product Flow Assets, 7 Services Assets, Corporate Centre, Finance, HR and CFDH's), it was felt that a flat structure with Asset Managers reporting directly to MD would not be workable. Therefore each Director also acts as a delegate of MD for his/her assigned portfolio of Product Flow or Service Assets.

Figure 20

 

Asset Managers will remain bottom-line accountable for the performance of their Assets. Conversely, Directors performance will be judged on PDO's performance and not on the performance of their delegated portfolio. The role of the Directors is therefore one of enabling rather than controlling, of integrating rather than isolating.

Each Director will also have a Functional responsibility, allocated according to his / her experience in such a way that all business-critical disciplines are covered by the Leadership Team. The roles of the functional organization are described in section 4.4.

In both his / her portfolio and functional responsibilities, the role of the Director is to:

-           Set & review functional & portfolio strategy

-           Set & review challenging performance targets for Asset Managers (as MD delegate) and CFDH’s

-           Provide technical leadership, challenge and act as consultant to Asset Managers & CFDH’s

-           Promote technical excellence, lateral learning & professional values

-           Define policies and endorse proposed codes of practice & standards

-           Chair the relevant Asset Managers' forum(s)

-           Facilitate performance optimization with Asset Managers

-           Resolve issues of resource allocations between Asset Managers

-           Stimulate motivation, resource sharing, joint ownership of PDO goals

-           Maintain an external focus, with Government, suppliers & contractors, the community and general public

The Directors will be supported in these responsibilities by Corporate Planning & Economics, who will compile the Corporate business plan and measure its performance, CFDH’s and their Discipline Experts, the HR organization, the Technology Asset Manager and the Business Improvement Manager.

    Assets Manager Mandates

An essential element of asset management is that the asset managers are directly and single-point accountable to the managing director for the performance of their asset. This accountability is wholly exercised through the mandate, which makes all requirements and controls on the asset manager both transparent and consistent. It stipulates the main items expected of each asset manager and the degree of freedom that he has in the execution of his business. This section describes the basic of elements of the mandates as adopted for PDO from SIEP report 97-5502 issued on June 1997.

Figure 5

 

A mandate consists of six elements. Some of these six elements already exist in PDO as independent documents that apply to every asset and every asset manager. Direction and strategies are currently addressed in the Corporate Management Framework (CMF). Policies and authorities are covered in the Corporate Policy Manual and the Manual of Authorities. On the other hand, targets and budgets are asset-specific and will be specifically described in the mandates. Service providers will maintain zero budgets by tariffing costs to users of the services. The structure of the mandates is fixed and consists of four sections. However the targets and budgets in the mandate will be reviewed annually.

    Learning Organisation – A sharing

The new organization places substantial emphasis on the performance of its major assets, for which the Asset managers have single-point accountability. The focus on Assets must be balanced by co-operation and flexibility amongst the Asset teams, in order to promote sharing, learning and consistency.

The Asset Managers Forum will be an important vehicle for promoting the sharing of knowledge and resources, and a role model for encouraging this amongst staff. However, it is recognized that the transformation process will require a proactive approach involving all staff.

    Organisational Culture in PDO

Culture is an important factor in the art of management, because for any organization to operate effectively it must for some extent have a general set of believes and assumptions. Because understanding the term of the culture metaphor helps organizations to be aware of how employees are thinking about the organization phenomena, and to recognize how different attitudes, value and beliefs affect the workplace.

Understanding and assessing the national culture and organization's culture can mean the difference between success and failure in today's fast changing business environment. Cultural assessment can provide measurable data about the real organizational values and norms that can be used to get management's attention. Though, it can be said that the basic assumption, values and norms drive practices and behaviors. Hence when a “culture” is created it becomes a driving force for the shape and scope of the organization.

The framework for national culture has been developed by researcher such as Hofstede (1980). While the respective merits and drawback of different framework are widely discussed, the Hofstede basic module of culture can be seen as a helpful framework to illustrate the major issues that need to be considered in change process.

According to McEwan (2001), culture is inseparable form the nation of human society which makes defining it a complicated task.  As a result, there are many definitions for culture. Czinkota et al (Cited in McEwan, 2001) define culture as “an integrated system of learned behavior patterns, characteristic of the members of any given society”. In addition Hofstede (1991) identifies culture as “collective programming of the mind”.

Therefore, the culture environment is one of the important principles that influence the organization as shown in the diagram.  Hostfede (1991) identifies that there are four dimensions that differentiate cultures at a national level (these are power distance, Individualism-Collectivism, Masculinity-femininity, Uncertainty avoidance), which help to understand that people arrive to organizations with their own national culture.

Therefore, it is only necessary to understand the relation between business environment and its culture. For that reason Hall (1976) identifies two classifications of culture that have an impact on business activity, the “High Context Culture” and the “low context culture”.  The high context culture have a very high prevailing homogenous view on nationality, religious values and beliefs (Hall, 1976) (such culture can be found in Japan and Arab countries); the context of communication is more valued such as body language and gestures.   However in the low context culture, communication context is more of formal written records, such culture can be found in the UK and USA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

National Culture Dimensions

Building on Hall research, Hofstede (1980) investigates the influence of national culture on organizational behavior, and he identifies four dimensions of culture, named as (power distance, Individualism/collectivism, Masculine/Feminine, Uncertainty Avoidance).

The first dimension is power distance. As defined by Hofstede (1991), power distance “is the extent to which the less powerful members of institution and organizations within a country expect and accept that the power is distributed unequally” (Hofstede, 1991, p28).   Therefore, according to Hofstede (1991), power distance indicates to what extent the society accepts the centralized power from the superior, it distinguishes the relation between subordinate and superior. The research shows that countries such Japan, India, Arab countries are having a high power distance. Whereas countries such as USA and UK are having a lower power distance. The chart above indicates that Arab countries are having high power distance compared to UK. (Cited in Hofstede, 1991)

The second dimension of culture is Individualism/collectivism. This dimension refers to the role of the individual and group whose interest prevails over the others. The collectivism culture is usually observed in high context communication countries similar as the one proposed by Hall (1976), where employee and employer relationship is defined in moral terms. Whereas the individualism countries have low context communication, and the relationship between the employer and employee is passed on mutual advantage.

According to Hofstede (1991), collectivism is likely to appear in high power distance countries, and the collective dimension is refer to the “we” group in the source of identity, loyalty and dependent relation (Hofstede, 1991).  In this cause the people in this culture integrate into strong cohesive groups who protect themselves and demand loyalty throughout lifetime.  The collectivism culture can be found in Ecuador, Pakistan, Arab countries etc, where there are large families, close relationship, and where conflict is minimized. Therefore people who deviate from this norm are considered as a bad or weak character.

Therefore, individualism dimension distinguishes countries in which employees are determined by their individual action. Thus individualist can be found in a small power distance. Hofstede (1991) research shows that USA ranked as the highest individual culture and Britain third; accordingly he defines individualism as “pertains to societies in which the ties between individuals are loose”.  Moreover, in the individualist culture the interest of the individual is over those of the group. As they are characterized by individual and personal characteristics rather than group, the ties between individuals are very loose, and everyone is expected to look after him/herself.  In this cause, the individualism culture is more regarded to assertiveness, trust and high conflict, and the self actualization is the goal, as shown in the chat that Arab countries scored an average of (38) compared with USA scored of (91). (Hofstede, 1991).

The third culture dimension is masculinity/femininity. Hofstede (1991) refers the masculine dimension to “male achievement” as it emphasizes assertiveness characteristics which associated with high earning, recognition for a good job, advancement and challenge to have personal accomplishment.

As illustrated by the Hofstede research, societies where gender roles are clearly distinct, material success, progress and money are the most dominate values. The top two ranking masculine countries are Japan (95) and Austria (79). Consequently, in these countries, men are supposed to be assertive, ambitious, and tough where women tend to take care of relationship.

However, Hofstede refers the feminine society as having a modest characteristic where there is a good working relationship and cooperation. Similarly, in this dimension, there is a desirable living area for family and employment security, and the roles are merged between both men and women.  Hofstede ranked Sweden and Norway as the most feminine society. In these countries, the dominating value is caring for others and  the relationships seem to be more important. As a result there is less conflict in the society and everyone seems to be modest.

The final culture domination identified by Hofstede is uncertainty avoidance, which he defines as “the extent to which the members of a culture feel threatened by uncertain or unknown situation” (Hofstede, 1991).  There are two types of uncertainty avoidance culture: either strong or a weak. The strong uncertainty avoidance creates high anxiety. Hofstede (1991) suggests that an “uncertainty avoidance” society tends to believe that there is one truth, and show its emotions to others by expressing itself. This kind of society is aggressive. Such culture can be found in Israel and Asian cultures like those of Japan and Taiwan. As a result, countries with high power distance and collectivistic tend to be high on uncertainty avoidance.

On the other hand, the week uncertainty avoidance culture is not inclined to express their emotions and aggression. So this society has a low anxiety level and according to Hofstede (1991), a significant number of people in this type of culture suffers from heart diseases due to their repressed feelings. In addition, they consume high amounts of caffeine (i.e. tea and coffee) to reduce stress, as is highly evident in UK and Sweden.

However, Rodriguez at al (2000) argue that Hofstede research in uncertainty avoidance is not prefect. He goes on to illustrate that “Singapore measures as a weak in uncertainty society, however the country functions under a governance system which provides high regimentation and stability for its citizens, this system tends to be more common in high uncertainty avoidance cultures”. (Rodriguez, at al, 2000, p 28)

3.    Aspects of Literatures

 

                Organisational Change

 

The globalization of the economy has radically changed how corporations do business and has forced individuals to redefine their work force. Private industry is cutting down costs through such massive restructuring, using measures as down-sizing, re-organization and out-sourcing. 

        The concept of Organisational Change

There is no right way of effective change. According to Burnes (1996), there is “No Best way to manage change”. An organizational change comes in  different shapes, sizes and forms. Thus it is difficult to establish an accurate picture of a successful change management (Burnes, 1996).  However, According to Ellis and Williams (1995) there are three main components for organizational change that collectively lead to improve business performance:

-          Creating a shared mindset;

-          Building competencies/capabilities;

-          Changing corporate culture

Moreover, change must be managed to enable the competitive position of the business to be refocused. At this instance, change becomes a fundamental need not an option (Ellis and Williams, 1995).  Nevertheless, organizational change requires a clear vision of the firm’s new strategy and the shared values needed to make it work by managing it from the top down. Leadership by example is combined with organizational adaptations and changes e.g. systems, structure etc.

        Types of Organisational Change

Organisational change can and has been classified in various ways, the approaches to change can be distinguished by their concentration on individual, group and organisation wide issues (Burnes, 1996). This leads to two main approaches of change management: planned change and emergent change (Burnes, 1996).  Burton (1999) argues that the market becomes increasingly globalise, therefore change becomes more pervasive, and businesses are now entering into a new phase in which sustainable business performance is perceived.  There is no doubt that the flow of capital and economic activity around the globe is extremely powerful and increasing, and business need to adapt for those changes to survive.  Thus there is considerable disagreement regarding the most appropriate approach to change, according to Burnes (1996) neither planned approach or emergent approach is suitable for all change situations.  Thus there are several methods that can help analyse organisational change.

Doberty and Horne (2002) suggest four types of changes that help to shape the way public and private originations operates. As shown in the table (2), they argue that most changes have been driven by technological factors which has a strong influence on other environmental factors i.e. economic, political and social factors.

 

Table: 2 : Types of Change

Difference

Speed

LITTLE

BIG

SLOW

Emergent

Transitional

FAST

Incremental

Transformations

Source: (Doberty and Horne, 2002, page 32)

 

Fundamental organizational change represents discontinuity as described by Gundy’s third type of change “discontinuous change” (cited on senior, 2002). It is a long-term, complex and uncertain notion inasmuch as an organization's culture is the amalgamation of its people’s attitudes, beliefs and behaviors.

The notion of managing organizational change consists of five major areas that need to be heeded whenever any change is considered in an organization (Ellis and William, 1998);

i)     Organizational Culture

ii)    Change models

iii)   Change Strategies

iv)   The Cultural web; and

v)    Resources and competitive advantage

Change normally arises from an organization's corporate culture’s misfits with the external environment of which can cause difficulties or even prevent a change of external focus to take place.  Change by drastic action, a revolutionary change or what described by Senior (2002) as “frame-breaking change” is discontinuous and often forced on the organization or mandated by top management. A phenomenon that occurs suddenly but more often than not requires time, commitment and the patience to endure (Meyerson, 2001), is a necessary condition for a fundamental attempt for strategic change (Ellis and Williams, 1995).

Duphy and Stace (cited in Senior, 2002) categorised change in 4 types:

-       Fine Tuning: ongoing process

-       Incremental Adjustment:  distinct modifications but not radical change

-       Modular Transformation: Radical change focus on subparts of the organization

-       Corporate Transformation: revolutionary change thought-out the whole organization.

However as different literatures reviewed different types of organizational change, the below table (3) shows those different types of changes that might related to certain environmental conditions (senior, 2002)

Table 3:- Environmental conditions and types of change:

Environmental forces for change

Types of Change

Ansoff and McDonnell (1990)

Strebel

(1996a)

Stacy

(1996)

Tushman et al. (1998)

Dunphy and Stace (1993)

Grundy (1993)

Stacey

(1996)

Predictable

Weak

Close to certainty

Converging (fine-tuning)

Fine- tuning

Smooth incremental

Closed

Forecastable by extrapolation

Moderate

Close to certainty

Converging (Incremental)

Incremental adjustment

 

Contained

Predictable threats and opportunities

 

 

 

Modular transformation

Bumpy Incremental

 

Partially predictable opportunities

Strong

 

 

Corporate transformation

 

 

Unpredictable

Surprises

 

Far from certainty

 

 

Discontinuous

Open ended

Source: Senior (2002) “Organisational Change”, 2nd e-d, page250

 

Another classification suggests two distinct fundamental process of change: planned change and emergent change (Burnes, 1996) (Senior, 2002).  Planned change is commonly considered as the process suggested by Organization Development (OD) (Burnes, 1996; Cummings and Worley, 2001). There are three major theories of planned change a) Lewin’s change model b) action resource model and C) contemporary action research.

 

According to Cummings and Worley (2001) a general framework of planned change can be seen in fig 1, which shows the components of diagnosis, Planning and implementing change (action) and Evaluating and Institutionalising change (program management).

Fig 1 – Framework of Planned Change

 

 

 

Moreover the planned approach initiates form inside the organization to deal with environmental demands and the change process is sequential (Burnes, 1996). Whereas emergent change stems from continuous improvement and learning organization theory. This approach initiates opportunity in ongoing activity within the organization and it is seen as driven by “bottom-up” process (Burnes, 1996).

However the two approaches appear to have some striking similarities (Burnes, 1996). The distinction between them is not cut-off (Senior, 2002) and both approaches share common difficulties. The planned change assumes organization that operates in stable environment (Burnes, 1996). It heavily focuses on management view or the  “single view” (Senior, 2002). On the other hand, the emergent approach assumes organization that operates in turbulent environment. This approach has a little control over its environment,(Fig. 2). The PDO corporate-transformation scale can be seen as a planned change because the company set is “top-down” and the oil environment is fairly stable environment. According to Deal and Kennedy (cited in Mullins, 1996) the oil companies such as PDO can be described as a “Bet-your-company culture” which is described by high risk and slow feedback culture. As the company invests millions in large-scale project, it takes a long-time for action and decision. As a result the decision making tend to be top-down similar as described by Handy (1979) role culture. However, one cannot distinguish the difference between planned and emergent changes. In many respects both approaches can be equally valid and applied to different organization circumstances.  The next step is to analyze the change management.

 

        Strategies of Organisational Change

There are two basic strategies to facilitate change in organizations: the “transition” and “transformation” strategies (Levy & Merry, 1986). The first is widely known and is more utilized because it is goal-oriented. In this strategy, the change efforts are focused on managing the transition from a present state into a new state that is already known. The second, on the other hand, which is less known and less developed, focuses on transformation processes. The transformation strategy is a process-oriented strategy in which the main efforts for change are focused on consciousness raising and processes like understanding present.

Ackerman (1983) states that “In situations where clients have a clear future state in mind, like reorganization…the transition management process is used to achieve or implement that desired state. Its focus is over a set period of time, at the end of which the ‘future’ becomes the ‘present’ way of operating”.

The transition strategy takes into account human as well as formal structural needs of the system as the implementation proceeds. The change process has a greater emphasis on the entire system (levy & Merry, 1986). The transition strategy is future-oriented for it only focuses on practical issues related to implementing the desired state. This strategy is analytical, rational, and pragmatic in nature. Its primary goal is to know the impact of the future state on the present state, and deducing what action steps need to be taken.

On the other hand, the words "spirit," "spirituality," and "energy" are key elements in describing organizational transformation (Levy & Merry, 1986). Hawley (1983) describes organizational transformation as follows a basic change in the organization energy.” Kiefer and Stroh (1984) also claim that the main emphasis of the transformation strategy is on the organization's purpose and vision, and the alignment of members with these elements. A vision created out of the organization's and individuals' needs tends to "pull" the organization toward its fulfillment.

Therefore, the main components of the transformation strategy are not inclined to forms nor to structures. On the contrary, they are abstract, fluid, and dynamic elements that are hard to define and deal with. These elements are the organization unconsciousness, energy, spirit, spirituality, mission, purpose, vision, belief systems, worldview, myths, symbols, paradigm, and state of being.

According to Levy and Merry (1986), the transition and transformation strategies are not mutually exclusive. In any organizational change, they are used as mixed strategies or one after the other, depending on the organization situation, the manager, or the consultant. But because of their different methods and approaches, transformation strategies are more useful for facilitating the first phases of the change process, while transition strategy is more useful for facilitating the later phases of the process.

        Limitation of Organisational Change  

        Mintzberg Five Configuration

According to Henry Mintzberg, an organization's structure is largely determined by the variety one finds in its environment. For Mintzberg, environmental variety is determined by both environmental complexity and the pace of change. As seen in Table 4, there are four types of organizational form, which are associated with four combinations of complexity and change.

Table 4. Environmental Determinants of Organizational Structures

 

 

In explaining each of the four organizational forms, Mintzberg defines five basic organizational subunits.

 

Figure 3. Five Basic Organizational Subunits

 

 

            In these subunits, the strategic apex is represented by the Board of Directors and Chief Executives. The technostructure on the other hand is represented by those involved in Strategic Planning, Personnel Training, Operations Research and Systems Analysis and Design. The Support Staff is composed of the Legal Counsel, Public Relations Officers, Payroll and Mailroom Clerks, and Cafeteria Workers. The Middle Line consists of the VP Operations, VP Marketing, Plant Managers and Sales Managers. Finally, the Operating Core involves Purchasing Agents, Machine Operators, Assemblers, Sales Persons and Shippers (Beshears, 2003).   

Each of the four organizational forms in Mintzberg's scheme depends on fundamentally different mechanisms for coordination. According to Mintzberg (1979), the glue holding organisational structure together involves mutual adjustment, direct supervision, standardisation of work processes, standardization of work outputs, standardisation of skills and standardisation of norms. Figure 4 illustrates the basic mechanisms of coordination

Mutual adjustment is the co-ordination of work by process of informal communication. Here, the control of work rests in the hands of the 'doers'. The success in mutual adjustment depends on groups/teams of specialists adapting to each other along an uncharted route. In direct supervision, the organization outgrows its simplest state. Co-ordination is practiced by taking responsibility for the work of others.

On the other hand, the standardisation of work processes is needed when the content of work is specified for in the program. Here, the routinisation and bureaucratization of processes is commonplace in business. Routinisation and bureaucratization may reduce opportunities for independent action and creative expression but for those delivering and those receiving the results of routinisation the benefits are substantial in every aspect of life.

Skills and knowledge are standardised through education and training before or after joining the firm. Where an organisation invests in systematic training not only policies, rules and values are being conveyed but also standard ways in which skill should be applied.

Furthermore, work results can be specified by performance dimensions, conversion ratios, profitability and cost indicators, time. Therefore, unlike the skills and knowledge, the result can be standardised.

Figure 4.

 

 

Mintzberg makes use of his own classification of organizational types (Mintzberg & Quinn, 1988): the Simple Structure, Machine Bureaucracy, Divisionalized Form, Professional Bureaucracy and Adhocracy (see Fig. 5).

            An organization with a simple structure does not have an elaborate, formal arrangement of reporting relationships (Mintzberg & Quinn, 1988). Because of its "structure" and coordination/control, it enables the organization to respond quickly to environmental demands. As a result, work relationships are more fluid and there is a small, centrist management hierarchy. Moreover, there are few functional specialists. People doing core operational tasks are often interchangeable. The division of labor is looser with people carrying out multiple roles. Finally, there is less role differentiation.

The Machine Bureaucracy is exemplified by large structures such as  an airline or a hotel chain. These structures are managed as integrated, regulated systems which make use of specialised, routinised methods and tasks, formal operating procedures governed by well defined rules and regulations and the formal organisational communication systems are well-developed to ensure communication flow between operational units (Mintzberg, 1979). In addition, tasks are grouped on functional lines and the decision making powers are more centralised.

As stated earlier, the standardisation of skills and values is one of the glues that bind a Professional Bureaucracy together. It is typified by a collegiate of academics in a university, a practice of doctors, a partnership of solicitors and a trumpet of volunteers. It may also show signs of machine bureaucracy and adhocracy but for typology purposes the Professional Bureaucracy reflects "standardisation with decentralization" (Mintzberg, 1979).

Mintzberg’s Adhocracy is represented by smaller scale and fluid structures. Here a group of line managers, staff and operating experts come together most of the time in small product, customer or project-focused teams. Informal behaviour and high job specialisation are its characteristic. Teams rely on liaison methods and mutual adjustment between themselves and other teams. Teams have their terms of reference by more senior management and a team's scope for action and membership may run counter to the command structure of the rest of the organisation e.g. a machine bureaucracy.

Figure 5.

                Managerial Roles

        Concept, Nature, Classification and the Mintzberg Framework of Managerial Roles

 

 

What is a managerial role? Mintzberg (1973) concludes that a role is a set of certain behavioral rules associated with a concrete organization or post. Thus, in addition to functions of management as parameters of managerial activities there appeared one more unit - managerial role. Mintzberg (1973) classified the roles into three groups- interpersonal, informational and the managerial proper.

Roles do not exist per se, with every manager they are interdependent and interrelated in such a way that they allow to describe the nature of managerial activities taking into account levels of managers and the specificity of production processes (Mintzberg, 1979). Therefore, it is possible to define different types managers with the help of prevalent roles. Table 5 and Figure 5 show the managerial roles according to Mintzberg.

Table 5. [Accessed at www.bashedu.ru]

Managerial Roles According To Henry Mintzberg

  • Interpersonal roles.

 

Description of actions

Examples from managerial practice requiring activation of corresponding roles

1. Figurehead

Symbolic leader of the organization performing duties of social and legal character

Attending ribbon-cutting ceremonies, hosting receptions, presentations and other activities associated with the figurehead role

2. Leader

Motivating subordinates, interaction with them, selection and training of employees

Virtually all managerial operations involving subordinates

3. Liaison

Establishing contacts with managers and specialists of other divisions and organizations, informing subordinates of these contacts

Business correspondence, participation in meetings with representatives of other divisions (organizations)

 

  • Informational roles.

1. Monitor (receiver)

Collecting various data relevant to adequate work

Handling incoming correspondence, periodical surveys, attending seminars and exhibitions, research tours

2. Disseminator of information

Transmitting information obtained from both external sources and employees to interested people inside the organization

Dissemination of information letters and digests, interviewing, informing subordinates of the agreements reached

3. Spokesperson

Transmitting information on the organization’s plan’s, current situation and achievements of the divisions to outsiders

Compiling and disseminating information letters and circulars, participation in meetings with progress reports

 

  • Decisional roles.

1. Entrepreneur (initiator of channge)

Seeking opportunities to develop processes both inside the organization and in the systems of interaction with other divisions and structures, initiates implementation of innovations to improve the organization’s situation and employee well-being

Participation in meetings involving debating and decision making on perspective issues, and also in meetings dedicated to implementation of innovations

2. Disturbance handler

Taking care of the organizations, correcting ongoing activities, assuming responsibility when factors threatening normal work of the organization emerge

Debating and decision making on strategic current issues concerning ways of overcoming crisis situations

3. Resource allocator

Deciding on expenditure of the organization’s physical, financial and human resources

Drawing up and approving schedules, plans, estimates and budgets; controlling their execution

4. Negotiator (mediator)

Representing the organization in all important negotiations

Conducting negotiations, establishing official links between the organization and other companies

 

 

According to Mintzberg (1973), the informational roles link all managerial work together; the interpersonal roles meanwhile ensure that information is provided; and the decisional roles make significant use of the information. The performance of managerial roles and the requirements of these roles can be interchangeably played at different times by the same manager and to different degrees depending on the level and function of management.

The interpersonal roles are primarily concerned with interpersonal relationships while the informational roles are concerned with the information aspects of managerial work. On the other hand, the unique access to information places the manager at the center of organizational decision-making.

Figure 5.

 

 

 

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