Building Quality Organizations – Woolworths Ltd Case Study

Introduction

Woolworths Ltd is the leading retail outlet and an outright household name in Australia and New Zealand.  It is also the largest and extensive retail company in both countries based on sales volume and market capitalization. Founded in December 1924 with a nominal capital of a paltry $ 25,000, the company has continued to register a steady growth and strategic expansions over the years. This has seen the organization expand its retail outlets and exert its presence across the two countries. The company specializes majorly on takeaway liquor, hotel operation, food and grocery retails, gaming poker operation, and retailing on various household products. The massive expansion has seen the organization operate with approximately 195,000 employees within its ranks (Woolworthslimited.com.au).

Embark on a journey through Woolworths Ltd’s pursuit of organizational excellence with Assignmentstudio. Our dedicated support on Assignment Help on Woolworths Ltd Building Quality Organization equips students with the tools and understanding needed to analyze and emulate successful organizational strategies

Q# 1: Woolworths’ Organizational Structure

An organization is an entity that provides a common podium for individual employees to work for a common goal. Each organization usually has its own unique ways of working as entrenched in its structure and culture. An organizational structure is a form of departmentalization that provides the framework through which decision-making process takes place. It provides a framework around which a group of employees is organized, while also providing the foundations that maintain the coalition operational (Schultz, J. Berkowitz, B. and Loewenstein, M., 2013). It also highlights the ordinary reporting relationship and the chain of command. As such, Woolworths group has effectively embraced the use of functional departmentalization to achieve its goals.

Elements of organizational structure

There are three main elements that are always inherent in the basic ideas of an organizational structure. These elements include:

Formalization: This refers to the degree to which jobs existing within the organization are standardized and the extent to which employee behavior is majorly guided by rules and procedures (Gardea, 2005). Formalization within Woolworths is fostered through high level of division of labor. This has been reinforced by the high degree of delegation of authority, specialization, departmentalization and span of control. Through formalization the organization is able to:

1. Reduce its operating costs
2. Standardized activities lower the variability, conflict and ambiguity in the organization
3. Reduces discretion as decisions made on the basis of standard rules and procedures
4. Fosters coordination as all activities are defined and specified.

Complexity: This refers to the difference that exists between jobs and functional units. It highlights the extent of differentiation that exists within the organization. A variety of jobs and functional units create more complexity within the organization and its management may be difficult. Complexity of activities within the organization usually results in three types of differentiation namely spatial differentiation, vertical differentiation and horizontal differentiation. 

Centralization and decentralization: This is mainly pegged on the decision-making process and the level at which they are made. Centralization is where top echelons make all the decisions concerning the organization and middle and lower level employees simply implement them.  On the other hand, decentralization is where decision making is delegated and are made at all levels of the organization. The Woolworths’ functional structure allows for decentralization of decision-making process to the functional and geographical units, while still remaining responsible for the top management (Peoplelearn.homestead.com).

Other elements of organizational structure include:

Work specialization: This element highlights the extent to which standardized tasks in an organization are distributed into separate jobs that can be done by a group. The tasks are broken down into steps, which are then completed by different specialized people.

Departmentalization: It provides the basis by which jobs are grouped together into common tasks that can be coordinated. There are generally five common forms of departmentalization such as functional, product, geographical, process, and customer departmentalization. Woolworths group’s chosen functional departmentalization has proved effective in delivering its set objectives.

Chain of command: This is the unbroken line of authority that extends from the top level of the organization to the bottom level and stipulates the reporting relationship between them. Attached to this theory are three complimentary concepts:

Authority:  The rights bestowed in a managerial position to give orders and expect them to be obeyed by others.

Unity of command: It highlights the reporting relationship that exists within the organization. The principle of unity of command stipulates that a person should only have one superior to whom he or she reports or answerable to.

Responsibility: This is the obligation that requires each individual within the organization to perform the assigned duties.

Span of control: This element lay down the number of employees one manager can efficiently and effectively manage. Span of control can either be narrow or wider span depending on the manager and the organizational behavior.  In general, the principle of span of control determines the number of levels and managers the organization has (Gardea, 2005).

Q# 2: Why Woolworths opted for the functional structure

            Due to the long standing commitment of the Woolworths group to build internal capability within such a massive and multi specialized organization, functional departmentalization promised and has proved to be the best option. This is because the functional structure provides the basis upon which each departmental function is geared towards the achievement of the overall organizational objectives.

The positive aspects of this structure are that:

1. It facilitates appropriate coordination within functional units.
2. It also leads to operational efficiencies by putting together similar or related specialties and employees with common knowledge, orientations and skills.
3. The specialized and repetitive functions also bring out in-depth specialization within the functional units.
4. The heads of functional units remain in direct touch with the chief executive officer who in turn has the authority to sort out any inter- departmental conflicts.
5. The chief executive is also capable of being in direct contact with lower cadre employees and thus having the full knowledge of the state of affairs of the organization.

Factors influencing functional structure include:

Organizational size:  This is a major factor that influences the organization structure to be implemented. Woolworths Ltd being a relatively large organization with close to 195, 000 employees across its various stores, support staff and distribution centers, functional structure has served to fit its orientation and level so well. The large size of the organization has ensured that there are functional units, more vertical levels, more specialization and more rules and regulations. This functional structure has ensured that Woolworths Ltd is a great place to work, which is also fundamental to the business growth.

Technology: The level of technology employed by Woolworths Ltd has been critical in ensuring that most of the important decisions concerning the operations of various stores are centralized. Technology has made it easy for the top management to ensure that every geographical and functional units are controlled and coordinated with great formalization for the common course of the organization.

Environment: Since Woolworths Ltd operates various stores across Australia and New Zealand, the functional structures have made it possible to adapt and sustain to those environmental dynamics. The structure provides the platform to adjust to unique environmental uncertainties across their stores, while maintaining the core values and strategies of the organization right from those functional units.

Strategy: Strategy is an important factor to be considered when choosing an organizational structure to be implemented. The strategic directions of Woolworths have been championed articulately from the top management but dutifully implemented by the functional units (Robbins, n.d).

Mintzbergs Theorem

According to Henri Mintzbergs, organizations are formed based on five key parts. These parts include strategic apex, operating core, middle line managers, technostructure and support staff. He indicated that each of these organizational parts has the tendency to pull the organization in specific directions convenient to them. As such, the strategic apex pulls to centralize, operating core pulls to professionalize, technostructures pulls to standardize, middle line managers pulls to balkanize, while support staff pulls to collaborate (Lindsay-sherwin.co.uk).

Based on this five part theory, Mintzbergs described five generic organizational structures. Two of those structures include:

Machine bureaucracy

Machine bureaucracy basically depends on the standardization of its working processes for coordination and technostructure appears as its key part. It is mainly common in environments that are simple but stable.  The machine bureaucracy structure is characterized by: routine working tasks that are highly specialized; formalized procedures in the operating core; centralized decision making power; bulk units at the operating levels; spread of regulations, rules and formalized channels of communications; dependence on functions  to group tasks; and detailed administrative structure with clear distinctions between line and staff.

The machine bureaucracies are common in mature organizations. This is because mature organizations like Woolworths are large enough to have the volumes for the needed repetition and standardization. It is also common in organizations that are old enough to make a choice of the standards they wished for. The top managers at the strategic apex of these machine bureaucracies mainly concentrate on fine -tuning of these machine bureaucracies.

Professional bureaucracy

The standards and procedures employed in this structure mostly originate from outside of the structure.  The structure gives emphasis to authority of a professional nature or power of expatriate, who develop the strategies of the organization. Other outside professional associations may also be used to help in drafting the strategies for the organization. The structure is mostly characterized by duly trained professionals that are hired to lead the core of operations and given remarkable authority over their work. It is characterized by standardized skills and their related parameters such as training, design and indoctrination

Under the professional bureaucracy structure, most of the relevant coordination between the working professionals is held by standardized knowledge and skills within the functional units (Lindsay-sherwin.co.uk).

Q# 3: Effectiveness of Woolworth’s structure in achieving its strategic directions

 The Woolworths’ functional structure has been effective in achieving its strategic directions. This can be highlighted by the great expansion and growth that has been registered by the organization since its inception. This is because the structure provides the organization with:

Clear- cut authority relationship: Functional structure makes provisions for authority and responsibility within the organization. It highlights who is responsible and accountable for the processes and results of the organization. Therefore, the structure has enabled the Woolworths’ employees to know their roles, responsibility and how their roles relate to other roles to achieve the strategic direction of the organization.

Proper balancing: Functional structure brings balance and commitment within functional units and by extension the whole organization. This enables the organization to work towards achieving common objectives.

Pattern of communication: The functional structure provides for the patterns and channels of communication which is necessary for coordination within the functional units and the entire organization.  

Location of decision centers: The functional structure identifies and locates the decision making centers and how an individual department relates to various departments for effective implementation of the strategic objective of the organization. This has been crucial in coordination of activities with Woolworths.

Stimulating Creating: Division of labor and specialization witnessed within functional units always tend to spur efficiency and creativity within the units. This then culminates into the efficiency and creativity of the entire organization.

Embracing technology: The functional structure within Woolworths Ltd has been efficient in embracing the use of technology for smooth coordination and control of the organization.

Encouraging Growth: The level of efficiency developed within the functional units always provides a good recipe to spur growth. This is because the level of efficiency and flexibility always enable the organization to adapt to environmental dynamics and provide opportunity for growth.

 Q# 4: Evaluating Organization Effectiveness

Organizational effectiveness can be defined as the ability of the organization to meet its objectives and existing expectations of the society in the near future, developing and adapting in the medium term, and surviving in the long term. Various approaches can be used to measure the effectiveness of the organization against its set objectives. Organization effectiveness involves a range of evaluation options. Each evaluation possibility requires suitable criteria such as: achievements and accomplishments, job satisfaction and interpersonal competency, stress and efficiency, capability and productivity, structural viability, functionality and resource utilization (Cunningham, 2001).

The most common evaluation approaches include:

The organization development model: This approach measures the organizational effectiveness based on its problem solving and ability to renew itself. It concentrates on the supervisory behavior, concern and interest for employees. The approach also evaluates the team spirit and loyalty between employees and management. It also looks at the communication, trust and confidence that exist between employees and management and the employees’ freedom to set own objectives.

Systems resource approach: This approach assesses the organizational effectiveness by monitoring the processes from the beginning and appraising whether the organization effectively acquires necessary resources for high performance. It examines the ability of the organization to obtain scarce and highly valued resources from the environment. The model generally defines the organization as an association of interrelated subsystems.

For an organization to be effective, systems resource models provide that the subsystems must be harmoniously coordinated to work together.  

Rational Goal approach: This is an output oriented approach that evaluates whether the organization is able to achieve its goals based on desired levels of output. The criteria for executing this model is to make use of formal statements as indicated in organizational manuals, charters and other documents. Others criteria can be obtained from conceptualization of organization functions or societal missions (Cunningham, 2001). The rational goal model is based on functional rationality as conceptualized by Weber.

Based on Weberian concept, typical modern organizations are characterized by divisions of labor, complex roles and hierarchies that define the relationship of each program, project, function and activity to the general organizational goal. The Woolworths’ functional structure provides for division of labor and complex roles and how they relate to various functional units. 

The managerial process model: This model assesses an organization’s ability to effectively perform some key managerial functions such as planning, decision making, budgeting etc. The approach assumes that organizational goals are set and achieved as a result of the effectiveness of the diverse management processes.  The Woolworths’ managerial process approach evaluates the organization’s processes based on their capability to achieve set goals. Thus, it evaluates the productivity and capability of the management processes towards achieving the common goals.

Constituency approach: Constituency approach measurers the ability of the organization to satisfy several strategic constituencies that are within and outside the organization (Google.co.ke). Woolworths have a robust corporate social responsibility that aims to satisfy and rewards all its stakeholders.

Q# 5: Problems/ Issues of functional structure

The following are some of the structural problems/ issues that are typical of functional structures:

1. As the organization grows larger, its functional areas become complex and difficult to manage. The functional units become like small companies operating independently within the organization, with own management styles, cultures and facilities. In this way, the functional units may deviate from the core values of the overall organization. To tackle this, Woolworths has embraced technology to speed up communication and decisions. The culture of teamwork is also inculcated right from the point of recruitment (Woods, 2013).  
2. Functional units may also have difficulty working with other departments due to poor horizontal communication and lack of coordination between them. They may also perceive other functional units as competitors. Conflicts may particularly arise when divisions attempt to exchange resources or develop joint projects. However, the strong culture and values inflicted on Woolworths’ employees ensures that commitment, coordination and collaboration among employees from various functional departments are observed for the common goal of the organization.
3. Operational units may also be distracted by their own goals and focus more on themselves rather than the overall objective of the organization. Woolworths’ structure addresses this by ensuring that the overriding objective is that of the organization and not individual department or functional unit (Woods, 2013). 

Order Now

 Conclusion

An organization is an entity that provides a common podium for individual employees to work for a common goal. Each organization usually has its own unique ways of working as instilled in its structure and culture. The kind of structure chosen is majorly aimed at developing a quality and competitive organization both in the short and long run. The structure is majorly determined by the strategy, size, environment and technological capability of the organization. Formalization, complexity and centralization are some of the key dimensions of any organizational structure.

The Woolworths’ Ltd functional structure has proved effective in achieving the strategic direction desired. Rational goal, organizational development, system resource, constituency and managerial process models are some of the approaches that the organization uses to evaluate its effectiveness. It is this effectiveness within the organization that Woolworths Ltd is regarded as a quality organization and a great place to work as it serves to meet the expectations of its stakeholders.

References

1. Cunningham, J.B., 2001, Approaches to the Evaluation of organizational Effectiveness. Available at: http://www.angelfire.com/creep/brendan/Cunningham_article.pdf Accessed 15 August 2013 at 19:23 pm)
2. Gardea, C., 2005, Six key elements in organization design. Available at: <http://www.emaytrix. com/mgmt307/section2.php> (Accessed 16 August 2013 at 11:04 am)
3. Google.co.ke, Organizational Effectiveness. Available at: <http://www.google.co.ke/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CDsQFjAB&url=http%3A%2F%2Fwww.iun.edu%2F~bnwcls%2Fw430%2Forgeff.ppt&ei=AuILUrG9MOqn0QXpsYDwDQ&usg=AFQjCNHFqqigZOgQ2t2YmOunAzRe-XMiIg&bvm=bv.50723672,d.d2k> (Accessed 15 August 2013 at 17.08 pm)
4. Lindsay-sherwin.co.uk, Mitzbergs model on organizational structures. Available at: <http://www.lindsay-sherwin.co.uk/guide managing change/html change _strategy/07_mintzberg.htm> (Accessed 15 August 2013 at 20: 41 pm)
5. Peoplelearn.homestead.com, Organizational structure and effectiveness. Available at: <http://peoplelearn.homestead.com/MEdHOME/MANAGEMENT /Organz.Structure.pdf> (Accessed 15 August 2013 at 16: 32 pm)
6. Robbins, n.d. Foundations of organizational structure. Available at:<http://www.google.co.ke/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CD8QFjAD&url=http%3A%2F%2Fcmsu2.ucmo.edu%2Fpublic%2Fclasses%2FHensley%2FOrganizational%2520Behavior%2Fim%2Fim_15.doc&ei=kUUNUsmnN6rh4QS5iYGAAQ&usg=AFQjCNHUqM4BNlqGzYXh2-R32k_UXzUdAA&bvm=bv.50768961,d.bGE>(Accessed 16 August 2013 at 09:24am)
7. Schultz, J. Berkowitz, B. and Loewenstein, M., 2013. Organizational structure: An overview. Available at: <http://ctb.ku.edu/en/tablecontents/sub_section_main_1092.aspx> (Accessed 15 August 2013 at 16:34 pm)
8. Woods, C., 2013. Functional Structure of an organization: Advantages, Disadvantages and Example. Available at: <http://education-portal.com/academy/lesson/functional-structure-of-an-organization-advantages-disadvantages-example.html> (Accessed 16 August 2013 at 08:14 am)
9. Woolworthslimited.com.au, Woolworths Limited. Available at: <http://www.woolworthslimited.com.au /page/A Great _Place To_Work/ > (Accessed 16 August 2013 at 09:13 am)