Title: The Implications of Organizational Behavior and Culture on Business Operations
Table of Contents
Introduction Page 3
Organizational Structure Page 3 to 6
Organizational Culture Page 6 to 7
Conclusion Page 7
Organization structure and culture are now becoming critical elements for businesses to not only make profits but to survive. Due in part to technological change, many businesses are undergoing fundamental shifts to their business models. No industry is immune to these changes. Trends are currently emerging around big data, data analytics, cloud computing, artificial intelligence, automation and more (Halpin, 2018). Many tasks that were once thought to be essential are now becoming much more routine and automated. These innovations, although warranted from the consumer perspective, bring with them a litany of challenges related to organizational structure (Bhambri, 2018). These challenges are result of how to properly leverage these emerging technologies in a manner the improves corporate performance while also creating a strong competitive advantage for the company at large. In order to accomplish these two tasks, organizational structure and organization culture must be changed (Abernethy, 2018).
Organizational structure is system of processes and procedures used by businesses to accomplish a predetermined task or goal. These structures often vary from company to company, each with the own strength in weaknesses. As noted in the introduction, technology is heavily disrupting industry irrespective of market position. The rapid change in business climate combined with the dynamic nature of technological evolution can help or harm certain organizational structures (Eccles, 2018). For example, the most common organization structure for many older organizations is that of a bureaucracy. Here, a bureaucracy is characterized by a complex system of layers and processes that govern activities within an organization (Carzo, 2019). This form of organizational structure was well-suited for industries that had little to no change within their core operations and was popularized back during the industrial revolution. During this period, although innovations where occurring, the structure required to adopt the innovations was same. Changes where not as rapid and therefore organizations could slowly implement changes once it was determined they would be successful. The railroad industry for example was heavily characterized by bureaucracy (Blankenship, 2018). Once track was laid, it was very difficult for competitors to take a specific route. For one government regulation wouldnt allow and two, the high capital expenditures required deterred market intrants. As such, as more layers of track where laid certain railroads incurred mini-monopolies in certain regions of the United States. This region dominance is still alive today with CSX dominating the southeast railroad sector, Burlington Northern Santa Fe dominating the Midwest and East, and the Canadian Pacific dominating the south. Due is part to the lack of competition in their industries, their market dominance, and the entrenched nature of their operations, railroads typically operate with bureaucracy (Cheney, 2018). Here, changes must be approved through layers of review and oversight as to avoid major disruptions and ill-advised decisions. Likewise, once approved, the changes often occur slowly as to ensure that they are implemented properly with minimal disruption to businesses operations or to customers. This is preferred system as the railroad industry occupies and entrenched position that changes rather slowly. As such changes can be seen ahead and time and adjustments can be easily made. As a result, operations do not require a decentralized structure like many of its competitors. Here, a pre-determined chain of command works best for this organization structure as positions and authority are both well defined (Abramson, 2019).
Most industry in America however is not so fortunate. A majority of industry is subject to dramatic change. A very controversial case study in organizational structure is occurring in the financial services industry. Here two, large banks often operated using a bureaucracy with layers and layers of red tape. Now however, they are being disrupted in nearly every one of their operating segments. Innovations in peer to peer lending has caused disruption in the banks core lending business. Fintech firms such as PayPal and Square has eroded bank market share as it relates to payment processing the resulting fees associated with it. The emergence of shadow banks has provided customers with services that banks are often unable and sometimes unwilling to provide. The emergence of crypto-currency and other forms of digital payments threaten to change the manner in which transactions are handled by intermediaries. Even the brokerage business is being disrupted by firms such as Robinhood and their ability to provide no commission pricing (Cooke, 2019).
To combat these trends financial institutions are altering their organization structures to become flatter. Here, the traditional financial institutions have significantly shrunk their physical bank branch networks to better compete with their smaller, more agile competitors. This has allowed banks to remove unnecessary headcount at bank branchers which are dwindling in usages and redeploy the capital in growing technologies such as mobile and online banking. They have streamlines operations to make the organization nimble with less approvals required to make a decision. Many banks have also been heavy adopters of data analytics and artificial intelligence protocols within their organizational structures. Here, through the use of a horizontal structure, banks can make faster, smarter and more accurate decisions related to core operations. For example, banks allow customers to open checking account and savings accounts purely through an online format. Customers can now apply for mortgage loans, apply for credit cards, and engage with customer staff solely online. Internally, the organizations have streamlined processes through the flat organizational structure to make quicker decisions on loan applications, payment disputes, and even fraudulent transactions. Through the use of data analyst, banks are now better able to spot money laundering activities online along with stolen cards and duplicitous transactions (Child, 2020). All of this occurs under the backdrop of more agile and horizontal organization. These companies have been rewarded as their stock prices continue to be market leaders throughout the COVID-19 pandemic. In addition, the market share of large banks, in terms of deposits continues to grow as consumers show confidence in the new business model and horizontal organizational structure. Departmentalization has allowed key personnel to focus on core strategic initiatives. As it relates to banking these initiatives are focused heavily on data analytics and how to properly leverage it to make better informed decisions related to loan, transactions, fraud, cyber security, and other areas of business performance. The company has also streamlined the chain of command through a horizontal business structure to make decisions more accurately and quickly (Bormann, 2020).
Organization culture refers to the expectations, values, philosophy and overall strategic vision that guides the behaviors of employees. Culture, much like organizational structure is now becoming a much more critical component to business success. A primary reason for this is the need for much more specialized and engaged workforce. As technology continues to permeate throughout the world, organization culture must be one that is more accepting of change and innovation to help fuel the business grow of tomorrow (Schrodt, 2020). An unwillingness or an inability to do so will result in a companys operations becoming obsolete. Culture is now becoming mch more heavily focused on values of associated with ESG standards. The most successful companies have values that often transcend the organization and create an empowering culture in which employees can follow. Teslas vision for its electrical car has inspired not only tens of thousands of employees but also its competitors as well. Likewise, knowing this vision consumers are also much more willing to pay premium prices for a Tesla knowing that it helps save the environment and preservers the world for the next generations. Armed with a compelling vision, the organization has been able to leverage it to introduce new and innovative products to the market. These products have moved the world passed the limitations of traditional electric vehicles and introduced new and dynamic technologies. For example, the Tesla can go 0 to 60 MPH in under 2 seconds. It has a sleek and very appealing design, all while being great for the environment. Here the vision has created a compelling value proposition for all stakeholders involved. Even investors have been rewarded as the market cap for the company currently stands at roughly $1.2 Trillion (Ravasi, 2019).
Here, a compelling leader with a compelling vision is able to engage roughly 70,000 employees through a shared goal. This goal manifests itself through a company culture of innovation and pushing the boundaries of what is possible within an electrical vehicle. This culture has ultimately resulting in a market leading position that has allowed to the company to become a household name synonymous with green energy standards (Deal, 2018)
In conclusion, organization culture and structure are very important element for business success. Although important, these isnt a one-size-fits-all approach to either organizational culture or structure. As discussed, stable industries such as the American railroad sector employ completely different organizational structures as compared to that of the American financial services sector. Likewise, both sectors have very different levels of competition that necessitates different organization structures. Likewise, as it relates to culture, organizations must be cognizant of how technology can adversely or positively impact their business operations. To continually innovate, organizations must be able to have a compelling vision backed by a culture that can deliver on that vision (Hofstede, 2020).
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