Organizational structure as a determinant of performance: Evidence from mutual funds
Management is an important aspect of any organization. For an organization to be successful, it is important that there should solid management carried out by managers. All companies that are successful have often ensured that they have a sound and strong management system as well as capable managers that can help in achieving the objectives of companies.
A manager can be described as an individual that has been placed in a position of authority to oversee the operations of an organization. Management is the art of overseeing the operations of an organization by ensuring that all operations are in line with the objectives of the company (Csaszar, 2012). An organization is any entity that is focused in achieving a collective objective. Managers as mentioned are persons in positions of authority within an organization that are tasked with the responsibility of overseeing the operations of a particular organization. Managers are the decision makers within an organization and every decision that they make is often implemented with an aim of meeting the objectives of the organization(Aquinas, 2010). The success of any organization greatly depends on the managers as they are the decisions makers that influence success. For example, when there are operational changes to be made such as the rate of production within an organization, a manager is deeply involved in providing the much needed guidance as well as making the final decision on what steps to undertake (Aghina, Smet,& Heywood, 2014). With the approval of the manager, the rate of production can be increased which can then help the company to attain more revenue.
Furthermore, managers are important within organizations since they perform the function of planning. It is the duty of the manager to plan how operations will be carried out and how each project within the organization will be undertaken. For example, if an organization has an objective of improving on its sales, the manager will be involved in the planning process by deciding the necessary steps that need to be taken for the project to be accomplished(Aquinas, 2010). Furthermore, it is important to note that managers are important in that they play the role of organizing. This involves formation of teams as well as providing the appropriate resources that can be used in completing tasks(Janićijević, 2013). Organizing also involves giving authority as well as assigning the staffs in the company respective duties. Managers are also important within organizations because they provide the staffing and make decisions on human resources. After assessing the needs that certain operations within an organization require, a manager will take the responsibility of sourcing for the right employees, recruiting as well as ensuring that they are capable of handling the duties(Aghina, Smet, & Heywood, 2014). The human resource manager is often the person in charge of staffing and ensures that there are enough staffs that can carry out the operations for the success of an organization.
Apart from the above important roles of a manager, they are also important because they provide leadership. The success of an organization will greatly depend on the type of leadership that is offered within the company(Koontz, &Weihrich, 2007). Managers often motivate, guide, communicate as well as encourage the employees under their leadership to perform well within the company. The managers also are important towards the success of an organization since they help employees in solving problems that they may face in the course of carrying out their duties. Therefore, through the leadership qualities, managers are able to help a company or business become successful. Finally, managers are importance within an organization since they provide control within an organization(Janićijević, 2013). It is important that there must be frequent and continuous checks to ensure that operations of an organization are in line for the success of the company. Therefore, to ensure that all things run as required and that there are no loopholes in the operations of an organization, a manager must be available.
Organizational structure refers to the arrangement in a hierarchical order which depicts the lines of authority as they are supposed to be within an organization. Furthermore, organizational structure depicts the channels of communication, duties as well as the rights as they should flow within the organization from the top ranking officers to the lower or junior employees. Organizational structure is of great importance because it helps in outlining how an organization operates in terms of roles, responsibilities as well as the powers and how they are assigned to each person in the company (Koontz, &Weihrich, 2007). It helps in ensuring that there is proper coordination of operations within an organization and proper control is maintained to avoid conflicts. Furthermore, it is also to be noted that organizational structures within organizations are important in identifying how information flows within the organization.
Figure 1: Organizational chart
The different levels of management, that is the top level, middle level, as well as the bottom level management often work closely with each other to ensure that the primary objectives of an organization are net both in the short run and in the long run. It is important to observe that the organizational structure of any given company will primarily depend on the objectives of the organization as well as its strategies (Krot, &Lewicka, 2012). When an organization has a centralized structure, it means that the overall decision making within the organization is made at the top level management of the company. Furthermore, under a centralized structure, the top management has great and tight control over all the divisions as well as the departments within the organization and often those departments have different levels of independence.
An organizational structure is important in that it helps to outline what steps different stakeholders need to take when dealing with the organization. Furthermore, it is to be noted that organizational structure helps in maintaining accountability(Aquinas, 2010). Through an organizational structure, one is able to know who is supposed to be held responsible in case certain things happen in the company. Every person has their roles outlined in the structure hence high level of accountability is maintained. It is also important in the success of an organization because it helps in the maximization of resources (Rolínek, Vrchota, Kubecová, &Švarová, 2014). The organizational structure is important because the resources can be allocated properly by following the right channel of communication as outlined by the structure.
In an organizational structure, the different levels of management are involved in making different types of decisions for the benefit of the organization (Chisa, 2014). It is to be noted that the strategic decisions which are often long term decisions of an organization are made by the top level management. These are decisions which shape as well as direct the operations of an organization as a whole and therefore the senior managers are the ones that make such decisions. The top level management often make their decisions which affect the stakeholders of the organization such as the shareholders as well as the internal stakeholders. The impact of the strategic decisions can be said to be greater than the impact of the operational decisions since the strategic decisions influence the tactical and the operational decisions to be made by other managers. On the other hand, the tactical decisions within an organization are often made by the middle level management. These are decisions which are made and help in the implementation of the strategies of an organization(Aquinas, 2010). The middle level management work closely with the top level management so that the strategies formulated and the tactical decisions made by the middle level management can result in to positive results.
The tactical decisions will often rely on market research and data to ensure that the implementation of the strategies provide positive results in the long run. Finally, the operational decisions within an organization are often made by the middle or the junior management in an organization (Takahara, &Mesarovic, 2003). These decisions often involve the daily routine activities that are performed within the organization. For example the decision to change shift for employees from time to time is an operational decision made by a junior manager.
Unilever Plcis one of the multinational corporations that deal in consumer products as well as services across the globe. The vision and mission of Unilever Plc is “helping people to look good, feel good and get more out of life.” The vision and mission of the company is to provide customer with consumer products that are of high quality and affordable (own website). The corporate strategy which Unilever has continued to use is that of providing products that meet the expectations of the consumers as well as ensuring that the prices are affordable hence attractive to customers. Packaging and branding is another corporate strategy the company has been using, ensuring that all its products are packaged in a unique way(own website).
SWOT analysis refers to the analysis conducted on a company to check on its strengths, weaknesses, the various opportunities it has as well as the threats that it faces in the course of carrying out its operations (Unilever SWOT Analysis, 2012). This analysis helps in determining whether a company is in a better position as compared to its competitors and can help in making important decisions. It helps in identifying opportunities which a company can take on as well as the weaknesses which a company can build on to improve its performance. Unilever makes use of the SWOT analysis to help make major business decisions such as the pricing of its products as well as packaging and how to handle competition(Unilever SWOT Analysis, 2012). Under SWOT analysis, the strengths of the company include innovation and new products launching, a strong portfolio for its brands as well as it has made strategic acquisitions. The weakness of the company is recalling of its products which affects its revenue. The opportunities include growing new markets such as home and personal care(Unilever SWOT Analysis, 2012). However, it is faced with the threat of counterfeit products in the market. Organizational culture is also important in performance of a company. In the case of Unilever, the company can improve its performance if its changes its culture of having a wide range of products under one brand (Unilever SWOT Analysis, 2012). The company needs to rebrand and have different portfolios for its products categorized for each consumer group.
Aghina, W., De Smet, A., & Heywood, S. (2014).The past and future of global organizations. Mckinsey Quarterly, (3), 97-106.
Aquinas, P. G. (2010).Organization structure and design: Applications and challenges. New Delhi: Excel Books.
Chisa, E. (2014). Evolution of the Product Manager.Communications Of The ACM, 57(11), 48-52. doi:10.1145/2669480
Csaszar, F. A. (2012). Organizational structure as a determinant of performance: Evidence from mutual funds. Strategic Management Journal, 33(6), 611-632. doi:10.1002/smj.1969
Janićijević, N. (2013). THE MUTUAL IMPACT OF ORGANIZATIONAL CULTURE AND STRUCTURE.EkonomskiAnali / Economic Annals, 58(198), 35-60. doi:10.2298/EKA1398035J
Koontz, H., &Weihrich, H. (2007).Essentials of management: An international perspective. New Delhi: Tata McGraw-Hill.
Krot, K., &Lewicka, D. (2012).THE IMPORTANCE OF TRUST IN MANAGER-EMPLOYEE RELATIONSHIPS.International Journal Of Electronic Business Management, 10(3), 224-233.
Rolínek, L., Vrchota, J., Kubecová, J., &Švarová, M. (2014).THE LEVEL OF PROCESS MANAGEMENT PRINCIPLES APPLICATION IN SMEs IN THE SELECTED REGION OF THE CZECH REPUBLIC.Serbian Journal Of Management, 9(2), 203-217. doi:10.5937/sjm9-6376
Takahara, Y., &Mesarovic, M. (2003).Organization structure: Cybernetic systems foundation. London: Kluwer Academic/Plenum.
Unilever SWOT Analysis. (2012). Unilever SWOT Analysis, 1-10.