Introduction
The business world is becoming competitive and managers are looking for ways to enhance the effectiveness of their operations. One way that is emerging as a favorite method with many business managers is the review of organizational structure to determine the effectiveness of the structure (Murphy & Willmott 2010, p. 34).
Some structures are more suitable to some businesses while making it good for managers to have a good understanding of each structure. Organization structure refers to the way a business is organized in order to achieve its objectives. Organization structure, therefore, entails the allocation of duties in an organization, coordination and supervision of tasks in order to attain the organizational goals and objectives.
This project evaluates the organization structure of the Saudi Arabian Airlines, an organization operating in the Kingdom of Saudi Arabia. The business is based in Jeddah, Saudi Arabia and it operates in many countries in Middle East, Europe, Africa and America (Ali 2008, p. 91).
The company offers flight services for passengers and parcels. Until 2006, the organization was the largest carrier in the Middle East, but the United Arab Emirates (UAE) pushed it to second place. The company owns several business units and assets; thus, organizational structure is of much importance to the organization.
Classification of Structure and Description of Elements
There are various organizational structures based on five elements that are hierarchy, specialization, standardization, and formalization (Tsoukas and Christian 2005, p. 56). Hierarchy means the way in which the authority in the organization is spread while specialization refers to the extent to which different employees perform different distinguished tasks in the organization.
Standardization is the need to have common culture, procedures and goals across all departments in an organization while formalization is the level and application of official administration in the organization. An organization should first prioritize its focus before coming up with an organization structure.
According to Robbins & Barnwell (2006, p. 37), organizations design their structure basing on several factors such as size, the operations, life cycle of the business, the business environment in which the business operates and the strategic orientation of the business. Small businesses usually have a simple structure, unlike big business.
The life cycle of the business is a major factor in determining the organization structure, as more mature companies tend to have structures that seek to enhance their effectiveness. The complexity of a business environment is also a big factor in determining the organization structure. The more complex the environment is, the more advanced the structure should be and vice versa (Robbins & Barnwell 2006, p. 55).
There are several organizational structures that include the matrix organizational structure, regional organization structure, departmental organization structure, centralized structure, flat structure and tall structure. The organization structure of Saudi Arabian Airlines is a matrix structure composed of the geographical structure and the functional departments.
The company has offices in most regions that cater for the needs of those regions. Additionally, the structure has functional departments in order to enhance specialization and formalization. The structure is quite flat making decision-making is quite decentralized.
In the matrix structure of the organization, all the regional offices have functional departments that report directly to the respective regional department at the head office. The regional offices have a regional manager who coordinates the operations in that region and reports directly to the Chief Executive officer (Robbins & Barnwell 2006, p. 112).
Function of the Present Structure
There are several reasons why the Saudi Arabian Airlines has its current organization structure. One of the reasons behind the matrix structure of the organization is the complexity of the airlines industry and the business environment (Ali 2008, p. 103).
The industry is quite complicated due to the interaction with different cultures, political situations and legal frameworks, different levels of technology in different regions and different economic conditions hence a matrix organization structure is necessary to manage all the dynamics.
In addition, the organization structure adopted by Saudi Arabian Airlines is most suitable for its business since the organization is at maturity level. The important factors of the organization are to enhance efficiency in its operations and maintain its market share. A flat structure is thus ideal in order to ensure fast decision-making.
The Mintzberg’s theorem is important to analyze how the organization structure of an organization works. According to this theory, an organization has five major parts that include the strategic unit, support staff, the technostructure, operating core and the middle line. The strategic unit is responsible for providing the overall direction of the firm while the operating core in the unit that performs the basic tasks in the organization.
The technostructure provides suggestions on how to improve the performance of the organization while the support staff is the unit outside the flow of work, but they support the organization. Middle line managers help in implementing the strategies or linking the strategic unit with the operating unit.
According to Mintzberg, several forces exist in an organization that pulls the business units towards standardization, centralization, collaboration, balkanization and professionalization (Hatch & Cumliffe 2006, p. 104).
In order to neutralize these forces, there are different organizational structures that exist to an organization and these include simple structure, machine bureaucracy, professional bureaucracy, divisionalized form and adhocracy.
According to this theory, the organizational structure of Saudi Arabian Airlines is a professional bureaucracy since the divisions in an organization are formed of duly competent people who can make their own decisions.
As such, decision making in the organization is highly decentralized. This is the ideal nature of organization structure for the Saudi Arabian Airlines since it is a large organization operating in a dynamic and complex environment.
Effectiveness of the Organization Structure in Meeting Strategic Goals
The main aim of developing an organization structure is to increase effectiveness of an organization and thus enhancing the competitiveness of an organization. Effectiveness is described as the extent of attainment of organizational goals hence an organizational structure is effective if it helps an organization to achieve its organizational goals.
Each organization has its organizational goals and objectives that justify their existence. The major reasons for an organizational structure are to enhance the functioning of the organization, enhance communication, evaluation and management of employees, achievement of firm goals and problem-solving (Jones and Munro 2005, p. 40).
In order to discuss effectively the organization structure of the Saudi Arabian Airlines, it is good to have an understanding of the strategies of the company and the strategic goals of the airlines company. The major strategic objective of the company is to maximize profits through provision of customer value.
This has some objectives that include operating under low cost, focusing on some markets, conducting market research to understand the market needs and expanding of operations into new markets. The strategies used by the company are thus consolidation of existing markets, strategic human resource management, efficiency in operations and expansion into new markets, among other strategies.
The organization structure of Saudi Arabian Airlines plays a big role in attaining the organizational goals and objectives. The matrix structure has enhanced communication across departments and across all hierarchies. This is good since it leads to coordination hence efficiency in the organization.
It is also a better way to achieve coordination and motivation of employees, which is a strategic move of the airlines company (Hatch & Cunliffe 2006, p. 83). Using geographic structure, the Saudi Arabian Airlines is able to understand the market requirements of each region hence the ability to consolidate operations in those regions.
The organization encourages decentralized decision making, which has led to autonomy of departments in decision-making. Organizational structure, therefore, gives an organization the ability of attaining the organizational goals and objectives.
The company measures the effectiveness of its strategies by measuring the attainment with the targets made. One major measure of the effectiveness of organization structure is using profitability as reported in the financial statements. These are compared with the reports for previous years and with the reports of other companies in the same industry.
This provides an insight into the performance of the company. The effectiveness of an organization structure is therefore measured through the ends focus of the effect on strategic goals (Tsoukas & Christian 2005, p. 119).
Merits of Four Approaches to Organizational Effectiveness
According to Ali, organizational effectiveness is generally defined as the ability to achieve the organizational goals and objectives (2008, p. 202). There are different dimensions of effectiveness of an organization that are always competing against each other.
These include flexibility, internal focus, external focus and control. For an organization to be effective, it must balance all these dimensions of organizational effectiveness. The approaches used to measure organizational effectiveness measure the extent to which an organization structure has been able to balance the main dimensions.
There are four major approaches to measure organizational goals. These are the goal approach, the internal process approach, system resources approach and constituency approach. The goal approach measures effectiveness by comparing the level of attainment of one or more goals such as maximizing profit or increasing market share.
The internal process approach defines effectiveness as the ability to achieve efficiency in operations through motivation and coordination of employees. The systems resource approach defines effectiveness in terms of ability to mobilize and put into use scarce resources.
The constituency approach measures the ability of the organization to satisfy the needs and expectations of the stakeholders of an organization (Wagner-Tsukamoto 2003, p. 57).
The merits of the above methods of measuring organizational effectiveness are that they provide a detailed measure and analysis of each component of an organization. The goal resources approach, the internal process approach, goal approach and constituency approach give the much-needed analysis of each strategic section of an organization such as the operations, employees, shareholders and other stakeholders and components.
This, therefore, forms a good base of developing a balanced scorecard in order to balance the focus of the organization. The four approaches also give a complete analysis of the ability of the organizational structure to balance the dimensions of effectiveness.
Structural Problems and Barriers to Problem Resolution in the Organization
Since Saudi Arabian Airlines uses the matrix organization structure composed of geographic and functional departmentation, there are some barriers and problems to effective resolution in the organization. The first barrier is ineffective communication and coordination between the head office and the regional departments. The regional departments are semi-autonomous and they cannot completely make decisions on their own.
The regional managers must consult the chief executive officer. This gives a barrier in attainment of organizational effectiveness since the response from the head office might be low due to wide span of control. This is a big communication breakdown that is a barrier to problem resolution in the organization.
Another possible barrier to problem resolution is potential conflicts between the regional departments and the geographic departments. Under the matrix structure of Saudi Arabian Airlines, there are regional departments that have all the functional departments. These functional departments in the regional offices report directly to the respective functional departmental heads rather than reporting to the regional manager.
The regional manager is responsible for coordination of the functional departments in that particular region and reports directly to the chief executive officer. The regional managers are also responsible for implementation of the organizational goals at the regional level.
There is a possible problem of conflicts of interest between the regional offices and the functional departments, which would affect negatively problems resolution in the organization hence, effectiveness (Jones & Munro 2005, p. 179).
The organization structure is flat, but the regional offices are not well empowered to make decisions. They are required to consult with the head office and the functional departments before making any decision.
This is a barrier to problem resolution in the organization since some problems are urgent and they need to be addressed urgently. The matrix organization structure used by Saudi Arabian Airlines leads to time wastage in consultations hence barrier to problem resolution in the organization (Murphy & Willmott 2010, p. 115).
Proposed Solutions to Address the Problems Identified
From the discussion above, the current structure used by Saudi Arabian Airlines has some shortcomings that should be addressed by some structural changes. One major recommendation is to change the communication channels used by the departments of the organization. Under the current channels, the functional departments at the regional level report directly to the respective functional departments at the head office.
They do not report to the regional manager. It is important that this structure be changed so that the functional departments report to both the regional manager and the functional departmental head office. This would empower the regional manager and enhance communication between the regional departments and the functional departments (Hodge, Anthony & gales 2003, p. 210).
This is necessary, as it will go a long way to reduce possible conflict of interest between the regional departments and the functional departments. It will also make coordination of the functional departments easy at the regional level.
Another proposal the writer would make to the organization structure is to increase the hierarchy of the structure. The structure currently used by Saudi Arabian Airlines is so simple and flat that it lacks the capacity to address the complex business environment. This study proposes that the airlines increase the hierarchy of the organization.
This could be done by grouping regional offices into a large block rather than having many regional offices. For instance, instead of Saudi Arabian Airlines having regional offices in Japan, Hong Kong, Seoul and other cities in Asia all reporting to the chief executive officer, these offices could report to a regional coordinator in charge of the Asian region.
These regional coordinators should be autonomous and this would speed up problem resolution and decision making in the organization. It would also be a good move to ensure coordination between regional departments of the airlines company (Hatch & Cunliffe 2006, p. 89).
Conclusion
An organization structure adopted by an organization has a big effect in the effectiveness of the organization in terms of achievement of organizational goals and operationalization of organizational strategies. Different organizational structures favour different stages of an organization and different industries. The Saudi Arabian Airlines uses the matrix structure that is a combination of geographic and functional departments.
This structure is ideal for Saudi Arabian Airlines since it is a mature company whose strategic goals are to consolidate the existing markets and maximize value for customers.
The organization structure used by Saudi Arabian Airlines has played a big role in attaining effectiveness in the organization as shown in the goals approach. However, the structure has some limitations that could be resolved by using the recommendations given (Ali 2008, p. 132).
With the increase of competition and complexity of the business environment coupled by the globalization of business, firms have to achieve competitiveness through enhancing effectiveness. The strategies used in an organization cannot be implemented effectively if the organization does not use the right organization structure.
An organization structure enhances coordination, focus, communication and motivation of employees that are key drivers of strategic decision-making and implementation. Organization structure, therefore, has a big role to play in the strategic direction and success of an organization.
List of References
Ali, A. 2008, Business and management environment in Saudi Arabia: Challenges and opportunities for multinational corporations, Taylor & Francis, London.
Hatch, M. & Cumliffe, A. 2006, Organization theory: Modern, symbolic, and postmodern perspectives, Oxford University Press, London.
Hodge, B., Anthony, A. & Gales, L. 2003, Organization theory: A strategic approach, Prentice Hall, French’s Forest, NSW.
Jones, C. & Munro, R. 2005, Contemporary organization theory, Wiley-Blackwell, London.
Murphy, D. & Willmott, H. 2010, Organization theory and design, Cengage Learning EMEA, New Jersey.
Robbins, S. P. & Barnwell, N. 2006, Organization Theory, 5 Edn, Prentice Hall, French’s Forest.
Tsoukas, H. & Christian, K. 2005, The Oxford handbook of organization theory, Oxford University Press, London.
Wagner-Tsukamoto, S. 2003, Human nature and organization theory: On the economic approach to institutional organization, Edward Elgar Publishing, Cheltenham.