Introduction
Malik (2017) defines organizational structure as to how different tasks in a corporation are executed, monitored, and assigned. The ultimate goal of this practice is to ensure the targeted organizational aims are realized within the specified time.
Multinational corporations should consider the best structures in order to achieve their business potential. Saudi Aramco (also called Aramco or Saudi Arabian Oil Company) is one of the leading players in the global oil and gas industry. The multinational firm is owned by the government of Saudi Arabia and has its headquarters in Dhahran City. The corporation was founded in the year 1933 (Malik 2017). The firm’s original name was the California-Arabian Standard Oil Company.
The firm currently employs over 65,000 people in different parts of the world (Who we are 2017). Aramco is the second-largest producer of oil. It has large oil deposits and reserves. The company’s information is available in different books and magazines. This is the case because it commands a huge share in the industry. The presence of the company’s operations in almost every part of the world makes it a global brand. This essay gives a detailed analysis of the tasks, business model, and goals of the company. The paper will go further to explain and describe why Aramco is a bureaucratic organization. The coordination mechanisms employed at the company will also be described in detail.
Analysis of the Bureaucratic Organisation
Purpose
Saudi Aramco is owned and controlled by the Kingdom of Saudi Arabia. The corporation has been integrated to become a giant in the oil and gas industry (Our vision 2017). The company has been in operation for the last eighty years. This period has made it possible for Aramco to develop a superior business model that makes it competitive in the sector. The company has designed a powerful infrastructure to support its production and operational processes. The firm uses the power of research and development (R&D) to come up with better practices that can support its goals. The firm’s main tasks or operations include exploration of hydrocarbons, refining crude oil, production of oil-based products, and marketing (Who we are 2017).
The company has developed a powerful business strategy that focuses on different key areas. The first one is creating value through the use of its business model. The concept of sustainability is taken seriously in order to support the needs of every stakeholder and community. The use of R&D, innovation, and technology has made it easier for the firm to come up with revolutionary ideas. The firm also embraces different strategies to create the best environment for attracting, retaining, and rewarding top talent (Our vision 2017). These attributes work synergistically to drive organizational performance.
The above tasks are merged with the outlined strategy to ensure the targeted goals are achieved. The company is guided by different goals such as the country’s development agenda. The corporation focuses on the best approaches to come up with better and sustainable solutions to address the challenges affecting the global community (Who we are 2017). The firm also seeks to ensure clean and quality energy is available to more customers. The desire to make sustainable and better choices throughout the production, marketing, and utilization of oil products is a critical goal for Aramco (Who we are 2017). These attributes have been coordinated to support the outlined vision and mission.
Structure
The structure of an organization can influence most of its functions, goals, strategies, and processes. Aramco adopts a bureaucratic approach to organizational structure. Van der Voet (2013) defines a bureaucratic organization as “a firm whereby management is characterized by a pyramidal leadership” (p. 4). A business organization’s structure will be bureaucratic if it applies formal approaches in every process or operation.
In order to ensure a given company achieves its business goals, the application of an organizational chart becomes pertinent. This chart is usually employed to dictate the performance, roles, and duties of different workers. The decision-making process is usually hierarchical in nature. This means that topmost managers will make specific decisions and present them to their respective followers (Bereznoy 2015). Successful companies ensure the bureaucratic model is implemented in a fair and orderly manner.
Aramco employs a bureaucratic leadership or structure to support most of its global functions. Several concepts can be utilized to explain why the organizational model qualifies to be bureaucratic in nature. At Saudi Aramco, the level of centralization is high. This means that different functions are monitored and supervised by different managers across the organizational structures. The topmost leaders at the company come up with specific decisions and procedures that must be taken seriously by the employees (Bereznoy 2015). The top managers heading various departments such as finance, marketing, exploration and productions, and gas operations (see Fig. 1) delegate and offer instructions to their subordinates.
The concept of formalization describes the manner in which a given organization relies on procedures and rules to influence organizational performance. The actions of every worker are usually governed by written procedures, terms and conditions, and rules. Malik (2017) indicates clearly that Aramco is a formalized company. Various rules are implemented and applied as control tools to ensure the targeted workers focus on the firm’s objectives. The firm’s leaders come up with adequate rules that govern a wide range of organizational practices such as marketing, oil exploration, and production. These rules make it easier for different players to focus on the firm’s goals.
Many bureaucratic corporations embrace the idea of differentiation to group different activities. At Amarco, differentiation is informed by the targeted goals and regions where the firm markets its products (Malik 2017). A hierarchal differentiation approach is used whereby several levels are maintained in various departments. Such ranks dictate the number of units established to deliver specific goals or activities. Several job titles have been created in the company. These titles are characterized by unique roles and responsibilities that must be supported by the company’s workers. Authority levels in the firm dictate how instructions are passed across from one stage to the other (Our vision 2017).
This analysis shows conclusively that a bureaucratic organizational structure is evident in this company. The level of differentiation at the firm has created a complex environment whereby jobs are specialized. The presence of different hierarchies in the organization guides every employee to focus on the best practices. Instructions are taken seriously to ensure every activity is completed in a timely manner (Van der Voet 2013). Complexity is a concept that refers to the level of differentiation (Malik 2017). Aramco has dispersed most of its units geographically in order to support its business model. It is therefore agreeable that Aramco’s bureaucratic structure has continued to support its business strategy.
The Board of Directors develops policies, principles, and codes to guide the behaviors of different employees. The board comes up with appropriate standards for ethical behavior and integrity at the company (Malik 2017). Contractors, suppliers, and consultants are also expected to act in accordance with the stipulated guidelines. The important thing is to support the needs of different stakeholders and customers.
Coordination Mechanisms
Bereznoy (2015) indicates that a coordination mechanism is an approach or subsystem through which activities or roles within an organization are managed. The process of coordination occurs to ensure different persons are aware of their responsibilities and goals. Coordination is something critical, especially whenever there is a relationship between different individuals in an organization. At Saudi Aramco, several coordination mechanisms are considered to make sure every targeted aim is realized in a timely manner (Who we are 2017). For instance, bureaucratic mechanisms (or coordination) are evident in this company.
This kind of mechanism portrays the relationship between the superiors and the subordinates. A vertical linkage informs this kind of mechanism (Van der Voet 2013). The leaders in different departments instruct their workers (or subordinates) to focus on specific goals. The workers are empowered and guided using different resources and rewards. This is something common especially in the firm’s marketing and research and development (R&D) departments.
As indicated earlier, the company applies a departmentalization approach as a coordination mechanism. This strategy is considered to influence specific functions or activities. A complex model is implemented whereby different functions are grouped as units (Popadiuk & Bido 2016). For example, each unit is expected to interact with others in an attempt to streamline various processes. At Saudi Aramco, the strategic department liaises with the R&D unit to ensure every new innovation seeks to improve the firm’s performance.
Managerial coordination is also embraced at Aramco to dictate the manner in which different activities are completed. The senior leaders at Saudi Aramco present directions to the targeted followers or subordinates. For instance, the firm’s chief executive officer (CEO) presents directions to topmost managers to influence the behaviors of different employees (Malik 2017). These managers go further to deliver similar instructions to those below them.
This kind of coordination is repeated until those at the end of the command chain implement the decisions. At the same time, information is collected from and passed upward to the CEO. The information is then used to inform most of the decisions made by the Board of Governors.
The above coordination mechanisms are exhibited by bureaucratic organizations. Since Aramco utilizes this organizational structure, the individuals at different levels of the command chain are required to coordinate and support the communication process (Malik 2017). Different subordinates and employees can interact among themselves since the firm uses the concept of departmentalization as a coordination mechanism. The harmonization makes it easier for decisions to be passed across to different departments. The workers implement them accordingly in an attempt to achieve positive results.
Conclusion
Saudi Aramco is one of the leading companies that have benefited from the exploitation of a bureaucratic organizational structure. The organization’s purpose is to produce and deliver quality products that result in sustainability. The firm has designed a powerful structure whereby decisions and guidelines are made by the board. The CEO comes up with policies that must be followed to foster organizational performance (Malik 2017). Different mechanisms such as managerial, departmentalization, and bureaucratic coordination support the relationships and activities of different stakeholders at Aramco.
Reference List
Bereznoy, A 2015, ‘The global big oil on the way to business model innovation’, Basic Research Program, vol. 1, no. 3, pp. 1-33.
Malik, A 2017, Aramco: above the oil fields, Daylight Books, Hillsborough, NC.
Our vision. 2017. Web.
Popadiuk, S & Bido, D 2016, ‘Exploration, exploitation, and organizational coordination mechanisms’, RAC, Rio de Janeiro, vol. 20, no. 2, pp. 238-260.
Van der Voet, J 2013, ‘The effectiveness and specificity of change management in a public organization: transformational leadership and a bureaucratic organizational structure’, SSRN, vol. 1, no. 4, pp. 1-13.
Who we are. 2017. Web.