This article focuses on two areas of Paper P3's syllabus on preparing and evaluating a cultural web of an organisation, and the importance of organisational structure and configuration
The Paper P3 Study Guide refers to the impact and evaluation of culture (using the cultural web) in Part A (6), and refers to the importance of organisational structure and configuration Part C (1). These topics have been tested regularly:
- in December 2008 – Question 1(b), National Museum
- in June 2009 – Question 2(a), Rock Bottom
- in December 2010 – Question 3, Frigate
- in December 2011 – Question 2(a), iCompute
As is so often the case in Paper P3 exams, candidates tend to describe a theory – for example, the constituent parts of the cultural web – but fail to apply findings to the scenario and to suggest the implications of their findings.
Knowledge brought forward from Paper F1
In the ACCA Qualification, organisational culture and structure first arise in Paper F1, Accountant in Business. Organisational culture was described by Handy as ‘the way we do things round here’. Most of us are very sensitive to organisational culture and tread warily when joining a new school, college or employer: we want to see ‘how they do things round there’.
With regard to organisational culture, the work of three academics is mentioned:
(1) Handy’s four cultural stereotypes. These are:
- Power culture. Here, power is concentrated in the hands of one person, ‘the boss’. This culture is often found in small, family businesses, particularly where the name of the business is the same as the name of the boss. Fast – but perhaps arbitrary – decisions can be made. As businesses grow, it becomes more difficult for one person to wield absolute power simply because of the demands on their time and ability. However, it is sometimes seen in large organisations, but then it is usually taken as a danger sign, and many of the corporate governance rules are there specifically to spread power and reduce risks. For example, splitting the roles of chief executive and chairman, holding regular board meetings to encourage collective responsibility, and balancing executive and non-executive directors. The December 2010 exam question Frigate gives an excellent example of a power culture.
- Role culture. This is characterised by a traditional organisational structure in which jobs are arranged by function and seniority, and each employee has a distinct role and job specification. This culture can be efficient in a stable environment in which employees are expected to do the same tasks year-in year-out, but can lead to inflexibility and can slow down response to change as employees defend their roles and rewards.
- Task culture. Here, the emphasis is on getting the job done. Flexibility is encouraged and it is more important to serve customers and clients well than to defend one’s role. This culture is much more responsive to environmental and competitive developments.
- Person culture. In the person culture the employee is following a personal ambition in the context of the organisation, and interacts with the organisation as little as possible. In this culture the individual is the central point. The organisation is seen as serving the individuals within it. Barristers’ chambers, architects’ partnerships and small consultancy firms often have this person orientation. The organisation structure is as minimal as possible; the individuals are clustered together, a small galaxy of individual stars.
(2) Schein’s determinants of organisational culture. These are:
- Artefacts. These are the influences on culture that can be seen. For example, how employees dress, the layout of the office, the way in which people behave.
- Espoused values. These are the strategies, goals and objectives of the organisation. For example, an emphasis on low cost or an emphasis on excellent service.
- Basic assumptions and values. These are the taken-for granted beliefs. They can be called a ‘paradigm’, which is a set of assumptions held in common.
(3) Hofstede’s international perspectives on culture. Hofstede recognised that people in different countries often have different outlooks and that these will influence organisational culture. The influences are:
- Power distance. Cultures that favour low power distance expect power relations to be relatively consultative or democratic. In high power distance countries, the less powerful accept power relations that are more autocratic.
- Individualism v collectivism. Individualistic societies place stress on personal achievements. In collectivist societies, individuals act predominantly as members of a group or team.
- Uncertainty avoidance. People in cultures with high uncertainty avoidance tend to be more cautious and proceed by careful planning. Low uncertainty avoidance cultures feel relatively comfortable making unstructured situations and dealing with changing and novel environments.
- Long-term orientation v short-term orientation. Long-term oriented cultures attach importance to the future and place emphasis on persistence, flexibility and a willingness to change. Short-term oriented cultures emphasise tradition and meeting social expectations.
- Masculinity v femininity. Masculine cultures include competitiveness and assertiveness; feminine cultures place greater emphasis on relationships and consensus.
With regard to organisational structure and configuration, the Paper F1 Study Guide mentions:
Entrepreneurial, functional, departmental, divisional and matrix structures
- An entrepreneurial structure is one in which the owner (the entrepreneur) dominates. An entrepreneurial structure tends to be found in new businesses, where the entrepreneur is still a hands-on manager. A power culture and an entrepreneurial structure will normally go hand-in-hand.
- A functional (and departmental) structure is a conventional structure with different departments for accounting, sales and marketing, research and development, and so on. This structure can be efficient and can lead to economies of scale, but as departments increase in size and power, they can begin to look after their own interests more than the organisation’s. Then a functional organisation has taken on the characteristics of a role culture: intense interest in role rather than getting the job done.
- As businesses grow, there is often a degree of diversification as new products and new markets are developed. It then often makes sense to set up separate divisions for each market and product group as this allows specialisation. So, the European Division will know about pricing, competitors, customer preferences in Europe, and the North American division will develop expertise for that market.
- A matrix structure is very common in project-led organisations as it allows multi-skilled teams to be set up for each project. However, it will mean that an employee is responsible to two superiors, and this was anathema to classical management theory. For example, the person shown below is responsible to the Project B manager and to the quality control manager. It is easy to imagine a situation where the project manager puts pressure on the employee to cut out some tests because the project is slipping and, at the same time, the quality control manager would put pressure on the employee to carry out full testing. The wrong way for the employee to choose what to do is to comply with the wishes of the manager who shouts louder; anyhow, it is unfair to expect the most junior member of the trio to make the decision. However, the matrix structure could empower the employee to point out to the two managers that there is a conflict and that they, as managers and as more experienced employees, should get together to resolve the problem.