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According to Burns and Stalker (1961), the organization structure must be in tandem with the rate of its environmental change for the organization to perform maximally. An organization’s structure is defined by McMillan (2012) “as the architecture both visible and invisible which connects and weaves together all aspects of an organization’s activities so that it functions as a complete dynamic entity.” Several theories have been advanced to provide guiding principles for many an organization in tackling day-to-day issues arising from an organization. Royce is no exception and will thus benefit from applying one or more of the relevant theories that are up for grubs. The theories that will be covered in this paper are namely the Contingency theory and Classical theory.
The Classical theory is based on the assumption of the following principles: there is one best way to organize; there are universal principles of management; organizations are closed-systems and mechanical in that they assume cultural dimensions, external conditions and human factors; and organization are established for goals geared towards production, hence emphasis is towards internal efficiency. Classical Theory encompasses the administrative theory, scientific management and bureaucracy. The administrative theory fosters establishment of a universal principles of management that are applicable to all organizations; bureaucracy that enhances a clear hierarchical power structure and specialization and division of labor; and scientific theory that promotes the principles of finding one proper way of performing each task, matching each worker to a task in a careful manner, close supervision of workers and punishing or rewarding as an incentive, and allowing the management to plan and control (Walonick, 1993; Mooney & Reiley ,1931).
Some of these organizational aspects can be seen in the management affairs of Royce. For instance, focused on internal effectiveness by restructuring the way the managers would operate in order to maximize productivity is one of the pillars of classical theory. Based on the internal process approach to effectiveness, Royce may not be productive in the future as they wish to be since an effective organization according to this criterion, should have satisfied and happy employees (Merry & Levy, 1986). The main concern for Royce is to streamline the internal environment while not focusing on the external environment. Consequently, since the managers will lack a positive work climate, satisfaction and happiness brought about by a private office, effectiveness of the firm will be reduced hence impacting negatively on productivity.
In addition, the Contingency theory is also essential in informing organizational arrangement. Unlike the Classical theory which holds that there is probably one best way to operate organizations, it proposes harmony between organization’s size, structure, needs of its environment and technology. It also holds that organizations can be able to adapt to changing environment and that managers at all strata of authority need to be allowed to make decisions over their jurisdictional area. Subsequently, the managers will make decisions that are contingent to the status quo (Lawrence & Lorsch, 1969).
Based on the explanation above, the organizational structure of Royce is a jigsaw fit to this theory. Conflict between the managers and the partners is easily solved due to the centralized power and mandate to makes critical decisions. In the event that the managers’ opinions are in conflict with those of the partners, then the decision of the partners carries the day. However, Royce as a firm may not be able to adjust to the market volatilities due to lack of a horizontal management system which allows the managers to react to any dynamism in the market based on their opinions (Plunkett, Attner & Allen, 2008). Based on the balanced scorecard approach, Royce’s effectiveness and productivity is good before the execution of the proposed changes. This is attributable to the good customer relations courtesy to quality and tailored service, an excellent learning and growth environment due to quality and relevant training , an internal business process that provide excellent services and thus adding value to the customers, and a proper financial management backed by a feasibility study before initiating any investment (Daft, 2010, p.77).
The problem facing Royce can also be attributed to organization life cycle. Since the firm has matured, it has become less interested in expansion and less innovative but focuses on maintaining a secure and stable environment. The Royce firm is concentrating more on improving profitability and efficiency. Maturity is a risky stage which may result into the decline of an organization and perhaps, this is why Royce has decided to cut on costs through the hoteling office system. Moreover, a prospected increase in the size of the staff at Royce firm has contributed to the restructuring of the internal process. The feasibility study conducted showed that a private office with some offices being shared was expensive especially with the expected staff expansion (Griffin, 2011, p.378). Furthermore, the technological improvements characterized by upgrading the network system has also contributed to the hoteling system since it will enable the managers and the administrative staff to communicate without necessarily having to meet thus reducing the size of office occupants. This will make acceptance of the hoteling system easier as some mangers and will cut costs as it is more plausible compared to the private or sharing of offices. According to Sengupta (2006), “[d]ecision making, communication and coordination are greatest problems for reciprocal interdependence. To overcome these, activities that are reciprocally interdependent should be grouped together in the organization so that the managers have an easy access to one another for mutual adjustment”.
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After the implementation of the hoteling system, productivity may take a nosedive due to the lax reception of the imminent changes by the managers. This communication deadlock in the management and irreconcilable differences in opinions will demoralize the mangers thus interfering with the good manager-client rapport that has been created and that are yet to be developed (Tripathi, 2009). Royce has adopted the differentiation strategy. This strategy is essential to the success of Royce since they offer various king of services to an array of institutions. As a result, they have incorporated computer aided courses and classroom instruction that are tailored to addressing the various needs of their clientele. Settling for this kind of strategy has made Royce design its organization towards a learning orientation, strong capacity in research, building strategies for customer intimacy and rewarding the creativity of employees by promoting them to manager status (Miles & Snow, 1978).
The feasibility study revealed that it is plausible to embark on the hoteling office system since it is more cost-effective compared to the private offices and office sharing. Since the occupancy rate of the offices is 60%, it is reasonable to pave way for the restructuring. This will be in the best interest of the firm and the staff in the long-term.