The paper "Organizational Culture and Engineering" is a perfect example of a Business Essay. HS Engineering is an engineering business that operates in three different locations in the United Kingdom i. e. Leeds (the head office), Wolverhampton, and Oldham. Leeds and Wolverhampton operate low products to general and automotive industries, which comprises two-thirds of the company’ s sales mix. Oldham operates a precision (high quality) to the aerospace market. This comprises one-third of the sales mix and registers a high-profit margin. HS Engineering has both local and oversea market. The local market comprise 50% of the company’ s market and is a majorly general industry and some automotive and aerospace.
The majority of the overseas market is found in Europe especially France (aerospace), USA (automotive), and Russia (general industry). There is an anticipated market change with Europe and the USA and Russia both having 20% of the market while the remaining market is expanding to the Far East. The company’ s profit has significantly reduced due to the rise of cheaper products from the Far East. In fact, there is a projected 30% decline in the overall company’ s turnover in the next financial year.
Due to this, the company is planning a major restructuring by closing down Wolverhampton and Oldham plants while Leeds takes over precision manufacturing. The non-precision work, formerly done by Leeds and Wolverhampton plants will be manufactured in Malaysia where there are cheap labor and easier access to the market. There is also a suggested expansion to clinical/medical precision engineering though this has not been decided. This article evaluates the impacts of the proposed change and makes suggestions to deal with issues arising due to this change.
It analyses the organizational culture and its impacts on the proposed change. Organizational Culture in HS Engineering Culture is defined as the fundamental ideas, beliefs, and practices that define a community. Smircich (1983, p 437) defines organization culture as “ either a critical variable or a root metaphor. ” Linstead (2001, p 97) observed that such critical variable definitions portray culture as an observable characteristic of an organization i. e. a characteristic that an organization “ has” which could also be referred to as property. In this definition, culture is a characteristic that belongs to an organization.
It is a tool to satisfy particular needs or as a means to regulate and to adapt to situations. In this case, the management controls culture and therefore plays an important role in balancing the efficiency of an organization (Riad 2005, p. 1539). On the other hand, the “ is” approach or the metaphorical definition of culture portrays the organization itself as a culture. Culture is, therefore, the pattern through which behaviors are transmitted in a particular group of people comprising a society and therefore is a lifestyle to certain people (Martin 2002, p.
29). This definition underlines culture as “ historical, as including beliefs, values and norms that guide the action of cultural members, as being learned and as an abstraction from behavior and products of behavior” (Fairfield-Sonn 2001, p. 214). According to Schabracq (2007, p. 31– 37) and Driskill et al, (2005, p. 53), organization culture is formed by three categories of factors; macro-environmental factors – has an indirect influence on organization culture e. g. economy, international events, political and legal factors, micro-environment factors – directly influences organizational culture e. g.
partners, customers and other organizations and beliefs and values of organizational leaders. Schein (2004, p. 225) observed that two companies doing the same business operating in a similar environment produce different results in the long run because of differences in values, attitudes, and goals of the leaders. Robbins (1993, p. 609) noted that the founders of an organization have the biggest influence on the culture of the organization. This is because the founders draw the organizational goals, mission, and purpose of the organization, determine its area of operation and choose the members of the organization.
Founders determine the organization's culture, especially at the early stages of development. However, at later stages of cultural development, small cultures within an organization form. At this point, managers can, therefore, decide the appropriate organizational values and thus change the culture of the organization. The company culture at HS Engineering varies across its operational sites. Leeds plant is highly unionized with very good benefits and wages. The labor force is majorly comprised of family members. This has ensured employee loyalty to the company thus enhancing employee retention.
In Wolverhampton, the plant is highly mechanized. It relies on temporary labor to cope with peak season. The labor force in this plant is unionized and there was redundancy around eight years ago. This has reduced employee loyalty to the company that is manifested by a call for a strike when redundancy took place. In Oldham, there is no formal union recognition. The plant has adopted a cellular manufacturing approach where teams are fully accountable for their productions. Despite lower wage rates in this plant, staffs earn better income compared to other local workers due to bonuses and incentives.
This serves as a motivation to employees that eventually produce better results. Deal and Kennedy (1982) observed that culture is the most important factor that determines the success or failure of an organization. This is evident in this case scenario. Oldham, which seems to have a good organization culture, register high-profit margins despite being very new as compared to Wolverhampton and Leeds plants. Business success and sustainability are enhanced through innovation (Cozijnsen, Vrakking, & van IJzerloo 2000, p. 150).
This involves products, services, technological innovations as well as the organization itself. Tushman and Nader (1986) forecasted that innovation management would turn out to be the most essential task for any organization to survive in the future. However, most innovation processes that are not properly completed end up in failure (Carr 1996). Carr (1996) observed that the process of innovation requires a more organized effort and professional input. The current structure of operation in HS engineering does not support innovation. The company relies on family labor that hinders professional input into the running of the company.
This promotes stagnation and thus inhibits innovation. Leeds houses the head office and is the mother of other plants. The family connection in this plant forces management to make inappropriate strategic decisions such as transferring precision manufacturing from Oldham to Leeds despite the advantages availed to the Oldham plant such as nearness to market and tax incentives. Successful innovation is defined as “ the degree in which innovations meet the demands of the market” (Cozijnsen, Vrakking, & van IJzerloo 2000, p 150). Therefore, ensuring that the organization cultivates a larger market share and enhance its competitive advantage is the main aim of the innovation process.
However, this seems not to be the case in HS Engineering as they are transferring Oldham plant which more profitable to Leeds. The proposed change in HS Engineering should be guided more market forces and performance rather than family connections to the company. Moving the non-precision work that is currently handled at Leeds and Wolverhampton to Malaysia is a good strategic move. This is because in Malaysia, there is cheap labor and access to new markets is much easier.
However, the Oldham plant should not be closed down. Instead, the Leeds and Wolverhampton should be relocated to Malaysia while the Oldham plant remains operational. In all operation sites, HS Engineering has a different business structure. Davies and Lawrence (1963) state that business structure should be developed to suit the needs of the business. Therefore, the adoption of different business structures is good as long as it ensures the sustainability of the business. HS Engineering is not the most promising financial position.
There is a projected 30% reduction in total turnover in the next financial year. This shows that the current organization does not ensure business sustainability. However, looking at individual plants, Oldham plant has a good structure embedded in professionalism with a very good reporting structure and competitive wages for employees. In Leeds, the family structure does not favor business development. Instead, it creates tension in operations that is not very good for the business. The tension therefore negatively affects communication within the plant thus affecting even the reporting line. This is evident in low-profit margins registered from this plant.
Wolverhampton plant was established to supply high engineering bearings to the car industry. Though the plant is cost-effective due to automation, the emergence of low-cost products in the Far East has negatively affected the profitability of the firm. This paper, therefore, suggests a relocation of low-precision manufacturing from Leeds and Wolverhaptom to Malaysia while retaining the high-precision manufacturing to Oldham. This is because the plant in Oldham is strategically located and is financially performing as it is registering high-profit margins. Plants in Leeds and Wolverhampton should be relocated to Malaysia where there are cheap labor and access to the market is easier.
This will enhance competitiveness in the market.
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