Organizational Theory and Design

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This case study has been specially extracted and adapted from an article written by Kumar, T.V. and Purkayastha for IBS Hyderabad, published in Daft, R.L. (2015) Organizational Theory and Design. 12th Edn. Boston, USA: Cengage Learning and on two audio programmes made by the BBC, which can be found at the following links: https://www.bbc.co.uk/programmes/p03jrn90 and https://www.bbc.co.uk/programmes/p03jrn8w, along with the Backlight documentary made by Dutch company VRPO, available at the following link: https://www.youtube.com/watch?v=FNzmk-2mpXk
https://www.youtube.com/watch?v=gG3HPX0D2mUThe adaptations have been made specifically for the purpose of this examination and are not for publication.Semco was established in 1953 in São Paulo, Brazil by Antonio Semler, an Austrian immigrant. It began as a manufacturer of marine pumps, 90% of which were supplied to Brazil’s shipbuilders. The company was structured as a strict, bureaucratical hierarchy, with strictly governed policies and practices. Managers prowled the shop-floor, monitored worker’s visits to the bathroom and checked the workers every day when they left the premises, to ensure that they had not stolen any tools, inventory or equipment. Pay was deducted for employees who arrived late, whatever the reason. Manufacturing processes left little room for employee autonomy. Basic rates of pay and salary scales applied. Initially, the company was very successful, but by the time Antonio’s son Ricardo Semler took over (at age 24) as CEO in 1982, the company was in very poor financial straits.Initially, Ricardo’s leadership style was authoritarian like his father’s, pushing his managers and employees hard, and putting in very long hours himself. The company structure was a traditional pyramid, where power was concentrated at the top and where it was difficult for employees to move up the ladder. Employees of each functional area such as manufacturing, sales and accounts reported to the respective functional heads at the head office. Expansion was being slowed down by bureaucracy and inter-departmental friction. Semler estimated that up to 30% of productive time at work was spent dealing with petty issues such as dealing with employees who showed up late, making sure they stayed late to make up time etc.This autocratic and controlling style of business took its toll on Semler, when still only in his mid-twenties, he collapsed in the middle of one of his factories. Ricardo’s doctor warned him that although relatively physically fit, he was more mentally strained than any patient of the same age. After a period of recovery and reflection Ricardo realised that if he wanted to enjoy the fruits of his labours to an old age, he needed to make radical changes to his life. According to the TV documentary, he also realised that if his own life was this stressful, then so were the lives of his employees. Ricardo resolved to make changes so that he and his employees could enjoy their working lives and attain a better work-life balance. The changes he made were based on two underpinning beliefs. One was faith in grown-up behaviour – the fundamental human urge to be productive and strive for a better tomorrow and to contribute to an endeavour of significance. The second was that everyone functioned in different ways with regards to the time, place and mode of delivering their best output.
He began by removing what he called ‘corporate oppression’. He stopped the security searches of employees leaving the building and relaxed the dress code for employees. He made changes to the hierarchically organised work areas. There were no longer executive dining halls or reserved parking spaces for senior staff members. The job roles of receptionist and personal assistants were removed, redeploying those staff members into more varied, stimulating and interesting job roles. This meant that employees were expected to welcome and make coffee for their own visitors. Semler also introduced flexible working hours and allowed employees to work-from-home. Hammocks were provided in the garden areas of Semco sites, so that employees could relax whenever they wanted. No one had a permanent workstation. On any specific day a top executive could be seated next to an intern. Those required to travel on company business could decide what form of travel was appropriate – knowing that their team members would scrutinise their expenses – this peer group scrutiny discouraged employees from taking advantage of the system.What Semler found was that the more autonomy he allowed his employees, output and efficiency rose. In time, he was able to push the boundaries of conventional working practices still further. There was no compunction to attend meetings – if no one attended the meeting it was seen that the agenda was worthless. Employees were prompted to raise queries or even leave a meeting if they lost interest. Two staff positions were created for all board meetings, where employees could fill them on a first-come, first-served basis. Semler introduced leaderless teams. The whole team were involved in interviewing to fill vacant positions, decide when, where and how they worked and negotiate their own salaries and pay rises. (Of course, they had to evidence why these were well deserved). All circulars, reports, meeting minutes and letters had to be reduced to a single page, forcing them to write down only what was necessary. The company became almost completely reliant on the zeal and creativity of its employees.
Every business division of Semco had complete autonomy to expend its allocated financial budget as it saw fit. Each division had only a few hundred employees, divided into self-managed teams of around 10 to 12 people. Each team manufactured a complete product, not merely individual parts. The team discussed and decided their strategies and action plans and outcomes and were answerable for them. The relatively small sized teams ensured that each employee knew their
co-workers well. Employees were not evaluated on the number of workhours they put in but based on meeting set output targets.
As a company, since 1981, Semco budgeted for six months at a time. Assessing the status of its business on a half-yearly basis enabled them to keep up with the changing business scenario. A thorough budgeting and planning mechanism meant each business unit was required to defend its continuation. This enabled the company to move employees and resources to more profitable business strands as needed. Also, every six months, each division estimated the number of employees they would need for the subsequent six-month period. This entailed very employee to justify his/her reappointment. The company continued to grow and every Semco employee had a vote – a say in determining whether to purchase a new company. Any new business proposals that employees put forward, were vetted speedily and transparently. Each proposal was presented to an executive committee made up of emissaries from key business divisions. Any employee could attend these meetings. Each proposal was required to fulfil the two conditions of operating in the premium segment and of the product or service being intricate, entailing engineering processes and being difficult for new entrants to get into.
If a new business proposition was put forward by a team and approved, it became that team’s responsibility to conduct that business and it could retain a pre-determined percentage of the profit – sometimes as much as 50%. This enabled Semco to grow from a small plant manufacturing marine and industrial machinery, to an alliance of 16 enterprises, also comprising 10 online businesses and cutting-edge Internet ventures, all funded by the Semco business units. Ricardo made clear that he was not concerned about which business segments Semco operated in – he felt that this would inhibit employees’ innovation, confine their thinking and discourage them from exploring new avenues.Semler believed that if his employees led balanced lives, the organisation would remain health. This balance could be achieved when employees were given room to figure out their strengths, likes and dislikes and align themselves and their ambitions with organisational objectives. Job rotation was actively promoted across the organisation so that the employees were given the freedom to experiment with different job roles in order to find their niche. Employee committees had regular discussions with the executives of each factory. They had a say in reducing expenses, making significant alterations to product lines and in difficult times, choosing which employees would be laid off. The overwhelming emphasis on objectivity also led to the company’s head office being dismantled and replaced by satellite offices, a bit like airport lounges, scattered across São Paulo Working in these smaller settings, closer to home reduced the amount of time employees spent battling the traffic to reach the office.In the 1990’s when the Brazilian economy was really struggling, employees voted to take a 30% reduction in wages, subject to their slice of any profits being increased to 39%, management pay being reduced by 40%, and employees being entitled to vet every expense. The employees also volunteered to take on some of the jobs that had previously been outsourced to other companies, such as preparing meals, cleaning, security, delivering products and collecting components. Later, as the fragile economy recovered, tasks which were due to be outsourced were instead offered to employees who would otherwise be laid off. These employees were encouraged to exit Semco and set up a satellite firm, sub-contacting to Semco. They were allowed a lease-free period before paying to lease Semco’s machinery and even operate from Semco’s factories, whilst also being allowed to take orders from companies outside of Semco.
AppendixSome examples of Employee Programs at Semco:
Retire-a-little
Employees in their 30’s and 40’s might not be able to pursue their hobbies or interests due to financial constraints (e.g. having a young family), but when they reach their 60’s, they might not have the physical ability to pursue their interests. Under RAL, an employee could take time out, possibly for half a day a week, to engage in their personal pursuits, which would also entail a slight deduction in monthly salary. After retirement, they could redeem from Semco the deducted salary by working the corresponding number of hours.
Lost in Space
Under LIS, for one year, every young entrant into Semco was free to do whatever they desired, work in any of Semco’s business division, or hop across any number of divisions they wanted to. However, after the completion of one year, if none of those divisions came up with a job offer, or if the entrant did not find anything interesting, they had to quit.
Up ’n Down Pay
Under UDP employees had the flexibility to adjust their compensation based on certain situations in life. An individual could reduce the number of working hours or responsibilities due to factors such as taking care of children or elderly relatives. There would be a corresponding reduction in pay.
Work n’ stop
Under WSP employees could take extended breaks of up to 3 years to pursue studies, or their other interests or to reflect on where they were headed.
Rush Hour MBA
RHM took place once every 2 weeks, for 2 hours starting at 6pm, so that employees could avoid the heavy rush hour traffic and make more productive use of their time. Any of Semco’s employees could volunteer to lecture on a subject of his/her interest or tell them about an interesting article they had recently read.
Compensation Options: Employees could combine any of these options in any proportion.
Fixed salary
Bonuses
Profit Sharing
Commission
Royalties on Sales
Royalties on Profits
Commission on gross margin
Stock or stock options
If a particular business unit went for an IPO or was sold off, then employees could take advantage of the IPO offering
Self-set yearly appraisal/compensation for achieving self-determined targets
Value added, a percentage of the difference between the present and the future, three-year worth of the company.
To achieve a Pass
Element
90- 100% Worthy of Publication
80-89% Excellent
70 -79% Very Good
60 – 69% Good
50-59% Threshold
Question 1: 30 marks available
The student demonstrated outstanding evidence of:Understanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (10 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer. (5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answer
(10 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated excellent evidence of:Understanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (20 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer
(5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answer
(10 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%. (5 marks)
The student demonstrated very good evidence of:Understanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (20 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer. (5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answer
(10 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated good evidence ofUnderstanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (20 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer. (5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answer (10 marks)Using correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated satisfactory evidence of:Understanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (20 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer. (5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answer (
10 marks)Using Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2% and only minor errors.
(5 marks)
Question 2:20 marks available
The student demonstrated outstanding evidence of:Critical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer (15 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated excellent evidence of:Critical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer. (15 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated very good evidence of:Critical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer. (15 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated good evidence ofCritical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer. (15 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated satisfactory evidence of:Critical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer. (15 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
Question 3:
50 marks available
The student demonstrated outstanding evidence of:Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a wide range of academic viewpoints, beyond the module content, in relation to their analysis. (15 marks)
Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated excellent evidence of:
Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a wide range of academic viewpoints, beyond the module content, in relation to their analysis. (15 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated very good evidence of:Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a good range of academic viewpoints beyond the module content, in relation to their analysis. (15 marks)Using fully correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated good evidence of:-Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a range of academic viewpoints, beyond the module content, in relation to their analysis. (15 marks)Using correct Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2%.
(5 marks)
The student demonstrated satisfactory evidence of:Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a range of academic viewpoints in relation to their analysis, but may be limited to module content. (15 marks)Using Harvard reference format for in-text citations and in reference list with no individual similarity matches above 2% and only minor errors. (5 marks)
Work which fails:
40 to 49% Not met some Learning Outcomes
20 to 39% Not met many learning outcomes
1-19% No learning outcomes met in full
Question One – 30 marks available
The student demonstrated limited or inconsistent evidence of:Understanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (20 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer. (5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answerAbility to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has plagiarised the work of others.
(5 marks)
The student demonstrated very limited evidence of:Understanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (20 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer. (5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answerAbility to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has heavily plagiarised the work of others.
(5 marks)
The student demonstrated little or no evidence of:Understanding different types of organisational structure and culture, and the ways in which they influence organisational behaviour. (20 marks)Use of relevant diagrams, charts and/or tables to illustrate their answer. (5 marks)Use of relevant and appropriate academic or professional opinions to underpin their answerAbility to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or significantly plagiarised the work of others.
(5 marks)
Question 2:
20 marks available
The student demonstrated limited or inconsistent evidence of:Critical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer (15 marks)Ability to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has plagiarised the work of others. (5 marks)
The student demonstrated very limited evidence of:
Critical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer (15 marks)Ability to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has plagiarised the work of others. (5 marks)
The student demonstrated little or no evidence of:Critical explanation of the terms ‘Best Practice’ and ‘Bundles of HR Policies and Practices’, incorporating relevant academic sources to underpin their answer (15 marks)Ability to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has plagiarised the work of others. (5 marks)
Question 3:
50 marks available
The student demonstrated limited or inconsistent evidence of:Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a wide range of academic viewpoints, beyond the module content, in relation to their analysis. (15 marks)Ability to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has plagiarised the work of others. (5 marks)
The student demonstrated very limited evidence of:
Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a wide range of academic viewpoints, beyond the module content, in relation to their analysis. (15 marks)Ability to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has heavily plagiarised the work of others. (5 marks)
The student demonstrated little or no evidence of:Critical analysis of the range of policies and practices used at Semco to engender change. (30 marks)Use of a wide range of academic viewpoints, beyond the module content, in relation to their analysis. (15 marks)Ability to utilise Harvard format for in-text citations and in reference list and/or the student is unable to paraphrase or has significantly plagiarised the work of others. (5 marks)
Assignments which Fail to meet the standard required for Master’s Study:
40 to 49%
 Unsatisfactory 
20 to 39%
1 to 19%
 Marks between 45 and 49% might indicate a narrow fail.
There is uneven attainment. Marks below 45% indicate a clear fail – some learning outcomes not met.Some assessment criteria not addressed. 
Work falls well below Masters’ standard.May have partially met one or two learning outcomes.Many assessment criteria are not addressed.  
Work is very poor/incomplete and/or irrelevant and demonstrates a serious lack of comprehension. Students may have misunderstood or misinterpreted the set task.No learning outcomes are met in full although there may be minimal attainment in relation to one or two. 

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