Tutorial 12 (Week 10) Lecture 12: Building an organisation capable of good execution

Question 1
MRCB
MRC Berhad has been involved in various businesses ranging from plantation to retailing for
more than 50 years, making the company a conglomerate. International expansions have also
seen the company operating in numerous countries. Business has been good with growing
market share and volumes for years until the recent turn of events that reverse the trend. The
last four years have been difficult for the company with declining net margins in all divisions.
The company has undertaken steps to improve operational efficiency but still failed to arrest
the decline. MRC Berhad has traditionally organised along divisions based on locations and
products as special business units (SBUs). Decision makings are generally decentralised at
the SBUs level. By having such structure, the company believed that it has strong customer
focus.

Required:
(a) Evaluate the current organisational structure of MRC Berhad. What went wrong with such
structure. (10 marks)
- The current organisational structure is a multidivisional structure with decentralized control.
- This organisation structure is independently managed.
- It may create competition within the company as the parent company gives SBUs freedom
to make decisions themselves, the outcome of each SBUs will be different.
- It will be more costly as the company believed that it has a strong customer focus, each
SBUs might repeat the process among them.
- The objective, vision and mission might be different among each other and the response
given might be conflict as each of them have their own way.
- The manager may not know or follow up the decision and create an unclear situation where
upper management does not really know what happened.
- They are not able to combine all the strength from each other to come up with a suitable
solution
(b) Based on your evaluation in part (a), recommend FOUR (4) alternative organisational
structures which MRC Berhad could adopt to overcome the decline.
(10 marks) [Total: 20 marks]

Matrix Structure
The matrix organizational structure is a combination of two or more types of organizational
structures. The matrix organization is the structure uniting these other organizational
structures to give them balance. Usually, there are two chains of command, where project
team members have two bosses or managers.

It allows the sharing of highly skilled resources between functional units and projects.
Communications are open, which helps knowledge move throughout the organization with
less obstruction. Because the matrix organizational structure fosters better communications, it
makes the normal boundaries between groups more porous, which allows for more
collaboration and an integrated, more dynamic organization.

This structure is benefits to those employees who are looking to widen their experience and
skill sets. They can be part of many different aspects of various projects. It puts them in an
environment that facilitates learning and gives them an opportunity to grow professionally.

Furthermore, the functional departments have highly skilled people, and those people are
available to help the project team if needed. This creates a pool of valuable resources that can
be dipped into and provides more flexibility to resolve issues without having to source new
resources.

Functional structure
A functional organizational structure is a business structure that groups employees by specialty, skill
or related roles. It is based on levels of hierarchy that include different departments, under the
direction of designated leaders.

People in a functional structure setting have specialized skills that allow them to work more quickly
and efficiently than those who may be unfamiliar with specific subjects, which leads to greater
productivity. Also, their confidence level enables them to complete tasks with minimal supervision.
Employees within this system of hierarchy who demonstrate high levels of productivity often receive
promotions to other positions.

Companies following a functional organizational structure have multiple departments composed of

small teams. Within each team, experienced managers have the chance to teach their team members
the same skills they possess, resulting in an enhanced skill set for all involved. Both soft
(interpersonal) and hard (technical) skills may develop over time as people work together to find
unique solutions and overcome work-related challenges.
Hierarchical organizational structure
A hierarchical organizational structure contains a direct chain of command from the top of
the organization to the bottom. Senior management makes all critical decisions, which are
then passed down through subsidiary levels of management.

Companies with hierarchical structures are divided into various departments and teams. When
employees are part of a team, they grow a sense of team spirit and loyalty. This can be beneficial for
company to ensure everyone works toward the same goal. 

Companies with a hierarchical structure have different levels of authority and power. This means
employees will have direct supervisors who they can report to. This eases the flow of
communication and ensures employees know who their direction and working orders are coming
from. Rather than having a company with a sole executive leader, a hierarchical structure allows for
better employee management and clearly defined executive positions.

Team-based organizational structure 

Team-based organizations emphasize the value and importance of all employees regardless
of their specific roles or the simplicity and complexity of the tasks that they perform. In this
organizational structure, employees have more autonomy and more authority to make
decisions, without needing managerial approval.

The primary advantage of a team-based organization is that because there are  usually no
managers or only one manager supervising multiple teams, communication between
employees is much more free-flowing and effective. This improved communication also
means that companies can resolve work issues quicker because employees can share
information at a faster rate, which speeds up responsiveness.

Another advantage is that team-based organizations are more flexible than organizations
that are traditionally structured. As a business owner, you can shift employees from one
team to another to maximize their skills and talent and to also keep them motivated with
new challenges.
Question 2
SDMC
SDM Corporation is a big conglomerate which has won several development projects from
the government. All those projects come with specific deadlines that the company has to
adhere to. Failure to meet those deadlines will result in the company having to pay penalties
to the government. This is the last thing that the company can afford to do since the profit and
reputation of the company will be at stake. The current organisational structure hinders the
capacity of the company to complete the projects on time. Changing the organisational
structure is inevitable and critical for the survival of the company

Required:
(a) Recommend the most effective organisational structure for the company. Justify your
recommendation. (10 marks)
 SDM Corporation is recommended to use matrix structure.
 It is an organizational structure in which some individuals report to more than one
supervisor or leader.
 This type of structure is based on a dual chain command and is often used as a
structure in project management.

 Since there are several development projects, SDM Corporation needs to create
flexibility across the projects to ensure they can meet the specific deadlines for
each project.
 The company also needs to have a speedy implementation of those projects to prevent
the company being failure and having to pay penalties to government.
 Hence, using a matrix structure can suit a rapidly changing environment and enable
flexibility across the projects.

 Next, SDM Corporation needs to be involved in establishing cross-functional teams

to enhance the capacity of the company completing the projects on time.
 It can improve the decision making process by bringing together a wide range of
expertise to the cross-functional team.
 People from different departments can collaborate to implement and execute
strategies.
 Thus, a matrix structure allows resources to be maximised in the company as
equipment and employees are shared across projects.
(b) Discuss the advantages and disadvantages of the organisational structure mentioned in
part (a). (10 marks) [Total: 20 marks]
Advantages
Maximizes resource usage
Resources usage is maximized by equipment and employees being shared across projects. A
matrix structure also allows project managers to work in the areas of their expertise rather
than being pulled across multiple projects, boosting the overall contribution of their talents.
For example, a quantity surveyor expertise on calculating the cost of the project and
specialization could be applied over a number of projects

Increased communication efficiency

A matrix organizational structure allows multiple departments to easily communicate and
collaborate on a project. Since the employees answer to multiple managers as opposed to just
the project functional manager, issues can be resolved more quickly and the company wide
interaction can be increased. The project manager can conduct a weekly or daily meeting to
communicate with the employee to ensure they follow the requirement of the project

Increased teamwork
In a matrix organization, employees work across multiple projects and with various
departments within the company and this can help to increase the employee interaction and
promotes a better sense of teamwork in the organization. The employees are able to increase
the knowledge from various departments, apply specialization over several areas

Disadvantages
Career development being threatened
Employees are not able to fully utilize their expertise and skills in certain area as matrix
structure requires employees to handle multiple tasks which may include tasks that they are
not familiar or expert in.

Reduced employee effectiveness

Employees are assigned to multiple tasks across a number of projects and this may result in
reduced employee effectiveness and increased ambiguity as employees try to decide which
tasks are most important.

Potential conflict between functional managers and project managers

Since this matrix requires employees to answer to two or more managers and work on
multiple projects, it could cause workers to become conflicted between project manager and
functional manager. Also, because there are multiple managers in charge, there is the
potential for inconsistent managing directives among teams