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Management and Organisations - Systems and Contingency Theory

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Management and Organisations

In today's society due to the globalisation of business for an organisation to survive this dynamic environment it must become internationally orientated. Leighton holdings is one such company whom through careful management by it's long standing CEO Wal King has become a profitable multinational company , a fair feat in the dynamic and uncertain Construction, Mining and Infrastructure development industry. This essay explores the application of systems and contingency theory to the Leighton case study and the international management strategies used in its inspiring growth. It also explores the various sustainability issues associated with a multinational company and the sustainability programmes Leighton may undertake in the future.

Systems and Contingency Theory

Both systems and contingency theory can be applied to the Leighton Holdings case. A system can be described as "a set of interrelated and interdependent parts arranged in a manner that produces a unified whole". (Robinson, S, et al, 2008) In terms of management this implies that a company is made of various parts which, after diverse inputs and processes, all work together to produce a particular output or product. A company which reacts to changes in its environment is called an open system, and one which does not a closed system. (Davidson, P, et al. 2009) Leighton Holdings can be identified as an open system. Through Wal Kings effective management practices the company is able to identify changes in the dynamic environment in which it operates and changes its operational systems effectively. A change in the environment, whether it be physical, financial or social can be regarded as a change in an input within the organisational system. Thus it responds accordingly through a decision making process guided by management to produce a different output or product as required by the now changed operational environment in order to survive.

Kings own emphasis on diversification indicates an open systems approach to a rapidly changing environment. By further diversifying the company's operations into the mining sector King was able to take advantage of relatively recent resources boom and an increase in china's demand for minerals and energy (Davidson, P, et al. 2009). In this case the input towards the system can be described as an information input resulting in the organisations overall increased output of mining infrastructure and increased profits. This also reduces the impact entropy, "the normal process leading to system decline" (Davidson, P, et al. 2009), as the system responds successfully to changes in its operating environment.

Systems theory can also be applied to Leighton holdings if it is considered in terms of subsystems. "General systems theory views the organization as a complex collection of subsystems that interact with each other at their interface, and which maintain internal boundaries that are essential for their survival" (Gong, Y, Shenkar, O, Luo, Y, Nyaw, M, 2005). Leighton holdings is a complex organisation and due to its composition of multiple companies needs effective management, which systems theory provides, to create a working cohesive whole. Each individual business composing the organisation can be viewed as a subsystem, a separate piece of the broader organisation. "The company structure is that of a conglomerate, with a holding company coordinating operations, and relatively autonomous companies within the group acting as individual businesses and undertaking the work" (Davidson, P, et al. 2009). Leighton Holdings provides the general strategies for the businesses and the performance targets, the outputs, and each individual company, a subsystem, operates independently to provide its individual output contributing to the organisational targets.

The separate businesses interact with each across intercompany interfaces providing information and resource inputs to each other in order to achieve operational goals, but don't interfere with each other's own individual hierarchy 's and processes due to their own distinctive natures. This proves to be an effective system and is an example of synergy, where the separate businesses working together accomplish more than they would alone (Samson, D, Daft, R, 2005).

Contingency theory is the fact that classical universal management theory may not suit all situations or organisations as they are unique in their own right (Davidson, P, et al. 2009). "The basic foundation for the contingency theory is that the effectiveness of management approaches is contingent upon the organisational environment in which they are applied" (Wetherbe, J, Whitehead, C, 1977). Due to the dynamic environment in which Leighton Holdings operates in contingency theory has an important role in Wal King's managerial strategies. Contingency theory itself can be linked closely to systems theory in its application in the Leighton Holdings case.

The dynamic environment in which the company operates encourages continually changing management strategies and thus the use of contingency theory. Classical theories suggest a framework for management techniques generally for one suitable situation and because of this they are commonly not suitable for companies which operate in dynamic environments such as Leighton Holdings. This enforces the use of response based management practices with King changing his management techniques to the suit the characteristics of different situations as they occur.

These situations also extend to the offshore based divisions of Leighton holdings. Leighton Asia based in Hong Kong with 706 million dollars worth of jobs in hand forms a considerable part of Leighton Holdings (Leighton Holdings Limited, 2009). Due to the cultural differences between China and Australia management methods utilized in Leighton's Australian arm may not be effective in the Asian branch. King recognises this and his systematic approach allowing each business to run independently is an example of the use of contingency theory, allowing Leighton Asia to be governed by its own unique situation.

International Management Strategies

International management can be simply defined as the "management of business operations conducted in more than one country" (Christopher, E, Deresky, H, 2008). In today's society globally orientated companies are nothing new and an international perspective on operations is seen as essential in order to survive in a world where countries are becoming highly specialised in terms of the different products, resources and services they provide.

In order to discuss the international management strategies

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