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Organization Behavior

Essay by   •  November 17, 2012  •  Essay  •  2,216 Words (9 Pages)  •  1,507 Views

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The problem confronting Argus Savings and Loan in the long term has been a decline in its profitability and margins while facing increased competition. Argus strategy of focusing on traditional home loans and savings had resulted in narrower margins between savings cost and mortgage yields. In the short term, the bureaucratic and authoritative leadership style of Adam Taylor had failed to rectify the situation through the austerity measures implemented earlier. The new measures to cut staff which has been proposed dictatorially had met with resistance from Elaine Edwards and created a conflict in the organization. The various branches were focused on their individual goals versus the overall goals of Argus.

Analysis of Situation: - A number of different levels of analysis can be brought to bear on this case: Societal Level of Analysis As Argus's business model iss based on local communities, it is sensitive to the changes in the local communities, government policies as well as its customer perception. The legal environment within the banking environment was changing but Argus had failed to capitalize on these changes and diversify into other banking services. Hence any cyclical changes to their traditional saving and loan would have a major impact to Argus. This was currently being experienced by Argus where their profitability was reducing due to decreasing margins. The Case also makes it clear that Argus Savings and Loan association is facing an increased competition and one of its main competitors is opening a branch in the same area as their Newgate branch. As Argus is run along bureaucratic lines, Research conducted by Burns and Stalker indicates that a mechanistic structure is best suited to a stable market environment. However as Argus's environment is changing - increased competition, reduced margins and legal changes in banking environment, it needs to establish a more responsive organization structure and alternatively needs to minimize the environmental impacts by increasing customer loyalty and customer premiums. Organizational Level of Analysis Organization Structure & Culture

A bureaucratic organization(Crozier) is effective in the initial stages of the organization when it is small, however according to OB theory, as the organization expands it is important for it to adapt to the growing needs of the business. As Argus was focused on the local communities it was important to understand the needs and challenges of each of the new branches which were opened and adapt their organization structure to the changing business needs and conditions. As Argus expanded into multiple branches it was important to ensure that there was a mechanism to integrate the various branches and understand the unique constraints and challenges of each branch. According to the (Lawrence & Lorsch) organizations with high differentiation and high integration tended to do better than organizations with low differentiation and integration. At Argus, The Newgate branch was the largest branch as compared to the other branches and

Elaine who was the branch manager at Argus was focused on ensuring that her branch was not affected by the cuts being imposed by Adam Taylor and wanted him to focus on other branches displaying a high level of differentiation with the other branches.

In case of Argus the organizational structure continued to be centralized under the Chief Executive with no coordination mechanisms with the different branches for lateral communication and integration. As a result each branch was focused on its individual goals versus the overall goals of Argus. This is illustrated by Elaine's contention to Taylor that the cutbacks be applicable to less profitable branches rather than her branch. This lack of integration between the branches has led to fragmentation of overall organizational goals and objectives. The prevalent structure at Argus was no longer sufficient to control the variety of its problems and needs a different structure and integration mechanism to operate efficiently. Moreover organizations are conceived as interdepartmental systems in the various departments are interdependent on each other. Imbalance of this reciprocal interdependence (Thompson, 1967) among the parts gives rise to power relations. Departments are able to increase their power base by making organization depend on them. Crozier (1964) stressed that groups use differential power to function within the system rather than to destroy it. However at Argus, the branches are focused on using this differential power to protect their powerbase rather than leverage it effectively for the organization goals as also outlined (D.J.Hickson). This has made Taylors directions ineffective as each branch is trying to protect their power base and not looking at the organizational goals. This is further illustrated by Elaine's dialogue with Adam Taylor where she has mentioned that her branch was most effectively run and would not have any job cuts within her branch and if it has to happen it needs to start with her. Hence as Argus expanded, the culture of the organization had to change from Power Culture in Handy's view to a task culture to deal with powerbases between the different branches and ensure that they are working towards the organizational goal. Secondly, the current power culture of the organization was sufficient in the early stages of Argus when Adam Taylor provided the vision and direction for the organizations growth. However as the organization continued to grow and the market conditions also changed, it was necessary for the culture of Argus to adapt accordingly. However the fact that Adam Taylor continued to rely on the financial statements for decision making which is a lagging indicator suggested that he was set on continuing a power culture (Harrison) within the organization. Power cultures are also associated with high turnover and low morale which at a time of strong competition may increase staff turnover. Organization Strategy In the book "The Bureaucratic Phenomenon" (French sociologist Michael Crozier) introduces the term 'vicious circle' to demonstrate the impersonal nature of decision making, decisions cannot must be made by the people who might be affected. The result of this is that most problems are resolved by people who have no direct knowledge of them. This has been the case in Argus as well where Adam Taylor dictatorially based his decisions on the short term output measures such as the financial balance sheets without consulting management on planning and company policy decisions. This prevented Argus from taking strategic advantage of changes in law which would have allowed Argus to diversify into house surveying, legal aid, and general purpose loans for improving their margins. This strategic myopia at Argus which has been limited by Taylor's vision

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