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De Montfort University

Masters of Business Administration (MBA)

Understanding Contemporary Organisations HRMG 5026-2012-2

Virgin Groups Organisational Structure, Leadership Style and Motivational Approach to Employee Satisfaction


Nwani, Mark Kido Student ID: P10523986

Submitted to: Dr. David Robotham


(Word Count: 3196)

Date of submission: 16/04/2012 1

The aim of this essay is to critically analyse the existing models that describe the organisational structure of Virgin Group and also the leadership style that characterised the approach to governance taken by its chairman, Sir Richard Brandson, as well as the effectiveness of the method to employee motivation adopted by Virgin Group to encourage employees to enhance their performance capabilities. Organisational structure as explained by Slevin and Covin (1990, pp. 43-53) involves a framework within which an organisation operates to delegate roles to employees, establish appropriate channels of communication and build a corporate culture that encompasses its goals and objectives. There are several models of organisational types that explain the structure of an organisation, but for the purpose of this essay and due to the restriction on word limit only eight models would be examined which define the structure of Virgin Group and play significant roles in its decision making process, communication viability, knowledge sharing avenues, flexibility in employee job descriptions, management process and other key areas. The models to be discussed include; informal, decentralized, divisional, holding, matrix, organic (adaptive), simple and adhocracy structures. Several authors views would be used to give an in-depth analysis on how these models work in Virgin Groups organisational structure and the level of its effectiveness in enhancing employee participation and involvement in key aspects of the organisation that require their input. The leadership style to be elaborated upon is centred on transformational leadership which critically sheds light on the leadership attributes of Richard Brandson and its impact on employee performance and relationship with management during the course of accomplishing tasks assigned to them. Also, the approach to employee motivation would be evaluated through various theories on motivation to assess the extent of its effectiveness in the organisation and if it reflected on employee performance and productivity in terms of continuous knowledge

sharing for the creation of innovative ideas/concepts, efficient service operations/delivery, job satisfaction and organisational commitment, which are end result factors of motivation.

The organisational structure of Virgin Group is designed to place less emphasis on a hierarchical chain of command, and instead focus on encouraging employees to play a vital role in its decision making process by delegating a significant level of authority to them so as to give them autonomy on tasks they set out accomplish, as well as making subsidiaries/divisions independent of corporate head office both financially and structurally through the implementation strategies and policies they create and view as being effective enough to make their quest of building a strong brand and being a market leader a reality that is sustained. One of the organisational structures that fall within this framework is the informal structure which Groat (1997, pp. 40) indicted involves all extensive avenues of communication and interrelations that occur outside an organisations formal framework which are designed to ensure effective level of working harmony exists among employees, and also between employees and management in order to create a strong corporate culture for the organisation. In addition to this, Cross, Borgatti and Parker (2002, pp. 25-46) held that the informal structure promotes the emergence of flexibility in the several job descriptions that exists within an organisation, which increases the innovative abilities of employees to be more creative in their thinking abilities and also ensures efficiency in service delivery due to the operational pooling of several unique expertise that eventually results in the creation of high quality products and services. Groat (1997, pp.41) also added that an informal structure brings benefits to the overall communication units of an organization by expanding the channels and avenues through which people communicate and easing its flow from management to employees with the view to maintaining the state of cohesiveness in an organisation in terms of the working structure arrangement that has been adopted, which goes a long way to empowering employees to make

effective decisions in areas that affect them and increases the person-to-person interaction in the workplace. Furthermore, Barnard (1968, p. 114-117) hinted that an informal organisational structure is indefinite and has variations in density which is due to external factors affecting the closeness of people of formal purposes which brings them specially into working and constant communication contact for the purpose to accomplishing tasks jointly. The Virgin Group structure is designed in a way that eliminates formal measures or control systems as being a paramount function in its decision making practice and communication relationship between management and employees, thus enabling employees take responsibility and control over roles assigned to them. In addition to this, the disregard of factors related to hierarchy and control in the Virgin Group structure eases the communication flow from top-down and ensures it is unhindered in any way as authority is not exclusively exercised through a formal management system. Thus, employees have flexible portfolios and do not have to follow a central system to implement policies and strategies they formulate, as they have a significant level of autonomy to implement policies formulated and ensure their end results are achieved.

Another model that describes the organisational structure of Virgin Group is the decentralized structure which according to Goold and Campbell (2002, pp. 117-124) is characterised by distinct self-standing divisions, hand-off management style and a structural integration of related companies. Once this structure is in place, strategies that tend to be formulated as a means of giving the organisation a competitive advantage over its rivals as seen in Virgin Groups activities include; growth by acquisition, independence of divisional arms to make policies that have been tailored to conform with their set goals and objectives, as well as the diversification of the organization into other sectors so as to be involved in a lot of unrelated businesses that are not integrated with each other. In his work, Simon (1960) described an administrative organisation to be decentralized to the extent where discretion and a significant

level of authority to make crucial decisions rests with subordinates by virtue of the decision of top management not to interfere with key aspects of their decision making process that directly affect employees or subsidiaries. This collaborated with March and Simon (1958) who were of the view that a decentralized structure facilitates the accommodation of employees perspectives which are often limited in the formal structure by assigning decision making responsibilities to them by management so that they are able to have a degree of sovereignty in making decisions and carrying out action plans. Duncan (1979, pp. 59-80) also took the perspective that a decentralized structure creates an enabling environment for subordinates to actively participate in deliberations in the organisation which are likely to generate the required amount information needed to reduce uncertainty that may arise when formulating effective policies, thus facilitating the emergence better decisions as a result of employee involvement and active participation. This relates to a key aspect of the Virgin Groups organisational structure as employees are given a significant degree of independence to make and implement decisions in areas that impact on their job responsibilities with minimal intervention of management who rather than use the normal top-down management control method in its dayto-day operations and delegation of duties to employees, sought to adopt the bottom-top empowerment approach with less concentration of power in the head office, and more focus on distributing it evenly among divisions in order to integrate work groups and team members to work more efficiently.

In addition to this, Capon (2004, p. 16-24) considered three structures under a decentralised system which further gives an insight to the organisational structure of Virgin Group. They include; divisional, holding and matrix structures. A divisional structure encompasses the separation of subsidiaries based on their service industries or product lines and enables the parent company spread its profitability across each division and reduce the chances of

underperformance resulting by ensuring each division specialises in a particular area. A holding structure on the other hand entails the process through which a parent companys main role is the investment in acquisition and diversification of subsidiaries and giving each of them autonomy to be independent of it in terms of its decision making and financing, while a matrix structure on the other hand as demonstrated by Lawrence, Kolodny and Davis(1977, pp. 43-60) entails the dissemination of authority among divisions and the creation of clear accountability measures by management as a means of addressing the extent of cross-functionalities that exists in employees roles so as to make their work structure more flexible. The organisational structure that is in place in Virgin Group is designed to enable the various divisional arms under it (most of which specialise in the particular product/service area) have autonomy to undertake decisions internally generated as the key focus of top management is usually geared toward acquisitions and making strategic decisions that would have a long-term impact on the group as a whole.

According to Robbins (1993), another model that characterises the organisational structure of Virgin Group is the organic/adaptive structure, which takes a decentralized organisational approach to distributing authority equally among the various divisions affiliated to it, thereby resulting in fewer rules and procedures, wider span of control, more personal means of coordination, low complexity and less specific division of labour so that good working harmony exists in the environment employees operate within. Burns and Stalker (1994, p. 96125) suggested that a key characteristic of the organic structure other than the fact that positions are not differentiated based on seniority, is that authority is taken by whoever shows himself to be the most informed and capable to lead a team. Mintzberg (1979, p. 299-304) agrees with this view by adding two more characteristics to the organic model which further help explain it better. They are; simple structure and adhocracy. A simple structure according to

him relies on direct supervision for coordination to take place. Here management may exercise control (which is often ceremonial in nature) but give employees a lot of freedom in their work, with minimal interference so as to enable an independent smooth flow of working conditions. Adhocracy as indicted by Toffler (1971, p. 119-133) seeks to develop close working ties between management and employees by making their working functions flexible enough to accommodate cross-functional attributes and a re-organisation of employee roles into job descriptions they can achieve more efficiently. Mintzberg (1979, p. 431-440) concurred with this by emphasizing the fact that adhocracy involves low level of formalised speciality, lack of reliance on standardised skills or know-how to achieve coordination, self-renewal, flexibility and strong reliance in synergy of skills and expertise as the bases to develop innovation. The approach taken by Richard Brandson to organise the activities of employees in Virgin Group is structured in a way that there is a management coordination structure in place but allows for each subsidiary to have an flexibility in its day-to-day operations, with employees having their job descriptions cut out for them in a way that fosters cordial working relationships and harmony as a result the effective distribution of authority across each staff by the leadership structure in place which enables innovation take place through the synergy of ideas and as such ensures employee participation and inputs are important in the decision making process.

As such, effective leadership play a crucial role in the coordination and direction of activities of employees because it not only motivates them to work more efficiently in any role assigned to them to be undertaken, but also make them have a sense of belonging and commitment in the organisation. The characteristics of the leadership qualities possessed by Richard Brandon as identified by Bass and Avolio (1990) includes; intellectual stimulation, consistent inspirational motivation, attributed charisma development, individualised consideration and idealised influence, and are strong predictors of technological change and innovation due to the fact they

allow for flexibility and knowledge sharing which are the basis for making insightful decisions that increases the interpersonal relationships in an organisation and enhance its communication avenues. Thus, the leadership style which incorporates these characteristics and best define the leadership attributes of Richard Branson fit into the transformational leadership style, which Shamir, House and Arther (1993, pp. 577594) claims alters the self-concept of followers by building strong personal and social empathy with them, and using it as a key guide for developing a leadership structure they can relate to. This was done by making the working environment less formal, more fun and enjoyable as well as carrying employees along in the decision making processes so that they have a sense of involvement in the organisation which leads to fulfilment in carrying out their roles because of the satisfaction derived from the outcome of action plans formulated. Bass, Avolio, Jung and Berson (2003, pp. 207-218) corresponded with this view by pointing out that transformational leadership builds a collective high level of confidence among employees owing to its design and structure which facilitates interdependence among employees in accomplishing a task, by placing emphasis on knowledge sharing and encouragement by the leader. A key element of the transformational leadership style used by Richard Brandon as indicted by Groves and LaRocca (2011, pp. 511-528) is its ability to influence employees through the development and effective communication of a collective vision and inspiring them to project their abilities beyond self-interests for the good of their various departments and the organization in general. And this usually leads to employees being committed to actualising the goals and objectives of the organisation due to the enhancement of their motivational level to work more efficiently in a dynamic way.

The approach to employee motivation taken my Virgin Group falls within the context of the theory Y model (McGregor, 1960) which was developed on the assumption of six key factors which are; the average human being doesnt dislike work as long as the working conditions

make it convenient for them to exhibit their know-how and learn from teams they are assigned to through the development of effective relationship management attributes, self-control and self-direction are elements employees adopt in the service of objectives they are committed to and do not need external control to bring them to achieving the objectives, commitment to the organisational objectives are as a result of the rewards attached to their achievement, the average employee learns to seek responsibility and not just accept it under proper conditions, the capacity to exercise a relatively high degree of creativity in the solution of an organisations problems is widely distributed among employees and lastly under conditions of modern industrial relations, the intellectual potentialities of the average employee are not fully utilized. In addition to this, Herzberg (1964, pp. 3-7) identified a different set of factors which he pointed out are needed to motivate and satisfy employees. They include; recognition, achievement, advancement, responsibility and the work in general. A key way through which employees are motivated for better performance in the Virgin Group structure is the acquisition or expansion of a business initiative, and then not handing its supervision and control to a top staff to manage in addition to delegating a stake of the organisations shares to them so that they have a sense of involvement in the company and run successfully like their own. Employees are also seen as being a vital part of the organisation and are motivated to enhance their level of know-how and involvement by assigning a degree of autonomy to their working conditions and making sure no level of interference plays a role in their assigned portfolio. That way, they have great level of responsibility to their roles and are motivated to formulate policies that aid in the accomplishment tasks allotted to them. Hicks and Gullett (1981, p. 456464) agreed with this in their claim that there are three key motives behind employee motivation. They are; power, affiliation and achievement, and these correlate with why the approach to employee motivation taken by the Virgin Group may be effective because every employee wants to have a sense of belonging in knowing that there is a great tendency for these

three elements to get to them in their quest to accomplish the desired results for the organisation they work in. The Virgin Group organisation structure is designed in a way that ensures employees who maximise their potentials are bestowed with them when management comes to the knowledge that they are organisationally committed to their duties, enjoy performing their roles and share knowledge where necessary with the view to adding value to their unit and team members know-how. Another reason why the approach taken by Virgin may be effective is because it follows the proposition of Maslow (1943, pp. 370396) with states that there are five categories of peoples needs which are; physiological, safety, social (sense of belonging), self-esteem and self-actualization, and have to be satisfied in an orderly way so as to make each level of need dominant enough to ensure employees dedicate their attention to accomplishing the higher rank need. There is less emphasis on building a formal hierarchy as seen in the Virgin Group organisational structure which bridges the communication gap between managers and subordinates, and reflects on employee roles by making it more flexible. A strong corporate culture is developed through this means due to the fact that the needs of employees are actualized through each of the stages till they get to the self-actualisation stage whereby they assume a management role and are charged with the responsibility of overseeing the affairs of a division.

In conclusion, this essay focused on eight models of organisational types which define the structure of Virgin Group, as well as the method to leadership taken by Richard Brandson and the style in which it fits into. Also the extent of the effectiveness of its approach to employee motivation was discussed and critically analysed to assess Virgin Groups approach to motivation of employees and its efficiency in achieving a desired result that had the interest of employees. It was seen that the models which characterise the organisational structure of Virgin group are designed to foster continued harmony and build cordial relationships among

employees, as well as between employees and management, while encouraging the emergence innovation in employees working structure due to the level of flexibility that exists in the specifications attached to their portfolio. Also each division is independent of the corporate office, and has no distinct affiliations with any other subsidiary in order to foster good working relationships among them and eliminate the tendency of competition or rivalry to emanate during the course of accomplishing tasks or meeting set targets. Additionally the leadership style discussed which is the transformational leadership style focuses on making employees roles less formalised and rule-oriented due to the charismatic and open-minded attributes possessed by its chairman, Sir Richard Brandson, which in geared towards making employees enjoy their job descriptions and participate in decision making in order to motivate them to enhance their level of know-how and share knowledge capabilities. Furthermore, the effectiveness of the approach to motivation taken by Virgin Group centred on several theories on motivation which were seen to have a direct correlation with the approaches taken by Virgin Group to ensure employees are motivated and progressed in the organisational management structure as a result of working effectively in their duties.

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