2015
ORGANIZATION THEORY AT FUTURE RETAIL LTD
GROUP 8 1
15/3/2015
Acknowledgement A Project usually falls short of its expectation unless guided by the right person at the right time. Success of a project is an outcome of sincere efforts, channeled in the right direction, efficient supervision and the most valuable professional guidance. This project would not have been completed without the direct and indirect help and guidance of such luminaries. They provide me with the necessary recourses and atmosphere conductive for healthy learning and training. At the outset I would like to take this opportunity to gratefully acknowledge the very kind and patient guidance I have received from my project guide Prof Rajesh Without his critical evaluation and suggestion at every stage of the Project this report could not have reached its present form.
2
TABLE OF CONTENTS •
Purpose of the project……………………………………………………………………………3
•
Introduction of the organisation………………………………………………………………….4
•
Form / Design of the organisation………………………………………………………………..6
•
Contextual factors………………………………………………………………………………..9
•
Structural configuration………………………………………………………………………….12
•
Conclusion……………………………………………………………………………………….15
3
PURPOSE To understand the dimension of organizational structure, organizational strategy, contextual factors such as environment, technology, size and structural configuration of future group in the special context of retail.
INTRODUCTION ABOUT THE ORGANISATION Future group is an Indian private conglomerate, headquartered in Mumbai and it is founded by Kishore Biyani (MD
& CEO) .Future Group’s businesses focus on developing and operating modern retail, brands and
distribution networks for the consumption sector in India. Built over more than two decades, the group’s flagship companies
focus on three distinct businesses – Hypermarkets business operated by Future Retail Limited, An integrated lifestyle fashion business operated by Future Lifestyle Fashion Limited and An FMCG and food distribution business operated by the Future Consumer Enterprise Limited.
Retail is the core business activity of future group, but group’s subsidiaries are present in consumer, insurance, brand development, real estate development, retail media and logistics. It is a corporate group and nearly all of its businesses are managed through its various operating companies based on the target sectors.Net income of company is 960.18 crore (US$150 million) as of March 2013.
4
5
Future Group's operating companies sorted by targeted market:Retail Future Retail Ltd Future Lifestyle Fashion Ltd Future Consumer Enterprise Limited
Financial Services Future Capital Holdings Future Generali Future Ventures
(for internal financial services)
Other Services Future Innoversity Future Supply Chains Future Brands Future Learning
Future Group retail services sorted by operating companies:Future Retail Ltd Big Bazaar Food Bazaar Fashion @ Big Bazaar HomeTown E Zone Foodhall FutureBazaar.com (e-retailing)
Future Lifestyle Fashion Ltd Central Brand Factory Planet Sports
Future Consumer Enterprise Limited KB's FairPrice Aadhaar Big Apple
Products brands under Future Group in India:7
Fashion and Lifestyle Indigo Nation Scullers John Millers Lombard All Rig Urban Yoga Nothing Fits like Jealous Bare Urbana Holii Converse Spalding Manchester United UMM
21
FORM / DESIGN OF THE ORGANISATION Mintberg argues that there are five basic parts to any organization.
8
1. Operating core – employees who perform the basic work related to the production of products and services. 2. Strategic apex – Top level managers, who are charged with the overall responsibility for the organization. 3. The middle line – Managers who stand in a direct line relationship between the strategic apex and the operating core. 4. The techno structure - The staff analysts who design the systems by which work processes and outputs are standardized in the organization. 5. The support staff - The specialists who provide support to the organization outside of its operating workflow.
Five Organizational Structures • • • • •
Simple Structure Machine Bureaucracy Professional Bureaucracy Divisionalized Form Adhocracy
Simple Structure • • •
Strategic Apex, direct supervision, vertical and horizontal centralization simple and dynamic, sometimes hostile Entrepreneurial firm generally follow simple structure.
9
Machine Bureaucracy • • •
Techno structure, standardization of work process, limited horizontal decentralization simple and stable Mass-production firms, service firms with simple, repetitive works
Professional Bureaucracy • • •
Operating core, standardization of skills, vertical and horizontal decentralization Complex and stable. School systems, social-work agencies, accounting firms
10
Divisionalized Form • • •
Middle line, limited vertical decentralization, standardization of outputs Relatively simple and stable; market diversity Large corporations, government
After analyzing the structure of FUTURE GROUP, we can say that it has a DIVISIONAL STRUCTURE. In future group, there are several divisions like retail, financial services, entertainment, real estate and media and within these divisions; there is also sub-division like in retail Future Retail Ltd, Future Lifestyle Fashion Ltd and Future Consumer Enterprise Limited. And each major division is headed by a president or vice president. And the power lies in middle management. For e.g. retail division’s president or vice president has full authority to take decision for retail division and they are also responsible for performance. Future group can be represented as a set of “little companies”. And each division can be organized into functional groups, with high division of labour, high formalization and centralized authority in the division managers.
11
CONTEXTUAL FACTORS ORGANIZATIONAL SIZE Organizational Size generally measured in terms of number of employs. There is no clear cut criteria dividing organization between big and small criteria but there is a common consensus that the organization which has more than 2000 employee is considered as big organization.
Size is directly proportional to complexity. Size is directly proportional of formalization. Size is inversely proportional of centralization.
Number of employees in future group is approx 35000 it means that it is a giant organization. So its organizational structure is highly complex, highly formalized, highly decentralized.
HIGHER COMPLEXITY: As a company is expanding its product variety or moving into new markets, managers are likely to add organizational complexity. For example, they may try both to maximize scale and to stay close to the customer. Pursuing both these objectives often leads to complex matrix structures, duplicated costs at different levels, and a lack of clear accountabilities. Each decision to add an organizational layer may make sense, but few companies in good times assess the overall impact of these decisions on organizational complexity. In a downturn, however, the performance burden of future group which is an overly complex organization becomes a major disadvantage. We have found three specific areas that provide a quick payoff in terms of nimbleness and the ability to focus. 1. They should increase span and remove layers: necessary hierarchy contributes to a number of ills, including excessive head count, inflexibility, slower decisions, and a lack of accountability. "De-layering" can help address all these issues. Companies typically begin by determining the average span of control (the number of employees assigned to any one manager) and the number of layers between the CEO and front-line employees (or between the head of a function and the lowest-level person in the group). They then compare those figures to the competition. 2. Eliminate decisions complexity: Decision paralysis is another pitfall of complex organizations. We'll address this point in greater detail in a subsequent installment on strengthening the organization in a downturn. In brief, however, many companies suffer from unclear decision roles and processes. This is bad in any economic climate, but can be particularly damaging in a downturn. A tool we call RAPID—for Recommend, Agree, Perform, Input and Decide—can help cut through the mess.
12
HIGHLY FORMALIZED: To cater to such a high complex structure, it is very important that the organization should be highly formalized. As company is growing larger, a certain amount of formalization is inevitable. Employees require some direction in their job responsibilities and in the procedures required for consistency within the organization's production schema. When organizing, however, managers should be aware of the costs of excessive formalization, which may include stifling employee creativity and innovation as well as slowing the organization's responsiveness to critical issues and problems.
DECENTRALIZATION: These rules and regulation allow top management to delegate decision making while at the same time ensure that the decision are made in accordance with desire of top management. But research is mixed in demonstrating that size leads to decentralization .so future group is larger size organization having highly formalized and highly complex but decentralized.
TECHNOLOGY Technology refers to the information, equipment, techniques and process required to transform inputs into outputs in the organization. There are four type of technology in any organization based on problem analyzability and task variability. TASK VARIABILITY
C E N T R A L I S A T I O N
P R O B L E M A N A Z I A B I L I T Y
CRAFT
NON ROUTINE
(Training and meetings)
(Group)
ROUTINE
ENGINEERING
(Planning and rigid rules)
(Reports meetings)
FORMALISATION
13
If we evaluate future group in the context of technology then we can say that there is CRAFT technology in future group because the core business of future group is retailing and retailing has very less task variability because employees perform same task from day to day they do repetitive activities such as ordering the stock, receiving the stock, arranging the stock on display, billing etc so task is less variable and but problem analyzability is very less because problem analyzability means to what extent is there a clearly known way to do the major types of work you normally encounter? To what extent is there an understandable sequence of steps that can be followed in doing your work? So in retailing there is problems which are not easy to analyze for example how much to order it is very difficult to analyze it depends upon market demand fluctuations , when you receive your order it is not in your hand it depends upon supplier, transportation and many other things. So problem is not easily analyzable so we can say that Future group follows CRAFT TECHNOLOGY.
ENVIRONMENT Everything outside organizational boundaries is environment. Environment has two types. 1. General – the environmental factors that may have an impact on the organization but their relevance is not overtly clear. 2. Specific – the environmental factors that is directly relevant to the organization in achieving its goals. Ex: customers, suppliers, government, competitors. Environment and structure *Environmental uncertainty is directly proportional to complexity. *The organization working in stable environment has highly formalized similarly the organization working in dynamic environment is low formalized. *The organization working in simple environment is highly centralized and the organization working in complex environment is low centralized that is decentralized. If we evaluate future group in the context of environment then we can say that future group has mainly in retail business and in retail sector lot of environmental uncertainty such as market demand and supply of goods, consumer taste and preferences all are changing very frequently. So we can say that future group has complex organizational structure. Also future group is working in stable and complex environment because the components of specific environment such as customers, suppliers, competitors are almost stable but complex. Because it may possible that future group ordering goods from the supplier each time but it is not possible that they supply goods each time in a fix period of time the quality of goods also may 14
vary from time to time so it is stable and complex environment. So according to environment perspective too future group has high formalized and centralized organization. Future group is MECHANISTIC STRUCTURE.
STRUCTURL CONFIGURATION COMPLEXITY Complexity refers the degree of differentiation that exists within an organization. Its types: Horizontal Differentiation – It considers the degree of horizontal separation between units. Specialization (division of labour) and departmentation is the best example of horizontal differentiation. Vertical Differentiation – Vertical differentiation refers to the depth in the organization structure. It depends upon span of control.
15
Spatial Differentiation – This differentiation arises due to working in different locations. Future group is generally working in India but retail sector is very diverse sector it depends upon culture, demography and income level of people so state to state there is differentiation arises in retail business.
FORMALIZATION Formalization refers to the degree to which jobs within the organization are standardized. Future group is highly formalized organization here every employ follow the decision and working direction of their superior and it is also theoretically right because where there is more complexity there is greater need of formalization.
CENTRALIZATION Centralization refers to the degree to which decision making is concentrated at a single point in the organization. Future group has decentralized culture for this purpose they create three separate division of group. Future Retail Ltd Future Lifestyle Fashion Ltd Future Consumer Enterprise Limited
16
Conclusion After viewing future group in the entire context we can say that future group is highly complex, highly formalized, decentralized organization that is working under simple and stable environment and follow DIVISIONAL STRUCTURE.
17
