How formalized is the organization? Provide examples of formal rules and procedures, and indicate whether they are always followed. In an organization, formalization refers to the extent to which employee behavior is steered by rules and regulations that govern the organization and the degree to which these rules and regulations are standardized within the organization. It is usually an essential part of large organizations in order to ensure that their complex structures are working effectively and significant risks are minimized.
In the case of Qantas, the organization is highly formalized which implies the presence of strict regulations, compliance and minimal discretion over what has to be done. First of all being an Australian airline operating globally, it has to comply with numerous laws and regulations within and outside Australia. Examples of such regulations include the Qantas Constitution, Qantas Sales Act, Qantas Corporate Governance Statement, Best Business Practices and etcetera. It is also imperative for the company to comply with Competition laws in Australia and globally. There are formally recorded rules and regulations for Qantas that need to followed for best business practices. A document named ‘An overview of Qantas Group Business Practices’ provides an overview of the principles, values and practices of the Qantas Group (Qantas Official Website).
It also depicts the standards set by the organization that should be upheld by all of its employees. The company encourages people to go through the document in order to better understand their responsibility as an individual and as a group. Some of the principles and formal rules laid out in the document are code of conduct and ethics, legal policy, safety and health policy, contracts review and execution and etcetera. Historically Qantas has been pretty efficient with regards to health and safety standards of its employees and passengers. It immediately grounded its A380 fleet after a famous mid-air incident, keeping in mind the safety of its employees and customers. However there have been occasions where employees or the company itself has failed to comply with certain rules and standards and have been in the public eye for such actions.
One of such incidents took place in 2008, when an Australian Competition and Consumer Commission court ordered Qantas to pay a hefty fine of $20 Million for involvement in price fixing and thus breaching a price fixing clause of the Trade Practices Act 1974 (ACCC, 2008). The fact that compliance with competition laws and standards is also mentioned in the ‘Qantas Group Business Practices’, proved out to be an embarrassing situation for the company. Qantas tried to compensate for the breach by extending full cooperation to the commission in providing evidence and conducting an internal inquiry into this matter as well. One of the most recent incidents is the resignation of a Qantas director earlier this year in response to the allegations of her involvement in an Italian bank scandal (Global Post, 2013). Italian prosecutors had launched legal proceedings against the director over bid rigging and fraud during her tenure as Chief Executive of a Luxemburg based transport equity fund. This incident raised concerns over Qantas’ policy of recruitment the right people for the right job.
It created further resentment amongst different people when it was revealed that Qantas board was aware of this particular practice while they were considering appointing Ms. Corinne Namblard as a director with the company. Experts argue that it is extremely hard to believe that a board as respected and trusted as Qantas, was unaware of her involvement in such a big scandal which predates to her appointment as a director (Sandilands, 2013). Apart from these major incidents, there have been numerous small incidents involving Qantas staff misusing their travelling benefits and free ticket perks (Crikey, 2004). Although this is a small issue, but there are formal rules and regulations that govern the use of staff benefits in a rational way. Qantas did act swiftly to such incidents and reminded its staff to abide by the rules and regulations in order to avoid any bad name for the company in the future.
Clearly describe the formal organisational structure. Provide a visual representation of the structure (use organisational charts).
Qantas was under government ownership until 1995 and therefore was following the classical/scientific management structure following a strict and tall hierarchical structure with clear lines of communication and responsibility. There were strict rules and procedures with an autocratic leadership style derived from traditional Taylor’s approach of putting the right person on the right job. Since 1995, when Qantas was privatized, the structure transformed more into Weber’s model and started evolving from a traditional top-down communication style to a flatter and more efficient one. However the current structure that is followed at Qantas comes after the new CEO, Alan Joyce, flattened the management structure to become more competitive, efficient and profitable (Qantas website)
The new structure has fewer levels of management and a wider span of control with increased flexibility and communication. The new structure also aims to create a better work friendly environment with eradication of inefficient work practices and a more democratic style of management where employees have a greater say in the decisions made by the company and also depicts greater amount of decentralization in the organization structure. Under the new structure, Qantas Group is now divided into four separate and independent business units namely Qantas Domestic, Qantas International, Jetstar and Qantas Frequent Flyer. All four units have separate CEO and its own operational and commercial functions. All CEOs will be reporting to Alan Joyce, who is the group CEO for Qantas. The new structure will help Qantas revive its flagging international operations and also result in more accountability within the group (Bratholomeusez, 2012).
Describe the level of horizontal differentiation and vertical differentiation, and the extent to which decision-making is centralized.
Horizontal differentiation is a part of complexity and refers to the number of job titles or departments across an organization (Morgan, 2006). It involves division of work and activities into departments or units. There are two ways to group these activities; Functional Structure is one way which means grouping carried out in accordance to the main functions of the organization which include Human Resource, Marketing, Finance and other functions. The other way is ‘Divisional Structure’ which implies that activities are grouped according to different departments that may depict needs of separate products, customers or markets.
In Qantas, Horizontal differentiation is in the form of a divisional structure. As depicted by the organizational chart, Qantas is divided into four main divisions of Qantas Domestic, Qantas International, Jetstar and Frequent Flyer and each division represents separate products for the Group. Each division has independent commercial and operational departments working exclusively under and for that division. With this level of horizontal differentiation in place, Qantas can retain specialization within each division due to the support of functional experts.
It is likely to help Qantas in analyzing and increasing the effectiveness of each division and help identify the exact issue and its core roots. Such structures are also known to be extremely responsive and are appropriate in large organizations like Qantas that has diversity in products and markets (Daft, 1998). However there are certain disadvantages associated with such kind of horizontal arrangement as well. It may lead to an increase in costs for the group as a whole to actually replicate the whole structure for all independent divisions. It may also cause problems of effective coordination in case of vast geographical areas or markets.
Vertical Differentiation refers to the amount of depth in any organizational structure. It indicates how tall or flat an organization is. Number of people working under a particular subordinate, also referred to as ‘span of control’, is one of the key dimension to determine the level of vertical differentiation in an organization (Morgan, 2006). A narrow span of control, mostly in the case of tall organizations represents higher levels of vertical integration whereas a wider span of control depicts lower level of vertical differentiation and is a typical feature of a flat organization.
Qantas, after privatization and the recent structural changes has made a shift from a tall to a flatter organizational structure and thus has lower levels of vertical integration within the company. The critics may argue that a flatter structure leads does not lead to closer or effective supervision in the company however flat structures indicate shorter and simpler communication between different levels for Qantas. It has also lead to an increase in the level of decentralization in the organization consequently leading to a greater level of participation for employees and general workforce in the management decisions. The decentralization has also enabled Qantas to initiate new communication systems and training programs in the organization in order to make each individual employee responsible and aware of the company’s goals and policies.
Weber’s ideal bureaucracy focuses on the characteristics of specialization of labor, presence of formal rules and procedures that apply uniformly to everyone in the organization, well-defined hierarchy and employee selection and promotion based on pure merit and performance (McGraw Hill, 2008). It is also referred to as one of the most rational and a stable form of organization where everyone knows what is expected of them as a member of a team. Qantas resembles a Weberian-style bureaucracy to an extent that it has the presence of formal rules and regulations, legal system, rational behavior and etcetera. However, the recent structural changes at Qantas, is the first step towards a shift to a non-bureaucratic structure.
It has implemented a divisional or a product structure, as depicted before, that aims to categorize four different products into different units. Divisional structure at Qantas also possesses characteristic of a contemporary organizational structure and thus can also be categorized as the first step towards a post-bureaucratic structure, as mentioned by (Hecksher, 1994), that keeps certain key characteristics of bureaucracy; however decisions are made more in collaboration rather than command and authority and organizations work more as a network to tackle challenges and achieve goals.
A pure non-bureaucratic organization structure for Qantas can be seen in the Engineering and project management departments. It follows the matrix management concept where all engineers belong to one department however have multiple reporting lines. Typically, engineering and procurement departments follow a matrix structure at all organizations. Even though it has moved towards a new structural change, looking ahead to a more flexible and non-bureaucratic structure to compete with strong competition in Australian and regional market, Qantas is facing problems in the application of the structure. This is primarily due to the hangover of bureaucracy within the organization which comes as a result of previous culture, compliance with Australia’s industrial agreements and the new industrial relations agreement that gives more right to the unions in the organization (Phillips, 2011).
Qantas is the largest and oldest airline of Australia. It was founded in 1920 in Queensland and was initially known as Queensland and Northern Territory Aerial Services Limited. It is also referred to as the pride of Australia and the Australians traditionally have a lot of emotional and national attachment to it. It currently operates a fleet of more than 145 aircrafts and operates to all major cities and airports in Australia and around the world. It was owned and operated by the government until its privatization in the year 1995.
Since then it has made significant changes to the structure and culture of the organization and also setup a low cost carrier with the name of Jetstar in order to compete in the local domestic market. It has stake in various regional airlines and aviation operators like Fiji Airways and multiple codeshare agreements on different routes around the world. Presently, Qantas group is divided into four major divisions of Qantas Domestic, Qantas International, JetStar and Qantas Frequent Flyer. It aims to boost its international operation by targeting Asian region and as a result it has concluded a recent deal with Emirates that aim to increase the presence of Qantas in the Asian market. It faces challenges in the form of increasing fuel prices, imposition of carbon tax, ongoing industrial disputes and increased competition in the form Virgin Australia and its recent partnership with Etihad Airways.
The report aims to use the four perspectives of bureaucracy, contingency, political and cultural to analyze Qantas as an organization. Qantas is identified as a complex organization with an open orientation towards the external environment. It uncovers the organizational structure and its change from a traditional tall to a modern, flat and modern structure. It identifies the set of formal rules and procedures followed by the organization and depict a wider span of control with a low level of vertical integration. It classifies the organization inside the Engineering quadrant according to Charles Perrow’s classification of technology model.
Qantas has recently faced a lot of problems with unions and staff members leading to the formation of obvious coalitions within the organization hence indication of how pluralistic the organization is. The report also identified key measures taken by the new management to evolve the culture of the company and make sure that there are no subcultures operating within the organization. The organization faces great challenges in the future that relate to an increase in competition, carbon tax problems in Australia, implementation of a flexible and more work-friendly structure and revitalize its international brand in terms of profitability and quality.
According to the analysis conducted, presently Qantas faces key challenges with respect to both internal and external competencies. Its recent amendments to the structure of the organization are a move by the company to streamline its operation and make it easier to quantify and specifically point out problems in particular areas. However it is still struggling to cope up with the structural changes due to traditional industrial relations with the employees and the presence of an old culture from which it is unable to escape. The company has problems with sub-cultures developed across different companies like Jetstar which has the potential to spoil the brand image in the future.
There has been a lot of criticism over the power of management and it was seen in the recent lockout of employees which led to grounding of all Qantas operations. The issue had to be solved with the help of government intervention but there is no guarantee that anything similar cannot come up again. The recent repositioning of Virgin Australia has set it up as a direct competitor with Qantas in the business market. Virgin’s agreement with Etihad has also led to panic within Qantas as it looks to establish itself in the Middle Eastern market for better access to Europe and parts of North America which has led to its alliance with Emirates Airlines. Qantas also faces challenges in the form of increasing fuel prices and carbon tax which has led to a decline in its overall profitability in the last two years.