Flight Centre Case Study
Graham Turner structured the company as families, villages and tribes. The creation of this unique system has also worked to the company’s advantage. It provides incentives based on outcomes. The Flight centre’s system is based on the idea that people work best in their preferred environment within the larger organisation rather than trying to fit them into the company’s mould. The employees believe ‘what gets rewarded gets done.’ they are hard workers but also enjoy the many social aspects of the company including buzz nights, award ceremonies and team get-togethers.
This essay would focus on how flight centre has structured with the four aspects of the organisation structure. Explains how flight centre has integrated the Mintzberg’s five elements to its structure. This essay would also highlight the roles of functional and social specialization. Finally, the metaphors used by flight centre would be discussed.
Structure of Flight Centre
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The importance of organisational structuring and restructuring to organisational effectiveness cannot be overemphasized. Effective organisational design or organisational structuring pays immense dividends, no matter how large or small the organisation is (HRODC, 2006). The founder of the Flight Centre Ltd, Graham Turner claims that people are hard-wired to work in small groups within larger groups. To understand this unique structure the four aspects of organisation structure, complexity, formalization, centralization and coordination, can be used.
Complexity refers to the way in which the organization is divided into different divisions, departments, groups, or individual roles, each with its own tasks and responsibilities. Vertical differentiation refers to the number of hierarchical levels in an organization (Robbins & Barnwell, 2006). At the Flight centre, the operation level involves retail shops. Each shop involves three to seven people working on one brand which is called a family. The area or a ‘village’ involves 7 or 10 families within one geographical region. The tribal country is a set of three or four villages. Each tribe is a different brand, brands include corporate traveller, flight centre and student flights (refer appendix 1).
In horizontal differentiation, different parts of the organization become specialized in different activities to increase efficiency (Robbins & Barnwell, 2006). All shops of flight centre sell similar services even though the names (corporate traveller, flight centre and student flights) are different which makes it easy to coordinate activities and to communicate among families. Moreover, due to the similarities of jobs within a family, there are no differences between the staff.
However, a special horizontal clustered family consisting of HR, IT and marketing professionals, provides administrative services for retail shops. By clustering different types of functions and activities on any one level of the hierarchy has the advantage of the application of higher technical knowledge for solving problems and greater group and professional identification (Luthans, 1986).
Flight Centre has more than 800 shops spatially dispersed. High-rise of overseas shops would increase the number of tribes, villages, families and employees. As a result, it would be difficult to communicate, coordinate and control. According to Baumard & Starbuck (2006), the members of spatially dispersed organizations seek appreciation within networks of friends and relatives, and they form subcultures that spread across several organizations and that may be more important to them than their focal organization. These communities encompass more aspects of their lives than the strict duties of their work contracts so work and leisure infiltrate each other.
Formalization refers to the extent to which rules, regulations, job descriptions, policies, and procedures govern the operation of an organization. (Robbins & Barnwell, 2006). Although the flight centre has a flat structure; it has three levels (tribe, village and family) which shows that there is a hierarchy within the structure.
Flight Centre also follows certain standards to sustain in the business. Flight centre maintains the levels and number of families, villages and tribes. Each family can sell a single service, Entry age to Flight centre is normally 25 years. Managers of the shops can take 10% profit and may own up to 20% of their shop. Some rituals include ‘Buzz nights’ once a month and formal get-togethers.
Centralization refers to the degree to which decision-making is concentrated at one point in the organization. At flight centre, there are no confusions about people’s goals, tasks, style of functioning, reporting relationship and sources of information. The ‘country’ buys services for villages and families. A centralized structure provides people with a clear picture of how their work fits into the organization. The SWOT teams analyze innovations and new ideas. However, at flight centre, there is no centralized control of the head office.
Coordination is integration of activities of specialized units towards the common objective. (Anderson, 1988). Programmed coordination requires advanced planning and is often used where there are a small number of expected occurrences (Argote, 1982). Programmed coordination is common in the flight centre. A head office team coordinates administrative services and marketing. Like wise, SWOT teams direct new businesses. All the retail shops are individually coordinated by the shop managers. Furthermore, get-togethers and Buzz-nights are informally coordinated.
Common Elements in Organisation
One framework proposed by Henry Mintzberg suggests that every organization has five parts (illustrated in appendix 2). The five parts of the organization may vary in size and importance depending on the organization’s environment, technology and other factors (Robbins & Barnwell, 2006).
At the bottom of the organization is the operating core. At the flight centre, it is referred to the members of the family (retail shops), employees who do the basic work of selling or delivering the services.
The Strategic apex is charged to ensure that the organization executes its mission. Flight Centre has a unique way of the distribution of powers where all authorities are not given to the tribes. However, the tribal country or the regional office is the centre that administrates the brands (corporate traveller, flight centre and student flights) which are retail shops.
They also facilitate training and recruitment, buying holiday packages and other employee-related services to the villages. Moreover, the head office or the board could also be taken into consideration because they would be establishing and monitoring the company’s visions, goals and strategies.
Each family or the retail shop has a manager who connects the operating core to the strategic apex. Moreover, managers of the administrative families (head office teams) would also be included. They are responsible for implementation and coordination at the departmental level.
The technostructure of the flight centre involves the HR, IT and marketing professionals who have the responsibility for effecting forms of standardization in the organisation. According to the flight centre report (1999), due to the recruitment system, they have changed the way they identify and attract the best staff. Moreover, technostructure would also include the flight centre SWOT teams where they focus on innovations and try new ideas.
Support staff refers to the people that provide indirect support services. The support staff of flight centre includes legal Counselors, cafeteria Workers, security guards and peons.
In any organisation, one of the above five (strategic apex, operating core, technostructure, middle line and support staff) would be dominant. The organisation is formed according to the dominating element. When the strategic apex is dominant, control is centralized and it forms a simple structure (Beshears, 2006).
At the Flight centre, functions the strategic apex appear to be more dominant than the other aspects. Firstly, the powers of the organisation are dispersed to some level at the flight centre, regional office or the tribal country administrates the brands (corporate traveller, flight centre and student flights) which are retail shops. They also facilitate training and recruitment, buying holiday packages and other employee-related services to the village and can be considered as more centrally controlled.
Secondly, the SWOT teams and the administrative teams are specialized; all other families do standardized work, which involves servicing customers and selling products.
The structure of the flight centre could also be considered flat because it only has three levels and the operating core reports to their respective managers. Some advantages include clear accountability and flexibility to respond to the issues of the customers.
Decision-making at the Flight centre appeared to be limited. The tribal country makes decisions regarding administrative technical matters. The tribal country facilitates brands and other employee-related services to the villages and families. Moreover, shop managers make decisions at the family level although the travel consultants are empowered.
Even though Flight centre have more similarities of a strategic apex it also has a few differences. As the flight centre has more than 800 retail shops worldwide and in each year 150 more shops are adding up, the operations would be complex because it would have more families, villages and tribe which would make communication and coordination barriers. Furthermore, some authorities are decentralized from the tribal country, such authorities include buying products from wholesalers.
Roles of functional and social specialization
As organisations become large and physically dispersed, it requires people with specialized knowledge and skills to attend to problems professionally and reduce waste. The main functional areas in the flight centre include HR, marketing and information technology.
In the rapidly changing business environment Information technology has becomes a vehicle for helping firms to reach their business goal more effectively. Flight Centre is well placed to keep pace with industry changes. As the flight centre is geographically dispersed, information technology enables them with quicker and more effective communication and customer support. Social specialization that is required by the IT professionals includes attending to faults 24-hours because flight centre is worldwide organisation where they deal with traveling and ticketing. If an IT personnel is not available, all the operations might come to a halt because tickets and holiday packages are sold worldwide.
In a successful organisation, employees are seen as their primary source of competitive advantage. One of the success factors of Flight centre is that they continuously identify and adopt innovative human resource management policies and practices to sustain that advantage. It also include how they have structured their work and designed their training, performance management, pay, and reward policies to help members of flight centre to succeed in achieving desired outcomes. In other words, they have aligned their HRM policies and practices to reinforce employee behaviors that can best realize the leaders’ strategic intent. As HR professionals, they would ensure that equal employment opportunities (EEO) are not violated.
The marketing department of the flight centre is like the center of a wagon wheel with each spoke connected to other departments (in- and out-side the company) including sales, production, research, advertising, etc. The center of the wheel connects the various parts so they work in harmony. With this analogy, it is easy to see that the main function of marketing is managing relationships in the organization, with outside vendors, and the consumer. Without marketing there is no consumer and without the consumer there is no use for the product or service the company is producing (University of California, 2005). Standards that are required by the marketing professionals include, caring all stakeholders: customers, employees, suppliers and distributors, local communities in which they do business, society, and the environment. For example, in promotional activities such as advertising, they would respect the host country’s culture.
Centralizing and Decentralizing
Decentralization refers to decision making at lower levels in the hierarchy of authority. In contrast, decision making in a centralized type of organizational structure is at higher levels. The degree of centralization and de-centralization depends on the number of levels of hierarchy, degree of coordination, specialization and span of control (Luthens, 1986).
The main reason that the ‘country’ as a business unit buys services for villages and families is to achieve economy of scale and to reduce waste. If the villages or the families buy services, it would increase the cost and repetition.
To reduce complexity and to make coordination easy, a head office team facilitates HR, IT and marketing services.
To follow a certain reporting duty each family is empowered with a manager. It would reduce the volume of day-to-day communication between the tribe and the family and have a clear accountability.
Decentralizing the authority to the travel consultants would reduce the probability of information overload and would facilitates rapid response to all customers. It would also reduce the stress and burdens of senior management. As travel consultants, they would have a better knowledge of local conditions affecting their areas of work. This would allow them to make more informed, well-judged choices. Moreover, motivates travel consultants and can enhance their skill development opportunities. However, decentralizing would reduce consistency in decision-making and some sometimes customers may perceive it as unfair.
Advantages of using metaphors
To recognize and cope with the idea that all theories of organization and management are based on metaphors that persuades people to see, understand, and imagine situations in partial ways. Moreover, Metaphors create ways of seeing and shaping organizational life. Any metaphor can be very persuasive (Morgan, 1997). The metaphors that are used at the Flight centre are family, village and tribal country.
As all the retail shops are considered as families, it shows equality among shops, which would create less comparison and competition among families. Moreover, giving a uniform service to the customers.
As employees are bonded up in small teams like a family, it gives them identity where they belong. It would also create close relationships within families and also gives the manager a clear picture of the capabilities of individual staff. Moreover, makes decisions more effective.
Creating families, villages and tribes in areas of countries would allow flight centre to adjust their services according to the specific culture of the region rather than generalizing to the whole county or state. For example, in Australia a certain area would dominate Indians, so rather than adjusting their services and marketing strategies to the Australian community, they could adjust their services to the Indian market.
This essay has discussed how flight centre has structured with the four aspects of the organisation structure. At the Flight centre, the operation level involves retail shops. Each shop involves three to seven people working on one brand which is called a family. All shops of flight centre sell similar services.
Flight centre has more than 800 shops spatially dispersed. High-rise of overseas shops would increase the number of tribes, villages, families and employees. Programmed coordination is common in the flight centre. A head office team coordinates administrative services and marketing.
As the flight centre is geographically dispersed, information technology enables them with quicker and more effective communication and customer support. Social specialization that is required by the IT professionals includes attending to faults 24-hours because flight centre is worldwide organisation where they deal with traveling and ticketing
Decentralizing the authority to the travel consultants would reduce the probability of information overload and would facilitates rapid response to all customers.
As employees are bonded up in small teams like a families, it gives them identity where they belong. It would also create close relationships within families and also gives the manager a clear picture of the capabilities of individual staff. Moreover, makes decisions more effective.
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