Question

Zara Organizational Structure
Structure relates to a skeletal framework of activities and processes in
an organisation and specifies the roles of these in achieving goals and
objectives of the organisation. According to (Mullins, 2009), a good structure is highly
important due to the fact that decisions on structure are primary strategic decisions which
can make or break an organisation. One important aspect of a good structure is the human
element. Organisation structure should be designed so as to encourage employees and
increase the morale and job satisfaction of organisation members which will result to
overall organisation efficiency.
(Mullins, 2006) describes nine basic considerations in the design of organisation structure.
The fundamental step is to define organisational objectives to enable further analysis and
comparisons of other forms of structure.
Clarification of objectives
A clear definition of objectives is vital to provide a framework for the design of structure
of an organisation. Organisation objectives provide fundamental schemes for division of
labour and creation of group units and sub units. Clearly stated aims and objectives will
assist in decisions on the strategy and structural dimension to employ to achieve
organisational objectives.
Task and element functions
Certain functions must be performed in order to produce a good or service, from the
development of the good or service to finance of resources used in the complete processing.
These functions are referred to as the task functions. The results of the task functions must
be coordinated to ensure the efficient achievement of total objectives of the organisation.
Element functions refer to vital parts of the management process and are supportive of the
task functions such as human resources and public relations.
Division of work
An organisation needs to accomplish an overall task of allocating many different activities
to groups of people or individuals to achieve its objectives. The division of work and
grouping together of individuals should be organised according to a basic criterion to
establish a coherent link between the activities involved. The division of work and linkage
of activities occur in various ways such as specialisation, use of similar resources or
common expertise of organisation members as the most commonly used basis for grouping
activities. Others include division by product or service, division by location, division by
nature of the work performed, division according to common time scales such as shift
working, division according to staff employed such as allocation of work based on
experience and so on.
Centralisation and decentralisation
The extent of centralisation or decentralisation refers to the point of critical decision
making in an organisation which reflects patterns of authority in a structure. In centralised
structures decision making authority is within the power of top management while
decentralised structures, decision making authority is delegated (Rollinson, 2005). The
arguments in favour of centralisation in an organisation entail the easier implementation of
a common policy, easier coordination and management control, preventing sub-units from
becoming too independent, over-head cost reduction and faster decision making because
of the smaller number of people involved. In contrary, arguments for decentralisation
include decisions being made at a point closer to operational levels, increased
responsiveness to local circumstances, improved level of personal customer service, more
flexible structure, control is distributed more evenly which provides opportunity for
development for those lower down, and encouraging effect on motivation and morale of
staff. Basically, decentralisation tends to be easier to implement in the private sector
organisations than public sector ones where procedures and protocols are the order of the
day. Decentralisation being a more flexible approach provides support for employee
participation and empowerment at all levels which increases innovation and improves
technology while centralisation ensures professionalism in all activities by maintaining
effective coordination and overall control of the organisations activities as a whole. A mix
of both such as being global and local, practically being decentralised with a central control
and authority should produce an organisational advantage.
A vivid illustration of decentralisation is the Zara fashion enterprise (cited in Mullins, 2009,
p.596), where the company derived its success from integration of design, production,
logistics and sales within companies globally rather than separating and outsourcing this
different business elements unlike its contemporaries in the fashion industry, while still
keeping control of all major operations in Spain. The company rejected rigid organisational
structures in favour of a more flexible approach which comes from a highly integrated, fast
and efficient form of communication between its global network of outlets and central hub
of operations in Spain. The industry average time for introducing a design into the shops
is six to nine months; Zara achieves this task in three to four weeks. What is peculiar here
is that Zara only makes what is selling at the moment, store assistants and managers
constantly get information about what is selling and how quickly it leaves the racks
implying that local managers have a strong influence on their store’s success and thus the
company overall.
On the other hand, an illustration of centralisation is that of Nissan Motor Company (cited
in Certo and Certo, 2006, p.123), a successful global automobile manufacturing company
where the new CEO ordered calls for the elimination of 30 per cent of production capacity
in Japan due to recent financial difficulties. The CEO’s plan is to help reduce expenses as
well as close offices in New York and Washington with a view to centralise company
operations in Japan to enhance success.
Principles of organisation
The ten principles of organisation include principles of the objective, specialisation, coordination,
authority, responsibility, definition, and correspondence, span of control,
balance and principle of continuity.
Span of control
This refers to number of subordinates who report directly to a particular manager or
supervisor. Span of control is larger at lower levels of the organisation where responsibility
is concerned more with the performance of specific tasks. If span of control is too wide,
supervising too many subordinates effectively becomes difficult and stressful for managers
as well as planning and development, training and control. Narrow span of control may
lead to low morale and initiative of subordinates due to close supervision level, and also
increase administrative costs.
Chain of command
This refers to the number of different levels in the structure of the organisation, the chain
of hierarchical command. Every employee must know there position within the
organisation structure. The combination of chain of command and span of control
determines the overall pyramid shape of the organisation and whether the hierarchical
structure is flat or tall. Flat hierarchical structure depict a broader span of control and few
levels of authority while tall structure depicts narrower spans of control and more levels of
authority. There is no ideal hierarchical structure but it is best to have a balance of both.
An illustration is Mc Donald’s fast-food restaurants (cited in Certo and Certo, 2006, p.236).
Mc Donald’s decided to reorganise its global senior management team as a reaction to its
recent poor financial performance. This involved creating two geographic areas of
responsibility. The new positions focuses on managing operations in the America’s while
the other in Europe, Asia and the Pacific. The new structure evolved with a view to create
clearer lines of responsibility and more focus on the company’s financial performance
within the territories. The new organisation hierarchy was also aimed at helping the
company make business decisions more quickly.
Formal organisational relationships
This refers to individual authority relationships arising from defined patterns of
responsibility in an organisation. This are identified as; line relationships where there is a
direct relationship between subordinate and supervisor; functional relationships between
people in advisory positions, and line managers and their supervisors; staff relationships
are usually personal assistants who exercise only representative authority.
Line and staff organisation
This provides a means of making full use of specialists while maintaining the concept of
line authority.
Project team and matrix organisation
A project team refers to a separate unit set up temporarily for a particular project which is
disbanded when the duration elapses while matrix organisation involves functional
departments specialising in numerous activities.
In conclusion, the overall effectiveness of the organisation will be influenced both by a
healthy structural design, and by the behaviour of people who work within the structure.
There are numerous variables and factors which influence the soundest structure. Nothing
like a perfect organisation exists but it is crucial to establish a framework of order and
system through which organisation activities can be planned, organised, directed and
controlled. Since structure divides up the organisation into different parts and specifies
what roles these will play in achieving specific aims and objectives, it also provides for
control and coordination of the parts to achieve this goals. Basically, the essence of
structure is the division of work among organisation members, the coordination of
activities and various jobs which are inter-related.  

(b)   Analyze the role of Zara’s organizational structure in shaping organizational effectiveness and performance. Justify your work and support your answer with evidences from Zara’s case study, looking at how adopting the wrong structure can lead to failure; word Count 500 words

Answer 1

Zara, established in 1974, is a Spanish fashion brand famous for its products world over. The company makes apparels and accessories that are fashionable, are of high quality yet affordable at the same time. The brand perfectly knows what its customer likes and wants. The combination of such essential qualities has been instrumental in its success.

One of the important elements for running a successful business is adopting the right organizational structure. Small companies with few employees work excellent under a centralized leadership. On the other hand, excessive centralization in large organizations might lead to low motivation levels and high retention and absenteeism rates among employees. Planning and choosing the right organizational structure is vital to achieve maximum efficiency and profitability. A poor organizational structure will lead to non-accomplishment of the organizational goals because of the ambiguity on the role and tasks of the employees.

In case of Zara, the company makes use of functional structure. The company is divided into different departments like design, production, sales and marketing, customer relationship, accounts and so forth. Each department is managed by a department head and a team of employees. Apart from this, Zara follows a mixed leadership style - centralized for functional activities like product design, manufacturing, logistics and decentralized for the individual store managers and assistants regarding the selling and personal marketing of the products. The company has an organizational structure that favors cultural integration, open and free communication, no red tapism and independent decision making power. The store managers are the people who are in direct contact with the customers and they are best aware of their changing tastes and preferences. By giving the required independence to the store managers and assistants, the company ensures keeping employees' due recognition and appreciation, high motivational levels and maximum efficiency. This practice gives the store managers to be innovative and creative, thus helping in their personal growth. Zara is effectively able to align the organizational goals with the personal goals of its employees. The information gained from the customers is easily flowed up to the top level management which formulated centralized policies and manufacture products satisfying the needs and taste of the target customers. The company has not opted for outsourcing. Zara adopts a centralized distribution system wherein all the items are dispatched from the its main distribution center in Spain. This helps the company to have complete control over the main elements of running a business, with due importance given to quality and customer satisfaction.

The company is flexible in its structure and gives due attention to each and every element at different levels that has played an important role in its success.