Organizational structure and leadership at Dimitri's Baked Goods Inc.

Dimitri's Baked Goods Inc.

Structure

The organizational structure is flat, with the organization chart only having one vertical layer. This layer has Leakos at the top as the manager and all employees reporting to Leakos. The second layer is then divided by function into four areas: production, sales, office and retail. This provides a single chain of command. This single chain of command is effective for the business because all employees are clear on who they report to. This is also assisted by Leakos dealing with his employees on an individual basis. This individual attention means employees have a relationship with their superior. This single chain of command is effective because of the small size of the business and because Leakos makes himself available to employees. If the business were larger or were to expand, this single layer of management would not be sufficient for adequate control to be maintained. The span of control would be too great and either management layers would need to be introduced or other means of providing control introduced, such as adding rules and procedures that can govern employee's actions.

Work specialization is also low. While the organization is divided into functional areas, the tasks within these areas are not specialized. As the case reports, "the production roles in the bakery vary at different times. Workers are not forced to specialize in one skill." This lack of specialization is effective because it provides employees with variety and prevents the work from becoming tedious. It also means that the department works more as a team and gives workers a range of skills. This variety and wide skill level is also useful in enhancing flexibility, since if one employee is absent another one can complete their task. In this way, the employees work as one team rather than as individuals.

Decision making is also centralized with Leakos making all the decisions. The case study states that Leakos "feels centralization makes his business more flexible because he can act without delay when problems arise." This is true since the decisions do not need to flow through a number of management levels for a decision to be made. However, this centralization is only efficient because of the small size of the organization. If the organization were larger or were to expand, there may be a need to decentralize decision making and give more decision making power to employees, rather than have all the decision making power rest with the manager.

Leadership

Leakos is the only supervisor at Dimitri's and so provides the leadership function. Leakos's leadership style varies with the situation and combines an interactive and a transactional approach.

An interactive leader is one who is more concerned with the environment than the tasks. An interactive leader encourages open communication and participation and strives to make the environment one without tension. Leakos develops close relationships with his workers and attempts to meet their needs. This includes such things as providing vacation time and being flexible with allowing leave for family duties. As the case study reports, "employees find themselves in a comfortable environment where they can speak their own language and affiliate with others with similar background and interests." This method of creating an informal environment for employees is effective because the employees are unskilled and have little formal education. Presumably, job opportunities for these individuals are limited, making Dimitri's a place they want to work. This leadership style would not be as suited to a diverse employee base including those more highly skilled. These individuals would be less likely to find the environment suitable and would prefer a high-achieving environment rather than one based on being comfortable.

Leakos is also a transactional leader, which is a leader who focuses on the needs of employees, clarifies roles and tasks and provides structure for employees. This is also suited to the unskilled workforce that require structure and to have tasks defined for them. Again, a higher skilled workforce would have more need to be independent and so this leadership approach would not be as effective.

As the case study notes, the time when Leakos has to change his leadership style is during peak seasons. Leakos, while having to be more authoritative and more focused on the tasks rather than the people, still maintains an approach where he treats his people fairly and avoids making the environment uncomfortable. This is achieved by using reward power, where employees who work overtime are rewarded for their efforts. It is important that Leakos does not use coercive power where punishment is used as a means of achieving results. Using coercive power would undermine the people-centered approach of Leakos and also prevent the community environment from being maintained. By using reward power Leakos achieves the task needs of the business while still maintaining the people side of the business.

Motivation

Motivation at Dimitri's is provided by both extrinsic and intrinsic rewards. Extrinsic rewards are the rewards Leakos gives. These include the rate of pay, which is twice the legal minimum wage and the bonuses that are given for working overtime. These rewards are offered to encourage certain behaviors.

Intrinsic motivation is achieved by the community environment that is provided. This environment is similar to the one the Macedonian workforce have in their lives outside of work. Providing a comfortable working environment is a significant reward for the Macedonian workforce, with this comfortable working environment one they would have trouble finding elsewhere. This intrinsic reward matches the requirements of the workforce. Relating this to Maslow's hierarchy of needs, it can be seen that this environment gives employees a sense of belongingness and also a sense of esteem. This can also be related to ERG theory, which has three levels of needs. The work environment provides for the existence needs by giving employees generous pay that allows them to live comfortably. Secondly, the employees have their relatedness needs met by being part of the community. The third level is growth needs. With the workforce being unskilled, these growth needs are provided for by allowing people to become multi-skilled and just by giving people suitable employment. The unskilled workers do not require great needs for growth. This is one important reason why the work environment motivates the current workforce but would not motivate a more standard workforce. More skilled or educated employees would require more opportunities for advancement than Leakos provides. Once again, the reason the motivation is effective is because it meets the needs of the employees.

Motivation is also provided by job enlargement and job rotation. This job rotation and enlargement gives employees variation, while ensuring the work is not tedious. This increases employee satisfaction. Employee satisfaction then contributes to the positive environment. The positive environment ensures a cooperative workforce. This is a cause and effect relationship which results in a spiral, where satisfaction improves the environment and the environment increases employee satisfaction.

Communication

Vertical communication is informal and direct, with Leakos communicating with employees on an individual basis. This communication appears to be mainly downward with Leakos speaking to employees. His good relationship with employees also suggests that it also involves upward communication with Leakos listening to employees. It is also stated that Leakos manages all functions including working in production. This approach is similar to 'management by wandering around,' a technique that involves the manager interacting directly with all employees. It is these techniques that are likely to have created the open environment where Leakos has a good relationship with employees.

The informal community environment also suggests that communication between employees is informal and open, with employees communicating as a team or a community rather than via any specific channels.

Case Study: Action Realty Inc.

Leadership

Marie's approach to leadership is a centralized approach where she controls staff and tells them what to do rather than accept any input from staff. This focus is task-oriented rather than people-oriented. One of the major reasons this approach is not effective is that Marie is using an authoritative approach but has no power other than that given to her because of her position. This is legitimate power, but not a power that commands respect from subordinates since she has little experience in this area and only has the position because she is the wife of the owner. This leadership might be effective if Marie had expert power and was more qualified and experienced than her subordinates. However, as it is, there is no reason for employees to respect her position.

The leadership style of Harvey and Paul can be described as an interactive approach, where an interactive approach is one that is focused on the environment, rather than the tasks. Harvey and Paul believe that they can achieve results by "providing great working conditions and by establishing excellent interpersonal relations between them and their staff." Harvey and Paul aim to create an open environment, enhancing this by holding social activities and having company meetings. The effectiveness of this method can be seen by looking at the issue in terms of the situational theory of leadership. This theory links the leadership style to the task readiness of subordinates. The management style of Harvey and Paul is suitable to those employees high in readiness who need little direction and have the skills, confidence and willingness to work. However, for employees with low task readiness, more leadership is required. This explains why some employees are suited to the environment while others are not. To fix this problem, Harvey and Paul either need to provide more leadership and direction to employees or need to be more selective in hiring employees with high task readiness who can be successful in the environment provided.

Motivation

As the case study says, "The Brokers motivate their sales staff by, in part, working hard and generating sales themselves." Motivation is also provided by the "open board" where all the listing and sales are compiled, with viewing the accomplishments of other agents expected to encourage employees to work harder. This approach can be related to Maslow's hierarchy of needs, with these motivation tools relating to esteem and self-actualization needs, the two highest needs on the scale. The problem with this motivation is that the company has not first provided for the lower level needs such as physiological, safety and belongingness needs. By only paying employees commission, employees do not have the definite income to meet their physiological needs. By not providing job security, employee's safety needs are not met. Finally, while the company attempts to create an organization based on teamwork, these motivation methods also mean that employees are competing with each other. Employees are not provided with any status or even a desk-space unless they make a certain amount of sales. This high pressure environment makes it difficult for these belongingness needs to be met or for employees to feel comfortable. These methods may work for some employees that are highly competitive and at the self-actualization stage, but for most employees these methods are counterproductive and more likely to decrease motivation.

The working conditions can also be related to Herzberg's two-factor theory. This theory states that for employees to be motivated, first the hygiene factors must be present which ensure employees are not dissatisfied. These hygiene factors include pay and security, company policies and interpersonal relationships. These hygiene factors are not provided for. Pay and security are not provided since employees are only paid by commission. Clear company policies are not provided, giving employees nothing to base their behaviors on. And, while the owners claim to want to create an organization with strong interpersonal relationships, they also are difficult to approach and discourage employees working together. These factors all contribute to the dissatisfaction of employees.

Communication

Vertical communication is informal and on a group rather than an individual basis. More formal methods of communication include the Action Realty house newspaper and the booklet of company policies. Policy meetings are also held monthly, with these an opportunity for open communication between management and employees, though employees are not required to attend and part-time employees are not aware of the meetings. This indicates that there is opportunity for upward communication, but whether this communication is effective is not clear. Not involving all staff in the meetings suggests that the upward communication is limited.

While management say they prefer problems to be taken to them, there appears to be little one-on-one communication. This indicates a lack of individual attention that is also likely related to the large span of control.

Horizontal communication is encouraged on a social level, though employees are also encouraged to work on their own. There is an inconsistency in communication, where on one level employees are expected to communicate openly and yet are also encouraged to work separately and to compete against each other.