An Duc Kien Spock - F06066

EXECUTIVE SUMMARY

An Duc Kien Spock - F06066

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................1
1.1 Compare and contrast different organizational structures and culture......................................2
1.1.1 Structure..............................................................................................................................2
1.1.2 Culture.................................................................................................................................4
1.2 Explain how the relationship between an organizations structure and culture can impact on
the performance of the business......................................................................................................5
1.2.1 Structure..............................................................................................................................5
1.2.2 Culture.................................................................................................................................5
1.2.3 Summary.............................................................................................................................6
1.3 Discuss the factors which influence individual behavior at work.............................................7
1.3.1 Discipline............................................................................................................................7
1.3.2 Awards.................................................................................................................................7
1.3.3 Attitude................................................................................................................................7
2.1 Compare the effectiveness of different leadership styles in different organizations.................9
2.2 Explain how organizational theory underpins the practice of management............................10
2.3 Evaluate the different approaches to management used by different organizations................11
CONCLUSION..............................................................................................................................12
References......................................................................................................................................13

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INTRODUCTION

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1.1 Compare and contrast different organizational

structures and culture
Structure
Span of control
Culture

Berkshire Hathaway
- Multidivisional
- Wide
- Centralization
- Power culture
- Person culture

Viet Tien
Multidivisional
Narrow
Decentralization
Role culture

Table 1 organisation structure and n culture

1.1.1 Structure
Berkshire Hathaway and VTEC have same structure. Both companies have multidivisional
structure, which make up of several operating divisions. As parent company, Berkshire and
VTEC can directly affect their children company and benefit from them. Berkshire has overall
76 businesses, which mostly operate in insurance and reinsurance product and services.
Berkshire also engages in non-insurance business. VTEC has 6 enterprises and 14 affiliates
operating in the garment industry.

Chart 1: Berkshire Hathaway corporate structure

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(Investing in knowledge, n.d.)

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Chart 2: List of companies that Viettien Garment Joint Stock Corporation retains
Controlling or dominant share (VTEC, n.d.)

However, Berkshire and VTEC also have different in the way they control business. Berkshire
Hathaway HQ in Omaha, Nebraska is very small. It only takes one floor of a building. Beside
CEO Warren Buffet, there are only 19 people running a whole empire (Ellis and Krishnan, n.d.)
Furthermore, Warren Buffet is the one who directly make the decision about the operating of the
enterprise and investment. He has just sit in the office reading all day and then made investment.
It can be relate as flat structure with wide span of control.
Unlike Berkshire, Viettien is likely to follow tall structure. In Viettien HQ, beside the Board of
Director and General Manager offices, there are several departments such as. Each department
responsible for one aspect of the company (VIETTIEN GARMENT CORPORATION, 2012).
All the decision must throughout all level of organization.

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1.1.2 Culture
With different way of management lead to different culture because culture reflect how
the manager control their business. In Berkshire, with the power is concentrated on few people
and all the operating unit have to directly report to Buffet and he is the one making decision. All
the capital expenditures and capital allocation decisions are made by Buffett and vice chairman
Munger (Ellis and Krishnan, n.d.). The company can be related as power culture. Another
culture that Buffet applies to his company is person culture. Warren Buffet always considers
employees are a major factor that leads to the successful of the company. He said "You can have
the greatest goals in the world, but if you have the wrong people running it, it isnt going to
work. On the other hand, if youve got the right person running it, almost anything is possible"
(Hom, 2013). That why he let the managers of subsidiaries independently operate without
supervising, even though they still have to report to Buffet and he is still make decision about
capital allocation for these subsidiaries."We tend to let our many subsidiaries operate on their
own, without our supervising and monitoring them to any degree. Most managers use the
independence we grant them magnificently, by maintaining an owner-oriented attitude." (Buffet,
2010)
In VTEC, the culture of the company is showed clearly in their organization structure. The power
is divided to many
department, so the
follow role culture.
into

different

department has their

employees

of

this

assigned a duty to
below shows the list
VTECs headquarter

Name of the departments

Accounting Department
Import Export Chamber
Department of market planning and investment
Export Sales Department
Domestic Sales Department
Department of Engineering Technology
Quality Assurance Department
Department of Organization Labor Wage
Warehouse and Transport Division
Electrical Engineering Department
Management Administration Section
Health Station
Security Office
Union Office

people and for each

company

to

VTEC are separated

departments.

Each

own function and the

department

are

undertake. The table

of the departments in

Table 1: List of departments in VTEC HQ (Viet

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likely

capital, n.d.)

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1.2 Explain how the relationship between an

organizations structure and culture can impact on the
performance of the business
1.2.1 Structure
With flat structure, Warren Buffet can have fully control his business. Flat structure with wide
span of control brings Berkshire many benefits. Firstly, it makes the communication between
manager and employees easily because this type of organization has fewer levels of
management. The employees will report to fewer managers in the company. It will create the
relationship between workers and managers, which will create better team spirit. Another
advantage of flat structure is that Berkshire Hathaway can reduce the cost of hiring and training
manager because it usually higher than workers. Furthermore, less management level means the
decisions from CEO Warren Buffet will reach the employees quicker. However, wide span of
control can cause for managers with heavier workload because now he have to responsible for
many workers under his command. Moreover, it is difficult for managers to manage a large
number of employees.

1.2.2 Culture
As mentioned above, Warren Buffet maintains the power culture in his company. The
advantage of power culture is that Warren can have an overall look at the operating of his
business because all the heading of each producing units have to report to him. From the
information they report to, Warren will make the investment on the company which he found
most profitable. Another advantage of this culture is that it can adapt quickly to meet the
changing of market. There will be no conflict between people at the top levels because the right
to make important decision belong to key person in organization. In the case of Berkshire
Hathaway, that person is Warren Buffet. Therefore, its will reduce the time to make decision and
Berkshire will be able to meet the alteration of market on time. However, it is also a
disadvantage of this culture. To meet the changing of the marker, that key person need to have
the knowledge and wisdom to make the decision. He can destroy entire company with one wrong
decision.
Another culture that Buffet maintains in his company is person culture. The benefit of
this culture is that it creates a work environment that encourages employee engagement. That
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make them feel important and it could motivate them to work harder. However, in person culture,
the role of the managers can be underrated because the employees also have the right to make
decision.

1.2.3 Summary
With company structure was kept as simple as possible; culture can be applied in an
appropriate way.The structure relate and support the company culture. The flat structure gives
Warren Buffett the opportunity to control the company and have an overall look at the operating
of his business. Flat structure means having little manager level. Therefore, Warren Buffett can
make quick decision without conflict with other subordinates.
The best way to assess a companys culture and structure is through its performance. In
the case of Berkshire Hathaway, it was proved that the way Warren run his enterprise is
appropriate. The chart below shows the information about the revenue of Berkshire Hathaway
from 2005 to March 2010. The companys income kept increasing from $80,000 million in 2005
to $120,000 million in 2007. In 2008, because of the financial crisis, there was a decreasing in
the revenue of the company. Specifically, from $120,000 million in 2007, the revenue of the
company has dropped to over $100,000 million, but in the following year, the financial situation
of the company had positive signs. By March 2010, the companys profit has returned to
$120,000 million.

Chart 3: Berkshire Hathaways revenue from 2005 to March 2010

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1.3 Discuss the factors which influence individual behavior

at work
1.3.1 Discipline
Discipline is a necessary factor for all organization. It keeps the company run properly
and the employees under control. Without it, the company will be totally chaos. Every
organization needs to set up a code of ethic so that the employees can take it as criteria. In
Berkshire Hathaway, the Code of Business Conduct and Ethics was set up to create the ethic
standard for both managers and employees working in the company. They have to strictly obey it
and have responsible to report any suspected violations of this code. For example, in the Section
C, article 1: Conflicts of Interests, if any employees private interests interfere in any way with
the interest of the company, he or she needs to consult with supervisor or manager or, if any
circumstances warrant, the chief financial officer of chief legal officer of the company (Berkshire
Hathaway Inc, n.d.). It creates a fair working environment where the employees can work
without worrying about their own interest.

1.3.2 Awards
Award is a great way to encourage the employees in company. When staffs have a good
performance and brings the benefit for the company, the manager should give a reward because it
will make them happy and encourage these staffs work harder and harder for the company in
order to achieve the reward. The reward is usually money or promotion. This is a useful tool for
the manager to please the employees and keep them stay with the company because after all,
everyone works for their own interest. In Berkshire, Warren Buffett made it clear that he was
depending on his staffs and showing appreciation for their work. In 2011 annual letter, Buffett
wrote As 2011 started, Todd Combs joined us as an investment manager, and shortly after year
and Ted Weschler came aboard. Both of these men have outstanding investment skills and a deep
commitment to Berkshire. Each will be handling a few billion dollars in 2012, but they have the
brains, judgment and character to manage our entire portfolio when Charlie and I are no longer
running Berkshire. (Buffett, 2012).

1.3.3 Attitude
Attitude is a factor that can influence the individual behavior at work. Attitude was
defined as a predisposition or a tendency to respond positively or negatively towards a certain
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idea, object, person, or situation. Attitude can affect on individual's decision and responses to a
particular situation or a problem. This is an important factor that can affect on the performance of
employees. For example, company A allows their employees to relax anytime they feel too
stressful. The company even provides recreational facilities such as: video games, billiard, HD
tivi.As a result, the employees can feel comfortable, relax and happy to work. Therefore, the
productivity of this company will highly increase. On the other hand, company B provides their
employees nothing but a working desk and a chair. The employees will find it is very boring and
they will not have motivation to work. Therefore, company B productivity cannot compete with
company A.
Warren Buffett appreciated his staffs. Therefore, he tried to create a good working
environment and build the relationship between manager and employees. And he was success. In
an online survey on Glassdoor, Berkshire Hathaway was rated as having a very relaxed working
environment. There are 86% of employees recommend this company to a friend (Annon, n.d.).
Buffett has also created a good relationship with his staffs. The picture below is Buffett and his
staffs at Berkshire Hathaway HQ. Most of them were worked with Buffett for a long time such
as his secretary, Debbie Bosanek. She has been working with Buffett for nearly two decades
(Lowrey, 2011)

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2.1 Compare the effectiveness of different leadership

styles in different organizations
-

Warren Buffett
Autocratic (Tell)
Laisser-faire

Vu Duc Giang
Autocratic (Tell)
Consults (Participative)

Table 2 Leadership style

Both CEO of two companies maintain autocratic style. The autocratic or tell style is a
way of management in which the manager make all the decision and the employees must obey
without question. The advantage of this style is that the decision can be made quickly. That why
both Berkshire and VTEC or maybe every companies in the world have this kind of style. The
market is changing everyday and companies need to be flexible in order to adapt the alternation
of market on time. When the changing happens, the managers need to have quick response if he
doesnt want to miss it. The requirement of quick decision is necessary. Therefore, the autocratic
style is suitable for the company in the situation when speed is required. When Warren Buffet
bought Chinas BYD share, he made his decision based on the price, not base on the opinion of
his subordinates (Crippen, 2010)
Another style that Warren Buffett uses to manage his business is laisser-faire. In this
style, the leader let his subordinates to free for making decision. Buffet believes that managers of
the companies he is investing in ought to be left to run the business without interference from
him (Kotelnikov, n.d.). That why he empowers his management team to make decision without
his approval. All the heads of business units in his empire are empowered to make decision in the
company that they in charge. Warren said We delegate almost to the point of abdication
(Buffett, 1999).
Vu Duc Giang, in other hand, applies the consult style in his company. The consult style
have a different with democratic. Unlike democratic, the manager still has the right to make the
final decision, but he also takes the opinion of his subordinates. In an article on business forum,
Duc Giang has revealed his leadership style in VTEC. He said Subordinates play an important
role in his successful today (Nhi, 2005). He assigned them the right to assign and direct work in
their respective domains, creating all favorable conditions and put into the hands of their specific
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responsibilities. Then, he has just re-control and remedial. He said the secret key in his
management is the absolute faith of his colleagues (Nhi, 2005).

2.2 Explain how organizational theory underpins the

practice of management
There are five different organizational theories: scientific management, classical
administration, human relation approach, system approach and contingency approach. For
Berkshire Hathaway, Warren Buffett applies the human relation approach theory of Elton Mayo.
The human relation approach theory focuses on the important of human factors and its influence
to organization. The main point of this theory is that managers need to understand the workers
feelings and their needs. The manager also needs to reduce the control on his employees.
Buffett believes that manager can work better without the interference from higher level.
That why he empower for the manager of the company that he own to have the right to make
decision without his approval. Warren Buffett also shows that he value his staffs in different
ways. When a manager makes an honest mistake, Buffett isnt angry at all. Instead he said We
all make mistakes . . . if you don't make mistakes, you can't make decisions ...You can't dwell on
them (Buffett, 2008). His secretary, Debbie Bosanek, has said she hasn't seen him mad even
once in the nine years she has worked for him (Buffett, 2008).

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2.3 Evaluate the different approaches to management

used by different organizations

CONCLUSION

References
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http://www.berkshirehathaway.com/govern/ethics.pdf [1 December 2013].
Buffet, W. (2010) Annual Report, [Online], Available:
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Buffett, W.E. (1999) AN OWNER'S MANUAL, January, [Online], Available:
http://www.berkshirehathaway.com/owners.html [1 December 2013].
Buffett, W.E. (2008) Warren Buffett makes Berkshire Hathaway proud, 14 November, [Online],
Available: http://articles.economictimes.indiatimes.com/2008-11-14/news/27699678_1_charliemunger-warren-buffett-berkshire-companies [1 December 2013].
Buffett, W.E. (2012) Annual letter to shareholders, 25 February, [Online], Available:
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http://www.businessnewsdaily.com/4211-business-profile-warren-buffett.html [1 December
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Kotelnikov, V. The World's Most Successful Investor: Success Story and Key Teachings, [Online],
Available: http://www.1000ventures.com/business_guide/cs_investors_buffett.html [1 December
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Nhi, P. (2005) Vu Duc Giang: I appreciate the human element, 12 September, [Online],
Available: http://dddn.com.vn/doanh-nghiep/vu-duc-giang-toi-coi-trong-yeu-to-con-nguoi5276.htm [1 December 2013].
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menuid=4&id=122860&catid=1222&tab=&title=&lang=vi-vn [1 December 2013].
VIETTIEN GARMENT CORPORATION (2012) Viettien Prospectus.
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menuid=4&id=122860&catid=1222&tab=&title=&lang=vi-vn [1 December 2013].