A Case Study on the Virgin Groups Management Structure

Virgin is made up of over 200 companies and employs approximately 50,000 people worldwide. It was originally set up as a mail-order record business by Sir Richard Branson. Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow in business sectors ranging from mobile communications, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. In 2006 Virgin’s revenues from around the world exceeded £10 billion.

Virgin has a unique management structure which does not specifically adhere to one specific model of management, however it does employ aspects of different concepts which comes together to form its own distinctive style. Management Theorists such as F.W Taylor created the concept of scientific management, which is made up of six key aspects including observation, experiment, standardisation, selection and training, payment by results and co-operation. Despite some facets of his theory becoming outdated, scientific management can still be seen in the some way in current business structures.

For example within Virgin, despite its reputation for having a relaxed working environment, some aspects of scientific management are used. Such as the selection and training and payment by results, with certain employees being offered rewards for showing ambition to set up their own businesses and showing signs of creative thinking.

Another management style is the concept of bureaucracy, this looks at the problem of managing the organisation as a whole. Pioneers of this concept such as M Weber commented on the way family practises serve personal not organisational goals, which he saw the need to distinguish with a more impersonal, ‘rational’ approach.

This approach included strict divisions of labour, organisation of positions into a hierarchy and the need to document decisions and actions in writing. This kind of management style is what Virgin attempt to distance themselves from, creating an atmosphere of ‘innovation and shared values’. Psychologist and management consultant Douglas McGregor described two typical management attitudes, being Theory X and Theory Y managers.

Theory X managers were described as people who believe that the average person inherently dislikes work and will avoid it if possible. Therefore they must be coerced to get them to put in adequate effort. Theory Y managers were described as people who believe that the expenditure of effort is natural and the average person is prepared to both accept and seek responsibility.

Virgin is run with the management attitude of a Theory Y manager, Richard Branson believes in empowering his managers and employees in order to create a more relaxed environment which ultimately allows for a more creative atmosphere. The empowerment of his workforce also links in to the theory of motivation, Maslow’s Hierarchy of Needs, which states that self-actualisation and high esteem will motivate employees to educate themselves, increase creativity, allow personal development and gain recognition.

Virgin look to achieve this by keeping staff happy and creating the feeling of a team in order to achieve an innovative atmosphere which will permit their staff and in reaction Virgin to move forward. A dominant culture is the set of policies, values, beliefs and attitudes learned and shared by the majority of the organisation’s members. Virgin’s dominant culture has affected the way in which they have developed its products and its staff. Values that have fuelled the progress of the organisation have been to do with ‘value for money, quality, innovation, fun and a sense of competitive challenge’ .

The company also states that ‘Richard Branson set out with these principles in mind in the 1970s and they still really define what Virgin is all about.’ And that ‘Virgin believes that the most important thing is the way those values are delivered and brought to life.’ Virgin’s dominant culture has led to the brand recognition of the ‘Virgin’ which leads to positive connotations had by the general public which allows the setting up of new businesses in new markets easier as there may be some level of brand loyalty and understanding of the quality they wish to provide.

Richard Branson uses this dominant culture as a marketing tool as well in order to entice customers to new products or to increase the reputation of the brand name by launching bold and striking promotions that tie into the organisations beliefs. He has utilised this by partaking publicity stunts including a world record flight attempt in a hot air balloon fashioning the Virgin logo and driving a tank down 5th Avenue New York to promote Virgin Cola, which has gained him a reputation for keeping the organisation in the public eye through exciting and unusual methods that involve humour and fun.

The Virgin Group contains more than 200 branded companies in its ‘family’ of businesses, all the companies run independently. Often the companies are set up as joint ventures with other partners, so they all have different shareholders and boards and do not directly affect any other company in the Virgin group. However in 2000 the Virgin group created a centralised web site, which developed closer ties between the companies where gains could be made from common approaches amongst the companies, where previously they had worked separately, in areas such as information technology, purchasing and human relations.

There has also been a Virgin Charter created outlining the aims, legal affairs and the other issues of the holding company and its subsidiaries. All the companies are still run independently however they now share a central hub in which human relations and logistical information can be pooled and shared. All of which have made Virgin slightly more bureaucratic than they previously had been.

In the next two to five years I believe Virgin will put further investment into its Virgin Media company. Virgin Media is currently in direct competition with BSkyB for market share over the UK digital television market (which it holds 30% share) and is in direct competition with BT Broadband over the broadband internet market, which it has the second highest market share (35%) behind BT broadband (40%).

If undertaken correctly Virgin media could create a package that would offer value for money deals on broadband, digital television as well as its telephone services to create potentially a better value package (the quad play package) to increase its sales and take increased market share in both of these markets.

The Virgin Group has also been seen to be scaling up its investment in renewable energy having committed to invest $3 billion over the next ten years . Therefore Virgin Fuel could be expected to start making head way in the use of bio-fuel as a source of power in the future. Having hosted the first flight by a commercial airline to use bio-fuel to generate some of its power

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http://www.virgin.com/RBP/Environment/Introduction.aspx Airline in First Bio-fuel Flight http://news.bbc.co.uk/1/hi/uk/7261214.stm