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The Virgin Group: Executive Summary The Virgin Group is one of Britain’s largest business empires. The heterogeneous British corporation founded by Sir Richard Branson has infiltrated into vastly diverse industries whereby unconventional business tactics are utilized to cross borders into new industries. Though the Virgin Group has retained an undeniable mystique, little empirical research has been done to obtain a perceptive analysis on the empire. Since the approach in which an organization manages itself is imperative to its success, it is important to look outside the box to assess the effectiveness of Virgin’s management operations. This paper examines the organizational culture that is synchronous with the Virgin brand, as well as the structural characteristics that have allowed Virgin to successfully operate in many industries. The company’s fundamental values foster many of the dimensions of culture, which are highly internalized within the organization. The success and coordination attributed by Virgin’s culture is greatly influenced by Richard Branson, the founder of the Virgin Group. Branson realizes the potential and importance of those who work for him. Consequently, he creates a structure, which is decentralized, through empowering his employees and providing them with autonomy. The Virgin Group is a company with little bureaucracy, as Branson often encourages employees to use their intuition to make decisions rather than a rational process. However, the lack of formalization within the company may deem to be a weak aspect of the organizational structure, since the lack of formal rules, regulations and procedures may create ambiguous situations for the company. Because of the company’s corporate culture and structure, Virgin has effectively forecasted possible occurrences and has dealt with them in a timely manner. The Virgin Group: Company Information The Virgin Group is one of Britain’s most noteworthy empires in the 21st century. The company has successfully incorporated a copious number of diverse industries under the Virgin brand. This includes travel, mobile, financial services, leisure, cosmetics, retail, and music businesses (Virgin, n.d.). Virgin has

been able to dominate the British market and has therefore continued to rapidly expand into other regions such as the United States, Canada and Australia. The enterprise was founded by Sir Richard Branson in 1970 as a simple mail-order record retailer and has blossomed into one of the most prosperous business empires in the business world (Virgin, n.d.). To date, the Virgin Group has globalized and established over 200 small to mid-sized firms, employing over 25,000 people. As a result, the company has exceeded over $7 billion in revenue in 2002 (Virgin, n.d.). Each one of Virgin’s 200 firms operates as a single entity. Branson either holds ownership of a firm as CEO, or has a minority or majority stake. The Virgin Group does not hold a hierarchal presence within the empire, which allowed its various subsidiaries to operate in an autonomous manner (Wikipedia, 2006). A large component of Virgin’s success has been credited to the founder, Sir Richard Branson. Branson’s self persona is keenly aligned with Virgin’s brand identity and has set the tone for its organizational culture (Virgin, n.d.). His beliefs and vision for Virgin has shaped the structure and culture of which its success is based upon. Branson has followed this guideline in how he treats his customers, his employees and how Virgin’s products are produced (Virgin, n.d.). The Virgin Group has had a profound impact on business relations in Britain and now the globe. The mystique that surrounds this company is undeniable; this has allowed the empire to flourish in uncertain and ambiguous times whilst pursuing financial success. The Virgin Group: Corporate Culture The Virgin Group’s overall brand identity is built upon the founder Richard Branson’s philosophy which states that “if you keep your staff happy then the customer will be happy, and if you keep the customer happy then the shareholders are happy” (Virgin, n.d.). This underlying belief transcends into each one of Virgin’s subsidiaries and into each individual organizational culture. The Virgin Group genuinely believes

in making a difference in each consumer, which can only be accomplished by delivering quality service accomplished by empowered and motivated employees. This ultimately enables the Virgin group to foster an informal, anti-corporate work environment, which is continuously defined by the pop culture of its era (Virgin, n.d.; Grant, 2004). Management holds high expectations and as such they expect a high level of commitment, the acceptance of personal responsibility, and long hours of work when needed (Grant, 2004). Financial rewards at Virgin for most employees are typically modest; however, the company continues to procure an abundance of non-monetary benefits, which include social activities, companysponsored weekend getaways, and impromptu parties (Grant, 2004). This work climate continually encourages positive employee-employer relations, as well as effectively allowing Virgin’s employees to create social networks while embracing the culture. This culture retained at Virgin has demonstrated that interpersonal relations are of key importance. The development of Virgin’s organizational culture has continually allowed for the emergence of a profoundly strong culture. This is evident in the way in which of the Virgin group interact with one another, as it is apparent that all at Virgin agree strongly about certain beliefs, values, and assumptions, which are reinforced within the company (Johns & Saks, 2001). The acquisition of a strong corporate culture retains several advantageous benefits, two of which are evident at the Virgin Group: coordination and financial success (Johns & Saks, 2001). Within the Virgin empire, the firm has consistently held open channels of communication between each individual subsidiary. The organization has established an internal communications community. The function of this community is to ensure that all Virgin employees become versed with the customary affairs of the company as a whole. Moreover, The Virgin Village is a Group intranet site where employees are able to access information about the company, job opportunities, s, and other prevalent information. Each Virgin company also communicates with

staff on a regular basis, updating them on any changes and the progress of the business. As a result, each subsidiary can learn from one another as well and allowing for coordinated efforts (Johns & Saks, 2001). Each subsidiary of the Virgin Group shares a set of values that are continually strengthened. This encomes a value for money, excellent quality products, brilliant customer service, innovation, competition and consistently having fun throughout the process. In such a large conglomerate empire as the Virgin Group, these broad set of fundamental beliefs continually work to strengthen the company’s brand as well as its culture. Virgin has continually retained a strong underlying belief that it is their employees who: deliver brilliant customer service; give the company its personality, shape its culture, and innovate. They are viewed as Virgin’s greatest asset and as such, management believes that employees should be treated with respect. Management looks after their employees’ welfare and allows them the freedom to flourish and be themselves (Virgin, n.d.). Virgin actively encourages personal expression, whether it is in their speech, creative and conceptual thinking, or dress code (Virgin, n.d.). It is these fundamental values and beliefs that have allowed Virgin to thrive in such a competitive environment, challenge new opportunities and excel in its markets, while still continuing to operate with integrity. One of the single most important influences on an organization’s culture is the founder (Author Unknown, 2002). Employees are often influenced by top management and mimic their behaviours (Author Unknown, 2002). Sir Richard Branson, the head of Britain's Virgin group, has had a profound influence on the corporate culture at Virgin. For example, he has a few phrases that demonstrate his underlying philosophy; one is, "common sense counts for way more than pure intellect." These phrases influence the entire organization's behaviour and thus promote Virgin’s autonomous work climate. Branson has been able to make his own freewheeling, antiestablishment personality synonymous with the Virgin brand. Whether it was a punk band, an airline, or a line of cosmetics, Branson incorporated his style of flare into Virgin’s

brand and culture, which allowed the organization to operate with style and playfulness (Author Unknown, n.d.). According to Branson, the key to encouraging innovation within the company is to listen to ideas and to offer . Interaction between employees and managers is fundamental (Author Unknown, 2005). According to John and Saks (Johns & Saks, 2001), the culture of an organization will emulate what top management ‘pays attention to’. Retaining a strong figurehead as a symbol of motivation and success creates a climate for employees, which breeds Branson’s simple philosophical values. The organizational culture at Virgin thus greatly reflects the values of the founder. All employees are continually faced with high levels of autonomy to stimulate innovation and idea generation; this is especially apparent in the strong organizational culture that exists within Virgin today. According to Sheridan (Johns & Saks, 2001), there are seven dimensions of culture, and Virgin has a heavy emphasis on three in particular: aggressiveness, innovation and risk-taking, and people orientation. Aggressiveness is a key dimension in Virgin’s culture because the company often seizes opportunities when they arise and confront the competition, taking out large and more cumbersome companies. It is evident that the Virgin Group focuses on innovation because of their eagerness to offer consumers something “better, fresher, and more valuable” (Virgin, n.d.). Virgin prides itself in carrying its operations unconventionally, which deviates significantly from traditional business practices. However, Virgin sees the importance of innovation, which is facilitated by Virgin’s flat organizational structure (Damanpour, 1996). This innovation and risk-taking has been very valuable in leading to Virgin’s success. What takes Virgin to its innovative standards is what lies behind the products: people. Virgin’s top priority and greatest asset is its workforce. Specifically, Virgin believes in providing its employees with autonomy and empowering them to make decisions. This way, decisions can be made more quickly without going through the hierarchy.

The effectiveness of Virgin’s culture may be measured through various factors, including economic and product analysis. In economic , there has been extensive media coverage on Virgin’s financial problems. For example, Virgin Radio sold two of its radio stations to offset its debt. However, Virgin was never into making profits, but they were into making value-added products. These innovative products are the main reasons for Virgin’s success and are a direct function of the brewed culture. The risk-taking, aggressive, and team oriented culture of Virgin provides focused direction for its workforce to meet customer demands of quality products in a creative fashion. The established culture fits well with its horizontal structure and is an important factor in the essence of the Virgin brand. However, Virgin must caution itself of the danger of the sub-cultures that may develop within departments. Also, a suggestion could be made to emphasize the importance of shareholder value, but overall, the culture is operating very effectively. The Virgin Group: Corporate Structure Although many perceive the Virgin Group to be a conglomerate, this may not be the case in actuality. Each of the Virgin brand companies operate as a separate entity. Branson either holds ownership of a firm as CEO, or has a controlling interest in shareholders equity. After careful analysis of the organizational structure of the Virgin Group’s subsidiaries, it can be concluded that product departmentation is exhibited. In Figure 15.1, it is illustrated that each operation of the Virgin Group can be considered as a department. For example, air travel operations are formed on the basis of providing a particular product or service. If compared with another department, such as Finance, a clear distinction is shown. Looking at the structure of each operation, a different type of departmentation can be seen. For example, mobile operations split into Virgin Mobile UK, USA, and Australia. This demonstrates how Virgin Mobile practices geographic departmentation. The internet “dot.com” operations of Virgin Mobile, on the other hand, practice product and customer departmentation. Because Virgin Group practices more than two forms of

departmentation, the company as a whole is considered to be hybrid. The multi-faceted approach of the Virgin Group may introduce different situations, based on social, cultural, technological and political circumstances. Therefore, having a hybrid structure will allow the Virgin Group to effectively adapt to various situations. The company’s division of labour purports a unique aspect of structure to analyze. Essentially, one must examine the number of levels of authority that exist in the company, as well as the autonomy, control and communication that exists among employees. This information aids in determining the ‘flatness’ or ‘tallness’ of the Virgin Group’s structure, which is an index of the vertical division of labour. (Johns & Saks, 2001) Figure 15.1 shows that Virgin’s subsidiaries operate separately from one another. The interaction between the companies can be considered similar to a ‘family’, as opposed to a hierarchy. Each company is empowered to run their own affairs, but is expected to aid one another when needed. Through closer examination, it is determined that Richard Branson also empowers his workers by giving them the ability to make unsupervised decisions. This leads to workers having high autonomy. Additionally, communication is effective, as interaction between employees of all ranks is transparent and descending through a long chain of command is not required. This effective communication is showcased through Branson’s spontaneous drop-ins on employees in any level within the Virgin ranks to receive ideas and . This simple act reduces information filtering by effectively decreasing organizational hierarchy and increasing accessibility to top management, which can possibly decrease power distance. Virgin Group demonstrates high autonomy and control, as well as an effective communication system for employees, which indicates that it is a flat organization. (Grant, 2004) Flat organizations, such as Virgin, commonly have effective communication channels and coordination. These attributes make decision-making in a company faster and more efficient. If the Virgin Group chooses to expand, having a flat structure would be advantageous because the effects of failure are less significant. Additionally, having a flatter organizational structure

promotes a wider span of control, which results in a greater range of responsibility given to employees. These responsibilities provide employees with the autonomy to execute unsupervised decisions, which in turn increase employee empowerment. Lawler expresses this premise in an article where he notes that one of the six factors that foster empowerment is a wide span of control. (Lawler, 1992) Having a wide span of control, however, decreases the interaction between a manager and the employees. It may also create subcultural differences, which may result in conflict. Virgin Group is a company which fosters a decentralized corporate structure. Essentially, decisionmaking power is dispersed down the hierarchy and across departments. The company is pursuing a more participative climate, ed by the company’s top role-model, Richard Branson, who believes that employees are the backbone of the company (Branson, 1998). Virgin Group has developed a culture, which aims to empower employees through allocating more autonomy, discretion and unsupervised decision making responsibility to the workers. A high-involvement design (Lawler, 1992), which reflects less constraining situations, has been developed which s the transmission of information, resources, and authority throughout the organization. This constructive process has been associated with the increased selfefficacy of Virgin Group employees and the fulfillment of the desires of individuals who have a need for power under McClelland’s Theory of Needs (Johns & Saks, 2001). Recent globalization trends have reinforced the effectiveness and importance of the Virgin Group’s decentralized structure. Studies have shown that there is a steady increase of knowledge workers - those who work primarily with information or develop and use knowledge in the workplace (Thurow, 2000). This has advocated a shift away from the traditional hierarchical constraints toward a more egalitarian organizational outline, which provides knowledge workers with greater autonomy (Kleinman & Vallas, 2001). The increasing importance of empowering knowledge workers is crucial to the current success of the Virgin Group and also aids in any company in the future. The premise behind this notion is ed by the fact that empowering knowledge

workers will increase their self-efficacy. However, managers must ensure that the empowerment does not result in inter-role conflict by providing workers with clear expectations and defining ambiguous situations or tasks. Therefore, as the company continues to expand, the autonomy provided for knowledge workers will give them the ability to make decisions. Virgin can be classified as a different breed of corporate enterprise within a web of competing firms. Across the wide spectrum of services and products offered under the leadership of Richard Branson, minimal organizational bureaucracy prevails. As quoted, Branson declares, “To them, the fact that Virgin has minimal management layers, no bureaucracy, a tiny board and no massive global HQ is an anathema.” (Virgin, n.d.) Virgin comprises of 200 separate companies that are individually managed and have separate funding. Traditionally, decentralized firms are marked by elements of organizational bureaucracy. However, this is not the case when evaluating the Virgin Group. As such, the formal organizational structure is decentralized, and elements of bureaucracy are traditionally prevalent in such firms. Despite this Virgin is characterized by minimal bureaucracy under Branson’s leadership. Essentially, Branson removes bureaucracy across his firms because he wishes to horizontally flatten the hierarchy within the Virgin Group. Company employees are highly competent and are classified as knowledge workers, who are significantly self-managed. The potency of such workers is enhanced through Branson’s leadership style, that emphasizes low role ambiguity, a wide span of control, role participation, and ample access to resources tailored to the role (Spreitzer, 1996). Branson has been known to exhibit consideration for his employees, and actively seek . Branson stresses inter-role responsibilities, where his top workers often are able for company success across different firms within the group. His strong disbelief in hierarchy and formal corporate structure contributes to organizational cohesiveness, which is embodied by his statement “(The

companies) are empowered to run their own affairs […] in a sense, we are a community, with shared ideas, values, interests and goals. The proof of our success is real and tangible”. (Spreitzer, 1996) Branson has adopted a very unusual strategy that defies conventional reliance on core competencies. Industry experts often term Branson as a wildcard, who prefers to utilize gut rationale rather than conventional business decision-making processes. His methods of structuring an organization, although non-traditional, foster an environment that allows employees to strive. This organizational structure is a major reason that contributes to the success of Virgin Group. The Virgin Group: Conclusion It is evident that the Virgin Group is a successful international organization. This success is a product of leader Richard Branson’s unique view on organizational culture and structure. Although many of his practices are considered unconventional, it is clear that they are effective. The underlying theme of the organization’s culture is the push for innovation, aggressiveness and team orientation. These three facets contribute to Virgin’s high exposure as well as its value-added products. With regards to organizational structure, Branson believes that the Virgin Group should possess attributes of a small business. He believes in building a strong relationship with employees, allowing them to express themselves. These fundamental values and beliefs lead Branson to form a structure, which demonstrates high empowerment, high autonomy and low bureaucracy. Virgin’s recent penetration into the Canadian mobile market is an example of the company’s forward-thinking and results-oriented capabilities. This thriving expansion has proven that Virgin’s organizational culture and structure have brewed corporate success. If Virgin continues to operate in this manner, as well as being aware of the problems with expansion, it will slowly progress through the ranks of some of the most influential and dominating companies.

The Virgin Group: Appendix Figure 15.1: The Virgin Group of Companies

(Grant, 2004) Glossary: Centralization: The extent to which decision-making power is localized in a particular part of an organization. Customer departmentation: Relatively self-contained units deliver an organization's products or services to specific customer groups. Flat organization: An organization with relatively few levels in its hierarchy of authority. Formalization: The extent to which work roles are highly defined by an organization. Functional departmentation: Employees with closely related skills and responsibilities are assigned to the same department. Geographic departmentation: Relatively self-contained units deliver an organization's products or services in a specific geographic territory.

Hybrid departmentation: A structure based on some mixture of functional, product, geographic, or customer departmentation. Organizational culture: The shared beliefs, values, and assumptions that exist in an organization. Organizational structure: The manner in which an organization divides its labour into specific tasks and achieves coordination among these tasks. Product departmentation: Departments are formed on the basis of a particular product, product line, or service. Span of control: The number of subordinates supervised by a manager. Socialization: The process by which people learn the norms and roles that are necessary to function in a group or organization. Socialization tactics: The manner in which organizations structure the early work experiences of newcomers. Strong culture: An organizational culture with intense and pervasive beliefs, values, and assumptions. Tall organization: An organization with relatively many levels in its hierarchy of authority.

The Virgin Group: References 1) Author Unknown. (2003 December). Breaking in a new culture: the Virgin Blue story. Retrieved July 31 from: 2) Author Unknown. (2002, July). When something is rotten. Retrieved August 1st 2006 from: 3) Author Unknown. (n.d.). Richard Branson 1950–. Retrieved July 27th 2006 from: 4) Author Unknown. (2005, August). The Importance of Being Richard Branson: A Young, Fun Culture. Retrieved July 27th 2006 from: http://www.informit.com/articles/article.asp? p=393257&seqNum=3&rl=1 85 Branson, R. (1998) Losing My Virginity. Three Rivers Press: New York. 6) Damanpour, F. (1996) Organizational Complexity and Innovation: Developing and Testing Multiple Contingency Models. Management Science, 42(5), 693-716. 7) Grant, Robert M. (2004, October). Richard Branson and the Virgin Group of Companies in 2004. Blackwell Publishing. Pages 16-18. 8) Johns, G. & Saks, A. M. (2001). Organizational Behaviour: Understanding and managing life at work. Fifth Edition. Addison Wesley: Toronto. 9) Kleinman, D. & Vallas, S. (2001) Science, Capitalism, and the Rise of the "Knowledge Worker": The Changing Structure of Knowledge Production in the United States. Theory and Society, 30, 451-492. 10) Lawler, E.E. (1992) The Ultimate Advantage. Jossey-Bass: San Francisco. 11) Spreitzer, G. (1996) Social Structural Characteristics of Psychological Empowerment. The Academy of Management Journal, 39(2), 483-504. 12) Thurow, L.C. (2000) Dimensions of Globalization. Annals of the American Academy of Political and Social Science, 570, 19-31. 13) Virgin Group. (n.d.). Virgin: Our People. Retrieved July 27th from: