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BUS7000 Organizational Behavior &Theory

Week 7

Dr Jenne Meyer

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Article Analysis

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Chapter 13

Designing Organizational Structures

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

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Merritt’s Bakery’s Evolving Organizational Structure

Merritt’s Bakery has grown

over the years, and

throughout this growth the

Tulsa, Oklahoma, company

has adapted its

organizational structure.

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Organizational Structure Defined

• Division of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities

• Relates to many OB topics (e.g. job design, teams, power, work standards, information flow)

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Division of Labor

Subdividing work into separate jobs assigned to different people

Division of labor is limited by ability to coordinate work

Potentially increases work efficiency

Necessary as company grows and work becomes more complex

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Coordinating Work Activities

1. Informal communication• Sharing information, forming common mental

models• Good for flexibility, nonroutine and ambiguous

situations• Easiest in small firms• Larger firms apply informal communication through

- Liaison roles- Integrator roles- Concurrent engineering

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Coordinating Work Activities

2. Formal hierarchy• Direct supervision• Assigns legitimate power to manage others • Necessary in most firms, but has problems

3. Standardization• Standardized processes (e.g., job descriptions)• Standardized outputs (e.g., sales targets)• Standardized skills (e.g., training)

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Elements ofOrganizational

Structure

Span of Control

Centralization

Department-alization

Formalization

Elements of Organizational Structure

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KenGen’s Flatter Structure

KenGen, Kenya’s leading electricity

generation company, reduced its

hierarchy from 15 layers to just 6

layers. “This flatter structure has

reduced bureaucracy and it has also

improved teamwork,” explains

KenGen executive Simon Ngure.

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Span of Control

Number of people directly reporting to the next level• Related to coordination through direct

supervision

Wider span of control possible when:1. Other coordinating mechanisms are

present

2. Routine tasks

3. Low employee interdependence

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Tall vs Flat Structures

As companies grow, they:• Build a taller hierarchy• Widen span, or both

Problems with tall hierarchies• Overhead costs• Worse upward information• Focus power around managers, so

staff less empowered

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Centralization and Decentralization Centralization -- Formal

decision making authority is held by a few people, usually at the top

Decentralization increases as companies grow

Varying degrees of centralization in different areas of the company• Example: sales decentralized;

info systems centralized

Upper Mgt

Middle Mgt

Front line

Supervisory

Upper Mgt

Middle Mgt

Front line

Supervisory

Upper Mgt

Middle Mgt

Front line

Supervisory

Production SalesInformation

Systems

= locus of decision making authority

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Formalization

The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms.

Formalization increases as firms get older, larger, and more regulated

Problems with formalization• Reduces organizational flexibility• Discourages organizational learning/creativity• Reduces work efficiency• Increases job dissatisfaction and work stress

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TAXI’s Organic Structure

TAXI, Canada’s creative agency of

the decade, has an organic

structure that relies on small

teams, low formalization, and

decentralized decision making. “We

needed a flexible infrastructure, able

to move with the pace of change,”

says co-founder Paul Lavoie (right in

photo with CEO Rob Guenette).

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Mechanistic vs. Organic Structures

Mechanistic Structure• Narrow span of control• High formalization• High centralization

Organic Structure• Wide span of control• Low formalization• Decentralized decisions

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Effects of Departmentalization

Specifies how employees and their activities are grouped together

Three functions:

1. Establishes chain of command

2. Creates common mental models, measures of performance, etc

3. Encourages staff to coordinate through informal communication

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Organizes employees around specific knowledge or other resources (e.g., marketing, production)

CEO

Finance Production Marketing

Functional Organizational Structure

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Evaluating Functional Structures

Benefits• Economies of scale• Supports professional identity and career paths• Easier supervision

Limitations• More emphasis on subunit than organizational

goals • Higher dysfunctional conflict• Poorer coordination -- requires more controls

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Organizes employees around outputs,clients, or geographic areas

Divisional Structure

CEO

HealthcareLightingProducts

Consumer Lifestyle

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Divisional Structure

Different forms of divisional structure• Geographic structure• Product structure• Client structure

Best form depends on environmental diversity or uncertainty

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Globally Integrated Enterprise

Fewer geographic divisions because:• Less need for local representation• Reduced geographic variation• More global clients

Globally integrated enterprise• Connects work processes around the world rather

than replicating them within each country or region• Functional heads are geographically distributed• Firm’s “home” country is no longer focus of

business

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Evaluating Divisional Structures

Benefits• Building block structure -- accommodates growth• Focuses on markets/products/clients

Limitations• Duplication, inefficient use of resources• Specializations are dispersed--silos of knowledge• Revising divisional structure emphasis produces

politics and conflict among executives

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Team-Based Structure

Self-directed work teams Teams organized around work processes Typically organic structure Usually found within divisionalized structure

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Evaluating Team-Based Structures

Benefits• Responsive, flexible• Lower admin costs• Quicker, more informed decisions

Limitations• Interpersonal training costs• Slower during team development• Role ambiguity increases stress• Problems with supervisor role changes• Duplication of resources

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Audio DeptLeader

SoftwareDept Leader

Art DeptLeader

Game1Project Leader

Game2Project Leader

Game3Project Leader

Matrix Structure (Project-based)

CEO

Employees ( ) are temporarily assigned to a specificproject team and have a permanent functional unit

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Evaluating Matrix Structures

Benefits• Uses resources and expertise effectively• Improves communication, flexibility, innovation • Focuses specialists on clients and products• Supports knowledge sharing within specialty• Solution when two divisions have equal importance

Limitations• Increases goal conflict and ambiguity• Two bosses dilutes accountability• More conflict, organizational politics, and stress

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CoreFirm(USA)

Productdevelopment

partner(France)

Call centerpartner

(Philippines)

Accounting partner(USA)

Package design partner

(UK)

Assembly partner(China)

Network Organizational Structure

Alliance of firms creating a product or service

Supporting firms beehived around a “hub” or “core” firm

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Evaluating Network Structures

Benefits• Highly flexible• Potentially better use of skills and technology• Not saddled with same resources for all products

Limitations• Exposed to market forces• Less control over subcontractors than in-house

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External Environment & Structure

Dynamic

• High rate of change• Use team-based, network, or

other organic structure

Stable

• Steady conditions, predictable change

• Use mechanistic structure

Complex

• Many elements (such as stakeholders)

• Decentralize

Simple

• Few environmental elements• Less need to decentralize

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Diverse

• Several products, clients, regions

• Use divisional form aligned with the diversity

Hostile

• Competition and resource scarcity

• Use organic structure for responsiveness

Integrated

• Single product, client, place• Use functional structure, or

geographic division if global

Munificent

• Plenty of resources and product demand

• Less need for organic structure

External Environment & Structure (con’t)

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Effects of Organizational Size

As organizations grow, they have: More division of labor (job specialization)

Greater use of standardization

More hierarchy and formalization

More decentralization

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Technology and Structure

Technology refers to mechanisms or processes by which an organization turns out its product or service

Two contingencies:• Variability -- the number of exceptions to standard

procedure that tend to occur. • Analyzability -- the predictability or difficulty of the

required work

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Organizational Strategy

Structure follows strategy• Strategy points to the environments in which the

organization will operate• Leaders decide which structure to apply

Innovation strategy• Providing unique products or attracting clients who

want customization

Cost leadership strategy• Maximize productivity in order to offer competitive

pricing

Chapter 13

Organizational Culture

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

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Facebook’s Organizational Culture

Facebook has been able to

maintain a strong corporate

culture even as it expands

globally. “Maintaining culture is

one of the top priorities we

have as a company,” says

Sarah Smith (shown in this

photo), head of Facebook’s

operations in Austin, Texas.

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Organizational Culture Defined

The basic pattern of shared values and assumptions shared within the organization.

Defines what is important and unimportant.

Company’s DNA—invisible, yet powerful template that shapes employee behavior

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Elements of Organizational Culture

Organizational culture

Artifacts of organizational culture

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Content of Organizational Culture

The relative ordering of values.• A few dominant values• Example: Facebook – creative, proactive, risk-oriented

Problems with measuring org culture• Oversimplifies diversity of possible values• Ignore shared assumptions• Adopts an “integration” perspective

An organization’s culture is fuzzy:• Diverse subcultures (“fragmentation”)• Values exist within individuals, not work units

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Organizational Culture Profile

Org Culture Dimensions Dimension Characteristics

Innovation Experimenting, opportunity seeking, risk taking, few rules, low cautiousness

Stability Predictability, security, rule-oriented

Respect for people Fairness, tolerance

Outcome orientation Action oriented, high expectations, results oriented

Attention to detail Precise, analytic

Team orientation Collaboration, people-oriented

Aggressiveness Competitive, low emphasis on social responsibility

Source: O’Reilly et al (1991)

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Organizational Subcultures

Dominant culture -- most widely shared values and assumptions

Subcultures• Located throughout the organization• Can enhance or oppose (countercultures) firm’s

dominant culture

Two functions of countercultures:• provide surveillance and critique, ethics• source of emerging values

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Artifacts: Stories and Legends

Social prescriptions of desired (or dysfunctional) behavior

Provides a realistic human side to expectations

Most effective stories and legends:• Describe real people • Assumed to be true• Known throughout the organization• Are prescriptive

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Artifacts of Organizational Culture

• Observable symbols and signs of culture

• Physical structures, ceremonies, language, stories

• Maintain and transmit organization’s culture

• Need many artifacts to accurately decipher a company’s culture

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Artifacts: Rituals and Ceremonies

Rituals• programmed routines • (e.g.., how visitors are greeted)

Ceremonies• planned activities for an audience• (e.g.., award ceremonies)

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Artifacts: Organizational Language

Words used to address people, describe customers, etc.

Leaders use phrases and special vocabulary as cultural symbols

Language also found in subcultures

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Artifacts: Physical Structures/Symbols

• Building structure -- may shape and reflect culture• Office design conveys cultural meaning

• Furniture, office size, wall hangings

Courtesy of Microsoft Corp.

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Organizational Culture Strength

How widely and deeply employees hold the company’s dominant values and assumptions

Strong cultures exist when:• most employees understand/embrace the

dominant values• values and assumptions are institutionalized

through well-established artifacts• culture is long lasting -- often traced back to

founder

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Functions of Strong Corporate Cultures

Functions ofStrong Cultures

• Control system• Social glue• Sense-making

OrganizationalOutcomes

• Org performance• Employee well-being

Culture strength advantages depend on:

• Environment fit• Not cult-like• Adaptive culture

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Contingencies of Organizational Culture & Performance

Organizational culture strength moderately predicts organizational performance

Need to consider contingencies:1. Ensure culture-environment fit

2. Avoid corporate “cult” strength

3. Create an adaptive culture

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Organizational Culture Assimilation in the Southwest--AirTran MergerOrganizational culture assimilation practices helped

AirTran Airways employees understand and embrace the Southwest Airlines culture, known as the “Southwest Way.” Southwest’s success and its popular culture assisted this assimilation process.

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Merging Cultures: Bicultural Audit

Part of due diligence in merger Minimizes cultural collision by diagnosing companies Three steps in bicultural audit:

1. Identify cultural artifacts

2. Analyze data for cultural conflict/compatibility

3. Identify strategies and action plans to bridge cultures

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Merging Organizational Cultures

Assimilation

Deculturation

Acquired company embraces acquiring firm’s cultural values

Acquiring firm imposes its culture on unwilling acquired firm

IntegrationCultures combined into a new composite culture

SeparationMerging companies remain separate with their own culture

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Changing/Strengthening Organizational Culture

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Changing/Strengthening Organizational Culture

Actions of Founders/Leaders• Org culture sometimes reflects the founder’s

personality• Transformational leaders can reshape culture

-- organizational change practices

Aligning Artifacts• Artifacts keep culture in place• e.g., create memorable events,

communicating stories, transferringculture carriers

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Changing/Strengthening Organizational Culture

Introducing Culturally Consistent Rewards• Rewards are powerful artifacts – reinforce

culturally-consistent behavior

Attracting, Selecting, Socializing Employees• Attraction-selection-attrition theory• Socialization practices

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Attraction-Selection-Attrition Theory

Organizations become more homogeneous (stronger culture) through:

• Attraction -- applicants self-select and weed out companies based on compatible values

• Selection -- applicants selected based on values congruent with organization’s culture

• Attrition -- employees quit or are forced out when their values oppose company values

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Lindblad’s Shipshape Socialization

As part of its socialization process, adventure cruise

company Lindblad Expeditions shows applicants a video

program with a realistic preview of what it’s like to work

onboard.

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Organizational Socialization Defined

The process by which individuals learn the values, expected behaviors, and social knowledge necessary to assume their roles in the organization.

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Socialization: Learning & Adjustment

Learning Process• Newcomers make sense of the organization’s

physical, social, and strategic/cultural dynamics

Adjustment Process• Newcomers need to adapt to their new work

environment- New work roles- New team norms- Newcomers with diverse experience adjust better

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Stages of Socialization

Role Management

• Insider

• Changing roles and behavior

• Resolving conflicts

EncounterStage

• Newcomer

• Testingexpectations

Pre-EmploymentStage

• Outsider

• Gathering information

• Forming psychological contract

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Improving Organizational Socialization

Realistic job preview (RJP)• A balance of positive and negative information

about the job and work context

Socialization agents• Supervisors – technical information, performance

feedback, job duties• Co-workers – ideal when accessible, role models,

tolerant, and supportive