CHAPTER-08

ORGANIZATION STRUCTURE, CULTURE, AND CHANGE

Dr. Gehan Shanmuganathan, (DBA)1

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PROCTER & GAMBLE

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PROCTER & GAMBLE Changing the structure (positions) of the

organization for cultural change

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CHAPTER OBJECTIVES

9.1

LEARNING OBJECTIVES1 Describe the bureaucratic organization structure and discuss

its advantages and disadvantages.2 Explain the major ways in which organizations are divided into

departments.3 Describe four modifications of the bureaucratic structure.4 Identify key factors that influence the selection of organization

structure 5 Specify how delegation, empowerment, and decentralization

spread authority in an organization 6. Identify major aspects of organizational culture 7 Describe key aspects of managing change, including gaining

support for change.

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BUREAUCRACY AS AN ORGANIZATION STRUCTURE

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ORGANIZATION STRUCTURE The arrangement of people and tasks to

accomplish organizational goals The structure specifies who reports to whom and

who does what The structure specifies who has the

power/authority The structure specifies how to communicate The structure specifies formal and informal social

group behaviors

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BUREAUCRACY

A rational, systematic, and precise form of

organization in which rules, regulations,

and techniques of control are specifically

defined

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PRINCIPLES OF ORGANIZATION IN A BUREAUCRACY

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PRINCIPLES OF ORGANIZATION IN A BUREAUCRACY Hierarchy of authority- each lower organizational

unit is controlled and supervised by a higher one Unity of command- each subordinate receives

assigned duties from one superior only and is accountable to that superior

Task specialization- division of labor is based on task specialization

Responsibilities and job description Line and staff functions

THE BUREAUCRATIC FORM OF ORGANIZATION

Top-Level

Managers

Middle-Level

Managers

First-Level Managers

Operative Employees

Few

Many

High

Low

Number of Employees

Power and Authority

9.2

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ADVANTAGES AND DISADVANTAGES OF BUREAUCRACY

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ADVANTAGES AND DISADVANTAGES OF BUREAUCRACY

Know who is responsible for what

Helps vertical integration

Knows who has the authority to make decisions

Rigid in handling people and problems

Create inconvenience and inefficiency

Competition between departments

Frustration caused by red-tape

Slow decision making

Advantages Disadvantages

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DEPARTMENTALIZATION

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DEPARTMENTALIZATION

The process of subdividing total work into

departments

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FUNCTIONAL DEPARTMENTALIZATION

An arrangement that defines departments by

the function each one performs, such as

accounting or purchasing The advantage is to increase functional

efficiencies

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GEOGRAPHIC DEPARTMENTALIZATION

An arrangement of departments according to

the geographic area or territory served Advantage is that it allows for decision making at

a local level, where the personnel are most

familiar with the problems and the local culture,

including taste, fashion, and food

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PRODUCT- SERVICE DEPARTMENTALIZATION

The arrangement of departments according

to the products or services they provide Advantage is to increase the product

management efficiencies

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MODIFICATIONS OF THE BUREAUCRATIC ORGANIZATION

Matrix Organization

Organization by Process

(Instead of Task)

Team Structure

Flat Structures

, Downsizin

g, and Outsourcin

g

Non-bureaucratic Forms of Organization

9.4

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PROJECT AND MATRIX ORGANIZATION

Project organization- A temporary group of

specialists working under one manager to

accomplish a fixed objective

Matrix organization- a project structure

superimposed on a functional structure These organizations are capable of managing the

complexity

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MATRIX ORGANIZATIONAL STRUCTURE

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FLAT STRUCTURES, DOWNSIZING, AND OUTSOURCING

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FLAT ORGANIZATION STRUCTURE A form of organization with relatively few

layers of management, making it less bureaucratic Less span of control (number of subordinates

reporting directly to a manager )

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DOWNSIZING OR BUSINESS PROCESS REENGINEERING (BPR) Laying off employees temporarily or permanently

business process redesigning or engineering The key motives of the downsizing are;

Less bureaucratic Low cost Higher profits and stock value Downsizing also could be expensive

Early retirement pay Disability claims Lower productivity due to staff low moral Against the social responsibility

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OUTSOURCING The methodology of giving out part of the

entire business process to achieve cost, time, and quality benefits by focusing on the organization core competencies Advertising Research Promotions campaigns Productions

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HOME SHORING Moving customer service into workers’

homes as a form of telecommuting

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THE HORIZONTAL STRUCTURE (ORGANIZATION BY TEAM AND PROCESS)

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HORIZONTAL STRUCTURE The arrangement of work by multidisciplinary

teams that are responsible for accomplishing a process New product development Marketing research Quality teams

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HORIZONTAL STRUCTURE

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REENGINEERING

The radical redesign of work to achieve

substantial improvements in

performance

Switching from a vertical (task) emphasis to

horizontal (process) emphasis could be

done through reengineering

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FOCUS OF TEAM OR PROCESS STRUCTURE Reduce cycle time Reduce cost Reduce throughput time

Team members; Need to develop a process mentality rather than

a task mentality

A TEAMWORK FORMULA

Team Triangle

Team

Forming, Storming, Norming, PerformingTrust

CongruenceCohesiveness [Bond]

4 stages

Individual Group

TEAM APPROACH TO A PROCESS

B

A

C

Collective Efforts

Results

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INFORMAL ORGANIZATION STRUCTURE AND COMMUNICATION NETWORK

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INFORMAL ORGANIZATION STRUCTURE A set of unofficial relationships that emerge to

take care of events and transactions not covered by the formal structure

Social network analysis- the mapping and measuring of relationships and links between and among people, groups, and organizations

Discuss how informal networks could be influenced by the information technology. E.g- emails, Skype, video conferencing

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POWER SHARING AT THE HIGHEST LEVEL OF MANAGEMENT

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POWER SHARING AT THE HIGHEST LEVEL OF MANAGEMENT Top of the organization has the highest level

of power Current trend is that one person holds two or

more positions such as CEO and Chairman This avoids the confusion of understanding of

“who has the ultimate power to control” This is designed in line with the flexible or

matrix organizations concept

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KEY FACTORS THAT INFLUENCE THE SELECTION OF AN ORGANIZATION STRUCTURE

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KEY FACTORS THAT INFLUENCE THE SELECTION OF AN ORGANIZATION STRUCTURE

Strategy and goals - structure follows the strategy Technology – high-tech companies use flexi organizations

as technology connects worker, supplier, and customer Size – higher the size of the organization, highly centralized

the control would be Financial condition of the firm – flatter organizations to

reduce the cost factor Environmental stability – when the business faces

uncertain and unstable environments, they need flexi organizations

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DELEGATION, EMPOWERMENT, AND DECENTRALIZATION

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DELEGATION AND EMPOWERMENT

Delegation- Assigning formal authority and

responsibility for accomplishing a specific task to

another person

Empowerment- The process by which managers

share power with group members, thereby

enhancing employees’ feeling of personal

effectiveness

INCREASING PRODUCTIVITY THROUGHDELEGATION AND EMPOWERMENT

5. Obtain feedback on

the delegated

task

1. Assign duties to the right people

2. Delegate the whole

task

3. Give as much

instruction as needed

4. Retain some

important tasks for yourself

9.5

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DECENTRALIZATION AND CENTRALIZATION Decentralization- The extent to which

authority is passed down to lower levels in an organization

Centralization- The extent to which authority is retained at the top of the organization

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ORGANIZATIONAL CULTURE

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ORGANIZATIONAL CULTURE (CORPORATE CULTURE)- THE SOFT SIDE OF THE ORG: The system of shared values and beliefs that

actively influence the behavior of organization members Subculture- a pocket in which the organizational

culture differs from the dominant culture and from other pockets of the subculture

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DIMENSIONS OF ORGANIZATIONAL CULTURE

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DIMENSIONS OF ORGANIZATIONAL CULTURE Values – the organization’s philosophy expressed through

values guides behavior on a day-to-day basis Relative diversity – the degree of homogeneity Resources allocations and rewards – resources

allocation send messages to employee what is valued in the firm

Degree of change – influences the organizational culture A sense of ownership – ownership of stocks will create a

culture of commitment and loyalty Strength of the culture – strong cultures influence day-

to-day behavior of the people

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HOW WORKERS LEARN THE CULTURE

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SOCIALIZATION The process of coming to understand the

values, norms, and customs, essential for adapting to the organization

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CONSEQUENCES AND IMPLICATIONS OF ORGANIZATIONAL CULTURE

CONSEQUENCES AND IMPLICATIONS OF ORGANIZATIONAL CULTURE

The Culture of an

Organization Affects

Employee Productivity, Quality, and Morale

Its Competitive Advantage in the Marketplace

Person- Organization fit

Direction of Leadership Activity

Adapted from Exhibit 9.9

9.7

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MANAGING CHANGE

THE CHANGE PROCESS

To bring about change, you have to break old habits, then create and solidify new

habits . . .

Unfreezing Changing Refreezing

Adapted from Exhibit 9.10

9.8

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GAINING SUPPORT FOR CHANGE

Invest time in planning the change

Allow for discussion

and negotiation

Allow for participatio

n

Point out the financial

benefits

Avoid change

overload

Gain political

support for change

Build strong working

relationships

Ask effective

questions to involve workers

How to Gain

Support for Change

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3

4

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7

8

9.9

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SIX SIGMA Refers to a philosophy of driving out waste

and improving quality, and the cost and the time performance of a company

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WRITE FIVE KEY THINGS (AREAS) THAT YOU CAN CRITICALLY REMEMBER IN TODAY’S DISCUSSION

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WHAT WE DISCUSSED TODAY?

9.1

LEARNING OBJECTIVES1 Describe the bureaucratic organization structure and discuss

its advantages and disadvantages.2 Explain the major ways in which organizations are divided into

departments.3 Describe four modifications of the bureaucratic structure.4 Identify key factors that influence the selection of organization

structure 5 Specify how delegation, empowerment, and decentralization

spread authority in an organization 6. Identify major aspects of organizational culture 7 Describe key aspects of managing change, including gaining

support for change.

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WEEKLY ASSIGNMENT

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WEEKLY ASSIGNMENT

How can a manager tell whether an

employee is resisting change? Discuss with

examples.