BUAD 304 Chapter 14/15: Organizational Structure and Culture

Purpose of Organizational Design

• 1. Clarify relationships

• 2. Establish lines of authority

• 3. Clarify ways of communicating

• 4. Coordination of activities to meet goals

• 5. Enable efficient decision making

• 6. To achieve the company’s objectives

Basic Foundations of Organizations

• 1. Common intentions among all organizations:

  • Coordination of effort

  • Division of labor

  • Aligned goals

• 2. Basic dimensions of organizations: organizational charts

  • Hierarchy of authority

  • Division of labor

  • Spans of control

Categories of Organizational Design

• Organizations are defined by a traditional approach tend to have functional, divisional, and/or matrix structures

• Organizations defined by a horizontal approach work hard to flatten hierarchy and organize people around specific segments of the workflow

• Organizations defined by an open approach tend to have hollow, modular, or virtual structures

Organizational Design

• We need to address two key questions:

  • 1. How to divide labor?

  • 2. How to coordinate and control labor?

• Different organizational designs address these questions

Types of Organizational Structures

• Functional: employees grouped according to the business functions they perform

• Divisional: employees grouped based on similar products or services, customers, or clients, or geographic regions

Functional Design

• Benefits: High specialization, efficiency, economies of scale

• Costs: creates silos, reduces collaboration, takes longer to communicate

Divisional Design

• Benefits: increase focus, increase coordination

• Costs: less efficient, duplication of effort, more myopic

Types of Organizational Structures

• Matrix:

  • Combines a vertical structure with an equally strong horizontal overlay

  • Generally combines functional and divisional chains of command to form a grid with two command structures

• Horizontal:

  • Teams or workgroups, either temporary or permanent, created to improve collaboration and work on common projects

• Hollow or Network: designed around a central core of key functions and outsources other functions to other companies or individuals who can do them cheaper or faster

• Modular: the company assembles product parts, components, or modules provided by external contractors

Matrix Design

• Benefits: 

  • Coordination across project

  • Efficient allocation of professionals to projects

• Costs:

  • Power struggles and confusion

  • Needs strong leadership skills

  • Stress

Horizontal Design

• Benefits:

  • Business focused

  • Highly flexible

  • Reduces control and coordination costs

• Costs:

  • Difficult to implement

  • Requires new skills and methods

  • Needs sophisticated IT

Hollow/Network Design

• Benefits: 

  • Gain scale without mass

  • Flexible and adaptive

  • Quickly access new markets

  • Agile

• Costs:

  • Loss of control

  • Difficult to form and manage

  • Requires trust between and among organizations

Virtual Design

• Generally appears to customers as a single, unified organization with a real physical location

• Members geographically separated, usually working with email and other forms of information technology

• Can be either:

  • Internal

  • Networked external virtual structures

• Benefits:

  • Respond to market opportunities

  • Provide product extensions or one stop shop

  • Low exist costs

• Costs:

  • Requires high level of communication/coordination costs

  • Low employee loyalty and/or commitment

Structural Considerations

• Increase structure to capture differentiation benefits

  • Minimize cost, difficulty, and uncertainty of individual tasks

  • Avoiding worker alienation and isolation

  • Minimize cost, difficulty, and uncertainty of HR (hiring, evaluation, reward)

  • Maximize uniformity and managerial control (easily push biggest ideas)

• Decrease structure (“flatten”) to avoid integration costs

  • Improve creativity and autonomy

  • Intrinsically motivate employes (task design)

  • Avoid attachment to rules (“bureaucracy”)

  • Reduce managerial burden

Mechanistic Organizations

• Centralized hierarchy of authority

• Many rules and procedures

• Specialized tasks

• Formalized communication

• Few teams or task forces

• Narrow span of control, taller

Organic Organizations

• Decentralized hierarchy of authority

• Few rules and procedures

• Shared tasks

• Informal communication

• Many teams or task forces

• Wider spans of control, flatter

Organizational Culture

• The set of shared, taken-for-granted, implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments

• Four Characteristics of Organizational Culture:

  • 1. Shared concept

  • 2. Learned over time

  • 3. Influences our behavior at work

  • 4. Impacts outcomes at multiple levels

Drivers of Culture

• Drivers of Culture: → Values → Beliefs → Norms

  • The founder’s values

  • The industry and business environment

  • The national culture

  • The organization’s vision and strategies

  • The behavior of leaders

• Organizational Culture → Organizational Structure/Internal Processes → Group and Social Processes → Work Attitudes and Behaviors → Outcomes

Three Levels of Organizational Culture

• ON THE FINAL EXAM

• 1. Observable artifacts:

  • The physical manifestation of an organization’s culture: rituals/ceremonies, stories, symbols, language

• 2. Espoused Versus Enacted Values:

  • Espoused values: explicitly stated values and norms that are preferred by an organization

  • Enacted values: values and norms that are actually exhibited or converted into employee behavior

• 3. Basic underlying assumptions:

  • Organizational values that have become taken for granted

Observable Artifacts

• The first level of organizational culture

• The physical manifestation of an organization’s culture: rituals/ceremonies, stories, symbols, language

Espoused Vs. Enacted Values

• The second level of organizational culture

• Espoused values: explicitly stated values and norms that are preferred by an organization

• Enacted values: values and norms that are actually exhibited or converted into employee behavior

Basic Underlying Assumptions

• The third level of organizational culture

• Organizational values that have become taken for granted

Functions Organizational Culture Serves

• Establish organizational identity

• Encourage collective commitment

• Ensure social system stability

• Act as sense-making device

Invisible Hand of Culture

• “There is a great deal of consistency around here in how certain things are done. Beyond that, there are very few hard and fast rules. People on the outside portray our culture as imposing lockstep uniformity. It doesn’t feel rigid when you’re inside. It feels like it accommodates you. And best of all you know the game you are in.” -P&G Executive

Cultural Maintenance

• Tell employees explicitly what behaviors are rewarded

• Specify what behaviors would entail a full/partial reward

• Make consequences equivalent to behavior

• Be consistent

• Do not reward all people equally – create contingencies so employees can tell who is doing better

Sustainability

• is a company’s ability to make a profit without sacrificing the resources of its people, the community, and the planet

Competing Values Framework (CVF)

• provides a practical way for managers to understand, measure, and change organizational culture

• Identifies four fundamental types of organizational culture

  • 1. Clan

  • 2. Adhocracy

  • 3. Hierarchy

  • 4. Market

Clan Culture

• Has an internal focus and values flexibility rather than stability and control

Adhocracy Culture

• Have an external focus and value flexibility

Market Culture

• Have a strong external focus and value stability and control

Hierarchy Culture

• Has an internal focus, which produces a more formalized and structured work environment, and values stability and control over flexibility

Vision

• is a long-term goal that describes what an organization wants to become

Strategic Plan

• outlines the organization’s long-term goals and the actions necessary to achieve them

12 Mechanism for Creating Culture Change

1. Formal statements

2. Design of physical space, work environments, and buildings

3. Slogans, language, acronyms, and sayings

4. Deliberate role modeling, training programs, teaching, and coaching by others

5. Explicit rewards, status symbols, and promotion criteria

6. Stories, legends, or myths about key people and events

7. Organizational activities, processes, or outcomes

8. Leader reactions to critical incidents and organizational crises

9. Rites and rituals

10. Work flow and organizational structure

11. Organizational systems and procedures

12. Organizational goals and criteria throughout employee circle

Rites and Rituals

• are the planned and unplanned activities and ceremonies used to celebrate important events or achievements

Organizational Socialization

• is the process by which individuals acquire the knowledge, skills, attitudes, and behaviors required to assume a work role

• Three phase model of organizational socialization that promotes deeper understanding of this important process

  • 1. Anticipatory socialization

  • 2. Encounter

  • 3. Change and acquisition

Anticipatory Socialization Phase

• Occurs before an individual actually joins an organization

  • During this phase, people acquire information about different careers, occupations, professions, and organizations that can come from many sources

Realistic Job Preview

• Gives recruits a realistic idea of what lies ahead by presenting both positive and negative aspects of the job

Encounter Phase

• Employees come to learn what the organization is really like

Onboarding

• help employees to integrate, assimilate, and transition to new jobs by making them familiar with corporate policies, procedures, culture, and politics and by clarifying work-role expectations and responsibilities

Change and Acquisition Phase

• requires employees to master important tasks and roles and adjust to their work group’s values and norms

Mentoring

• is the process of forming and maintaining intensive and lasting developmental relationships between a variety of developers (people who provide career and psychosocial support) and a junior person (the protege, if male, or protegee, if female)

Coaching

• is a process that focuses on improving an individual’s behavior and performance to resolve work issues or handle specific aspects of the job and may be short term

Human Capital

• is the productive potential of an individual’s knowledge, skills, and experiences

Social Capital

• is the productive potential resulting from relationships, goodwill, trust, and cooperative effort

Unity of Command Principle

• specifies that each employee should report to only one manager

Span of Control

• describes the number of people reporting directly to a given manager

Staff Employees

• do background research and provide technical advice and recommendations to their line managerse

Line Managers

• generally have the authority to make decisions for their units

Closed System

• is a self-sufficient entity

  • It is “closed” to the surrounding environmentO

Open System

• depends on constant interaction with the environment for survival

Failure

• occurs when an activity fails to deliver its expected results or outcomes

Boundary Less Organization

• is one in which management has largely succeeded in breaking down barriers between internal levels, job functions, and departments, as well as reducing external barriers between the association (organization) and those with whom it does business

Contingency Approach to Organization Design

• organizations tend to be more effective when they are structured to fit the demands of the situation, and when the structure is aligned with internal activities and actions of the organization

Centralized Decision Making

• occurs when key decisions are made by top manegement

Decentralized Decision Making

• occurs when important decisions are made by middle and lower level managers

Innovation

• is the creation of something new that makes money

  • It finds a pathway to the consumer

Product Innovation

• is a change in the appearance or functionality/performance of a product or a service or the creation of a new one

Process Innovation

• is a change in the way a product or service is conceived, manufactured, or distributed

Innovation System

• is a coherent set of interdependent process and structures that dictates how the company searches for novel problems and solutions, synthesizes ideas into a business concept and product designs, and selects which projects get funded

Strategy map

• is a visual representation of a company’s critical objectives and the crucial relationships among them that drive organizational performance