E

Organizational Culture, Structure, & Design

Organizational Culture, Structure, & Design Study Notes

Introduction to Organizational Structure, Design & Culture

  • This chapter covers the essential aspects of how organizations are built, operate, and how their internal environment influences behavior and performance. It focuses on:

    • Organizational Structure

    • Organizational Design

    • Organizational Culture

Organizational Structure & Design

Drivers of Organizational Structure and Design

  • Strategy: The overarching plan or approach of the organization heavily influences its structure.

  • Power: The distribution and exercise of power within an organization play a role in its design.

  • Politics: Internal organizational politics can significantly impact structural choices and design decisions.

Illustrative Examples of Organizational Design

  • A video example from "Miracle" (link: https://www.youtube.com/watch?v=8YCVtPVP5wl&t=42s) demonstrates practical aspects of organizational design.

  • Another video, "The Right Team" (link: https://www.youtube.com/watch?v=J0nZh9065nE), likely illustrates dynamics within effective organizational teams.

Types of Organizational Structures
Tall Organization

  • Characteristics:

    • Structure: Features multiple layers of management, typically flowing from CEO to Executive Managers, General Managers, Line Managers, down to Employees.

    • Centralized Decision-Making: Decisions are predominantly made at the top levels of the hierarchy.

    • Consistency: Tends to produce consistent decisions across the organization due to centralized control.

    • Slow: The multi-layered approval process often leads to slower decision-making.

Flat Organization

  • Characteristics:

    • Structure: Characterized by fewer management layers, typically Executives, Team Leaders, and Employees.

    • Nimble: Allows for greater agility and faster response times.

    • Decisions at Lower Levels: Empowerment leads to decisions being made closer to the point of action.

    • Lack Consistency: Decisions may lack uniformity across different teams or departments due to decentralized control.

    • Hard to Replicate Success: Challenges can arise in standardizing best practices and replicating success broadly.

Divisional Structure

  • Definition: An organizational structure where people with diverse occupational specialties are grouped into formal units based on similar products, customers, or geographic regions.

  • Example: Procter & Gamble (P&G)'s organization around product lines, such as their "Beauty Products" division, exemplifies a divisional structure.

Functional Matrix

  • Description: A hybrid organizational structure that combines elements of both functional and divisional structures. Typically, employees report to both a functional manager (e.g., HR VP, Sales VP) and a project or regional manager (e.g., Regional VP, District Manager).

Common Elements of Organizations

  1. Common Purpose: Provides every member with a clear understanding of the organization's fundamental reason for existence.

  2. Coordinated Effort: Involves the systematic integration of individual contributions into a cohesive group-wide effort.

  3. Division of Labor: The process of breaking down a large task into smaller, discrete parts, with different people specializing in each part.

  4. Hierarchy of Authority: Establishes a chain of command to ensure that the right individuals are performing the right tasks at the appropriate times, enforcing the principle of "unity of command."

Organizational Culture

Definition and Importance of Culture

  • Definition: Organizational culture encompasses the shared values, norms, and beliefs that permeate an organization.

  • Profound Impact:

    • Personal Connection: Individuals often either love or hate the culture within a company.

    • Hiring: Companies actively interview candidates to assess their cultural fit.

    • Promotions: Cultural alignment is frequently a factor in promotion decisions.

    • Retention/Dismissal: Employees who do not fit the culture may find themselves unable to thrive and potentially facing termination.

Impact of Strong Corporate Culture

  • Organizations with a strong corporate culture built on a foundation of shared values demonstrably outperform other firms by a significant margin:

    • Revenue Growth: Revenue grew more than 4 times faster.

    • Job Creation: The rate of job creation was 7 times higher.

    • Stock Price Growth: Stock price grew 12 times as fast.

    • Profit Performance: Profit performance was 750\% higher.

Culture in Mergers and Acquisitions

  • A significant challenge in business: 50\% of all acquisitions fail.

  • Primary Reason for Failure: The most common and critical reason for acquisition failure is cultural incompatibility.

Frameworks and Examples of Organizational Culture

  • Competing Values Framework: A model (referenced as Figure 8.2) used to understand and categorize different organizational cultures, developed by Cameron, Quinn, Degraff, and Thakor.

  • Cultural Contrast: The distinct organizational cultures of Apple and Microsoft serve as prominent examples for comparison.

  • Steve Jobs' Influence: A video depicting "Steve Jobs Another View" (link: https://www.youtube.com/watch?v=f60dhel4ARg) likely highlights the significant role of founders and leaders in shaping organizational culture.

Drivers of Organizational Culture

  • Definition of 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.

  • Key Influences:

    • Founder's Values: The beliefs and principles of an organization's founders profoundly shape its initial culture.

    • Industry and Business Environment: The competitive landscape and operational context of an industry influence cultural development.

    • National Culture: Broader societal values and norms of the country can impact corporate culture.

    • Organization's Vision and Strategy: The long-term goals and strategic direction guide cultural evolution.

    • Behavior of Leaders: The actions, decisions, and leadership styles of management significantly reinforce or alter organizational culture.

Person-Organization Fit

  • Definition: This concept reflects the degree to which an individual's personality, values, and beliefs align with the prevailing climate and culture within an organization.

How Employees Learn Culture

Employees are socialized into an organization's culture through various mechanisms:

  • Symbols: These are objects, actions, qualities, or events that convey specific meaning to others within the organization (e.g., company logo, executive parking spots).

  • Stories: Narratives based on true events, which are repeated and often embellished to emphasize particular values or lessons integral to the organization's culture.

  • Heroes: Individuals whose accomplishments embody the core values and ideals of the organization, serving as role models.

  • Rites and Rituals: Formal and informal activities and ceremonies that celebrate important occasions, achievements, or transitions, reinforcing cultural norms (e.g., annual awards, company retreats).

  • Organizational Socialization: The comprehensive process by which newcomers learn the essential values, norms, and required behaviors necessary to function effectively within the organization.