Organizational Behavior- CH 15 Organizational Design, Effectiveness, and Innovation

Innovation

"is the creation of something new that makes money; it finds a pathway to the consumer."

Unity of command principle

Each employee should report to a single manager.

15.5 Organizational Innovation-Question

How can I support my employer's attempts to innovate?

15.3 Contingency design and internal alignment- Question

How can I use knowledge about contingent organization design and internal alignment to improve my satisfaction and performance

15.2 Organizational Design- Question

What are the seven basic ways in which organizations are structured, and how do these structures relate to the organization's purpose?

Strategy map

is a "visual representation of the key drivers of an organization's success, showing the cause-and-effect relationship among goals and plans."

Knowledge integration

occurs when information is shared and accumulated across different parts of an organization.

The Learning Organization

one that proactively creates, acquires, and transfers knowledge, and that changes its behavior on the basis ofnew knowledge and insights. Researchers have shown that organizations learn by using five independent subprocesses: information acquisition, information distribution, information interpretation, knowledge integration, and organizational memory. To improve organizational learning, managers should use surveys to improve on the five steps of organizational learning; they must understand that leader behavior and organizational culture drive organizational learning; and they can be role models of learning from failure.

Contingency Approach to Designing Organizations

organizations tend to be more effective when they are structured to fit the demands of the situation

Organizational Design

sets the structures of accountability and responsibility used to develop and implement strategies, and the human resource practices and information and business processes that activate those structures

information interpretation

step is all about making sense of the information that organizations have acquired and distributed.

Types of Organizational Structures

-Functional A functional structure groups people according to the business functions they perform, for example, manufacturing, marketing, and finance. This arrangement puts together people who are experts in the same or similar activities. Some organizations have concluded that using a functional structure divides people too much, ultimately creating silos within the organization. -Divisional Structure In a divisional structure, employees are segregated into organization groups based on similar products or services, customers or clients, or geographic regions. The divisional structure is sometimes called a product structure or profit center approach. The use of a divisional structure can also create silos within the organization. -Matrix Structure A matrix structure combines a vertical structure with an equally strong horizontal overlay. A matrix structure combines functional and divisional chains of command to form a grid with two command structures, one shown vertically according to function, and the other shown horizontally, by product line, brand, customer group, or geographic region. Application of a matrix structure is not easy, and it can be complex and confusing. -Horizontal In a horizontal structure, teams or workgroups, either temporary or permanent, are created to improve collaboration and work on common projects. The horizontal approach to organizational design tends to focus on work processes—every task and responsibility needed to meet a customer need. Teamwork is a common feature of organizations designed horizontally. -Hollow Structure A hollow structure, also known as a network structure, is designed around a central core of key functions, and outsources other functions to other companies or individuals who can do them cheaper or faster. The more processes that are outsourced, the more the resulting organization is "hollow" and focused on what it does best. A hollow structure is useful when an organization is faced with strong price competition and there are enough companies to perform the required outsourced processes. -Modular Structure In a modular structure, the company assembles product parts, components, or modules provided by external contractors. A modular organization is responsible for ensuring that the outsourced parts meet quality requirements, that the parts arrive in a timely fashion, and that the organization is capable of efficiently combining the parts into the final whole. This design is useful when a company can identify product modules and create design interfaces that allow it to assemble parts into a working order. Virtual A virtual structure is one whose members are geographically apart, usually working with e-mail and other forms of information technology, yet which generally appears to customers as a single, unified organization with a real physical location. The primary benefits of virtual structures are the ability for organizations to tap into a wider talent pool, to increase the speed in getting things done, and to reduce costs because there is less need for physical facilities and travel budgets. Virtual structures are classified into two different types: internal and networked. Internal virtual structures- pertain to work arrangements that are used to coordinate the work of geographically dispersed employees working for one organization. Managers of internal virtual structures need to make sure they have the right people; they get them together often enough; and that they use the right type of technology to coordinate activities. Networked virtual structures- establish a collaborative network of independent firms or individuals in order to create a virtual entity. (Ex Movie production) The networked individuals or companies join forces because each possesses core competencies needed for a project or product.

Basic dimensions of organizations reflected in organizational charts

-Hierarchy of authority -Division of labor -Spans of control: describes the number of people reporting directly to a given manager. Organization size (large vertical high cost vs small wider), Skill level, Organizational culture, and Managerial Responsibilities. -Line-staff positions: Staff Position: do backgroup research and provide technical advice and recommendations to their line managers. Line Mangers: generally have the authority to make decisions for their units.

Learning and Growth Perspective

-This perspective assesses "Can we continue to improve and create value?" -The learning and growth perspective focuses on providing employees with the capabilities, resources, and work environment they need to achieve customer, internal business processes, and financial goals. -Typical metrics are employee satisfaction/engagement, employee retention, employee productivity, training budget per employee, technology utilization, and organizational climate and culture.

Customer Perspective

-This perspective assesses "How do customers see us?" -The balanced scorecard measures items such as market share, customer acquisition, customer retention, customer satisfaction/loyalty, product/service quality, response time, and percentage of bids won.

Financial Perspective

-This perspective assesses "How do we look to shareholders?" -Corporate financial strategies and goals generally fall into two buckets: revenue growth and productivity growth.

Internal Business Process Perspective

-This perspective assesses "What must we excel at?" -Four critical high-level internal processes are innovation, customer service and satisfaction, operational excellence, and good corporate citizenship. -These processes influence productivity, efficiency, quality, safety, and a host of other internal metrics. -Companies tend to adopt continuous improvement programs in pursuit of upgrades to their internal processes.

Categories of Organizational Design

1. Traditional 2. Horizontal 3. Open

Foster an Innovative Culture and Climate

A risk-averse culture is a key obstacle to innovation. An innovative culture and climate are associated with the creation of new ideas and products. Innovation requires experimentation, failure, and risk taking, and these are all aspects of an organization's culture.

Organization

A system of consciously coordinated activities or forces of two or more persons. Common denominators of all organizations are -coordination of effort -aligned goals -division of labor -hierarchy of authority. Coordination of effort is achieved through formulation and enforcement of policies, rules, and regulations. Aligned goals start from the companywide strategic plan, then cascade down through the organization so the employees are aligned in their pursuit of common goals. Division of labor occurs when the common goal is pursued by individuals performing different but related tasks. The hierarchy of authority, also called the chain of command, is a control mechanism dedicated to making sure the right people do the right things at the right time. Historically, managers have maintained the integrity of the hierarchy of authority by adhering to the unity of command principle.

Create an Innovation Strategy

An innovation strategy, or a plan for being more innovative, requires a company to integrate its innovation activities into its business strategies. This integration encourages management to invest resources in innovation and generates employee commitment to innovation across the organization.

Organizations as Open Systems

Closed system: a relatively self-sufficient entity; one that is closed to its surrounding environment. Open system: depends on constant interaction with the environment for survival. The distinction between closed and open systems is a matter of degree. Open systems are capable of self-correction, adaptation, and growth, thanks to feedback from the environment. Moving away from the historical perspective that organizations are closed systems, current thinking is that organizations are open systems and dependent on the external environment for survival.

15.1 The Foundation of an Organization- Question

How can knowledge about an organization's foundation help me in my career?

The Contingency Factors to Designing Organizations

Key issues when making organizational design decisions •Strategy and goals •Market uncertainty •Decision making process •Technology •Size •Human resources An organization's strategy is the cornerstone of its decision about the most appropriate design. Because setting a corporate strategy requires an organization to decide how it will compete, given both internal and external considerations, organizational design must be developed in tandem with establishing strategy. In general, more complex organizational designs are needed as companies pursue strategies to add products, services, markets, or geographic expansion.

organizational memory

Knowledge needs to be put into some type of repository or organizational memory if it is to be used in the future.

Decision Making Process

Mechanistic organizations- are rigid bureaucracies with strict rules, narrowly defined tasks, top-down communication, and centralized decision making. •Centralized decision making:key decisions made by top management •Works best when environment is stable and certain A mechanistic organization generally would have one of the traditional organization designs. The "orderliness" of mechanistic structures is expected to produce reliability and consistency in internal processes, thereby resulting in higher efficiency, quality, and timeliness. Organic organizations- flexible networks of multitalented individuals who perform a variety of tasks. •Decentralized decision making:important decisions made by middle and lower-level managers •Works best when environment is unstable and uncertain Organic organizations are more likely to use decentralized decision making and horizontal or open designs.

Horizontal Design

Organizations defined by a horizontal approach work hard to flatten hierarchy and organize people around specific segments of the workflow. A horizontal structure, sometimes called a team or process structure, relies on a horizontal workflow and attempts to dissolve departmental boundaries and reporting relationships as much as possible.

Traditional Designs

Organizations defined by a traditional approach tend to have functional, divisional, and/or matrix structures. Each of these structures relies on a vertical hierarchy and attempts to define clear departmental boundaries and reporting relationships.

Open Designs

Organizations defined by an open approach tend to have hollow, modular, or virtual structures. Each of these structures relies on leveraging technology and structural flexibility to maximize potential value through outsourcing and external collaboration. Boundaryless organization: one where management has largely succeeded in breaking down barriers between internal levels, job functions, and departments, as well as reducing external barriers between the organization and those with whom it does business. This type of structure is fluid and flexible and relies on telecommuting between geographically dispersed people.

Commitment from Senior Leaders

The achievement of strategic goals is unlikely without real commitment from senior leaders.

Assessing Organizational Effectiveness

Translating organizational vision, strategy, and goals into comprehensible performance metrics. Balanced score cards (BSC) and other organizational dashboards -Financial perspective -Customer perspective -Internal business process perspective •Innovation •Customer service and satisfaction •Operational excellence: safety, quality •Corporate citizenship -Learning, growth, development

Approaches to Innovation

Type of Innovation -Product: a change in the appearance or the performance of a product or a service or the creation of a new one. -Process: a change in the way a product or a service is conceived, manufactured, or distributed. Focus of the Innovation -Improvement: enhance or upgrade an existing product, service, or process. These types of innovations are often incremental and are less likely to generate significant amounts of new revenue at one point in time. -New-directions: take a totally new or different approach to a product, service, process, or industry. These innovations focus on creating new markets and customers and rely on developing breakthroughs and inventing things that don't already exist.

15.4 Assessing Organizational Effectiveness- Question

What does its choice of ways to measure its effectiveness tell me about an organization?

innovation system

a coherent set of interdependent processes 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. There are seven components of an innovation system: -Innovation strategy -Committed leadership -Innovative culture and climate -Required structure and processes -Necessary human capital human resource policies, practices, and procedures -Appropriate resources.

Information acquisition

also known as scanning, refers to the process through which an organization obtains information from internal and external sources.

Information distribution

pertains to the processes or systems that people, groups, or organizational units use to share information among themselves.