Chapter 8: Organizational Culture, Structure, & Design

To implement a particular strategy, managers must determine the right kind of 1) _____________ & 2) _____________

(1) Organizational Culture (2) Organizational Structure

Three Categories of Organizational Designs

(1) Traditional designs (2) Horizontal designs (3) Designs that open boundaries between organizations

Three (3) Levels of Organizational Culture

(1) observable artifacts (2) espoused values (3) basic assumptions

Three Pairings Of Authority:

1) Accountability 2) Responsibility 3) Ability to Delegates One's Authority

The Importance of Culture: 5 Conclusions

1) An Organization's Culture Matters - The type of organizational culture can be a source of competitive advantage 2) Employees are Happier with Clan Cultures 3) Elements of These Cultures--Clan, Adhocracy, Market--can be Used to Boost Innovation and Quality 4) Changing the Organizational Culture Won't Necessarily Boost Financial Performance (but it might) 5) Market Cultures Tend to Produce Better Results

Four (4) Types of Organizational Culture

1) Clan 2) Adhocracy 3) Market 4) Hierarchy

Common Elements of Organizations: Four Proposed by Edgar Schein & 3 More Most Agree on

1) Common Purpose - The Means for Unifying Employees or Members 2) Coordinated Effort: Working Together for Common Purpose 3) Division of Labor: Work Specialization for Greater Efficiency 4) Hierarchy of Authority: The Chain of Command 5) Span of Control: Narrow (or Tall) versus Wide (or Flat) 6) Authority, Responsibility, & Delegation: Line versus Staff Positions 7) Centralization versus Decentralization of Authority

Three Factors to Be Considered in Designing an Organization's Structure

1) Environment—mechanistic versus organic 2) Environment—differentiation versus integration 3) Link between strategy, culture, and structure

The Organization: Three Types

1) For-profit organizations - These are formed to make money, or profits, by offering products or services 2) Nonprofit organizations - These are formed to offer services to some clients, not to make a profit (examples: hospitals, colleges) 3) Mutual-benefit organizations - These are voluntary collectives whose purpose is to advance members' interests (examples: unions, trade associations)

Two kinds of Spans of Control 1) Narrow (or tall) 2) Wide (or flat)

1) Narrow (or tall) -- This means a manager has a limited number of people reporting—An organization is said to be tall when there are many levels with narrow spans of control 2) Wide (or flat) -- This means a manager has several people reporting (40+ Subordinates, 7-10 is Best)— An organization is said to be flat when there are only a few levels with wide spans of control

How Employees Learn Culture (4)

1) Symbols - an object, act, quality, or event that conveys meaning to others 2) Stories - a narrative based on true events, which is repeated—and sometimes embellished upon—to emphasize a particular value 3) Heroes - a person whose accomplishments embody the values of the organization 4) Rites & Rituals - the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organization's life

Two Kinds of Info Organization Charts

1) The Vertical Hierarchy of Authority: Who Reports to Whom 2) The Horizontal Specialization: Who Specializes in What Work

A Dozen Ways to Change Organizational Culture

1. Formal statements 2. Slogans & sayings 3. Rites & rituals 4. Stories, legends, & myths 5. Leader reactions to crises 6. Role modeling, training, & coaching 7. Physical design 8. Rewards, titles, promotions, & bonuses 9. Organizational goals & performance criteria 10. Measurable & controllable activities 11. Organizational structure 12. Organizational systems & procedures

Drivers and Flow of Organizations Culture

< Drivers of Cultrure --> Organizational Culture --> Organizational Structure & Internal Processes --> Group & Social Processes --> Work Attitudes & Behaviors --> Overall Performance >

3rd Type of Organizational Culture: 3) Market Culture

A Competitive Culture Valuing Profits over Employee Satisfaction - Strong External Focus - Values Stability and Control Thrust: Compete Means: Customer Focus, Productivity, Enhancing Competitiveness Ends: Market Share, Profitability, Goal Achievement

2nd Type of Organizational Culture: 2) Adhocracy Culture

A Risk-Taking Culture Valuing Flexibility - External Focus - Values Flexibility & Discretion Thrust: Create Means: Adaptability, Creativity, Agility Ends: Innovation, Growth, Cutting-Edge Output

4th Type of Organizational Culture: 4) Hierarchy Culture

A Structured Culture Valuing Stability & Effectiveness - Internal Focus - Values Stability & Control over flexibility Thrust: Control Means: Capable Processes, Consistency, Process Control, Measurement Ends: Efficiency, Timeliness, Smooth, Functioning

The Organization Chart

A box-and-lines illustration showing the formal lines of authority and the organization's official positions or work specializations

b) The Modular Structure: Outsourcing Pieces of a Product to Outside Firms

A firm assembles product chunks, or modules, provided by outside contractors The modular structure differs from the hollow structure in that it is oriented around outsourcing certain pieces of a product rather than outsourcing certain processes (such as human resources or warehousing) of an organization

Boundaryless Organization

A fluid, highly adaptive organization whose members, linked by information technology, come together to collaborate on common tasks. The collaborators may include not only coworkers but also suppliers, customers, and even competitors

(2) Organizational STRUCTURE: Who Reports to Whom & Who Does What

A formal system of task and reporting relationships that coordinates and motivates an organization's members so that they can work together to achieve the organization's goals

4. Stories, Legends, & Myths

A narrative about an actual event that happened within the organization and that helps to symbolize its vision and values to employees.

Organization

A system of consciously coordinated activities or forces of two or more people

Three Pairings Of Authority: 1) Accountability

Accountability—managers must report and justify work results to the managers above them Authority -- The rights inherent in a managerial position to make decisions, give orders, and utilize resources

1st Type of Organizational Culture: 1) Clan Culture

An Employee-Focused Culture Valuing Flexibility, Not Stability - Internal Focus - Values Flexibility/Discretion rather than stability and control Thrust: Collaborate Means: Cohesion, Participation, Communication, empowerment Ends: Morale, People Development, Commitment

6) Authority, Responsibility, & Delegation: Line versus Staff Positions

Authority is related to the management authority in the organization; it has nothing to do with the manager's fighting ability or personal characteristics Authority -- The rights inherent in a managerial position to make decisions, give orders, and utilize resources - Three Types 1) Accountability 2) Responsibility 3) Ability to Delegates One's Authority

Level 3: Basic Assumptions—Core Values of the Organization

Basic assumptions - which are not observable, represent the core values of an organization's culture—those that are taken for granted and, as a result, are difficult to change

7. Physical Design

Best office layout that will encourage employee productivity and send a strong message about the culture

7) Centralization versus Decentralization of Authority

Centralized Authority -- Important decisions are made by higher-level managers Decentralized Authority -- Important decisions are made by middle-level and supervisory-level managers

12. Organizational Systems & Procedures

Companies are increasingly using electronic networks to increase collaboration among employees, to increase innovation, quality, and efficiency

6. Role Modeling, Training, & Coaching

Companies provide structured training to provide an in-depth introduction to their organizational values

Organizational Design

Concerned with designing the optimal structures of accountability and responsibility that an organization uses to execute its strategies

Contingency (factor) Approach & Design

Contingency Approach: -- Emphasizes that a manager's approach should vary according to—that is, be contingent on—the individual and environmental situation Contingency Design: -- The process of fitting the organization to its environment

Three Pairings Of Authority: 3) Ability to Delegates One's Authority

Delegation -- the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy Authority -- The rights inherent in a managerial position to make decisions, give orders, and utilize resources

Level 2: Espoused Values—Explicitly Stated Values & Norms

Espoused Values - the explicitly stated values and norms preferred by an organization (Encouraging Trust) Enacted Values - represent the values and norms actually exhibited in the organization (Seizing Visitor's Belongings)

9. Organizational Goals & Performance Criteria

Established for recruiting, selecting, developing, promoting, dismissing, and retiring people, all of which reinforce the desired organizational culture

Level 1: Observable Artifacts—Physical Manifestations of Culture

Expressed in Observable Artifacts Observable Artifacts—physical manifestations such as manner of dress, awards, myths and stories about the company, rituals and ceremonies, and decorations, as well as visible behavior exhibited by managers and employees

1. Formal Statements

Formal statements of organizational philosophy, mission, vision, values, as well as materials used for recruiting, selecting, and socializing employees

a) The Hollow Structure: Operating with a Central Core & Outsourcing Functions to Outside Vendors

Hollow structure (the network structure) -- The organization has a central core of key functions and outsources other functions to vendors who can do them cheaper or faster

Second Category of Organizational Designs: 2) The Horizontal Design: Eliminating Functional Barriers to Solve Problems

Horizontal design (team-based design) -- teams or work-groups, either temporary or permanent, are used to improve collaboration and work on shared tasks by breaking down internal boundaries

5. Leader Reactions to Crises

How top managers respond to critical incidents and organizational crises sends a clear cultural message

Mechanistic Organizations: When Rigidity & Uniformity Work Best

In a mechanistic organization, authority is centralized, tasks and rules are clearly specified, and employees are closely supervised. Mechanistic organizations, then, are bureaucratic, with rigid rules and top-down communication. This kind of structure is effective in certain aspects of hotel (stable env.) work because the market demands uniform product quality and cleanliness.

Organic Organizations: When Looseness & Flexibility Work Best

In an organic (loose) organization, authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks

2. Slogans & Sayings

Language, slogans, sayings, and acronyms

Line Position

Line managers have authority to make decisions and usually have people reporting to them Examples: the president, the vice presidents, the director of personnel, and the head of accounting

1) The Environment: Mechanistic versus Organic Organizations—the Burns & Stalker Model

MECHANISTIC ORGANIZATIONS: i. Centralized hierarchy of authority ii. Many rules and procedures iii. Specialized tasks iv. Formalized communication v. Few teams or task forces vi. Narrow span of control, taller structures ORGANIC ORGANIZATIONS: i. Decentralized hierarchy of authority ii. Few rules and procedures iii. Shared tasks iv. Informal communication v. Many teams or task forces vi. Wider span of control, flatter structures

5) Span of Control

Narrow (or Tall) versus Wide (or Flat) - Span-of-Control, or Span-of-Management -- refers to the number of people reporting directly to a given manager. - Two kinds of spans of control narrow (or tall) and wide (or flat)

10. Measurable & Controllable Activities

Pay attention to, measure, and control a number of activities, processes, or outcomes that can foster a certain culture

Person-Organization Fit

Reflects the extent to which your personality and values match the climate and culture in an organization

3. Rites & Rituals

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

Three Pairings Of Authority: 2) Responsibility

Responsibility -- the obligation you have to perform the tasks assigned to you Authority -- The rights inherent in a managerial position to make decisions, give orders, and utilize resources

8. Rewards, Titles, Promotions, & Bonuses

Rewards and status symbols are one of the strongest ways to embed organizational culture

(1) Organizational CULTURE: The Shared Assumptions That Affect How Work Gets Done

Sometimes called corporate 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

Staff Position

Staff personnel have authority functions; they provide advice, recommendations, and research to line managers (examples: specialists such as legal counsels and special advisers for mergers and acquisitions or strategic planning)

4) Hierarchy of Authority

The Chain of Command - A control mechanism for making sure the right people do the right things at the right time - Flat Organization - One with an organizational structure with few or no levels of middle management between top managers and those reporting to them - Unity of Command - An employee should report to no more than one manager in order to avoid conflicting priorities and demands

1) Common Purpose

The Means for Unifying Employees or Members and gives everyone an understanding of the organization's reason for being

11. Organizational Structure

The hierarchical structure found in most traditional organizations is more likely to reinforce a culture oriented toward control and authority compared with the flatter organization that eliminates management layers in favor of giving employees more power

c) The Virtual Structure: An Internet-Connected Partner for a Temporary Project

Virtual Structure -- A company outside a company that is created "specifically to respond to an exceptional market opportunity that is often temporary" Virtual Organization -- An organization whose members are geographically apart, usually working with e-mail, collaborative computing, and other computer connections, while often appearing to customers and others to be a single, unified organization with a real physical location

3) Division of Labor

Work Specialization for Greater Efficiency - (Also known as work specialization) is the arrangement of having discrete parts of a task done by different people

2) Coordinated Effort

Working Together for Common Purpose - The coordination of individual efforts into a group or organization-wide effort

Fourth Category of Organizational Designs: 4) Designs that open boundaries between organizations (3 Types)

a) Hollow b) Modular c) Virtual Structures

First Category of Organizational Designs: 1) Traditional Designs (4 Types)

a) Simple Structure b) Functional Structure c) Divisional Structure d) Matrix Structures

Traditional Design (a) -- Simple Structures

a) The Simple Structure: For the Small Firm -- Has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization

Traditional Design (b) -- Functional Structures

b) The Functional Structure: Grouping by Similar Work Specialties -- People with similar occupational specialties are put together in formal groups. This is a quite commonplace structure, seen in all kinds of organizations, for-profit and nonprofit

Traditional Design (c) -- Divisional Structures

c) The Divisional Structure: Grouping by Similarity of Purpose -- i) Divisional Structure: People with diverse occupational specialties are put together in formal groups by similar products or services, customers or clients, or geographic regions -- ii) Product Divisions: Grouping Activities Around Similar Products or Services -- iii) Customer Divisions: Grouping Activities Around Common Customers or Clients -- iv) Geographic Divisions: Grouping Activities Around Defined Regional Locations

Traditional Design (d) -- Matrix Structures

d) The Matrix Structure: A Grid of Functional & Divisional for Two Chains of Command -- An Organization combines functional and divisional chains of command in a grid so that there are two command structures—vertical and horizontal

2) The Environment: Differentiation versus Integration—the Lawrence & Lorsch Model

i. Differentiation: When Forces Push the Organization Apart -- Differentiation is the tendency of the parts of an organization to disperse and fragment. The more subunits into which an organization breaks down, the more highly differentiated it is. -- Arises bc technical specialization and Division Of Labor ii. Integration: When Forces Pull the Organization Together -- Integration is the tendency of the parts of an organization to draw together to achieve a common purpose. In a highly integrated organization, the specialists work together to achieve a common goal. The means for achieving this are a formal chain of command, standardization of rules and procedures, and use of cross-functional teams and computer networks

What Drives an Organizational Culture?

• Founder's values • Industry & business environment • National culture • Organization's vision & strategies • Behavior of leaders