Exam 3 - Chapter 11
In Organizational Structure, what is Formalization?
-The extent to which employee behavior is steered by explicit and codified rules/procedures
In Organizational Culture, what is Founder Imprinting?
-The founder defines/shapes the culture -Can persist for decades after their departure ex) Steve Jobs, Walt Disney
In a Hierarchy, what is Span of Control?
-The number of employees who directly report to a manager -Can be Tall (many levels of hierarchy) -Can be Short (few levels of hierarchy)
How do you avoid Inertia and possible organizational failure?
-the firm needs a flexible/adaptive structure to effectively translate the formulated strategy into action as they grow in size/complexity
What is Organizational Design?
-the process of creating, implementing, monitoring and modifying the structure, processes, and procedures of an organization
Characteristics of the relationship between Firm Strategy and Structure
-they are interdependent -Structure can directly affect firm performance -To implement/formulate business strategy successfully, Structure must accommodate Strategy (not the other way around)
What is the Goal of Organizational Design?
-to design an organization that allows managers to effectively translate their chosen strategy into a realized one
What is the pattern of successful firms that leads to Inertia?
1) managers achieve a mastery of, and fit with, the firm's current environment 2) The firm often defines/measures success by financial metrics, w/short-term focus 3) The firm puts in structures, metrics, and systems to accommodate and manage increasing firm size/complexity due to continued success 4) As a result of a tightly coupled, but successful system, organizational inertia sets in--with resistance to change
Several of the building blocks of Organizational Structure frequently appear together, creating what 2 distinct organizational forms?
1)Mechanistic Organizations 2)Organic Organizations
What are the 4 types of Organizational Structure?
1)Simple 2)Functional 3)Multidivisional 4)Matrix
What is Organizational Structure?
the arrangement or relationship of positions, resources and work efforts of individuals within an organization
In Organizational Structure, what is Centralization?
-The degree to which decision-making authority is concentrated at the top of the organization
What are the disadvantages of a Multidivisional structure?
-Adds another layer of corporate hierarchy -This increases bureaucracy, red tape, duplication of efforts, and can slow down decision making -SBU's can end up competing with each other -This leads to corporate politics/turf wars over resources
Specialization requires a trade off between ___________ and ______________
-Breadth -Depth of knowledge
What are the positive results of Formalization?
-Can achieve consistent/predictable results -Can boost efficiency/effectiveness
What are potential negatives of Formalization?
-Can slow down decision making -Reduce creativity/innovation -Can hinder customer service effectiveness -Can reduce employee motivation
What is a Multidivisional Structure?
-Consists of several Strategic Business Units (SBUs) -Each SBU is operated independently -Each SBU is lead by a CEO who is responsible of the units business strategy and day-to-day operations
Culture can turn from a core competency into a _________ ___________
-Core Rigidity
What happens in a Decentralized Organization?
-Decisions are made/problems are solved by lower-ranking managers who are closer to the sources of issues and who make more autonomous decisions
What are the disadvantages of the Matrix Organizational Structure?
-Difficult to implement -Creates additional organizational complexity -Increases administrative costs -Reporting structures are often not clear -Employees can have trouble reconciling goals cuz they have 2 or more supervisors -Performance appraisals more difficult -Can slow decision making
What is a Functional Organizational Structure?
-Employees are grouped based on functional areas -These often reflect a firm's value chain activities (R&D, Marketing/sales, Manuf.) -Leaders of functional areas report to the CEO -Can reflect Mechanistic or Organic structural design characteristics depending on the strategy
What is a Matrix Organizational Structure?
-Firm is organized according to SBUs (similar to the M-form. Has a 2nd structural dimension[e.g. geographic/functional areas])
Successful new ventures typically grow by:___
-First by increasing sales -Then by expanding their geographic reach -Finally by diversifying through vertical integration and entering into related/unrelated businesses
What are the disadvantages of a Functional Organizational Structure?
-Frequently lacks effective communication channels across departments -Top level manager must take on the coordination/integration work -It CANNOT effectively address a higher level of diversification, which often stems from further growth
In Organizational Structure, Larger firms have: ________ _______ of specialization. And Smaller firms have: ________ _______ of specialization
-High degree -Low degree
Characteristics of Mechanistic Organizations
-High degree of specialization and formalization -Tall Hierarchies -Relies on centralized decision making -Decision power is centralized at the top of the organization -Communication/Authority lines are top-down and well defined -Allow for standardization/economies of scale -**Often used for a Cost-Leadership strategy**
For larger firms with a high degree of specialization, what is a potential negative downside?
-Increases in productivity, but can have unintended side-effects such as reduced employee job satisfaction due to repetition of tasks
Characteristics of Organic Organizations
-Low degree of specialization and formalization -Flat structure -Decentralized decision making -Correlated with: (flexible info flow among employees both horizontal/vertical, Faster decision making, Higher employee motivation/retention/creativity) -Allow to foster R&D and marketing as a core competency -**Pursuing a Differentiation Strategy**
___________ _______________ is often the result of success in a particular market during a particular time, it becomes difficult to argue with success
-Organizational Inertia
What is Culture is shaped through? 2 things
-Organizational Structure -Resource allocation and Reward systems
_________ __________ takes place in more Decentralized organizations
-Planned Emergence
What are the 4 key building blocks of Organizational Structure?
-Specialization -Formalization -Centralization -Hierarchy
Structure must follow _____________ in order for firm's to gain/sustain competitive advantage
-Strategy
What are the 3 key components of Organizational Design?
-Structure -Culture -Control Mechanisms
What are primary means of cultural change?
-The Board of Directors brings in new leadership -Leadership is charged to make changes in strategy/structure
What is Organizational Culture?
-The collectively shared values/norms of an organizations members -Value: define what is considered important -Norms: define appropriate employee attitudes/behaviors
In Organizational Structure, what is Specialization?
-The degree to which a task is divided into separate jobs (horizontal division of labor) -e.g. military, hospitals
In Organizational Structure, what is Hierarchy?
-The vertical division of labor, determines the formal, position-based reporting lines among subordinates and managers
What is the purpose of a Matrix Organizational Structure?
-To draw on the benefits of the M-form (e.g. Domain expertise, economies of scale, efficient info. processing/sharing) -To draw on the benefits of the geographic structure (regional responsiveness and decentralized decision making)
____________ ___________ __________ takes place in highly centralized organizations
-Top-down Strategic Planning
What is a Simple Organizational Structure?
-Typically preferred by small firms with low organizational complexity -Founders make all the strategic decisions and run day-to-day operations -Prof. managers or sophisticated info systems are typically NOT used
In Organizational Culture, what is Groupthink?
-When opinions combine -Results when individuals don't critically evaluate and challenge a leader's opinions and assumptions
What is Inertia?
-a firm's resistance to change the status quo, can set the stage for the firm's subsequent failure
Centralized decision making often correlates with what negatives?
-slow response time/reduced customer satisfaction
Review slides 15/18/21/23 in chapter powerpoint
Review slides 15/18/21/23 in the chapter PP