Management A Practical Introduction Third Edition

Angelo Kinicki & Brian K. Williams

Kinicki/Williams, Management: A Practical Introduction 3e 2008, McGraw-Hill/Irwin

Chapter 8: Organizational Culture, Structure, & Design

Building Blocks of the Organization

What Kind of Organizational Culture Do We Have? Developing High Performance Cultures What is an Organization? Elements of an Organization Types of Organizational Cultures Creating the Best Structure Building a Learning Organization
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8.1 What Kind Of Organizational Culture Will You Be Operating In? WHAT IS AN ORGANIZATIONAL CULTURE?
Organizational culture (also called corporate culture) is a system of shared beliefs and values that develops within an organization and guides the behavior of its members It is the organizations personality There are two levels of corporate culture: The invisible level The visible level
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Layers of Organizational Culture

Invisible Level: Core Culture
Not seen by the naked eye. Consists of values, beliefs, and assumptions Core culture might be associated with its the way we do things around here Often has two sources: 1) Visions, assumptions, and biases of founders 2) Outlook that initial employees learned from their own experiences

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Layers of Organizational Culture

Visible Level:
Observable culture Manifestations of culture:
Symbols Stories Heroes Rites and rituals

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8.1 What Kind Of Organizational Culture Will You Be Operating In?

-symbols are objects, acts, qualities, or events that

convey meaning to others -stories are narratives based on true events which are repeated and sometimes embellished to emphasize a particular value -heroes are people whose accomplishments embody the values of the organization -rites and rituals are the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organizations life

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8.1 What Kind Of Organizational Culture Will You Be Operating In? WHY IS CULTURE IMPORTANT? 1. Culture provides an opportunity to reinforce the
companys message 2. Culture helps to get everyone on board 3. Culture helps companies manage conflict and change effectively 4. Culture helps employees understand why the company does what it does and how it will achieve its long term goals
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Four Functions of Organizational Culture

It gives members an organizational identity It facilitates collective commitment It promotes social-system stability It shapes behavior by helping employees make sense of their surroundings

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8.1 What Kind Of Organizational Culture Will You Be Operating In?

Figure 8.1: Four Functions Of Organizational Culture

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8.2 Developing High-Performance Cultures

WHAT ORGANIZATIONAL CULTURE ENHANCES ECONOMIC PERFORMANCE? There are three perspectives of how culture can enhance performance: 1. The strength perspective assumes that the strength of a corporate culture is related to a firms long-term financial success 2. The fit perspective assumes that an organizations culture must align or fit with its business or strategic context 3. The adaptive perspective assumes that the most effective cultures help organizations anticipate and adapt to environmental changes Studies show that in the long-term, financial performance is highest for firms with an adaptive culture
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8.2 Developing High-Performance Cultures

HOW CAN CULTURE BE EMBEDDED IN AN ORGANIZATION?
The values and beliefs of a culture are shared with members of the organization using a variety of mechanisms: 1. Formal Statements - culture can be embedded in an organization through formal statements of philosophy, mission, vision, and values 2. Slogans & Sayings - corporate cultures can be promoted through slogans and sayings 3. Stories, Legends, & Myths - telling stories, legends, and myths can help embed desirable values in an organization 4. Leader Reactions to Crises - how top managers respond to critical incidents sends a message to employees
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8.2 Developing High-Performance Cultures

5. Role Modeling, Training, & Coaching - organizational culture can be promoted through role modeling, training programs, teaching, and coaching 6. Physical Design - the physical design of workspaces, buildings, and so on can also help embed corporate culture 7. Rewards, Titles, Promotions, & Bonuses - companies use rewards, status symbols, promotions, and so on to encourage desirable organizational behavior 8. Organizational Goals & Performance Criteria - desired organizational behavior and goals can be promoted through criteria for recruiting, selecting, promoting, and dismissing people
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8.2 Developing High-Performance Cultures

9. Measurable & Controllable Activities - companies can measure and control certain activities to foster a certain culture 10. Organizational Structure - how an organization is structured can send a clear message about its organizational culture 11. Procedures For Self-Development - procedures can be established to help employees develop according to organizational goals

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Practical Action: Fitting into an Organizations Culture

Get to know some people and listen to what they have to say Remember the seven second rule for first impressions

Make it easy for others to give you feedback

Get something done

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Practical Action: When You Should and Shouldnt Delegate

Delegate routine and technical matters Delegate tasks that help your subordinates grow Dont delegate confidential and personal matters Dont delegate emergencies Dont delegate special tasks that your boss asked you to dounless you have his or her permission

Match the tasks delegated to your subordinates skills and abilities

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8.3 What Is An Organization?

Organization: is a system of consciously coordinated activities or forces of two or more people. For profit organizations Formed to make money by offering products or services Not-for-profit organizations Formed to offer services to clients, not to make profit for its owners (hospitals, colleges)

Mutual-benefit organizations
Voluntary collectives whose purpose is to advance member interests (unions, trade associations)
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8.3 What Is An Organization?

HOW ARE ORGANIZATIONS STRUCTURED? Organizations can be represented in an organization chart (a box-and-lines illustration showing the formal lines of authority and the organizations official positions)

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8.3 What Is An Organization?

Figure 8.2: Organization Chart

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The Organization Chart

Board of Directors Strategic Planning Advisor Chief Executive Officer President Executive Administrative Director Director of Personnel Director of Admissions Director of Nutrition & Food Services Director of X-Ray & Laboratory Services Legal Counsel Cost Containment Staff

Executive Medical Director

Director of Pharmacy Chief Physician

Director of Patient & Public Relations

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Director of Accounting

Director of Surgery

Director of Outpatient Services

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8.3 What Is An Organization?

The vertical hierarchy of an organization shows the chain of command, and the official communication network The horizontal specialization shows the different jobs or work specialization of an organization

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8.4 The Major Elements Of An Organization

WHAT ARE THE COMMON ELEMENTS OF AN ORGANIZATION?
There are seven elements common to all organizations: 1. Common Purpose - a common purpose unifies employees or members and gives everyone an understanding of the firms reason for being - mission 2. Coordinated Effort - organizations achieve a common purpose by coordinating individual efforts into a group or organization-wide effort 3. Division Of Labor - the arrangement of having discrete parts of a task done by different people is referred to as work specialization
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8.4 The Major Elements Of An Organization

4. Hierarchy Of Authority - the control mechanism for making sure the right people do the right things at the right time is called the hierarchy of authority or chain of command 5. Span Of Control - the span of control or span of management refers to the number of people reporting directly to a given manager

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Spans of Control: Narrow versus Wide

Narrow
T
M F F F F M F F F F M F F M F F F F

CEO

Key: T = Top manager M = Middle manager F = First-line (supervisory) manager

T
M F F M F F F F M F F

T
M F F F F M F

Wide
M F F M F F M F M F F

CEO
M F M F F M F M F F M F

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8.4 The Major Elements Of An Organization

6. Authority, Responsibility, & Delegation authority, accountability, responsibility, and the ability to delegate are all part of an organizations elements 7. Centralization Versus Decentralization - when important decisions are made by higher-level managers, the organization has centralized authority, when important decisions are made by middle-level and supervisory-level managers, the organization has decentralized authority

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Eight Organizational Structures

1) Simple structure: for the small firm 2) Functional structure: grouping by similar work specialties 3) Division structure: grouping by similarity of purpose 4) Conglomerate structure: grouping by industry 5) Hybrid structure: functional & divisional used within the same organization 6) Matrix structure: a grid of functional & divisional for two chains of command 7) Team-based structure: eliminating functional barriers to solve problems 8) Network structure: connecting a central core to outside firms by computer connections
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8.5 Basic Types Of Organizational Structures

WHAT ARE THE BASIC TYPES OF ORGANIZATIONAL STRUCTURES?

1. The simple structure has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization and is often used in the very early stages of a firm

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8.5 Basic Types Of Organizational Structures

Figure 8.4: Simple Structure: An Example

There is only one hierarchical level of management beneath the owner

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8.5 Basic Types Of Organizational Structures

WHAT ARE THE BASIC TYPES OF ORGANIZATIONAL STRUCTURES?

2. In a functional structure, common in both profit and nonprofit organizations, people with similar occupational specialties are put together in formal groups

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8.5 Basic Types Of Organizational Structures

Figure 8.5: Functional Structure: Two Examples

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8.5 Basic Types Of Organizational Structures

3. When people with diverse occupational specialties are put together in formal groups, a divisional structure is in place Product divisions group activities around similar products or services Customer divisions group activities around common customers or clients Geographic divisions group activities around regional locations
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Divisional Structure
Product Divisional Structure
Motion Pictures & TV Division Music Division President

Magazine & Book Division President

Internet Products Division

Customer Divisional Structure

Consumer Loans Mortgage Loans

Business Loans

Agriculture Loans

Geographic Divisional Structure

Western Region
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President

Northern Region

Southern Region

Eastern Region

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8.5 Basic Types Of Organizational Structures

4. The conglomerate structure groups divisions or business units around similar businesses or industries

Kinicki/Williams, Management: A Practical Introduction 3e 2008, McGraw-Hill/Irwin 34

Conglomerate Structure
This resembles the structure of Tyco International
President

Electronics

Fire & Security

Healthcare

Plastics & Adhesives

Engineered Products & Services

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8.5 Basic Types Of Organizational Structures

5. A hybrid structure uses functional and divisional structures in different parts of the same organization

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Hybrid Structure
Product Divisional Structure President Cadillac President President Buick President Pontiac VicePresident, Human Resources President Chevrolet

VicePresident, Production

VicePresident, Marketing

VicePresident, Finance

Functional divisional structure

Manager Region I

Manager Region II

Manager Region III

Manager Region IV

Geographical divisional structure

A Hypothetical example of what GM might use

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8.5 Basic Types Of Organizational Structures

6. When an organization combines functional and divisional chains of command in a grid so that there a two command structures, vertical and horizontal, a matrix structure is used

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8.5 Basic Types Of Organizational Structures

Example of Ford motor company

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8.5 Basic Types Of Organizational Structures

7. In a team-based structure, teams, both temporary and permanent, are used to improve horizontal relations and solve problems throughout the organization

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8.5 Basic Types Of Organizational Structures

Figure 8.10: Team-Based Structure

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8.5 Basic Types Of Organizational Structures

8. The network structure or virtual organization has a central core that is linked to outside independent firms by computer connections which are used to operate as if all were a single organization

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Network Structure
Design Studio
Sweden

Components Assembly
Mexico, Asia

Core of personal computer company USA

Engineering Company
Japan

Distribution Company
Canada

Accounting & Finance

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USA

8.6 Contingency Design: Factors In Creating The Best Structure

WHAT IS THE BEST STRUCTURE?
Contingency Design is the process of fitting the organization to its environment Firms must consider: 1. The environment (mechanistic versus organic) Mechanistic organizations are characterized by centralized authority, clearly specified tasks and rules, and close supervision of employees When authority is decentralized, there are few rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks, an organic organization exists
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Mechanistic Vs. Organic

Mechanistic organizations:
authority is centralized, tasks and rules are clearly specified, and employees are closely supervised.
When rigidity and uniformity work best McDonald's

Organic organizations:
authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks.
When looseness and flexibility work best Information and Technology adhocracies

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Chapter 8: Organizational Culture, Structure, & Design

CLASSROOM PERFORMANCE SYSTEM Which of the following is not a characteristic of a mechanistic organization? A) clearly specified tasks B) decentralized authority C) close supervision D) clearly specified rules

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Chapter 8: Organizational Culture, Structure, & Design

CLASSROOM PERFORMANCE SYSTEM Which of the following is not a characteristic of a mechanistic organization? A) clearly specified tasks B) decentralized authority C) close supervision D) clearly specified rules

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8.6 Contingency Design: Factors In Creating The Best Structure 2. The Environment (differentiation versus integration) Differentiation is the tendency of the parts of an organization to disperse and fragment Integration is the tendency to come together to achieve a common purpose 3. Size Organizational size is usually measured by the number of full-time employees
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8.6 Contingency Design: Factors In Creating The Best Structure 4. Technology Technology (the tools and ideas for transforming materials, data, or labor into goods and services) influences organizational design 5. Organizational life cycle The organizational life cycle involves birth, youth, midlife, and maturity
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Life Cycle: Four Stages in the Life of an Organization

The organizational life cycle has a natural sequence of stages:
1. 2. 3. 4. Birth Youth Midlife Maturity

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Life Cycle: Four Stages in the Life of an Organization

As organization moves through the stages, it becomes not only larger, but more mechanistic, specialized, decentralizes, and bureaucratic There are different managerial challenges and different organizational design issues in each stage

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Life Cycle: Four Stages in the Life of an Organization

Stage 1: The Birth Stage nonbureaucratic Stage which organization is created No written rules and little supporting staff Founder may be a lone entrepreneur or two friends who have gotten together Text: Apple Computers early development
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Life Cycle: Four Stages in the Life of an Organization

Stage 2: The Youth Stage prebureaucratic Stage of growth and expansion People are added to the payroll, and some division of labor and setting of rules is instituted Text: Apple Computer from 1978 to 1981 with Apple II product line
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Life Cycle: Four Stages in the Life of an Organization

Stage 3: The Midlife Stage bureaucratic Period of growth evolving into stability Organization has formalized bureaucratic structure, staff of specialists, decentralization of functional divisions, and many rules Text: Apple Computer in the 1980s under John Scully
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Life Cycle: Four Stages in the Life of an Organization

Stage 4: The Maturity Stage very bureaucratic Organization large and mechanistic Danger at this point is lack of flexibility and innovation Text: Apple Computer floundered in the late 1980s until Steve Jobs returned

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Life Cycle: Four Stages in the Life of an Organization

Holding on to the prebureaucratic way of life for too long hinders the organizations ability to deliver goods and services efficiently

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Building Learning Organizations

A Learning Organization is an: Organization that actively creates, acquires, and transfers knowledge within itself and is able to modify its behavior to reflect new knowledge

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Building Learning Organizations

Organizations must continually learn new things or face obsolescence A key challenge for managers is to establish a culture that will enhance their employees ability to learn But, there may be resistance, and some firms unconsciously resist learning because:
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8.7 Toward Building A Learning Organization WHY DO ORGANIZATIONS RESIST LEARNING?

-people believe that competition is always better than collaboration -fragmentation leads to specialized fiefdoms that resist learning -unless encouraged, people wont take risks, the basis for learning
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The New Paradigm: Were All Stakeholders

Paradigms are generally accepted ways of viewing the world The paradigm underlying American business today is that competition is superior to collaboration Many established paradigms have outlived their usefulness

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8.7 Toward Building A Learning Organization

WHAT IS THE NEW PARADIGM? A new paradigm suggests that everyone in an organization is business together- and everyone has a responsibility for working toward common goals

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The New Paradigm: Were All Stakeholders

One challenge is to create a climate in which managers and employees stop thinking in terms of us versus them and start thinking of themselves as mutual stakeholders

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