structure and culture summary

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Structure and Culture Summary

Å To what degree are tasks subdivided into separate jobs? Work specialization

Å On what basis will jobs be grouped together? Departmentalization

Å To whom do individuals and groups report? Chain of command

Å How many individuals can a manager efficiently and effectively direct? Span of control

Å Where does decision-making authority lie? Centralization and decentralization

Å To what degree will there be rules and regulations to direct employees and managers?

Formalization

1. Simple Structure A simple structure is defined as a design with low departmentalization, wide spans of control,

centralized authority, and little formalization. This type of design is very common in smallstart up businesses. For example in a business with few employees the owner tends to be the

manager and controls all of the functions of the business. Often employees work in all parts of

the business and don’t just focus on one job creating little if any departmentalization. In this

type of design there are usually no standardized policies and procedures. When the company begins to expand then the structure tends to become more complex and grows out of the

simple structure.

2. Functional Structure A functional structure is defined as a design that groups similar or related occupational

specialties together. It is the functional approach to departmentalization applied to the entire

organization.

With the exception of marketing, most employees have no direct contact with

customers and may lose sight of the need to meet or exceed customer expectations

May be effective when the organization:

a. Has a narrow product line b. Competes in a uniform environment

c. Pursues a low-cost or focused business strategy

d. Does not have to respond to the pressures of serving different types of customers



3. Divisional Structure A divisional structure is made up of separate, semi-autonomous units or divisions. Within one

corporation there may be many different divisions and each division has its own goals to accomplish.

A manager oversees their division and is completely responsible for the success or failure of the

division. This gets managers to focus more on results knowing that they will be held accountable for

them.

II. Contemporary Designs

1. Team Structure A team structure is a design in which an organization is made up of teams, and each team works

towards a common goal. Since the organization is made up of groups to perform the functions of thecompany, teams must perform well because they are held accountable for their performance. In a

team structured organization there is no hierarchy or chain of command. Therefore, teams can work

the way they want to, and figure out the most effective and efficient way to perform their tasks.Teams are given the power to be as innovative as they want. Some teams may have a group leader

who is in charge of the group.

2. Matrix Structure A matrix structure is one that assigns specialists from different functional departments to work on one

or more projects. In an organization there may be different projects going on at once. Each specific

project is assigned a project manager and he has the duty of allocating all the resources needed to

accomplish the project. In a matrix structure those resources include the different functions of the

company such as operations, accounting, sales, marketing, engineering, and human resources.

Basically the project manager has to gather specialists from each function in order to work on a project, and complete it successfully. In this structure there are two managers, the project managerand the department or functional manager.

3. Project Structure A project structure is an organizational structure in which employees continuously work on projects.

This is like the matrix structure; however when the project ends the employees don’t go back their

departments. They continuously work on projects in a team like structure. Each team has the

necessary employees to successfully complete the project. Each employee brings his or herspecialized skill to the team. Once the project is finished then the team moves on to the next project.

4. Autonomous Internal Units Some large organizations have adopted this type of structure. That is, the organization is comprised of

many independent decentralized business units, each with its own products, clients, competitors, and

profit goals. There is no centralized control or resource allocation.



5. Boudaryless Organization A boundaryless organization is one in which its design is not defined by, or limited to, the horizontal,

vertical, or external boundaries imposed by a predefined structure. In other words it is an unstructured

design. This structure is much more flexible because there is no boundaries to deal with such as chain

of command, departmentalization, and organizational hierarchy. Instead of having departments,companies have used the team approach. In order to eliminate boundaries managers may use virtual,

modular, or network organizational structures. In a virtual organization work is outsourced when

necessary. There are a small number of permanent employees, however specialists are hired when a

situation arises. Examples of this would be subcontractors or freelancers. A modular organization isone in which manufacturing is the business. This type of organization has work done outside of the

company from different suppliers. Each supplier produces a specific piece of the final product. When

all the pieces are done, the organization then assembles the final product. A network organization is

one in which companies outsource their major business functions in order to focus more on what they

are in business to do.

Key Elements of Network Design:

Distinctive competence

Responsibility

Goal setting Communication

Information technology

Organization design

Balanced view

Organizational Uses of Network Design Effective in creating alliances of flexible partnerships

Can create successful external relationships through: Importance

Investment

Interdependence Integration Information

Institutionalization

Organizational Uses of Virtual Design Structure can be changed quickly to meet changing conditions and situations Boundaries between an organization and its customers and suppliers are blurred

Employees continually master new manufacturing and information technologies, speeding the

production process and the flow of information through the organization Employees respond quickly to changing customer demands with customized products and

services available at any time and place



Employees are reciprocally interdependent

Managers delegate authority and responsibility to employees while providing a clear vision of

the organization’s purpose and goals

6. Learning Organization A learning organization is defined as an organization that has developed the capacity to continuously

learn, adapt, and change. In order to have a learning organization a company must have very

knowledgeable employees who are able to share their knowledge with others and be able to apply it

in a work environment. The learning organization must also have a strong organizational culturewhere all employees have a common goal and are willing to work together through sharing

knowledge and information. A learning organization must have a team design and great leadership.

Learning organizations that are innovative and knowledgeable create leverage over competitors.

Flat Structures

Less complex organizations have flat structures where authority is decentralized and the span

of control is wider.

Complex/Tall Organizations

Highly structured, formal entities with uniform rules, policies and procedures.

People placed in functional specialty areas with standard pay structures,roles and

responsibilities.

Authority clearly designated and centralized=a tall structure

Centralized versus Decentralized

Centralization refers to the area where decisions are made. In autocratic structures decisions

are made at the top and flow downward. There is a small span of control resulting in many

layers of management and a tall structure.Decentralized structures are flat and decisions are

made at the level where they occur.

Bureaucratic Structure

In the past, organizations were commonly structured as bureaucracies. A bureaucracy is a form

of organization based on logic, order, and the legitimate use of formal authority. Bureaucracies

are meant to be orderly, fair, and highly efficient. Their features include a clear cut division of

labor, strict hierarchy of authority, formal rules and procedures, and promotion based on

competency.



Today, many people view bureaucracies negatively and recognize that bureaucracies have their

limits. If organizations rely too much on rules and procedures, they become unwieldy and too

rigid — making them slow to respond to changing environments and more likely to perish in the

long run.

Bureaucracy results in a line structure, so called because it is a chain of command orleader-follower relationship. It is also called a machine bureaucracy.

This type of structure facilitates large scale administration by coordinating the work of

many personnel.

Characteristics of Bureaucratic Structures

Authority and communication flow downward through a rigid chain of command.

The vertical growth represents many levels of supervision and indicates a one person one

boss philosophy (unity of command)

The number of people supervised is small(span of control).

The organization operates according to a set of rules that are intended to tightly controlemployees’ behavior

All employees must carefully follow extensive impersonal rules and procedures in

making decisions

Each employee’s job involves a specified area of expertise, with strictly defined

obligations, authority, and powers to compel obedience

Each lower-level position is under the tight control and direction of a higher one

Candidates for jobs are selected on the basis of ―technical‖ qualifications

The organization has a career ladder; promotion is by seniority or achievement and

depends on the judgment of superiors

Strengths

o Functional economies of scale

o Minimum duplication of personnel and equipment

o Enhanced communication

o Centralized decision making

Weaknesses

Subunit conflicts with organizational goals

Obsessive concern with rules and regulations

Lack of employee discretion to deal with problems

The mechanistic structure, sometimes used synonymously with bureaucratic structure, is amanagement system based on a formal framework of authority that is carefully outlined and preciselyfollowed. An organization that uses a mechanistic structure is likely to have the followingcharacteristics:

Clearly specified tasks



Precise definitions of the rights and obligations of members

Clearly defined line and staff positions with formal relationships between the two

Tendency toward formal communication throughout the organizational structure

Perhaps the best example of a mechanistic structure is found in a college or university. Consider thevery rigid and formal college entrance and registration procedures. The reason for such procedures isto ensure that the organization is able to deal with a large number of people in an equitable and fairmanner. Although many individuals do not like them, regulations and standard operating procedures pretty much guarantee uniform treatment. But those same rules and procedures, with theirtime‐consuming communication and decision‐making processes, tend to bog down organizations.

Mechanistic organizations are appropriate when the external environment is fairly stable. The biggestdrawback to the mechanistic structure is its lack of flexibility, which may cause an organization tohave trouble adjusting to change and coping with the unexpected.

The organic structure tends to work better in dynamic environments where managers need to reactquickly to change. An organic structure is a management system founded on cooperation andknowledge‐ based authority. It is much less formal than a mechanistic organization, and much moreflexible. Organic structures are characterized by

Roles that are not highly defined.

Tasks that are continually redefined.

Little reliance on formal authority.

Decentralized control.

Fast decision making.

Informal patterns of both delegation and communication.

Because the atmosphere is informal and the lines of authority may shift depending on the situation,the organic structure requires more cooperation among employees than does a bureaucracy.

Advantages of Decentr ali zation when low or high

Low Decentr alization (H igh Centralization) Eliminates the additional responsibility not desired by people performing routine jobs Permits crucial decisions to be made by individuals who have the ―big picture‖

High Decentralization (Low Centralization) Can eliminate levels of management, making a leaner organization Promotes greater opportunities for decisions to be made be people closest to problems



THE BURNS AND STALKER MODEL

(Contingency Organization Design)

Mechanistic vs. Organic Designs

Dimension Mechanistic Organic

Stability Change unlikely Change likely

Specialization Many specialists Many generalists

Formal rules Rigid rules Considerable flexibility

Authority Centralized in a few toppeople

Decentralized, diffusedthroughout the organization



―Mechanistic design is appropriate for environmental stability, and organic design is appropriate forhigh environmental uncertainty.‖

1. Successful organizations in relatively stable and certain environments tended to bemechanistic.

2. Relatively organic organizations tended to be the successful ones when the environment wasunstable and uncertain.

THE LAWRENCE AND LORSCH MODEL

Opposing Organizational Forces

u Differentiation: tendency among specialists to think and act in restricted ways. (Tends tofragment the organization.)

u Integration: in direct opposition to differentiation, it involves the collaboration amongspecialists needed to achieve a common purpose. (Tends to coordinate the organization.)



1. Every organization requires an appropriate dynamic equilibrium between

differentiation and integration.

2. In successful firms, both differentiation and integration increased as environmental

complexity increased.

Five Different Types of Departmentalization:

u Functional Departments (most common)u Product-service departments (organic alternative to functional departments)

u Geographic location departments (communication can be strained)

u Customer classification departments (needs of different customers better served

u Work flow process departments (found in horizontal organizations resulting from

reengineering)

Virtual Organization

A small, core organization that outsources major business functions

Provides maximum flexibility while concentrating on what the organization does best.

Disadvantage is reduced control over key parts of the business.



Factors Affecting Organizational Design

Although many things can affect the choice of an appropriate structure for an organization, thefollowing five factors are the most common: size, life cycle, strategy, environment, and technology.

Organizational size

The larger an organization becomes, the more complicated its structure. When an organization issmall — such as a single retail store, a two‐ person consulting firm, or a restaurant — its structure can be simple.

In reality, if the organization is very small, it may not even have a formal structure. Instead of

following an organizational chart or specified job functions, individuals simply perform tasks basedon their likes, dislikes, ability, and/or need. Rules and guidelines are not prevalent and may exist onlyto provide the parameters within which organizational members can make decisions. Smallorganizations are very often organic systems.

As an organization grows, however, it becomes increasingly difficult to manage without more formalwork assignments and some delegation of authority. Therefore, large organizations develop formalstructures. Tasks are highly specialized, and detailed rules and guidelines dictate work procedures.Interorganizational communication flows primarily from superior to subordinate, and hierarchicalrelationships serve as the foundation for authority, responsibility, and control. The type of structurethat develops will be one that provides the organization with the ability to operate effectively. That's

one reason larger organizations are often mechanistic — mechanistic systems are usually designed tomaximize specialization and improve efficiency.



Organization life cycle

Organizations, like humans, tend to progress through stages known as a life cycle. Like humans, mostorganizations go through the following four stages: birth, youth, midlife, and maturity. Each stage hascharacteristics that have implications for the structure of the firm.

Birth: In the birth state, a firm is just beginning. An organization in the birth stage does notyet have a formal structure. In a young organization, there is not much delegation of authority.The founder usually ―calls the shots.‖

Youth: In this phase, the organization is trying to grow. The emphasis in this stage is on becoming larger. The company shifts its attention from the wishes of the founder to thewishes of the customer. The organization becomes more organic in structure during this phase. It is during this phase that the formal structure is designed, and some delegation ofauthority occurs.

Midlife: This phase occurs when the organization has achieved a high level of success. Anorganization in midlife is larger, with a more complex and increasingly formal structure. Morelevels appear in the chain of command, and the founder may have difficulty remaining incontrol. As the organization becomes older, it may also become more mechanistic in structure.

Maturity: Once a firm has reached the maturity phase, it tends to become less innovative, lessinterested in expanding, and more interested in maintaining itself in a stable, secureenvironment. The emphasis is on improving efficiency and profitability. However, in anattempt to improve efficiency and profitability, the firm often tends to become less innovative.Stale products result in sales declines and reduced profitability. Organizations in this stage areslowly dying. However, maturity is not an inevitable stage. Firms experiencing the decline of

maturity may institute the changes necessary to revitalize.

Although an organization may proceed sequentially through all four stages, it does not have to. Anorganization may skip a phase, or it may cycle back to an earlier phase. An organization may even tryto change its position in the life cycle by changing its structure.

As the life‐cycle concept implies, a relationship exists between an organization's size and age. Asorganizations age, they tend to get larger; thus, the structural changes a firm experiences as it getslarger and the changes it experiences as it progresses through the life cycle are parallel. Therefore, theolder the organization and the larger the organization, the greater its need for more structure, morespecialization of tasks, and more rules. As a result, the older and larger the organization becomes, the

greater the likelihood that it will move from an organic structure to a mechanistic structure.Strategy

How an organization is going to position itself in the market in terms of its product is considered itsstrategy. A company may decide to be always the first on the market with the newest and best product(differentiation strategy), or it may decide that it will produce a product already on the market moreefficiently and more cost effectively (cost‐leadership strategy). Each of these strategies requires a



structure that helps the organization reach its objectives. In other words, the structure must fit thestrategy.

Companies that want to be the first on the market with the newest and best product probably areorganic, because organic structures permit organizations to respond quickly to changes. Companies

that elect to produce the same products more efficiently and effectively will probably be mechanistic.

Environment

The environment is the world in which the organization operates, and includes conditions thatinfluence the organization such as economic, social‐cultural, legal‐ political, technological, and naturalenvironment conditions. Environments are often described as either stable or dynamic.

In a stable environment, the customers' desires are well understood and probably will remainconsistent for a relatively long time. Examples of organizations that face relatively stableenvironments include manufacturers of staple items such as detergent, cleaning supplies, and

paper products.

In a dynamic environment, the customers' desires are continuously changing — the oppositeof a stable environment. This condition is often thought of as turbulent. In addition, thetechnology that a company uses while in this environment may need to be continuouslyimproved and updated. An example of an industry functioning in a dynamic environment iselectronics. Technology changes create competitive pressures for all electronics industries, because as technology changes, so do the desires of consumers.

In general, organizations that operate in stable external environments find mechanistic structures to beadvantageous. This system provides a level of efficiency that enhances the long‐term performances of

organizations that enjoy relatively stable operating environments. In contrast, organizations thatoperate in volatile and frequently changing environments are more likely to find that an organicstructure provides the greatest benefits. This structure allows the organization to respond toenvironment change more proactively.

Advances in technology are the most frequent cause of change in organizations since they generallyresult in greater efficiency and lower costs for the firm. Technology is the way tasks areaccomplished using tools, equipment, techniques, and human know‐how.

In the early 1960s, Joan Woodward found that the right combination of structure and technology werecritical to organizational success. She conducted a study of technology and structure in more than 100

English manufacturing firms, which she classified into three categories of core‐

manufacturingtechnology:

Small batch production is used to manufacture a variety of custom, made‐to‐order goods.Each item is made somewhat differently to meet a customer's specifications. A print shop isan example of a business that uses small‐ batch production.



Mass production is used to create a large number of uniform goods in an assembly‐linesystem. Workers are highly dependent on one another, as the product passes from stage tostage until completion. Equipment may be sophisticated, and workers often follow detailedinstructions while performing simplified jobs. A company that bottles soda pop is an exampleof an organization that utilizes mass production.

Organizations using continuous process production create goods by continuously feedingraw materials, such as liquid, solids, and gases, through a highly automated system. Suchsystems are equipment intensive, but can often be operated by a relatively small labor force.Classic examples are automated chemical plants and oil refineries.

Woodward discovered that small‐ batch and continuous processes had more flexible structures, andthe best mass‐ production operations were more rigid structures.

Once again, organizational design depends on the type of business. The small‐ batch and continuous processes work well in organic structures and mass production operations work best in mechanistic

structures.

Organic and Mechanistic Design Features

Hierarchy of authority

Centralization

Division of labor

Rules

Procedures

Impersonality

Chain of command

Unity of command

Span of control

1- Work Specialization:

The degree to which tasks in an organization are subdivided into separate jobsDivision of labor:Makes efficient use of employee skillsIncreases employee skills through repetitionLess between-job downtime increases productivitySpecialized training is more efficient

Allows use of specialized equipment

2- Departmentalization:

The basis by which jobs are grouped together

Grouping Activities By:

1. Function

2. Product

3. Geography



4. Process

5. Customer

3- Span of Control:

The number of subordinates a manager can efficiently and effectively direct

Concept:Wider spans of management increase organizational efficiency

Narrow Span Drawbacks:

Expense of additional layers of management.

Increased complexity of vertical communication.

Encouragement of overly tight supervision and discouragement of employee autonomy.

4- Centralization:

The degree to which decision making is concentrated at a single point of organization

5- Formalization

The degree to which jobs within the organization are standardized

6- Matrix structure

A structure that creates dual lines of authority and combines functional and product

departmentalization

Key Elements:

Gains advantages of functional and product departmentalization while avoiding their

weaknesses. Facilitates coordination of complex and interdependent activities.

Breaks down unity-of-command concept.

Advantages (increased coordination) u Efficient use of resources

u Project integration

u Improved information flowu Flexibility

u Discipline retention

u Improved motivation and commitmentDisadvantages (project manager’s authority gap)

u Power struggles

u Heightened conflict

u Slow reaction time

u Difficulty in monitoring and controllingu Excessive overhead



u Experienced stress

7- Team Structure:

The use of teams as the central device to coordinate work activities

Characteristics:

Breaks down departmental barriers.

Decentralizes decision making to the team level.

Requires employees to be generalists as well as specialists.

Cr eates a ―flexible bureaucracy.‖

8- Boundaryless organization

An organization that seeks to eliminate the chain of command, have limitless span of control

and replace departments with empowered teams.

T-form Concepts:Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.

Breakdown external barriers to customers and suppliers.

9- Mechanistic Model:

A structure characterized by extensive departmentalization, high formalization, a limited

information network and centralization.

10- Organic:

A structure that is flat, uses cross hierarchical and cross functional teams, has lowformalization, possesses a comprehensive information network, and relies on participative

decision making.



Why do structures differ?

1- Strategy:

2- Technology:

Characteristics of routineness (standardized or customized) in activities:

• Routine technologies are associated with tall, departmentalized structures and formalization in

organizations.

• Routine technologies lead to centralization when formalization is low.

• Nonroutine technologies are associated with delegated decision authority.

3- Environment:

Key Dimensions:

Capacity: the degree to which an environment can support growth.

Volatility: the degree of instability in the environment.

Complexity: the degree of heterogeneity and concentration among environmental

elements.

Research Findings:

• Work specialization contributes to higher employee productivity, but it reduces job

satisfaction.

• The benefits of specialization have decreased rapidly as employees seek more

intrinsically rewarding jobs.



• The effect of span of control on employee performance is contingent upon individual

differences and abilities, task structures, and other organizational factors.

• Participative decision making in decentralized organizations is positively related to job

satisfaction.

• Organization: a cooperative social system involving the coordinated efforts of two or

more people pursuing a shared purpose.

• Common Characteristics of Organizations

1. Coordination of effort: multiplying individual contributions to achieve results

greater than those possible by individuals working alone.

2. Common goal or purpose: having a focus to strive for something of mutual

interest.

3. Division of labor: dividing tasks into specialized jobs that use human resources

efficiently.4. Hierarchy of authority: using a chain of command to control and direct the

actions of others.

• Organization Chart (Table)

A visual display of an organization’s positions and lines of authority that is useful as a

blueprint for deploying human resources.



• Vertical and Horizontal Dimensions

1. Vertical hierarchy establishes the chain of command which coordinates the

efforts of the organization.

2. Horizontal specialization denotes the division of labor.

3. A balance between hierarchy and special ization is necessary if the organization is to

be effective.

• The Time Dimension of Organizational Effectiveness Involves

– Meeting organizational objectives and prevailing societal expectations in the near

future.

– Adapting to environmental demands and developing as a learning organization in

the intermediate future.

– Surviving as an effective organization into the future.

Important Factors in an Organization’s Environment

• Suppliers

• Distributors

• Competitors

• Customers

The Burns and Stalker Model

– Mechanistic organizations

• Are rigid in design, rely on formal communications, and have strong

bureaucratic qualities best suited to operating in relatively stable and

certain environments.

– Organic organizations

• Have flexible structures, participative communication patterns and are

successful in adapting to change in unstable and uncertain environments.

• Departmentalization

– The grouping of related jobs or processes into major organizational units.

• Overcomes some of the effect of fragmentation caused by differentiation

(job specialization).• Permits coordination (integration) to be handled in the least costly

manner.

– Sometimes refers to division , group , or unit in large organizations.

• Functional Departments

– Categorizing jobs according to the activity performed.

• Product-Service Departments



– Grouping jobs around a specific product or service.

– Reduces the information overload that managers face in a purely functional

design

– More effective handling of the business is possible

– Addition of product lines, diverse customers, and technological advances

increases the complexity and uncertainty of an organization’s business

environment

– Product design may incorporate features of functional and place designs into the

organization of each product division

– • Geographic Location Departments

– Adopting a structural format based on the physical dispersion of assets,

resources, and customers.

• Customer Classification Departments

–

Creating a structural format centered on various customer categories.• Reengineering into Cross-Functional Teams

– Lowering costs, improving quality, increasing speed, incorporating IT, and

improving customer satisfaction

• Span of Control (Management)

– The number of people who report to a manager.

• Narrow spans of control foster tall organizations with many

organizational/managerial layers.

• Flat organizations have wider spans of control.

• Is There an Ideal Span of Control?

– The right span of control efficiently balances too little and too much supervision.• The Contingency Approach to Spans of Control

– Both overly narrow and overly wide spans of control are counterproductive.

– Situational factors dictate the width of spans of control.

• Wide spans of control are appropriate for departments where many

workers work close together and do the same job.

• Narrow spans of control are best suited for departments where the work is

complex and/or the workers are widely dispersed.

• Centralization

– The retention of decision-making authority by top management.

• Decentralization

– The sharing of decision-making authority by management with lower-level

employees.

• The Need for Balance



– The challenge is to balance the need for responsiveness to changing conditions

(decentralization) with the need to create low-cost shared resources

(centralization).

• Delegation

– Assigning various degrees of decision-making authority to lower-level employees.

• The Advantages of Delegation

– Frees up managerial time for other important tasks.

– Serves as a training and development tool for lower-level managers.

– Increases subordinates’ commitment by giving them challenging assignments.

• Barriers to Delegation

– Belief that only you can do the job right.

– Lack of confidence and trust in subordinates.

– Low self-confidence.

–

Fear of being called lazy. – Vague job definition.

– Fear of competition from subordinates.

– Reluctance to take risks that depend on others.

– Lack of early warning controls.

– Poor example of bosses who do not delegate.

• Characteristics of New Organizations

– Fewer organizational layers

– More teams

– Smallness within bigness

• New Organizational Configurations

– Hourglass organization: a three-layer structure with constricted middle

(management) layer.

– Cluster organization: collaborative structure in which teams are the primary

unit.

– Virtual organizations: internet-linked networks of value-adding subcontractors.

Types of Organizations:

u Business organizations (Main problem: Make a profit)

u Nonprofit service organizations (Main problem: Selectively screen large numbers of

potential clients)

u Mutual-benefit organizations (Main problem: Satisfy members’ needs)



u Commonweal organizations (Main problem: provide standardized services to large

groups of people with diverse needs)

Open-System Characteristics

u Interaction with the environment

u Synergy

u Dynamic equilibrium: the process of maintaining the internal balance necessary for

survival by importing needed resources from the environment

u Equifinality: reaching the same result by different means

u Learning organization: ―an organization skilled at creating, acquiring, and transferring

knowledge, and at modifying its behavior to reflect new knowledge and insights.‖

Garvin’s Model of the Learning Organization



Complacency Can Lead to Organizational Decline

Characteristics of Organizational Decline

1. Centralization

2. No long-term planning

3. Innovation curtailed

4. Scape-goating

5. Resistance to change

6. Turnover

7. Low morale

8. Non-prioritized cuts

9. Conflict

Contingency design: the process of determining the degree of environmental uncertainty and

adapting the organization and its subunits to the situation.



Strategies for Building a Competitive Advantage

Low-cost strategy Based on an organization’s ability to provide a product or service at a lower cost

than its rivals

Di ff erentiation strategy Based on providing customers with something unique and makes the

organization’s product or service distinctive from its competition

Focused strategy Designed to help an organization target a specific niche in an industry, unlike

both the low-cost and differentiation strategies, which are designed to target

industrywide markets



• Organizational Culture

– The collection of shared beliefs, values, rituals, stories, myths, and specialized

language that creates a common identity and sense of community.

– The ―social glue‖ that binds an organization’s members together.

– • Characteristics of Organizational Cultures

– Collective: organizations are social entities.

– Emotionally charged: the organization’s culture serves as a security blanket to its

members.

– Historically based: trust and loyalty result from long-term organizational

associations.

– Inherently symbolic: actions often speak louder than words.

– Dynamic: culture promotes stability and control.

– Inherently fuzzy: ambiguity, contradictions, and multiple meanings are part of

culture.Forms and Consequences of Organizational Cultures

• Organizational values: shared beliefs about what the organization stands for.

• The degree of sharing and intensity determine whether an organization’s culture is

strong or weak.

The Organizational Socialization Process

– Organizational socialization: the process of transforming outsiders into accepted

insiders.

– Orientations

• Programs that familiarize new employees with the organization’s history,culture, competitive realities, and compensation and benefits.

– Storytelling

Recitations of heroic or inspiring deeds provide ―social roadmaps‖ for

new employees.

Strengthening Organizational Cultures

Symptoms of a weak organizational culture

– Inward focus

– Morale problems

– Fragmentation/inconsistency

– Ingrown subcultures

– Warfare among subcultures

– Subculture elitism (exclusiveness)



Requirements for Successfully Changing Organizational Culture

Understand the old culture first

Support employees and teams who have ideas for a better culture and are willing to act

on those ideas

Find the most effective subculture in the organization and use it as a model

Help employees and teams do their jobs more effectively

Use the vision of a new culture as a guide for change

Recognize that significant cultural change takes time

Live the new culture

Attributes of a Bureaucratic Culture

Long-term concerns are predictability, efficiency, and stability

Members value standardized goods and services

Managers view their roles as being good coordinators, organizers, and enforcers of

written rules and standards

Tasks, responsibilities, authority, rules, and processes are clearly defined

Attributes of a Clan Culture

Members understand that contributions to the organization exceed any contractual

agreements

A clan culture achieves unity with a long and thorough socialization process

Members share feelings of pride in membership, as well as feelings of personal

ownership of a business, a product, or an idea



Peer pressure to adhere to important norms is strong

Success is assumed to depend substantially on sensitivity to customers and concern for

people

Teamwork, participation, and consensus decision making are believed to lead to success

Attributes of an Entrepreneurial Culture

There is a commitment to experimentation, innovation, and being on the leading edge

This culture does not just quickly react to changes in the environment — it creates change

Effectiveness depends on providing new and unique products and rapid growth

Individual initiative, flexibility, and freedom foster growth and are encouraged and well

rewarded

Attributes of a Market Culture

Contractual relationship between individual and organization

Independence and individuality are valued and members are encouraged to pursue their

own financial goals

Does not exert much social pressure on an organization’s members, but when it does,

members are expected to conform

Superiors’ interactions with subordinates largely consist of negotiating performance–

reward agreements and/or evaluating requests for resource allocations

Has a weak socialization process

Few economic incentives are tied directly to cooperating with peers

Often tied to monthly, quarterly, and annual performance goals based on profits

Organizational Uses of Culture

Organizational culture has the potential to enhance organizational performance,

individual satisfaction, and a variety of expectations, attitudes, and behaviors in

organizations

If an organization’s culture is not aligned with the changing expectations of internal

and/or external stakeholders, the organization’s effectiveness can decline

Organizational culture and performance are related, although the evidence regarding

the exact nature of this relationship is mixed

Organizational culture affects employee behavior and performance

Assessing which attributes of an organization’s culture need to be preserved and which

ones need to be modified is a constant organization need



Opt for a ―strong‖ culture that encourages and rewards diversity and principled dissent

Provide training on adopting and implementing the organization’s values

Guidelines for Managing Cultural Diversity

Organization members must:

Understand the nature of diversity and value a variety of opinions and insights

Recognize the learning opportunities and challenges presented by the expression

of different perspectives

The organizational culture must:

Foster expectations for high standards of performance and ethics for everyone

Stimulate personal development

Encourage openness

Make workers feel valued

The organization must have a well-articulated and widely understood mission

The Process of Organizational Socialization

Successful social ization i s refl ected in :

Job satisfaction

Role clarity

High work motivation

Understanding of culture, perceived control



High job involvement

Commitment to organization

Tenure

High performance

Internalized values

Unsuccessfu l sociali zation is refl ected in:

Job dissatisfaction

Role ambiguity and conflict

Low work motivation

Misunderstanding, tension, perceived lack of control

Low job involvement

Lack of commitment to organization

Absenteeism, turnover

Low performance

Rejection of values

Hofstede’s Four Value Dimensions

Dimension Description

Power Distance The level of acceptance by a society of the unequal distribution of

power in organizations

In higher power distance cultures, employees acknowledge the

boss’s authority and follow the chain of command

The result is a more centralized authority and structure

Uncertainty Avoidance The extent to which people in a society feel threatened by

ambiguous situations

Countries with a high level of uncertainty avoidance tend to have

specific rules, laws, and procedures

Managers in these countries tend towards low-risk decision-

making

Employees exhibit little aggressiveness

Individualism The tendency of people to fend for themselves and their family

In countries that value individualism, individual initiative and

achievement are highly valued and the relationship of the

individual with organizations is one of independence



Masculinity The extent to which assertiveness and materialism is valued

In highly masculine societies, there is considerable job stress and

conflict between job and family roles



What Is the Relationship Between Organizational Structure and Strategy?

Organizational structure and strategy are related because organizational strategy helps a

company define and build its organizational structure. A company's organizational structure is

based on the result of the analysis of organizational strategy. The company will use these results

to determine its areas of concentration and how to position itself in order to succeed.

One of the first steps a company takes in its initial stages is assessing its operational

environment in order to determine the conditions in which it must operate. This involves

checking out the competition, consumer trends, culture and other factors. The company will

find out the strengths and weaknesses of its competition, the buying habits of the consumers,

and its economic capabilities. If the competition sells their own product for $10 US Dollars

(USD), the company would have to work out if the best strategy is to sell its own product above

or beyond that price. Selling its own product at a discount is a strategy that might appeal to a

certain demographic. On the contrary, selling the same product above the price of the

competition is also a strategy that might confer exclusivity and appeal to a certain

demographic.

A company will also find out what kind market exists in its environment by researching the people inthat environment. If the majority of the people are highly educated with greater spending power,making a product exclusive might appeal to them. If the majority of customers belong to the lowerincome bracket, selling a product at a discount will work better. Other organizational strategy mightinclude outsourcing some of the jobs to minimize costs. It may also include locating themanufacturing plant in countries with cheap labor to enable the company to offer its products at a

competitive price.

The relationship between organizational structure and strategy becomes clearer when the company’s

strategy is in place. With a clear focus of what it wants to achieve, the organization will proceed toalign its structure in such a manner to best achieve this. It will allocate responsibilities for optimalresults, create branches, and decide whether individual efforts or group participation is the bestmethod for it to achieve its goals. The organizational structure and strategy will also help thecompany decide if the tone of the company should be strictly formal, semi-formal or informal. All ofthese decisions can be made after determining the organizational strategy of the company.



What Is the Relationship Between Organizational Structure and Organizational Culture?

Organizational structure and organizational culture have a dependent relationship with one another. Inthe business world, management structure determines the behaviors, attitudes, dispositions and ethicsthat create the work culture. If a company's organizational structure is strictly hierarchical, with

decision-making power centralized at the top, the company's culture will likely reflect a lack offreedom and autonomy at the lower levels. If a company's management structure is decentralized,with shared power and authority at all levels, the culture is likely to be more independent, personalized and accountable.

The way a company allocates power and authority determines how employees behave. These choicesmanifest in a company's organizational structure and organizational culture. Organizational structureis the the way a company arranges its management and lines of authority. It determines roles,responsibilities and the flow of information within the company. Work culture results from thosedecisions.

Most companies use a hierarchical structure that looks like a pyramid on paper. The chief executiveor president sits at the very top of the pyramid. His direct reports, usually the vice-presidents, are on aline under him. Their direct reports are on a line under them. The pyramid stretches outward anddownward based on the number of levels of management the company needs to operate according toits objectives.

Upper management uses organizational structure to control who has power and authority in thecompany. For example, if a company president only wants to deal with the most important decisionsand wants to leave the day-to-day decision-making to someone else, the organizational structurewould have the president on the top line with the vice-president of operations sitting alone on thesecond line. This effectively means that the vice-president of operations is the only executive with a

direct line to the president, and everyone else reports to him. In this scenario, the vice-president ofoperations has a great deal of power.

Conversely, the president could allow many of his executives with direct access to him. This is adecentralized approach to organizational structure, allowing more people to have input into thedecision-making process. Decentralized power gives more autonomy to individual departments andmanagers. In this way, organizational structure and organizational culture are interrelated.

A decentralized power structure means there is more room for employee input into decisions.Employees are more accountable, because they have more responsibility. They work moreindependently, because they do not always need approvals from upper management to proceed. Theorganizational culture reflects these freedoms.

Likewise, organizational structure and organizational culture can have a negative impact on oneanother if power and authority are highly centralized at the top of the pyramid. In this instance,employees have little control over decisions and must merely do their jobs. The type of culture thisstructure can breed is one of no accountability at the lower levels, hostility and an environment whereemployees do not feel vested in the company or their jobs.

http://www.wisegeek.com/what-is-an-organizational-structure.htm





In what ways can a corporation’s structure and culture be internal strengths or weaknesses?

Organizational Structure

There are three basic organizational structures. The simple structure is designed for smallorganizations. The functional structure is for medium-sized companies with several products. Finally,a divisional structure is for large companies with multiple product lines (Wheelen & Hunger, 2010).A corporation's structure can be a company's strength as well as weakness. If the correct structure ischosen and developed, then the firm can prosper and grow. If the wrong structure is selected acompany may have problems operating until the structure is corrected.

A corporation's structure gets its strength from its foundation. If the company is structured correctly,following one of the three above mentioned structures will help it operate efficiently and supportsome of the corporations strategies. If it is the wrong structure, then the corporation may crumble because individuals may not know their particular role within the organization.

Corporate culture is where organization's reflect the values instilled on passing generations from thefounders. A strength of culture would be the organization's ability to relate to each other and followthe beliefs, expectations, and values of the founders (Wheelen & Hunger, 2010). A weakness is theexact opposite. If employees don't understand the culture they may not be able to respondappropriately to supervisors. The organization's culture may dictate how information iscommunicated, feedback is given, and performance is managed (The Sergay Group, Ltd, 2012).

The military, as an organization, has a very large corporate structure. A structure weakness within theArmy could relate to individual Soldiers not understanding the structure and where they fit into it.Through knowledge and training, Soldiers will see how they fit into the structure and become a partof it instead of an individual. The same holds true to the Army culture. With over 235+ years ofhistory and culture, each Soldier must learn the culture and heritage of the organization. Some maynot be accepting of certain beliefs or values, but those are choices that are made when individualschoose to enlist. That choice they make is to follow these beliefs and values and make them theirown.

The Sergay Group Ltd. (2012). What is corporate culture? Retrieved fromhttp://www.sergaygroup.com/Smart-Talk/What-is-Corporate-Culture.html

Wheelen, T. L & Hunger, J. D. (2010). Concepts in strategic management and business policy. UpperSaddle River, NJ: Prentice Hall.



5 Focuses of Organizational Structure – Strengths and Weaknesses

1. Functional Structure

Strengths Weaknesses

Easier to manage work within a group Coordination and communication betweendepartments may be slower and less accurateContains people who ―speak the samelanguage‖ and nurtures technical expertise,

attracts and develops experts

Individual department managers have limiteddecision making authority

Lower labor costs; workload can be balancedupon demand

Different departments have different priorities; resolving conflicts may be costly;customers’ interests could be overlooked

2. Product or Service-Based Structure

Strengths Weaknesses Responsibility for each product can be pinpointed at the division level

Less sharing of resources across divisions

Focus on one product can produce higherquality ―state-of-the-art‖ output

More duplication of effort resulting in highercosts

Team spirit develops around each productline;Competition among divisions can boost business

Customers who want more than one product/service will have to work with morethan one division

Encourages independent decision making;Quicker response to customer request Company may be slow to recognize that a product should be changed, dropped or addedCould be stifled by one product focus

3. Customer or Geography-Based Structure

Strengths Weaknesses Unique needs of each type of customer arewell served

May be less sharing of resources acrossdivision/departmental boundaries

Focus on customers’ needs and preferences More duplication of effort and infrastructure

resulting in higher costsUnprofitable product lines more likely to bedropped

Internal systems may evolve in differentways to serve different customer segments



4. Business Process Team Structure

Strengths Weaknesses Focus on organization is outward to customer Involves major transformation of the

organization (difficult, timely and costly

change; new systems required for virtuallyeverything)Reduces number of levels of management – ―flatten organizations‖ (reduced management

cost; less need for coordination)

Company may need to retain functionalexpertise if not sufficient within each process

Time and money saved due to reduced needto pass information up and down thehierarchy and between departments

May require major and costly traininginitiative

Promotes self-management by employees(greater job satisfaction because of moreinvolvement)

Broadens individuals’ knowledge and skill basesFaster decision making, reduced cycle timeand improved responsiveness to customers

5. Matrix (Hybrid) Structure (contains more than one focus; has two or more bosses)

Strengths Weaknesses Enables organization to use its resources

efficiently (provides flexibility to assign staffto project requirements and reassign asneeded)

Multiple bosses may result in confusion

Takes full advantage of the use of teams(maintaining in-depth technical expertise incritical functions)

Slows down decision making

Provides individuals an opportunity to workwith different skills and expertise

Conflicting demands from bosses leads to personal stress and reduced work quality

Requires managers to cooperate with oneanother and moderates their power oversubordinates

Power struggle between managers regardingresources

Can disrupt the work and get in the way ofcustomer serviceSubordinates may play one boss againstanother

Read more: MBA Boost - 5 Focuses of Organizational Structure – Strengths and Weaknesses http://www.mbaboost.com/content/248/#ixzz2joZPsON2

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Questions:

1. What is strategy and how is it linked to different types of organizational goals?

Strategy.

The process of positioning the organization in the competitive environment and

implementing actions to compete successfully.

A pattern in a stream of decisions.

Choices regarding goals and the way the firm organizes to accomplish

them.

Elements of conventional strategy decisions.

Choosing the types of contributions the firm intends to make to society.

Precisely whom the firm will serve.

Exactly what the firm will provide to others.

Societal goals.

– Reflect an organization’s intended contributions to the broader society.

– Enable organizations to gain legitimacy, a social right to operate, and more

discretion for their non-societal goals and operating practices.

– Enable organizations to make legitimate claims over resources, individuals,

markets, and products.

Societal contributions and mission statements.

– A firm’s societal contribution is often part of its mission statement.

A written statement of organizational purpose.

– A good mission statement identifies whom the firm will serve and how it will goabout accomplishing its societal purpose.

Output goals.

– Define the type of business the organization is pursuing.

– Provide some substance to the more general aspects of mission statements.

Systems goals.

– Concerned with the conditions within the organization that are expected to

increase the organization’s survival potential.

– Typical systems goals include growth, productivity, stability, harmony, flexibility,

prestige, and human resource maintenance.

– Systems goals must often be balanced against one another.

Well-defined systems goals can:

– Focus managers’ attention on what needs to be done.



– Provide flexibility in devising ways to meet important targets.

– Be used to balance the demands, constraints, and opportunities facing the firm.

– Form a basis for dividing the work of the firm.

2. What are the basic attributes of organizations?

Successful organizations develop a structure consistent with the pattern of goals

established by senior management.

The formal structure shows the planned configuration of positions, job duties, and the

lines of authority among different parts of the organization.

The formal structure of the firm is also known as the division of labor.

Vertical specialization.

A hierarchical division of labor that distributes formal authority and establishes

where and how critical decisions are to be made.

Creates a hierarchy of authority. An arrangement of work positions in order of increasing authority.

Organization charts are diagrams that depict the formal structures of

organizations.

Chain of command.

A listing of who reports to whom up and down the organization.

Unity of command.

Each person has only one boss and each unit one leader.

Span of control.

The number individuals reporting to a supervisor.

Line units. Work groups that conduct the major business of the organization.

Staff units.

Work groups that assist the line units by providing specialized expertise and

services to the organization.

Internal versus external units.

Internal line units.

Transform raw materials and information into products and services.

External line units.

Maintain outside linkages.

Internal staff units.

Assist the line units in performing their functions.

External staff units.

Assist the line units with outside linkages and act to buffer internal

operations.

Some firms are outsourcing many of their staff functions.



Use of information technology to streamline operations and reduce staff.

Most organizations use a variety of means to specialize the vertical division of labor.

Best pattern of vertical specialization depends on environment, size, technology, and

goals.

Control.

– The set of mechanisms used to keep actions or outputs within predetermined

limits.

– Deals with:

• Setting standards.

• Measuring results against standards.

• Instituting corrective action.

Output controls.

– Focus on desired targets and allow managers to use their own methods to reach

defined targets. – Part of overall method of managing by exception.

– Promote flexibility and creativity.

Process controls.

– Specify the manner in which tasks are accomplished.

– Types of process controls.

• Policies, procedures, and rules.

• Formalization and standardization.

• Total quality management controls.

Policies, procedures, and rules.

– Policies.• Guidelines for action that outline important objectives and broadly

indicate how activities are to be carried out.

– Procedures.

• Identify the best method for performing a task, show which aspects of a

task are most important, or outline how an individual is to be rewarded.

– Rules.

• Describe in detail how a task or a series of tasks is to be performed, or

indicate what cannot be done.

– Policies, procedures, and rules are often used as substitutes for direct managerial

supervision.

Formalization.

– The written documentation of policies, procedures, and rules to guide behavior

and decision making.

Standardization.



– The degree to which the range of allowable actions in a job or series of jobs is

limited so that uniform actions occur.

Deming’s 14 points for achieving total quality management.

– Create a consistency of purpose in the company to innovate; put resources into

research and education, and into maintaining equipment and new production

aids.

– Learn a new philosophy of quality to improve every system.

– Require statistical evidence of process control and eliminate financial controls on

production.

– Require statistical evidence of control in purchasing parts.

– Use statistical methods to isolate the sources of trouble.

– Institute modern on-the-job training.

– Improve supervision to develop inspired leaders.

–

Drive out fear and instill learning. – Break down barriers between departments.

– Eliminate numerical goals and slogans.

– Constantly revamp work methods.

– Institute massive training programs for employees in statistical methods.

– Retrain people in new skills.

– Create a structure that will push, every day, on the above 13 points.

Centralization and decentralization.

– Centralization.

• Degree to which the authority to make decisions is restricted to higher

levels of management. – Decentralization.

• Degree to which the authority to make decisions is given to lower levels in

an organization’s hierarchy.

Benefits of decentralization.

– Higher subordinate satisfaction.

– Quicker response to a series of unrelated problems.

– Assists in on-the-job training of subordinates for higher-level positions

– Encourages participation in decision making.



3. How is work organized and coordinated?

Horizontal specialization.

– A division of labor that establishes specific work units or groups within an

organization.

– Often referred to as departmentation.

– Whenever managers divide tasks and group similar types of skills and resources

together, they must also be concerned with coordination.

Coordination.

– The set of mechanisms that an organization uses to link the actions of its units

into a consistent pattern.

– Within a unit, much of the coordination is handled by its manager.

– Smaller organizations rely on management hierarchy for coordination.

– As the organization grows, more efficient and effective methods of coordination

are required. Personal methods of coordination.

– Produce synergy by promoting dialogue, discussion, innovation, creativity, and

learning, both within and across units.

– Common personal methods of coordination are direct contact between and

among organizational members and committee memberships.

– Mix of personal coordination methods should be tailored to subordinates, skills,

abilities, and experiences.

Impersonal methods of coordination.

– Produce synergy by stressing consistency and standardization so that individual

pieces fit together. – Often are refinements and extensions of process controls.

– Historical use of specialized departments to coordinate across units.

– Contemporary use of matrix departmentation and management information

systems for coordination.



4. What are bureaucracies and what are the common structures?

Bureaucracy.

– An ideal form of organization, the characteristics of which were defined by the

German sociologist Max Weber.

– Relies on a division of labor, hierarchical control, promotion by merit with career

opportunities for employees, and administration by rule.

Mechanistic type of bureaucracy (machine bureaucracy).

– Emphasizes vertical specialization and control.

– Stresses rules, policies, and procedures; specifies techniques for decision making;

and use well-documented control systems.

– Often used with a low cost leader strategy.

Benefits of the mechanistic type.

– Efficiency.

Limitations of the mechanistic type.

– Employees dislike rigid designs, which makes work motivation problematic.

– Unions may further solidify rigid designs.

– Key employees may leave.

– Hinders organization’s capacity to adjust to subtle environmental changes or new

technologies.

Organic type of bureaucracy (professional bureaucracy).

– Horizontal specialization.

– Procedures are minimal, and those that do exist are not highly formalized.

–

Used to pursue strategies that emphasize product quality, quick response tocustomers, or innovation.

Benefits of the organic type.

– Good for problem solving and serving individual customer needs.

– Centralized direction by senior management is less intense.

– Good at detecting external changes and adjusting to new technologies.

Limitations of the organic type.

– Less efficient than mechanistic type.

– Restricted capacity to respond to central management direction.

Common types of hybrid structures.

– Divisional firm. Composed of quasi-independent divisions so that different divisions can be

more or less organic or mechanistic.

– Conglomerate.

A single corporation that contains a number of unrelated businesses.



The conglomerate simultaneously illustrates three key points that will be the focus of

Chapter 18.

– All structures are combinations of the basic elements.

– There is no one best structure.

– The firm does not stand alone but is part of a larger network of firms that

compete against other networks.

Process Mechanistic Structure Organic Structure 1. Leadership Includes no perceived confidence

and trust between superiors andsubordinates.

Includes perceivedconfidence and trustbetween superiors and

subordinates. 2. Motivation Taps only physical, security, and

economic motives, through use offear and sanctions.

Taps a full range ofmotives throughparticipatory methods.

3. Communication Information flows downward andtends to be distorted, inaccurate,

and viewed with suspicion bysubordinates.

Information flows freely:upward, downward, and

laterally. The informationis accurate andundistorted.

4. Interaction Closed and restricted.Subordinates have little effect ondepartmental goals, methods, andactivities.

Open and extensive.Both superiors andsubordinates are able toaffect departmental

goals, methods, andactivities.



5. Decision Relatively centralized. Occurs onlyat the top of the organization.

Relatively decentralized.Occurs at all levelsthrough group

processes.

6. Goal setting Located at the top of theorganization, discouraging groupparticipation.

Encourages groupparticipation in settinghigh, realistic objectives.

7. Control Centralized. Emphasizes fixingblame for mistakes.

Dispersed throughoutthe organization.

Emphasizes self-controland problem solving.

8. Performancegoals

Low and passively sought bymanagers, who make nocommitment to developing theorganization’s human resources.

High and actively soughtby superiors, whorecognize the need forfull commitment todeveloping, throughtraining, the

organization’s humanresources.

structure and culture summary

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