Chapter 08

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

Management A Practical Introduction

Third Edition

Angelo Kinicki &Brian K. Williams

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin2

Chapter 8: Organizational Culture,

Structure, & Design

Building Blocks of the Organization

What Kind of Organizational Culture Do We Have?Developing High Performance CulturesWhat is an Organization?Elements of an OrganizationTypes of Organizational CulturesCreating the Best StructureBuilding a Learning Organization


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 membersIt is the organization’s personality

There are two levels of corporate culture:The invisible levelThe visible level


McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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 “it’s 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



Layers of Organizational Culture

Visible Level:Observable cultureManifestations of culture:

SymbolsStoriesHeroesRites and rituals



-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 organization’s life



WHY IS CULTURE IMPORTANT?

1. Culture provides an opportunity to reinforce the company’s 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



Four Functions of Organizational Culture

It gives members an organizational identityIt facilitates collective commitmentIt promotes social-system stabilityIt shapes behavior by helping employees make

sense of their surroundings



Figure 8.1: Four Functions Of Organizational Culture


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 firm’s long-term financial success2. The fit perspective assumes that an organization’s culture must align or fit with its business or strategic context3. 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



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 values2. Slogans & Sayings - corporate cultures can be promoted through slogans and sayings3. Stories, Legends, & Myths - telling stories, legends, and myths can help embed desirable values in an organization4. Leader Reactions to Crises - how top managers respond to critical incidents sends a message to employees



5. Role Modeling, Training, & Coaching - organizational culture can be promoted through role modeling, training programs, teaching, and coaching6. 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 behavior8. Organizational Goals & Performance Criteria - desired organizational behavior and goals can be promoted through criteria for recruiting, selecting, promoting, and dismissing people



9. Measurable & Controllable Activities - companies can measure and control certain activities to foster a certain culture10. Organizational Structure - how an organization is structured can send a clear message about its organizational culture11. Procedures For Self-Development - procedures can be established to help employees develop according to organizational goals



Practical Action: Fitting into an Organization’s 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



Practical Action: When You Should and Shouldn’t Delegate

Delegate routine and technical matters

Delegate tasks that help your subordinates grow

Don’t delegate confidential and personal matters

Don’t delegate emergencies

Don’t delegate special tasks that your boss asked you to do—unless you have his or her permission

Match the tasks delegated to your subordinates’ skills and abilities



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)



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 organization’s official positions)



Figure 8.2: Organization Chart



The Organization Chart

Director of

Personnel

Director of

Admissions

Director of Nutrition &

Food Services

Director of X-Ray &

Laboratory Services

Chief Physician

Director of

Pharmacy

Director of Patient &

Public Relations

Director of Accounting

Director of Surgery

Director of Outpatient Services

Board of Directors

Strategic Planning Advisor

Chief Executive Officer

Legal Counsel

PresidentCost Containment

Staff

Executive Administrative

Director

Executive Medical Director



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


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 firm’s reason for being - mission2. Coordinated Effort - organizations achieve a common purpose by coordinating individual efforts into a group or organization-wide effort3. Division Of Labor - the arrangement of having discrete parts of a task done by different people is referred to as work specialization



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



Spans of Control: Narrow versus Wide

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6. Authority, Responsibility, & Delegation – authority, accountability, responsibility, and the ability to delegate are all part of an organization’s 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



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


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



Figure 8.4: Simple Structure: An Example

There is only one hierarchical level of management beneath the owner



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



Figure 8.5: Functional Structure: Two Examples



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 servicesCustomer divisions group activities around common customers or clientsGeographic divisions group activities around regional locations



Divisional Structure

President

Motion Pictures & TV

Division

Music Division

Magazine &Book

Division

Internet ProductsDivision

Product Divisional Structure

President

Consumer Loans

Mortgage Loans

Business Loans

Agriculture Loans

Customer Divisional Structure

President

Western Region

NorthernRegion

SouthernRegion

Eastern Region

Geographic Divisional Structure



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



Conglomerate Structure

President

ElectronicsFire &

SecurityHealthcare

Plastics &Adhesives

EngineeredProducts

& Services

This resembles the structure of Tyco International



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



Hybrid Structure

Vice-President, Production

Vice-President, Marketing

Vice-President,

Finance

Vice-President,

Human Resources

Functional divisional structure

President

President Cadillac

PresidentBuick

PresidentPontiac

PresidentChevrolet

Product Divisional Structure

ManagerRegion I

ManagerRegion II

ManagerRegion III

ManagerRegion IV

Geographical divisional structure

A Hypothetical example of what GM might use



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



Example of Ford motor company



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



Figure 8.10: Team-Based Structure



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



Network Structure

Core of personal computer company

USA

Design Studio

Sweden

Engineering Company

Japan

Components Assembly

Mexico, Asia

DistributionCompany

CanadaAccounting& Finance

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 environmentFirms 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



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”


Chapter 8: Organizational Culture, Structure, & Design

CLASSROOM PERFORMANCE SYSTEM

Which of the following is not a characteristic of a mechanistic organization?

A) clearly specified tasksB) decentralized authorityC) close supervision D) clearly specified rules



2. The Environment (differentiation versus integration) Differentiation is the tendency of the parts of an organization to disperse and fragmentIntegration is the tendency to come together to achieve a common purpose3. Size Organizational size is usually measured by the number of full-time employees



4. Technology Technology (the tools and ideas for transforming materials, data, or labor into goods and services) influences organizational design

5. Organizational life cycleThe organizational life cycle involves birth, youth, midlife, and maturity



Life Cycle: Four Stages in the Life of an Organization

The organizational life cycle has a natural sequence of stages: 1. Birth

2. Youth

3. Midlife

4. Maturity




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




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 Computer’s early development




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




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




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




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



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



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:


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 won’t take risks, the basis for learning



The New Paradigm: “We’re 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


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



The New Paradigm: “We’re 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

Chapter 08

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