Designing Organizationa l Structures McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Merritts Bakerys Evolving Organizational Structure Merritts Bakery has grown over the years, and throughout this growth the Tulsa, Oklahoma, company has adapted its organizational structure. 13-4
Organizational Structure Defined Division of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities Relates to many OB topics (e.g. job design, teams, power, work standards, information flow) 13-5 Division of Labor
Subdividing work into separate jobs assigned to different people Division of labor is limited by ability to coordinate work Potentially increases work efficiency Necessary as company grows and work becomes more complex 13-6
Coordinating Work Activities 1. Informal communication Sharing information, forming common mental models Good for flexibility, nonroutine and ambiguous situations Easiest in small firms Larger firms apply informal communication through - Liaison roles - Integrator roles - Concurrent engineering 13-7 Coordinating Work
Activities 2. Formal hierarchy Direct supervision Assigns legitimate power to manage others Necessary in most firms, but has problems 3. Standardization Standardized processes (e.g., job descriptions) Standardized outputs (e.g., sales targets) Standardized skills (e.g., training) 13-8 Elements of Organizational Structure Departmentalization
Span of Control Elements of Organizational Structure Formalization Centralization 13-9 KenGens Flatter Structure KenGen, Kenyas leading electricity generation company, reduced its hierarchy from 15 layers to just 6 layers. This flatter structure has reduced bureaucracy and it has also
improved teamwork, explains KenGen executive Simon Ngure. 13-10 Span of Control Number of people directly reporting to the next level Related to coordination through direct supervision Wider span of control possible when: 1. Other coordinating mechanisms are present
2. Routine tasks 3. Low employee interdependence 13-11 Tall vs Flat Structures As companies grow, they: Build a taller hierarchy Widen span, or both Problems with tall hierarchies Overhead costs Worse upward information Focus power around managers, so staff less empowered
13-12 Centralization and Decentralization Centralization -- Formal decision making authority is held by a few people, usually at the top Decentralization increases as companies grow Varying degrees of centralization in different areas of the company
Information Production Systems Sales Upper Mgt Upper Mgt Upper Mgt Middle Mgt Middle Mgt Middle Mgt Supervisory
Supervisory Supervisory Front line Front line Front line Example: sales decentralized; info systems centralized = locus of decision making authority 13-13 Formalization
The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms. Formalization increases as firms get older, larger, and more regulated Problems with formalization Reduces organizational flexibility Discourages organizational learning/creativity Reduces work efficiency
Increases job dissatisfaction and work stress 13-14 TAXIs Organic Structure TAXI, Canadas creative agency of the decade, has an organic structure that relies on small teams, low formalization, and decentralized decision making. We needed a flexible infrastructure, able to move with the pace of change, says co-founder Paul Lavoie (right in photo with CEO Rob Guenette). 13-15 Mechanistic vs. Organic Structures Mechanistic Structure
Narrow span of control High formalization High centralization Organic Structure Wide span of control Low formalization Decentralized decisions 13-16 Effects of Departmentalization Specifies how employees and their activities are grouped together Three functions: 1. Establishes chain of command 2. Creates common mental models, measures of
performance, etc 3. Encourages staff to coordinate through informal communication 13-17 Functional Organizational Structure Organizes employees around specific knowledge or other resources (e.g., marketing, production) CEO Finance Production Marketing
13-18 Evaluating Functional Structures Benefits Economies of scale Supports professional identity and career paths Easier supervision Limitations More emphasis on subunit than organizational goals Higher dysfunctional conflict Poorer coordination -- requires more controls 13-19
Divisional Structure Organizes employees around outputs, clients, or geographic areas CEO Healthcare Lighting Products Consumer Lifestyle 13-20 Divisional Structure Different forms of divisional structure
Geographic structure Product structure Client structure Best form depends on environmental diversity or uncertainty 13-21 Globally Integrated Enterprise Fewer geographic divisions because: Less need for local representation Reduced geographic variation More global clients
Globally integrated enterprise Connects work processes around the world rather than replicating them within each country or region Functional heads are geographically distributed Firms home country is no longer focus of business 13-22 Evaluating Divisional Structures Benefits Building block structure -- accommodates growth Focuses on markets/products/clients
Limitations Duplication, inefficient use of resources Specializations are dispersed--silos of knowledge Revising divisional structure emphasis produces politics and conflict among executives 13-23 Team-Based Structure Self-directed work teams Teams organized around work processes Typically organic structure Usually found within divisionalized structure 13-24 Evaluating Team-Based
Structures Benefits Responsive, flexible Lower admin costs Quicker, more informed decisions Limitations Interpersonal training costs Slower during team development Role ambiguity increases stress
Problems with supervisor role changes Duplication of resources 13-25 Matrix Structure (Projectbased) Employees ( ) are temporarily assigned to a specific project team and have a permanent functional unit CEO Game1 Project Leader Game2 Project Leader Game3 Project Leader Art Dept Leader Software
Focuses specialists on clients and products Supports knowledge sharing within specialty Solution when two divisions have equal importance Limitations Increases goal conflict and ambiguity Two bosses dilutes accountability More conflict, organizational politics, and stress 13-27 Network Organizational Structure Alliance of firms creating a product or service Product development partner
(France) Call center partner (Philippines) Core Firm (USA) Supporting firms beehived around a hub or core firm Package design partner (UK) Accounting
partner (USA) Assembly partner (China) 13-28 Evaluating Network Structures Benefits Highly flexible Potentially better use of skills and technology Not saddled with same resources for all products Limitations
Exposed to market forces Less control over subcontractors than in-house 13-29 External Environment & Structure Dynamic High rate of change Use team-based, network, or other organic structure Complex Many elements (such as stakeholders) Decentralize Stable Steady conditions, predictable change
Use mechanistic structure Simple Few environmental elements Less need to decentralize 13-30 External Environment & Structure (cont) Diverse Several products, clients, regions Use divisional form aligned with the diversity Hostile Competition and resource scarcity Use organic structure for
responsiveness Integrated Single product, client, place Use functional structure, or geographic division if global Munificent Plenty of resources and product demand Less need for organic structure 13-31 Effects of Organizational Size As organizations grow, they have:
More division of labor (job specialization) Greater use of standardization More hierarchy and formalization More decentralization 13-32 Technology and Structure Technology refers to mechanisms or
processes by which an organization turns out its product or service Two contingencies: Variability -- the number of exceptions to standard procedure that tend to occur. Analyzability -- the predictability or difficulty of the required work 13-33 Organizational Strategy Structure follows strategy Strategy points to the environments in which the
organization will operate Leaders decide which structure to apply Innovation strategy Providing unique products or attracting clients who want customization Cost leadership strategy Maximize productivity in order to offer competitive pricing 13-34 Chapter 13 Organizationa
l Culture McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Facebooks Organizational Culture Facebook has been able to maintain a strong corporate culture even as it expands globally. Maintaining culture is one of the top priorities we have as a company, says Sarah Smith (shown in this photo), head of Facebooks operations in Austin, Texas. 13-36
Organizational Culture Defined The basic pattern of shared values and assumptions shared within the organization. Defines what is important and unimportant. Companys DNAinvisible, yet powerful template that shapes employee behavior
13-37 Artifacts of organization al culture Elements of Organizatio nal Culture Organizationa l culture 13-38 14-38 Content of Organizational Culture
The relative ordering of values. A few dominant values Example: Facebook creative, proactive, risk-oriented Problems with measuring org culture Oversimplifies diversity of possible values Ignore shared assumptions Adopts an integration perspective An organizations culture is fuzzy: Diverse subcultures (fragmentation) Values exist within individuals, not work units 13-39 Organizational Culture
Profile Org Culture Dimensions Dimension Characteristics Innovation Experimenting, opportunity seeking, risk taking, few rules, low cautiousness Stability Predictability, security, rule-oriented Respect for people Fairness, tolerance Outcome
orientation Action oriented, high expectations, results oriented Attention to detail Precise, analytic Team orientation Collaboration, people-oriented Aggressiveness Competitive, low emphasis on social responsibility Source: OReilly et al (1991) 13-40 Organizational Subcultures
Dominant culture -- most widely shared values and assumptions Subcultures Located throughout the organization Can enhance or oppose (countercultures) firms dominant culture Two functions of countercultures: provide surveillance and critique, ethics source of emerging values 13-41 Artifacts: Stories and
Legends Social prescriptions of desired (or dysfunctional) behavior Provides a realistic human side to expectations Most effective stories and legends: Describe real people
Assumed to be true Known throughout the organization Are prescriptive 13-42 Artifacts of Organizational Culture Observable symbols and signs of culture Physical structures, ceremonies, language, stories Maintain and transmit
organizations culture Need many artifacts to accurately decipher a companys culture 13-43 Artifacts: Rituals and Ceremonies Rituals programmed routines (e.g.., how visitors are greeted)
Ceremonies planned activities for an audience (e.g.., award ceremonies) 13-44 Artifacts: Organizational Language Words used to address people, describe customers, etc. Leaders use phrases and special vocabulary as cultural symbols
Language also found in subcultures 13-45 Artifacts: Physical Structures/Symbols Building structure -- may shape and reflect culture Office design conveys cultural meaning Furniture, office size, wall hangings Courtesy of Microsoft Corp. 13-46 Organizational Culture Strength
How widely and deeply employees hold the companys dominant values and assumptions Strong cultures exist when: most employees understand/embrace the dominant values values and assumptions are institutionalized through well-established artifacts culture is long lasting -- often traced back to founder 13-47 Functions of Strong Corporate Cultures Culture Culture strength
strength advantages advantages depend depend on: on: Environment Environment fit fit Not Not cult-like cult-like Adaptive Adaptive culture culture Functions
Functions of of Strong Strong Cultures Cultures Control Control system system Social Social glue glue Sense-making Sense-making Organizational Organizational
predicts organizational performance Need to consider contingencies: 1. Ensure culture-environment fit 2. Avoid corporate cult strength 3. Create an adaptive culture 13-49 Organizational Culture Assimilation in the Southwest--AirTran Merger Organizational culture assimilation practices helped AirTran Airways employees understand and embrace the Southwest Airlines culture, known as the Southwest Way. Southwests success and its popular culture assisted this assimilation process.
13-50 Merging Cultures: Bicultural Audit Part of due diligence in merger Minimizes cultural collision by diagnosing companies Three steps in bicultural audit: 1. Identify cultural artifacts 2. Analyze data for cultural conflict/compatibility 3. Identify strategies and action plans to bridge cultures 13-51 Merging Organizational Cultures Assimilation
Deculturation Acquired company embraces acquiring firms cultural values Acquiring firm imposes its culture on unwilling acquired firm Integration Cultures combined into a new composite culture Separation Merging companies remain separate with their own culture 13-52 Changing/Strengthening
Organizational Culture 13-53 Changing/Strengthening Organizational Culture Actions of Founders/Leaders Org culture sometimes reflects the founders personality Transformational leaders can reshape culture -- organizational change practices Aligning Artifacts Artifacts keep culture in place e.g., create memorable events,
13-55 Attraction-SelectionAttrition Theory Organizations become more homogeneous (stronger culture) through: Attraction -- applicants self-select and weed out companies based on compatible values Selection -- applicants selected based on values congruent with organizations culture Attrition -- employees quit or are forced out when their values oppose company values 13-56 Lindblads Shipshape
Socialization As part of its socialization process, adventure cruise company Lindblad Expeditions shows applicants a video program with a realistic preview of what its like to work onboard. 13-57 Organizational Socialization Defined The process by which individuals learn the values, expected behaviors, and social knowledge necessary to assume their roles in the organization. 13-58 Socialization: Learning & Adjustment
Learning Process Newcomers make sense of the organizations physical, social, and strategic/cultural dynamics Adjustment Process Newcomers need to adapt to their new work environment - New work roles - New team norms - Newcomers with diverse experience adjust better 13-59 Stages of Socialization Pre-Employment Pre-Employment Stage
Stage Encounter Encounter Stage Stage Role Role Management Management Outsider Outsider Newcomer Newcomer Insider Insider
Gathering Gathering information information Testing Testing expectations expectations Changing Changing roles roles and and behavior behavior Forming Forming
psychological psychological contract contract Resolving Resolving conflicts conflicts 13-60 Improving Organizational Socialization Realistic job preview (RJP) A balance of positive and negative information about the job and work context
Socialization agents Supervisors technical information, performance feedback, job duties Co-workers ideal when accessible, role models, tolerant, and supportive 13-61
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