Week 7 Dr Jenne Meyer 1 Article Analysis 2 Designing Organizational Structures McGrawHillIrwin Copyright 2013 by The McGrawHill Companies Inc All rights reserved Merritts Bakerys Evolving Organizational Structure ID: 701058
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BUS7000 Organizational Behavior &Theory
Week 7Dr Jenne Meyer
1Slide2
Article Analysis
2Slide3
Designing Organizational Structures
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.Slide4
Merritt’s Bakery’s Evolving Organizational Structure
Merritt’s Bakery has grown over the years, and throughout this growth the Tulsa, Oklahoma, company has adapted its organizational structure.Slide5
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)Slide6
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 complexSlide7
Coordinating Work Activities
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 engineeringSlide8
Coordinating Work Activities
Formal hierarchy
Direct supervision
Assigns legitimate power to manage others
Necessary in most firms, but has problems
Standardization
Standardized processes (e.g., job descriptions)
Standardized outputs (e.g., sales targets)
Standardized skills (e.g., training)Slide9
Elements of
Organization
al
Structure
Span of Control
Centralization
Department-alization
Formalization
Elements of Organizational StructureSlide10
KenGen’s Flatter Structure
KenGen, Kenya’s 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.
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10Slide11
Span of Control
Number of people directly reporting to the next level
Related to coordination through direct supervision
Wider span of control possible when:
Other coordinating mechanisms are present
Routine tasks
Low employee interdependence
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11Slide12
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
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12Slide13
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
Example: sales decentralized; info systems centralized
Upper Mgt
Middle Mgt
Front line
Supervisory
Upper Mgt
Middle Mgt
Front line
Supervisory
Upper Mgt
Middle Mgt
Front line
Supervisory
Production
Sales
Information
Systems
= locus of decision making authoritySlide14
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 stressSlide15
TAXI’s Organic Structure
TAXI, Canada’s 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).Slide16
Mechanistic vs. Organic Structures
Mechanistic Structure
Narrow span of control
High formalization
High centralization
Organic Structure
Wide span of control
Low formalization
Decentralized decisionsSlide17
Effects of
Departmentalization
Specifies how employees and their activities are grouped together
Three functions:
Establishes
chain of
command
Creates common mental models, measures of performance, etc
Encourages staff to coordinate through informal communicationSlide18
Organizes
employees around specific knowledge or other resources (e.g., marketing, production)
CEO
Finance
Production
Marketing
Functional Organizational StructureSlide19
Evaluating Functional Structures
BenefitsEconomies 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 controlsSlide20
Organizes employees around outputs,
clients, or geographic areas
Divisional Structure
CEO
Healthcare
Lighting
Products
Consumer
LifestyleSlide21
Divisional Structure
Different forms of divisional structureGeographic structure
Product structure
Client structure
Best form depends on environmental diversity or uncertaintySlide22
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
Firm’s “home” country is no longer focus of businessSlide23
Evaluating Divisional Structures
BenefitsBuilding 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 executivesSlide24
Team-Based Structure
Self-directed work teams
Teams organized around work processes
Typically organic structure
Usually found within divisionalized structure
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24Slide25
Evaluating Team-Based Structures
BenefitsResponsive, 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 resourcesSlide26
Audio Dept
Leader
Software
Dept Leader
Art Dept
Leader
Game1
Project Leader
Game2
Project Leader
Game3
Project Leader
Matrix Structure (Project-based)
CEO
Employees ( ) are temporarily assigned to a specific
project team and have a permanent functional unitSlide27
Evaluating Matrix Structures
Benefits
Uses resources and expertise effectively
Improves communication, flexibility, innovation
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 stressSlide28
Core
Firm
(USA)
Product
development partner
(France)
Call
center
partner
(Philippines)
Accounting partner
(USA)
Package design partner
(UK)
Assembly partner
(China)
Network Organizational Structure
Alliance of firms creating a product or service
Supporting firms beehived around a “hub” or “core” firmSlide29
Evaluating Network Structures
BenefitsHighly 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-houseSlide30
External Environment & Structure
Dynamic
•
High rate of change
• Use team-based, network, or other organic structure
Stable
•
Steady conditions, predictable change
• Use mechanistic structure
Complex
•
Many elements (such as stakeholders)
• Decentralize
Simple
•
Few environmental elements
• Less need to decentralizeSlide31
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
External Environment & Structure (con’t)Slide32
Effects of Organizational Size
As organizations grow, they have:
More division of labor (job specialization)
Greater use of standardization
More hierarchy and formalization
More decentralizationSlide33
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 workSlide34
Organizational Strategy
Structure follows strategyStrategy 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 pricingSlide35
Organizational Culture
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.Slide36
Facebook’s 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 Facebook’s operations in Austin, Texas. Slide37
Organizational Culture Defined
The basic pattern of shared values and assumptions shared within the organization.
Defines what is important and unimportant.
Company’s DNA—invisible, yet powerful template that shapes employee behaviorSlide38
Elements of
Organizational Culture
Organizational culture
Artifacts of organizational culture
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38Slide39
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 organization’s culture is fuzzy:
Diverse subcultures (“fragmentation”)
Values exist within individuals, not work unitsSlide40
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: O’Reilly et al (1991)Slide41
Organizational Subcultures
Dominant culture -- most widely shared values and assumptions
Subcultures
Located throughout the organization
Can enhance or oppose (countercultures) firm’s dominant culture
Two functions of countercultures:
provide surveillance and critique, ethics
source of emerging valuesSlide42
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 prescriptiveSlide43
Artifacts of Organizational Culture
Observable symbols and signs of culture
Physical structures, ceremonies, language, stories
Maintain and transmit organization’s culture
Need many artifacts to accurately decipher a company’s cultureSlide44
Artifacts: Rituals and Ceremonies
Ritualsprogrammed routines
(e.g.., how visitors are greeted)
Ceremonies
planned activities for an audience
(e.g.., award ceremonies)Slide45
Artifacts: Organizational Language
Words used to address people, describe customers, etc.
Leaders use phrases and special vocabulary as cultural symbols
Language also found in subculturesSlide46
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.Slide47
Organizational Culture Strength
How widely and deeply employees hold the company’s dominant values and assumptionsStrong 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 founderSlide48
Functions of Strong Corporate Cultures
Functions of
Strong Cultures
Control system
Social glue
Sense-making
Organizational
Outcomes
Org performance
Employee well-being
Culture strength advantages depend on:
Environment fit
Not cult-like
Adaptive cultureSlide49
Contingencies of Organizational Culture & Performance
Organizational culture strength moderately predicts organizational performance
Need to consider contingencies:
Ensure culture-environment fit
Avoid corporate “cult” strength
Create an adaptive cultureSlide50
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.” Southwest’s success and its popular culture assisted this assimilation process.Slide51
Merging Cultures: Bicultural Audit
Part of due diligence in merger
Minimizes cultural collision by diagnosing companies
Three steps in bicultural audit:
Identify cultural artifacts
Analyze data for cultural conflict/compatibility
Identify strategies and action plans to bridge culturesSlide52
Merging Organizational Cultures
Assimilation
Deculturation
Acquired company embraces acquiring firm’s 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 cultureSlide53
Changing/Strengthening Organizational CultureSlide54
Changing/Strengthening Organizational Culture
Actions of Founders/Leaders
Org culture sometimes reflects the founder’s personality
Transformational leaders can reshape culture -- organizational change practices
Aligning Artifacts
Artifacts keep culture in place
e.g., create memorable events, communicating stories, transferring
culture carriersSlide55
Changing/Strengthening Organizational Culture
Introducing Culturally Consistent Rewards
Rewards are powerful artifacts – reinforce culturally-consistent behavior
Attracting, Selecting, Socializing Employees
Attraction-selection-attrition theory
Socialization practicesSlide56
Attraction-Selection-Attrition 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 organization’s culture
Attrition -- employees quit or are forced out when their values oppose company valuesSlide57
Lindblad’s Shipshape Socialization
As part of its socialization process, adventure cruise company Lindblad Expeditions shows applicants a video program with a realistic preview of what it’s like to work onboard.Slide58
Organizational Socialization Defined
The process by which individuals learn the values, expected behaviors, and social knowledge necessary to assume their roles in the organization.Slide59
Socialization: Learning & Adjustment
Learning Process
Newcomers make sense of the organization’s 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 betterSlide60
Stages of Socialization
Role Management
Insider
Changing roles and behavior
Resolving conflicts
Encounter
Stage
Newcomer
Testing
expectations
Pre-Employment
Stage
Outsider
Gathering information
Forming psychological contractSlide61
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