Organizational Behavior, 8e Schermerhorn, Hunt, and Osborn Prepared by Michael K. McCuddy Valparaiso University John Wiley & Sons, Inc.

Organizational Behavior: Chapter 11 COPYRIGHT Copyright 2003 © John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein. Organizational Behavior: Chapter 11

Chapter 11 Strategy and the Basic Attributes of Organizations Study questions. What is strategy? What types of contributions do organizations make, and what types of goals do they adopt? What is the formal structure of the organization, and what is meant by the term division of labor? Organizational Behavior: Chapter 11

Chapter 11 Strategy and the Basic Attributes of Organizations Study questions — cont. How is vertical specialization used to allocate formal authority within the organization? How does an organization control the actions of its members? What different patterns of horizontal specialization can be used within the organization? Organizational Behavior: Chapter 11

Chapter 11 Strategy and the Basic Attributes of Organizations Study questions — cont. Which personal and impersonal coordination techniques should the organization use? What are bureaucracies and what are the common types? Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What is strategy? 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. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What types of contributions do organizations make, and what types of goals do they adopt? Strategy, contributions, and goals. Establishing goals represent one of a firm’s most important choices. By selecting goals, executives begin to formulate strategy. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What types of contributions do organizations make, and what types of goals do they adopt? Societal contributions of organizations. Societal goals. An organization’s intended contributions to the broader society. Mission statements. Written statements of organizational purpose. Should capture the firm’s societal goals. Often the first visible outcome of developing a strategy. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What types of contributions do organizations make, and what types of goals do they adopt? Societal contributions of organizations — cont. By claiming to provide societal contributions, an organization can make legitimate claims over: Resources. Individuals. Markets. Products. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What types of contributions do organizations make, and what types of goals do they adopt? Societal contributions of organizations — cont. Organizations need to target their societal contributions toward a primary beneficiary. Secondary beneficiaries may be identified as well. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What types of contributions do organizations make, and what types of goals do they adopt? Output goals. Define the type of business the organization is in. Provide some substance to the more general aspects of mission statements. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What types of contributions do organizations make, and what types of goals do they adopt? 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. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What types of contributions do organizations make, and what types of goals do they adopt? Systems goals — cont. Reflect the short-term organizational characteristics that senior managers wish to promote. Different organizational units may be asked to pursue different systems goals. Help link together various organizational units to assure survival. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What is the formal structure of the organization, and what is meant by the term division of labor? 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. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What is the formal structure of the organization, and what is meant by the term division of labor? Organization charts. Diagrams that depict the formal structures of organizations. Typically shows the various positions, the position holders, and the lines of authority linking them together. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 How is vertical specialization used to allocate formal authority within the organization? 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. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 How is vertical specialization used to allocate formal authority within the organization? Chain of command. A listing of who reports to whom up and down the organization. Traditional management theory argues for unity of command — each person has only one boss and each unit one leader. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 How is vertical specialization used to allocate formal authority within the organization? Span of control. The number individuals reporting to a supervisor. Complex tasks require narrower spans of control. Narrow spans yield many organizational levels. New information technologies enable organizations to broaden spans of control, flatten organizations, and still maintain control. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 How is vertical specialization used to allocate formal authority within the organization? Line and staff units. Line units and personnel conduct the major business of the organization. Examples: production and marketing. Staff units and personnel assist the line units by providing specialized expertise and services. Examples: accounting and public relations. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 How is vertical specialization used to allocate formal authority within the organization? Distinctions between line and staff. The nature of the relationship of a unit in the chain of command. The amount and types of contacts line or staff maintains with organizational outsiders. Internal line units. External line units. Internal staff units. External staff units. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 How is vertical specialization used to allocate formal authority within the organization? Key decisions in configuring staff and information systems for implementation. Deciding whether to assign staff units to senior, middle, or lower level managers. Deciding whether to outsource some staff functions. Deciding whether and how to use information technology to streamline operations and reduce staff. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 How is vertical specialization used to allocate formal authority within the organization? The most appropriate pattern of vertical specialization depends on the organization’s: Environment. Size. Technology. Goals. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? The set of mechanisms used to keep actions or outputs within predetermined limits. Deals with: Setting standards. Measuring results against standards. Instituting corrective action. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Output controls. Focus on desired targets and allow managers to use their own methods to reach defined targets. Promote flexibility and creativity. Facilitate dialogue concerning corrective action. Separate what is to be accomplished from how it is accomplished. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? 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. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Policies, procedures, and rules. Policies. Guidelines for action that outline important objectives and broadly indicates 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. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Policies, procedures, and rules — cont. Rules. Describe in detail how a task or a series of tasks is to be performed, or they indicate what cannot be done. Policies, procedures, and rules are often used as substitutes for direct managerial supervision. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Formalization. The written documentation of policies, procedures, and rules to guide behavior and decision making. Substitutes for direct supervision. Used to simplify jobs. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Standardization. The degree to which the range of allowable actions in a job or series of jobs is limited. Establishes guidelines so that similar work activities are repeatedly performed in a similar fashion. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Total quality management controls. Draws on W. Edwards Deming’s approach to continual improvement based on statistical analyses of the firm’s operations. Deming’ approach is articulated through 14 points. All levels of management must be involved in the TQM program. Works well in conjunction with empowerment and participative management. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Centralization and decentralization. Centralization. Decision making responsibility is moved upward in the hierarchy of authority. Decentralization. Decision making responsibility is moved downward in the hierarchy of authority. Greater centralization is often used by firms facing a single major threat to its survival. Organizational Behavior: Chapter 11

How does an organization control the actions of its members? Centralization and decentralization — cont. 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 Participation is closely related to decentralization. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Horizontal specialization. A division of labor that establishes specific work units or groups within an organization. Often referred to as departmentation. Pure forms of departmentation. By function. By division. By matrix. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Functional departmentation. Grouping individuals by skill, knowledge, or action. The functional pattern dominates in many small firms. Large firms use the functional pattern in technically demanding areas. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Advantages of functional departmentation. Yields very clear task assignments, consistent with an individual’s training Individuals within a department can easily build on one another’s knowledge, training, and experience. Provides an excellent training ground for new managers. It is easy to explain. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Disadvantages of functional departmentation. May reinforce the narrow training of individuals. May yield narrow, boring, and routine jobs. Communication across technical areas is complex and difficult. “Top management overload” with too much attention to cross-functional problems. Individuals may look to the organizational hierarchy for direction and reinforcement rather than focusing attention on products, services or clients. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Divisional departmentation. Groups individuals and resources by products, territories, services, clients, or legal entities. Often used to meet diverse external threats and opportunities. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Advantages of divisional departmentation. Promotes adaptability and flexibility in meeting the demands of important external groups. Allows for spotting external changes as they emerge. Provides for the integration of specialized personnel. Focuses on the success or failure of particular products, services, clients, or territories. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Disadvantages of divisional departmentation. Does not provide a pool of highly trained individuals with similar expertise to solve problems and train others. Allows duplication of effort, as each division tries to solve similar problems. May give priority to divisional goods over the health and welfare of the entire organization. Creates conflict between divisions over shared resources. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Matrix departmentation. Uses functional and divisional forms simultaneously. Workers and supervisors in the middle of a matrix organization have two bosses — one functional and one divisional. Many firms use elements of a matrix structure without officially designating the organization as a matrix. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Advantages of matrix departmentation. Combines strengths of both functional and divisional departmentation. Blends technical and market emphases. Provides a series of managers able to converse with both technical and marketing personnel. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Disadvantages of matrix departmentation. Very expensive. Unity of command is lost. Authority and responsibilities of managers may overlap, causing conflicts and gaps in effort across units and inconsistencies in priorities. It is difficult to explain to employees. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 What different patterns of horizontal specialization can be used within the organization? Mixed forms of departmentation. Organizations often use a mixture of departmentation forms. Using a mixture of forms helps balance the advantages and disadvantages of each. Mixed forms are discussed in Chapter 12. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 Which personal and impersonal coordination techniques should the organization use? Coordination. The set of mechanisms that an organization uses to link the actions of its units into a consistent pattern. In small organizations, much of the coordination is handled by its manager(s). As the organization grows, more efficient and effective methods of coordination are required. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 Which personal and impersonal coordination techniques should the organization use? Personal methods of coordination. Produce synergy by promoting dialogue, discussion, innovation, creativity, and learning, both within and across units. Types of personal methods. Direct contact between and among organizational members. Assignment to committees to improve coordination across departments. Use of task forces. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 Which personal and impersonal coordination techniques should the organization use? 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. Organizational Behavior: Chapter 11

Organizational Behavior: Chapter 11 Which personal and impersonal coordination techniques should the organization use? Impersonal methods of coordination — cont. Matrix departmentation has the most highly developed form of impersonal coordination. Information technologies provide significant impersonal coordination potential. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? Max Weber’s view of bureaucracy. Emphasizes legal authority, logic, and order. Relies on: Division of labor. Hierarchical control. Promotion by merit with career opportunities for employees. Administration by rule. The ideal form of organization. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? Types of bureaucracies. The mechanistic type. The organic type. The hybrid type. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? Characteristics of the mechanistic type of bureaucracy (machine bureaucracy). Emphasizes vertical specialization and control Relies on rules, procedures, and policies. Has well-documented control systems backed by strong middle management and supported by a centralized staff. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? Characteristics of the mechanistic type — cont. Specifies techniques for decision making. Often uses functional departmentation. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? 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. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? Characteristics of the organic type of bureaucracy (professional bureaucracy). Horizontal specialization. Procedures are minimal, and those that do exist are not highly formalized. Relies on the judgments of experts and personal means of coordination. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? Characteristics of the organic type — cont. Controls back up professional socialization, training, and individual reinforcement. Staff units are placed toward the middle of the organization. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? Benefits of the organic type. Good for problem solving and serving individual customer needs. Good at detecting external changes and adjusting to new technologies. Limitations of the organic type. Less efficient than mechanistic type. Sacrifices ability to respond to central management direction. Organizational Behavior: Chapter 11

What are bureaucracies and what are the common types? The hybrid type of bureaucracy. Many very large firms have found that neither the mechanistic type nor the organic type was suitable for all their operations, and therefore have adopted a hybrid type. Two hybrid types. Extension of divisionalized pattern with different divisions being more or less organic or mechanistic. Conglomerate. Organizational Behavior: Chapter 11