Managing Organizational Structure and Culture chapter ten

Learning Objectives Identify the factors that influence managers’ choice of an organizational structure. Explain how managers group tasks into jobs that are motivating and satisfying for employees. Describe the types of organizational structures managers can design, and explain why they choose one structure over another. Explain why managers must coordinate jobs, functions, and divisions using the hierarchy of authority and integrating mechanisms List the four sources of organizational culture, and explain why and how a company’s culture can lead to competitive advantage.

Organizational Structure Organizational Architecture The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used. 3

Designing Organizational Structure Organizing The process by which managers establish working relationships among employees to achieve goals. Organizational design The process by which managers create a specific type of organizational structure and culture so that a company can operate in the most efficient and effective way 4

Designing Organizational Structure formal system of task and reporting relationships that coordinates and motivates organizational members so they work together to achieve organizational goals.

Factors Affecting Organizational Structure The Organizational Environment The quicker the environment changes, the more problems face managers. Structure must be more flexible (i.e., decentralized authority) when environmental change is rapid. Strategy Different strategies require the use of different structures. A differentiation strategy needs a flexible structure, low cost may need a more formal structure. Increased vertical integration or diversification also requires a more flexible structure. Technology The combination of skills, knowledge, tools, equipment, computers and machines used in the organization. More complex technology makes it harder for managers to regulate the organization. Technology can be measured by: Task variety: the number of new problems a manager encounters. Task analyzability: the availability of programmed solutions to a manager to solve problems. Human Resources Highly skilled workers whose jobs require working in teams usually need a more flexible structure. Higher skilled workers (e.g., CPA’s and doctors) often have internalized professional norms and values. Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization. Figure 10.1 6

Designing Organizational Structure Organizational design The process by which managers create a specific type of organizational structure and culture so that a company can operate in the most efficient and effective way

Designing Organizational Structure The way an organization’s structure works depends on the choices managers make about: How to group tasks into individual jobs How to group jobs into functions and divisions How to allocate authority and coordinate functions and divisions

Grouping Tasks into Jobs: Job Design The process by which managers decide how to divide tasks into specific jobs. The appropriate division of labor results in an effective and efficient workforce. 9

Job Design Job Simplification Job Enlargement Job Enrichment The process of reducing the tasks each worker performs. Job Enlargement Increasing the number of different tasks in a given job by changing the division of labor Job Enrichment Increasing the degree of responsibility a worker has over a job Job Simplification The process of reducing the tasks each worker performs. Too much simplification and boredom results. 10

Job Enrichment Empowering workers to experiment to find new or better ways of doing the job Encouraging workers to develop new skills Allowing workers to decide how to do the work Allowing workers to monitor and measure their own performance

The Job Characteristics Model Skill variety Employee uses a wide range of skills. Task identity Worker is involved in all tasks of the job from beginning to end of the production process Task significance Worker feels the task is meaningful to organization. Autonomy Employee has freedom to schedule tasks and carry them out. Feedback Worker gets direct information about how well the job is done. Figure 10.2 12

Grouping Jobs into Functions Functional Structure An organizational structure composed of all the departments that an organization requires to produce its goods or services. Function - Group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs 13

Functional Structure Advantages Encourages learning from others doing similar jobs. Easy for managers to monitor and evaluate workers. Allows managers to create the set of functions they need in order to scan and monitor the competitive environment

Example – A.C. Moore Arts & Crafts A.C. Moore is organized with a functional structure Examples of divisions are Marketing & Merchandising, Stores & Loss Prevention, Store Operations, Merchandise Administration, Real Estate, and Legal http://www.theofficialboard.com/org-chart/a.c.-moore-arts-crafts 15

Functional Structure Disadvantages Difficult for departments to communicate with others. Preoccupation with own department and losing sight of organizational goals.

Divisional Structures An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer. Product, market, geographic 17

Product, Market, and Geographic Structures Figure 10.4

Types of Divisional Structures Product Structure Managers place each distinct product line or business in its own self-contained division Divisional managers have the responsibility for devising an appropriate business-level strategy to allow the division to compete effectively in its industry Product structure Allows functional managers to specialize in one product area Division managers become experts in their area Removes need for direct supervision of division by corporate managers Divisional management improves the use of resources Global Product Structure Each product division takes responsibility for deciding where to manufacture its products and how to market them in foreign countries worldwide 19

Product Structure Allows functional managers to specialize in one product area Division managers become experts in their area Removes need for direct supervision of division by corporate managers Divisional management improves the use of resources

Types of Divisional Structures Geographic Structure Divisions are broken down by geographic location Global geographic structure Managers locate different divisions in each of the world regions where the organization operates. Generally, occurs when managers are pursuing a multi-domestic strategy 21

Types of Divisional Structures Market Structure Groups divisions according to the particular kinds of customers they serve Allows managers to be responsive to the needs of their customers and act flexibly in making decisions in response to customers’ changing needs 22

Matrix Design Structure Matrix Structure An organizational structure that simultaneously groups people and resources by function and product. The structure is very flexible and can respond rapidly to the need for change. Each employee has two bosses Matrix Structure An organizational structure that simultaneously groups people and resources by function and product. Results in a complex network of superior-subordinate reporting relationships. The structure is very flexible and can respond rapidly to the need for change. Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both. 23

Matrix Structure Figure 10.6

Product Team Design Structure Product Team Structure Does away with dual reporting relationships and two-boss managers Functional employees are permanently assigned to a cross-functional team that is empowered to bring a new or redesigned product to work Product Team Structure Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks. 25

Product Team Structure Cross-functional team A group of managers brought together from different departments to perform organizational tasks.

Product Team Structure Figure 10.6

Allocating Authority Authority power to hold people accountable for their actions and to make decisions concerning the use of organizational resources. Hierarchy of Authority An organization’s chain of command, specifying the relative authority of each manager. Span of Control: the number of subordinates who report directly to a manager 28

Allocating Authority Line Manager Staff Manager Someone in the direct line or chain of command who has formal authority over people and resources Staff Manager Managers who are functional-area specialists that give advice to line managers. Minimum Chain of Command Top managers should always construct a hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources 29

Tall and Flat Organizations Tall structures have many levels of authority and narrow spans of control. As hierarchy levels increase, communication gets difficult creating delays in the time being taken to implement decisions. Communications can also become distorted as it is repeated through the firm. Can become expensive 30

Tall Organizations Figure 10.9

Tall and Flat Organizations Flat structures have fewer levels and wide spans of control. Structure results in quick communications but can lead to overworked managers. Figure 10.9

Centralization and Decentralization of Authority Decentralizing authority giving lower-level managers and non-managerial employees the right to make important decisions about how to use organizational resources Disadvantages Teams may begin to pursue their own goals at the expense of organizational goals Can result in a lack of communication among divisions 33

Integrating Mechanisms Organizing tools that managers can use to increase communication and coordination among functions and divisions. Figure 10.10

Sources of an Organization’s Culture Organizational culture shared set of beliefs, expectations, values, and norms that influence how members of an organization relate to one another and cooperate to achieve organizational goals Ultimate source of organizational culture is the people that make up the organization Members become similar over time which may hinder their ability to adapt and respond to changes in the environment Organizational Ethics moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and people outside the organization Figure 10.11 35

Employment Relationship Human resource policies: Can influence how hard employees will work to achieve the organization’s goals, How attached they will be to it Whether or not they will buy into its values and norms

Organizational Structure In a centralized organization: people have little autonomy norms that focus on being cautious, obeying authority, and respecting traditions emerge predictability and stability are desired goals

Organizational Structure In a flat, decentralized structure: people have more freedom to choose and control their own activities norms that focus on being creative and courageous and taking risks appear gives rise to a culture in which innovation and flexibility are desired goals.

Strong, Adaptive Cultures Versus Weak, Inert Cultures values and norms help an organization to build momentum and to grow and change as needed to achieve its goals and be effective Inert cultures Those that lead to values and norms that fail to motivate or inspire employees Lead to stagnation and often failure over time

Video Case: Making Changes in New Orleans’ Most Troubled Schools How would you rate teaching according to the five characteristics that determine how motivating a job is? Does establishing organizational culture in a school present any different challenges than establishing culture in other types of organizations? Making Changes in New Orleans’ Most Troubled Schools   Teaching Objective: To look at job motivation, organizational structure, and culture at a special type of organization, the public school Summary: New Orleans public schools had a history of subpar performance when they were devastated by the hurricane and its aftermath. The destruction of the city’s educational infrastructure brought a chance for rebuilding. Superintendent Paul Vallas is trying to seize that chance with ambitious plans for the district’s high schools. To build a culture of excellence, plans include changes in leadership, personnel performance evaluations, a longer school day, increased discipline, rigorous academic standards, and even specialty schools for at-risk students. Questions: How would you rate teaching according to the five characteristics that determine how motivating a job is? What does the Rabouin High School situation show about the effect those in authority have on motivation and morale? Teaching would rate high in all five characteristics: skill variety, task identity, task significance, autonomy, and feedback. A principal who does not enforce rules or policies, support teachers, and solve problems like scheduling of classes has devastating effects on teacher morale. As the first-year science teacher at Rabouin High School says, teachers there suffered for months. It was a refreshing change and a moral boost when the new principal proved that she meant what she said. What types of organizational structures does the New Orleans Recovery School District illustrate? How do these structures impact the schools? Like most school districts, the Recovery School District uses geographic structure and market structure. Besides old problems of poor performance and inefficient management, the schools face unique, severe problems because of their location—an area devastated by the hurricane and subsequent flooding. Establishing Booker T. Washington as a school serving only “over-age, underachieving” students is an example of market structure. That population presents many instructional and disciplinary challenges. Does establishing organizational culture in a school present any different challenges than establishing culture in other types of organizations? Besides management, faculty, and other staff members, schools have an additional group to share in the organizational culture—students. Unlike customers or clients of other organizations, students directly affect a high school’s culture, since their performance--measured in tests, graduation rates, and extracurricular activities—is used to measure teacher and administration performance. 40