Chapter 7: Organizational Structure and Change Learning Objectives  Define organizational structure and its basic elements  Describe matrix, boundaryless, and learning organizations  Describe why and how organizations change  Understand reasons why people resist change, and strategies for planning and executing change effectively  Develop your own strategy to promote change.

Organizing in the P-O-L-C-Framework

Building Blocks of Structure CentralizationFormalization Hierarchical LevelsDepartmentalization Organizational Structure

Establishing Balance Centralized Can lead to inefficiencies in decision making in an uncertain or highly competitive market In a stable environment, can lead to more efficient operations Decentralized Decisions can be made more quickly Can provide greater levels of procedural fairness to employees

Caterpillar Once decision making became more decentralized, Caterpillar was better equipped to compete at the global level

Formalization is the extent to which an organization’s policies, procedures, job descriptions, and rules are written and explicitly articulated Written Rules Explicit Regulations Formalization

Hierarchical Levels Several layers of management between frontline employees and the top level Fewer employees report to each manager Greater opportunities for managers to supervise and monitor employee activities Tall Few management layers Larger number of employees reporting to each manager Can lead to greater levels of freedom for each employee Flat

Departmentalization Organizations using functional structures group jobs based on similarity in functions – Marketing – Manufacturing – Finance – Accounting – Human Resources – Information Technology In organizations using divisional structures, departments represent the unique products, services, customers, or geographic locations the company is serving – Each unique product or service the company is producing will have its own department

Functional/Divisional Departmentalization

Departmentalization options

Contemporary Forms of Organizational Structures Matrix Organizations balance a traditional functional structure with a product structure Boundaryless Organizations eliminate traditional barriers between departments and the external environment Learning Organizations actively seeks to acquire knowledge and change behavior as a result of the newly acquired knowledge

In a Matrix Structure each person reports to a department manager as well as a project or product manager

Nike successfully utilizes the matrix organization Provides quick responses to technical problems and customer demands Increases the frequency of informal and formal communication within the organization May increase communication and cooperation among departments Structures are created in response to uncertainty and dynamism of the environment Advantages of Matrix

Disadvantages of the Matrix Organization Can create role ambiguity and role conflict Potential for interpersonal conflict with team members as well as with leaders More effort is required to coordinate work flow Two managers per individual can result in power struggles

Boundaryless Organizations Modular Organization – where all nonessential functions are outsourced Toyota manages relationships with hundreds of suppliers Strategic Alliances - two or more companies combine their efforts to create a partnership that is beneficial for both parties Starbucks achieved distribution success of Frappuccino by partnering with Pepsi

Learning Organizations Experimenting Learning new things Reflecting on new knowledge

Forms of Organizational Change company structure strategy policiesprocedures technology culture

The Impact of Technology Moore’s law dictates that the overall complexity of computers will double every 18 months with no increase in cost Such change is motivating corporations to change their technology rapidly

Growth Drives Change Owned and granted permission by Widmer Brothers Brewing Co.

Resistance to change takes many forms

Resistance prohibited the Dvorak keyboard from becoming the norm

Why people resist change Disrupted Habits Personality Feelings of Uncertainty Fear of Failure Personal Impact of Change Prevalence of Change Perceived Loss of Power

Fear of failure! Fear of failure is a common reason employees resist change

Lewin’s Three-Step Model of Planned Change

What can organizations do before change occurs to prepare employees? Communicate a Plan for ChangeDevelop a Sense of UrgencyBuild a CoalitionProvide SupportAllow Employees to Participate

Executing and Facilitating Change Continue to provide support Create small wins Eliminate obstacles

Refreezing and Making Change Part of the Culture Reward change adoption Publicly recognize those who are giving support to the change effort Publicize success Share concrete results with employees

Your Professional Strategy for Promoting Change Listen for clues from naysayers Propose the change by reinforcing the benefit Seek and retain involvement Acquire trust and expert power Be prepared to defend and provide evidence Appeal your proposal to the audience’s ideals Understand and respect the reasons for resistance