2. The Structure and Culture of a Business Organization
Chapter Eight
The Structure and Culture of a Business Organization
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McGraw-Hill/Irwin
Introduction to Business

3. Learning Objectives
Discuss why organizational structure and culture are important determinants of a company’s ability to pursue a profitable business model.
Identify the relationship between organizational design, structure, culture and the environment.
Identify the main types of organizational structure companies can choose from to group their activities, employees and resources.

4. Learning Objectives
Explain why the need to coordinate functions and divisions is an important element in organizational design and list the main methods companies use to coordinate their activities.
Identify the nature and sources of organizational culture and understand the way it influences and shapes employee behavior and attitudes.

5. Structure, Culture, and the Organization’s Business Model
Organizational structure
the framework of task-and-authority relationships in a company that coordinates and motivates employees to work together toward a common goal

6. Structure, Culture, and the Organization’s Business Model
Organizational culture
the set of shared company values and norms that shape the way employees and groups interact with one another

7. Structure, Culture, and the Organization’s Business Model
Organizational design
the process of creating an organizational structure and culture so that a company can pursue its business model profitably

8. The Contingency Approach to Organizational Design
a type of organizational design that depends on the changing forces in a firm’s competitive environment

9. Implementing a Profitable Business Model through Organizational Structure and Culture
Figure 8.1

10. Question?
What structure groups people together because of their expertise?
Functional
Divisional
Procedural
Geographic
The correct answer is “A” – functional. See next slide.

11. Functional Structures
a structure that groups people together because of their expertise or the type of activity they do (typically into departments)

12. Grouping Activities by Function
Figure 8.2

13. Chantal Cookware’s Functional Structure
Figure 8.3

14. Advantages of a Functional Structure
Coordination advantages
Motivational advantages

15. Disadvantages of a Functional Structure
When the range of goods and services a company makes increases
As companies attract customers with different needs
As companies expand nationally and globally

16. Divisional Structures: Product, Market, and Geographic
a structure that groups employees by function but allows them to focus their activities on a particular product line or type of customer

17. Divisional Structures: Product, Market, and Geographic
Product structure
a structure that groups functions into divisions that specialize in certain products
Market structure
a structure that groups functions into divisions that serve different types of customers

18. Dell’s Market Structure
Figure 8.5

19. Divisional Structures: Product, Market, and Geographic
Geographic structure
a structure in which divisions are created to serve the needs of customers in a particular region, country, or world area

20. Geographic Structure
Figure 8.6

21. Advantages of a Divisional Structure
Coordination advantages
Motivational advantages

22. Disadvantages of a Divisional Structure
Operating costs are much higher
Having more managers can result in communications problems, slower decision making, and lower performance

23. Question?
Which structure groups people and resources in two ways simultaneously?
Product
Process
Matrix
Environmental
The correct answer is “C” – matrix. See next slide.

24. Matrix Structure Matrix Structure
a structure that groups people and resources in two ways simultaneously: by function and by product

25. Matrix Structure
Figure 8.7

26. Matrix Coordination Advantages
The company can develop new products more rapidly
It can maximize communication and cooperation between team members
Innovation and creativity are the key to the company’s competitive advantage

27. Disadvantages of a Matrix Structure
Dual reporting relationships
Bosses come into conflict over precisely who is in charge of which team members and for how long
Employees feel the lack of a stable “home base”

28. Coordinating Functions and Divisions
Allocating authority
Specifying work rules
Using formal integrating mechanisms

29. Allocating Authority Tall and flat hierarchies
Minimum chain of command
Centralization and decentralization of authority

30. Tall and Flat Structures
Figure 8.8

31. Problems in Companies with Too Many Levels in the Hierarchy
Figure 8.9

32. Allocating Authority Minimum chain-of-command principle
the principle that a company’s structure should be designed with as few managerial levels as possible

33. Work Rules and Standard Operating Procedures
Management by exception
the use of rules and standard operating procedures to coordinate operations whereby managers only intervene to take corrective action

34. Integrating Mechanisms
organizing tools that managers use to increase communication and coordination among a company’s functions and divisions

35. Integrating Mechanisms
Direct contact
Liaison roles
Task forces
Cross-functional teams

36. Four Kinds of Integrating Mechanisms
Figure 8.10

37. Sony’s Cross-Functional Product Teams
Figure 8.11

38. Values and Norms Company values Company norms
the shared standards a company’s members use to evaluate whether or not they have helped the company achieve its goals
Company norms
beliefs, attitudes, and behaviors that specify how a company’s members should behave

39. Sources of a Company’s Culture
Values of the founder
Organizational socialization
Ceremonies and rites
Stories and language
Read about one company’s shared values

40. Sources of a Company’s Culture
Figure 8.12

41. Organizational Socialization
the process by which newcomers learn and absorb a company’s values and norms and acquire the work behaviors and attitudes necessary to perform their jobs effectively

42. Characteristics of a Strong Culture
Cohesive sets of values and norms that work together to motivate employees
Companies communicate with employees their desire to invest in them
Rewards are directly linked to an employee’s performance and to the performance of the company as a whole

43. Video: NBB
NBB is a high tech, environmentally conscious brewery that produces a world class beer. The corporate culture of NBB is strong and pervasive.
What are the sources of a company’s corporate culture? Is this true at NBB?
Discussion Questions:
Why is corporate culture an important element in understanding businesses?
Answer: As you can see from the success of New Belgium Brewery, strong, ethically driven corporate cultures built on employee participation, satisfaction, and relationships, is truly empowering. Modern employees look fore many other intangible rewards from their jobs. NBB core values and beliefs define its culture. Its organizational structure supports that culture. Its HR practices, the attitudes of the owners, and employee empowerment have demonstrated a direct and measurable impact on productivity, cost reduction, and profitability.
What is the key difference between a company’s values and its norms?
Answer: A company’s “values” are the shared standards which its members use to evaluate their contributions in achieving the company’s vision and goals. Company norms specify the kinds of shared beliefs, attitudes, and behaviors that its members should observe and follow. Norms are informal. In NBB, both values and norms are significant features of its corporate culture.
What are the sources of a company’s corporate culture? Is this true at NBB?
Answer: The following are the sources of a company’s culture (1) values of the founder; (2) ceremonies and rites; (3) organizational socialization; (4) stories and language. At NBB, there is clear evidence of all four of these factors operating. You may ask students to identify examples for each of the four sources.