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MNGT 5590 Organizational Behavior Week 8: Chapters 13, 14, 15 Dr
MNGT 5590 Organizational Behavior Week 8: Chapters 13, 14, 15 Dr. George Reid
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Chapter 13: Designing Organizational Structures
Chapter 14: Organizational Culture Chapter 15: Leadership
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Designing Organizational Structures
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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Valve Corporation’s Organizational Structure
Valve Corporation has a flat, organic organizational structure to leverage the creative and entrepreneurial potential of its 300 employees
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Organizational Structure Defined
Division of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities Relates to many OB topics (job design, teams, power)
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Division of Labor and Coordination
Results in specialization, separate jobs for different people Improves work efficiency Coordination of work Value of division of labor is limited to ability to coordinate that work Coordinating work can be costly Three coordinating mechanisms informal communication formal hierarchy standardization
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Coordination Through Informal Communication
Informal communication coordinates work in all firms Vital in nonroutine and ambiguous situations Easiest in small firms, but technology extends its use in large firms Larger firms also apply informal communication through Liaison roles Integrator roles Temporary teams
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Other Coordinating Mechanisms
Formal hierarchy Direct supervision Assigns legitimate power to manage others Necessary in most firms, but has problems Standardization – create routine behavior/output Standardized processes (e.g., job descriptions) Standardized outputs (e.g., sales targets) Standardized skills (e.g., training)
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Elements of Organizational Structure
Department-alization Span of Control Elements of Organizational Structure Formalization Centralization
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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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Span of Control Number of people directly reporting to the next level
Wider span of control possible when: Other coordinating mechanisms are present Routine tasks Low employee interdependence
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Tall vs Flat Structures
As companies grow, they: Build a taller hierarchy Widen span, or both Problems with tall hierarchies Poorer upward information Overhead costs Focus power around managers, so staff feel less empowered
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Centralization/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 Information Systems Production Sales Upper Mgt Middle Mgt Front line Supervisory Upper Mgt Upper Mgt Middle Mgt Middle Mgt Supervisory Supervisory Front line Front line = locus of decision making authority
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Formalization Standardizing behavior through rules, procedures, training, etc Increases as firms get older, larger, regulated Problems with formalization Less organizational flexibility Discourages organizational learning/creativity Less work efficiency Increases job dissatisfaction and work stress Rules/procedures become focus of attention
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Mechanistic vs. Organic Structures
Mechanistic Structure Narrow span of control High centralization High formalization Organic Structure Wide span of control Decentralized decisions Low formalization
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Functional Organizational Structure
Organizes employees around specific knowledge or other resources (e.g., marketing, production) CEO Finance Production Marketing
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Evaluating Functional Structures
Benefits Economies of scale Supports professional identity and career paths Easier supervision Limitations Emphasizes subunit more than organizational goals Higher dysfunctional conflict Poorer coordination – requires more controls
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Divisional Structure Organizes employees around outputs, clients, or geographic areas CEO Healthcare Lighting Products Consumer Lifestyle
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Divisional Structure Best type of divisional structure depends on environmental diversity or uncertainty Geographic structures becoming less common because: Less need for local representation Reduced geographic variation More global clients
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Evaluating Divisional Structures
Benefits Building block structure – accommodates growth Focuses on markets/products/clients Limitations Duplication, inefficient use of resources Silos of knowledge – expertise isolated across divisions Executive power affected by shifting divisional structure – common with complex environment
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Team-Based Structure Self-directed work teams organized around work processes Typically organic structure Usually found within divisionalized structure
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Evaluating Team-Based Structures
Benefits Responsive, flexible Lower admin costs Quicker, more informed decisions Limitations Interpersonal training costs Slower coordination during team development Role ambiguity increases stress Team leader issues – less power, ambiguous roles/career Duplication of resources
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ABB’s* Geographic-Product Matrix Structure
Regional Groups Product Groups North America South America Europe Middle East, Africa/ India Asia Pacific Power Products Power Systems Discrete Automation and Motion Low Voltage Products Process Automation *Simplification of ABB’s actual structure Product leader in that region
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Project-based Matrix Structure
Employees ( ) are temporarily assigned to a specific project team and have a permanent functional unit CEO Game1 Project Leader Game2 Game3 Audio Dept Leader Software Dept Leader Art Dept Leader
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Evaluating Matrix Structures
Benefits Uses resources and expertise effectively Potentially better communication, flexibility, innovation Focuses specialists on clients and products Supports knowledge sharing within specialty Solution when two divisions have equal importance Limitations More conflict among managers who share power Two bosses dilutes accountability More conflict, organizational politics, and stress
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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 decentralize
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Effects of Organizational Size
As organizations grow, they: Increase division of labor (job specialization) Increase standardization and formal hierarchy as coordinating mechanisms Become more decentralized
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Organizational Strategy
Structure follows strategy Strategy 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 pricing
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Designing Organizational Structures
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Organizational Culture
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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Zappos’ Organizational Culture
Zappos, the world’s largest online shoe retailer, relies on recruitment, selection, socialization, and other practices to maintain a strong organizational culture
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Organizational Culture Defined
The values/assumptions shared within an organization Defines what is important Provides direction toward the “right way” of doing things Company’s DNA – invisible to the eye, yet a powerful template that shapes employee behavior
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Elements of Organizational Culture
Artifacts of organizational culture Elements of Organizational Culture Organizational culture 14-33
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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 units
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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)
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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 values
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Cultural Artifacts at Goldman Sachs
The language of Goldman Sachs employees may be artifacts of underlying cultural values. “Elephant trades” and “muppet” clients suggest that the investment firm values profitability and individual performance more than customer service.
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Organizational Culture Artifacts
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 culture
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Artifacts: Stories and Legends
Social prescriptions of desired (or dysfunctional) behavior Realistic human side to expectations Most effective stories and legends: Describe real people Assumed to be true Known throughout the organization Are prescriptive
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Artifacts: Rituals, Ceremonies, Language
programmed routines (e.g., how visitors are greeted) Ceremonies Planned activities for an audience e.g., award ceremonies Language How employees address each other and outsiders, express emotions, describe stakeholders, etc. Leaders use language to anchor or change culture Language also differentiates subcultures
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Artifacts: Physical Structures/Symbols
Building structure – may shape and reflect culture Office design conveys cultural meaning Furniture, office size, wall hangings, art deco
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Organizational Culture Strength
How widely and deeply employees hold the company’s dominant values and assumptions Most employees understand/embrace the culture Institutionalized through artifacts Long-lasting – possibly back to founder(s) Three functions of strong cultures : Control system Social glue Sense-making
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Organizational Culture and Effectiveness
Culture strength advantages depend on: Environment fit Moderate strength Adaptive culture Functions of Strong Cultures Control system Social glue Sense-making Organizational Outcomes Org performance Employee well-being
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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 cultures
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Merging Organizational Cultures
Assimilation Acquired company embraces acquiring firm’s cultural values Deculturation 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 culture
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Changing/Strengthening Organizational Culture
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Changing/Strengthening Organizational Culture
Actions of founders/leaders Founder’s values/personality Transformational leaders can reshape culture – organizational change practices Aligning artifacts Artifacts keep culture in place
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Changing/Strengthening Organizational Culture
Introducing culturally consistent rewards Rewards are powerful artifacts Support workforce stability and communication High turnover weakens org culture Strong culture depends on frequent, open communication Attracting, selecting, and socialization of employees Attraction-selection-attrition theory Socialization practices
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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 values
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Organizational Socialization
The process by which individuals learn the values, expected behaviors, and social knowledge necessary to assume their roles in the organization Learning Process Newcomers make sense of the organization’s physical, social, and strategic/cultural dynamics Adjustment Process Newcomers adapt to new work roles, team norms, etc.
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Stages of Socialization
Pre-Employment Stage Outsider Gathering information Forming psychological contract Encounter Stage Newcomer Testing expectations Role Management Insider Changing roles and behavior Resolving conflicts
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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
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Organizational Culture
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Organizational Change
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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Organizational Change at LG Group
LG Group chairman Koo Bon-moo (shown) is creating an urgency to change Korea’s second largest conglomerate into a more proactive, marketplace leader rather than a follower of Samsung
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Force Field Analysis Model
Driving forces Push organizations toward change External forces or leader’s vision Restraining forces Resistance to change – employee behaviors that block the change process Restraining Forces Driving Forces
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Force Field Analysis Model
Desired Conditions Driving Forces Restraining Driving Forces Restraining Driving Forces Restraining Current Conditions Before Change During Change After Change
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Restraining Forces (Resistance to Change)
Many forms of resistance complaints, absenteeism, passive noncompliance View resistance as a resource Symptoms of deeper problems in the change process A form of task conflict – may improve change decisions Form of voice – procedural justice
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Why People Resist Change
Negative valence of change Negative cost-benefit analysis Fear of the unknown People assume worst when future unknown Perceive lack of control Not-invented-here-syndrome Staff oppose the change to prove their ideas were better successful change threatens self-esteem
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Why People Resist Change
Breaking routines Cost of moving away from our “comfort zones” Time/effort to learn new routines Incongruent team dynamics Norms contrary to desired change Incongruent organizational systems Systems/structures reinforce status quo rewards, information systems, patterns of authority, career paths, selection criteria
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Creating an Urgency for Change
Inform employees about driving forces Most difficult when organization is doing well Customer-driven change Human element energizes employees Reveals problems and consequences of inaction Sometimes need to create urgency to change without external drivers Requires persuasive influence Use positive vision rather than threats
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Reducing the Restraining Forces
Communication Highest priority and first strategy for change Generates urgency to change Reduces uncertainty (fear of unknown) Problems: time consuming and costly Learning Provides new knowledge/skills Includes coaching and other forms of learning Helps break old routines and adopt new roles Problems: potentially time consuming and costly
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Reducing the Restraining Forces
Involvement Employees participate in change process Helps saving face and reducing fear of unknown Includes task forces, future search events Problems: time-consuming, potential conflict Stress management When previous strategies do not minimize stress enough Potential benefits More motivation to change Less fear of unknown Fewer direct costs Problems: time-consuming, costly, doesn’t help all
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Reducing the Restraining Forces
Negotiation Influence by exchange – reduces direct costs May be necessary when people clearly lose something and won’t otherwise support change Problems: expensive, gains compliance, not commitment Coercion When all else fails Assertive influence Radical form of “unlearning” Problems Reduces trust May create more subtle resistance Encourage politics to protect job
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Alan Mulally: Change Agent
Alan Mulally’s “One Ford” vision and his transformational leadership were key factors in the successful turnaround of Ford Motor Company.
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Change Agents Change agent – possesses knowledge and power to guide and facilitate the change effort Involves transformational leadership Strategic visions and change Provides a sense of direction Identifies critical success factors to valuate change Links employee values to the change Minimizes employee fear of the unknown Clarifies role perceptions
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Coalitions, Social Networks and Viral Change
Guiding coalition Representative across the firm Influence leaders – respected Viral change Information seeded to a few people, then transmitted through social networks Social networks influence others due to: high trust referent power behavior observation
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Diffusion of Change Begin change as pilot projects
Effective diffusion applies the MARS model Motivation Pilot project employees rewarded; motivate others to adopt pilot project Ability Train employees to adopt pilot project Role perceptions Translate pilot project to new situations Situational factors Provide resources to implement pilot project elsewhere
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Action Research Approach
Action orientation and research orientation Action – to achieve the goal of change Research – testing application of concepts Action research principles Open systems perspective Highly participative process Data-driven, problem-oriented process
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Action Research Process
Form client- consultant relations Diagnose need for change Introduce intervention Evaluate/ stabilize change Disengage consultant’s services
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Appreciative Inquiry Approach
Frames change around positive and possible future, not problems. Positive principle focus on positive, not problems Constructionist principle conversations shape reality Simultaneity principle inquiry and change are simultaneous Poetic principle we can choose how to perceive situations (glass half full) Anticipatory principle people are motivated by desirable visions
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Four-D Model of Appreciative Inquiry
Discovery Discovering the best of “what is Dreaming Forming ideas about “what might be” Designing Engaging in dialogue about “what should be” Delivering Developing objectives about “what will be”
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Large Group Interventions
Future search, open space, and other interventions that involve “the whole system” Large group sessions May last a few days High involvement with minimal structure Limitations of large group interventions Limited opportunity to contribute Risk that a few people will dominate Focus on common ground may hide differences Generates high expectations about ideal future
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Parallel Learning Structure Approach
Highly participative social structures Members representative across the formal hierarchy Sufficiently free from firm’s constraints Develop change solutions – then applied back into the larger organization
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Cross-Cultural and Ethical Concerns with Managing Change
Cross-Cultural Concerns Linear and open conflict assumptions different from values in some cultures Ethical Concerns Privacy rights of individuals Management power Individuals’ self-esteem
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Organizations are About People
“Take away my people, but leave my factories, and soon grass will grow on the factory floors. Take away my factories, but leave my people, and soon we will have a new and better factory.” Andrew Carnegie ( )
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Organizational Change
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