1. Organizational Behaviour Canadian Edition Schermerhorn, Hunt, Osborn, Currie Prepared by: Joan Condie

2. Chapter 11 Strategy and the Basic Attributes of Organizations

3. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. 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 labour”?  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 in the organization?  Which personal and impersonal coordination techniques should the organization use?  What are bureaucracies and what are the common types?

4. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Strategy  Strategy = the process of positioning the organization in its competitive environment and implementing actions so it can compete successfully  Begins with deciding:  Who it will serve  What it will provide

5. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Strategy and Goals  Critical strategic choices start with formation of goals  Goals then form basis of further decisions regarding how to allocate resources and how best to structure the organization to accomplish the goals  Mission statement is a written statement of an organization’s purpose

6. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Societal Contributions  Noting the organization’s positive contributions to society (how its specific tasks link to higher purposes) enhances its image and creates advantages:  Desirable missions increase employee motivation through shared sense of noble purpose  Organization’s claim to society’s resources becomes more legitimate

7. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Goals and Missions  Each organization has one primary beneficiary of its business success, i.e., one group that benefits (e.g., shareholders)  Output goals (regarding product or service) define how the organization will accomplish its mission; they define the type of business the organization is in

8. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Goals and Missions  Systems goals define desirable conditions in the organization that are expected to increase the organization’s survival potential (e.g., flexibility, quality, innovation, productivity) Will differ in different parts of the organization Will differ in different parts of the organization Need to be well-defined, practical and easy-to- understand in order to focus managers on what needs to be done and to be a basis for deciding appropriate structure Need to be well-defined, practical and easy-to- understand in order to focus managers on what needs to be done and to be a basis for deciding appropriate structure

9. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Formal Structure and the Division of Labour  An organization’s structure must fit the pattern of goals chosen by senior management  Formal structure of firm is also known as division of labour, and outlines:  Jobs to be done  Positions designated to perform specific duties  How tasks of organization are to be accomplished  Organization chart visually depicts the formal structure (or skeleton) of the organization CEO VPProduction Manager Plant A ShiftSupervisor ShiftSupervisor ShiftSupervisor Manager Plant B ShiftSupervisor ShiftSupervisor ShiftSupervisor Manager Plant C ShiftSupervisor ShiftSupervisor ShiftSupervisor VPMarketingVPFinance

10. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Vertical Specialization  A hierarchical division of labour that distributes formal authority  Distribution of authority reflected in typical responsibilities in Canada:  Top managers plan overall strategy, plot future, and act as final judges  Middle managers guide daily operations, help formulate policy  Lower-level managers supervise subordinates to ensure strategies implemented and policies followed CEO VPVPVP

11. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Chain of Command  Chain of command = listing of who reports to whom up and down the organization  Unity of command = traditional belief that each individual should have only one boss and each unit only one leader  Avoids confusion, clarifies responsibility, provides clear communication CEO VPProduction Manager Plant A ShiftSupervisor Welder

12. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Span of Control  Span of control = the number of individuals reporting to a supervisor  Narrow: for complex tasks, inexperienced or poorly trained subordinates  Creates many levels – expensive, unresponsive to change, management isolation, less effective communication  Wide span of control goes along with flatter structures (fewer levels)  More possible now with new information technologies

13. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Line and Staff Units  Line units = work groups that conduct the major business of the organization Internal line units (e.g., production) Internal line units (e.g., production) External line units (e.g., marketing) External line units (e.g., marketing)  Staff units = groups that assist the line units by performing specialized services in the organization Internal staff units (e.g., accounting) Internal staff units (e.g., accounting) External staff units (e.g., public relations) External staff units (e.g., public relations)

14. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Placement of Staff Units  Staff units can be assigned at any level of the organization, offering their specialized help at mostly the senior level, the middle management level, or to lower-level managers  Increasing interest in outsourcing many staff functions  Also interest in decreasing need for some internal staff through greater use of information technology by managers, enhancing their analytical and decision-making capabilities

15. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Control  Set of mechanisms an organization uses to ensure that actions and outputs respect predetermined limits  Involves setting standards, measuring results, and taking corrective actions  Types of controls:  Output controls  Process controls

16. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Output Controls  Controls that focus on desired targets and allow managers to use their own methods for reaching these targets  Steps in developing output controls: Developing targets or standards Developing targets or standards Measuring results against targets Measuring results against targets Taking corrective action Taking corrective action  Part of a “management by exception” approach  Promotes flexibility as only goals are defined; methods still open to creativity

17. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Process Controls  Controls that try to specify how tasks are to be accomplished  Represent use of experience to prevent recurring problems  Three types of process controls:  Policies, procedures, and rules  Formalization and standardization  Total quality management controls

18. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Process Controls (cont’d)  Policies, procedures, and rules  A policy is a guideline for action, noting important objectives and broad indication of performance approach  A procedure indicates the best method for performing a task, shows which aspects of a task are most important, or outlines how an individual is to be rewarded  A rule is a specific, rigid guideline for action, typically indicating how something should be done or what should not be done  Are often used as substitutes for direct managerial supervision

19. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Process Controls (cont’d)  Formalization and standardization:  Formalization refers to the written documentation of work rules, policies, and procedures Simplifies jobs, ensures consistency Simplifies jobs, ensures consistency  Standardization is the degree to which the range of actions in a job or series of jobs is limited Guidelines are created so that similar work activities are repeatedly performed in a similar manner Guidelines are created so that similar work activities are repeatedly performed in a similar manner

20. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Process Controls (cont’d)  Total Quality Management (TQM)  Deming’s process approach focused on continual improvement through use of statistical analyses of all firm’s operations  Emphasizes managers and employees collaborating in search of quality improvements  Often uses empowerment and participative management

21. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Allocating Formal Authority  Where is decision-making power in the organization?  Centralization = authority to make decisions is restricted to higher levels of management  Preferred when facing a major threat  Decentralization = authority to make decisions is given to lower levels in an organization’s hierarchy  Leads to higher satisfaction in subordinates, quicker response to problems, easier training for promotion  Linked to idea of participation; many want to be involved in decisions that affect their work

22. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Horizontal Specialization  Division of labour by forming work units or work groups within organizations  Process of departmentation  Several pure forms of departmentation:  Functional  Divisional  Matrix  Mixed

23. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Functional Departmentation  Common grouping of individuals by skill, knowledge, and action yields  Advantages: Clear task assignments, easy for department members to build on each other’s experience, easy to explain, excellent management training, uses employee technical quality Clear task assignments, easy for department members to build on each other’s experience, easy to explain, excellent management training, uses employee technical quality  Disadvantages: Rigidity to change, difficulty coordinating functions, reinforces narrow training and thinking, may create routine jobs, difficulties in communicating across technical areas Rigidity to change, difficulty coordinating functions, reinforces narrow training and thinking, may create routine jobs, difficulties in communicating across technical areasCEO ProductionMarketingFinanceHR

24. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Divisional Departmentation  Grouping individuals and resources by products, territories, services, clients, or legal entities  Advantages: Flexibility in responding to external demands, spotting external changes, integration of specialized personnel, focusing on delivery of special products to specific customers Flexibility in responding to external demands, spotting external changes, integration of specialized personnel, focusing on delivery of special products to specific customers  Disadvantages: Duplication of effort by function, tendency for divisional goals to be placed above corporate interests, conflict among divisions Duplication of effort by function, tendency for divisional goals to be placed above corporate interests, conflict among divisions HQ IndustrialCommercialResidential

25. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Matrix Departmentation  Combination of functional and divisional patterns which assigns an individual to more than one type of unit  Advantages:  Combines strengths of functional and divisional approaches, blends technical and market emphasis  Disadvantages:  Loss of unity of command means potential conflict and ambiguity and communication difficulties, expensive due to number of managers Engineer ProjectManagerManagerEngineering

26. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Mixed Forms of Departmentation  Common to blend two or more forms of departmentation to take advantage of different benefits

27. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Coordination  Set of mechanisms used to link the actions of the organization’s units into a consistent pattern  Personal methods of coordination  Direct contact among members, assignment of managers to committees and task forces Promote dialogue, learning, innovation Promote dialogue, learning, innovation  Impersonal methods of coordination  Written policies and procedures (e.g., budgets, schedules), matrix departmentation, management information system Stress consistency and standardization Stress consistency and standardization

28. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Bureaucracy  Originally conceived by Weber as an ideal form of organization that emphasizes importance of legal authority, logic and order as basis for design as opposed to a firm based on charisma or cultural tradition  Relies on division of labour, hierarchical control, promotion by merit, career opportunities for employees, administration by rule  Types of bureaucracies:  Mechanistic  Organic  Hybrid

29. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Mechanistic Type (or Machine Bureaucracy)  Emphasizes vertical specialization and control, with impersonal coordination and a heavy reliance on standardization, formalization, rules, policies, and procedures  Emphasizes routine  Challenges of this design:  Employee motivation weakened by rigidity; unions protect employees from the many controls by imposing more controls; limited ability to adjust to subtle external changes or new technologies

30. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Organic Type (Professional Bureaucracy)  Emphasizes horizontal specialization, extensive use of personal coordination, and loose rules, policies, and procedures, decentralization  Staff units placed toward middle here than at top, as in mechanistic  Less efficient than mechanistic and less responsive to direction from central management  But better for problem-solving, satisfying individual customer needs, detecting external changes, adjusting to new technologies

31. Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Hybrid Types  Different divisions in divisional departmentation can differ in how mechanistic or organic they are  Conglomerate (a single corporation that consists of a number of unrelated businesses) can use different designs for various businesses, depending on need dictated by size, environment, technology and strategy

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