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1 ILMU ORGANISASI Dosen : Dedi Purwana E.S. SKS : 2
HP : Thomson Learning © 2004

2 Organizations and Organization Theory
Chapter One Organizations and Organization Theory Thomson Learning © 2004

3 Organization Theory in Action
Topics Current Challenges Global Competition Ethics and and Social Responsibility Speed of Responsiveness The Digital Workplace Diversity Thomson Learning © 2004

4 What is an Organization?
Definition Importance of Organizations Bring together resources to achieve desired goals and outcomes Produce goods and services efficiently Facilitate innovation Use modern manufacturing and information technologies Thomson Learning © 2004

5 Importance of Organizations
Importance of Organizations (cont’d) Adapt to and influence a changing environment Create value for owners, customers and employees Accommodate ongoing challenges of diversity, ethics, and the motivation and coordination of employees Thomson Learning © 2004

6 An Open System and Its Subsystems
Environment Transformation Process Raw Materials People Information resources Financial Products and Services Input Output Production, Maintenance, Adaptation, Management Boundary Spanning Boundary Spanning Subsystems Thomson Learning © 2004

7 Five Basic Parts of an Organization
Top Management Technical Support Administrative Support Middle Management Technical Core Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) ; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): Thomson Learning © 2004

8 The Organization Goals and Strategy Environment Size Culture
Technology Structure Formalization Specialization Hierarchy of Authority Centralization Professionalism Personnel Ratios Thomson Learning © 2004

9 Organization Chart Illustrating the Hierarchy of Authority
for a Community Job Training Program Board of Directors Advisory Committee Executive Committee Level 1 Executive Director Level 2 Assistant Executive Director for Community Service Assistant Executive Director for Human Services Level 3 Director Economic Dev. Director Reg. Planning Director Housing Director Criminal Justice Director Finance Director AAA Director CETA Public Info Coord. Asst. Director Finance Lead Counsel Lead Counsel CETA Intake & Orient CETA Couns. Devs. Title II ABC CETA Couns. Devs. Youth IV CETA Couns. Devs. Title II D &VI&VII Program Spec. AAA Contract Fiscal Manager Program Planner AAA Level 4 Housing Coord. Alcohol Coord. Account. CETA Planner Level 5 Records Clerk Secretary Secretary Adm. Asst Payroll Clerk Secretary MIS Specialist Staff Clerk Adm. Asst. Thomson Learning © 2004

10 Characteristics of Three Organizations
TECHNOLOGY Manufacturing Retailing Government Service SIZE (#employees) , , Thomson Learning © 2004

11 Two Organization Design Approaches
Mechanical System Design Natural System Design Vertical Structure Routine Tasks Rigid Culture Competitive Strategy Formal Systems Horizontal Structure Adaptive Culture Empowered Roles Collaborative Strategy Shared Information Organizational Change in the Service of Performance Stable Environment Efficient Performance Turbulent Environment Learning Organization Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School) Thomson Learning © 2004

12 Organizational Dimensions
Workbook Activity Organizational Dimensions High Formalization Low Formalization High Specialization Low Specialization Tall Hierarchy Flat Hierarchy Product Technology Service Technology Stable Environment Unstable Environment Strong Culture Weak Culture High Professionalism Low Professionalism Well-Defined Goals Poorly-Defined Goals Small Size Large Size Modern Postmodern Thomson Learning © 2004

13 Xerox Use for 1959-1990, Use for 1990-present
Workbook Activity Use for , Use for 1990-present High Formalization Low Formalization High Specialization Low Specialization Tall Hierarchy Flat Hierarchy Product Technology Service Technology Stable Environment Unstable Environment Strong Culture Weak Culture High Professionalism Low Professionalism Well-Defined Goals Goals Not Defined Small Size Large Size Modern Postmodern Thomson Learning © 2004

14 Strategy, Organization Design, and Effectiveness
Chapter Two Strategy, Organization Design, and Effectiveness Thomson Learning © 2004

15 Top Management Role in Organization Direction, Design, and Effectiveness
External Environment Organization Design Opportunities Threats Uncertainty Resource Availability Structural Form – learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages Effectiveness Outcomes Strategic Direction Resources Efficiency Goal attainment Competing values Define mission, official goals Select operational goals, competitive strategies CEO, Top Management Team Internal Situation Strengths Weaknesses Distinctive Competence Leadership Style Past Performance Source: Adapted from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,” Organization Studies 15, no. 2 (1994): Thomson Learning © 2004

16 Goal Type and Purpose Type of Goals Purpose of Goals
Official Goals, mission: Legitimacy Operative goals: Employee direction and motivation Decision guidelines Standard of performance Thomson Learning © 2004

17 Porter’s Competitive Strategies
Competitive Scope Competitive Advantage Strategy Example Broad Low Cost Low-Cost Leadership Dell Computer Uniqueness Differentiation Starbucks Coffee Co. Narrow Focused Low-Cost Enterprise Rent-a- Car Focused Edward Jones Investments Thomson Learning © 2004

18 Miles and Snow’s Strategy Typology
Prospector Learning orientation; flexible, fluid, decentralized structure Strong capability in research Values creativity, risk-taking, and innovation Defender Efficiency orientation; centralized authority and tight cost control Emphasis on production efficiency, low overhead Close supervision; little employee empowerment Source: Based on Michael Treacy and Fred Wiersema, “How Market Leaders Keep Their Edge,” Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), ; and Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., “Organizational Strategy, Structure, and Process,” Academy of Management Review 3 (1978), Thomson Learning © 2004

19 Miles and Snow’s Strategy Typology (cont’d)
Analyzer Balances efficiency and learning; tight cost control with flexibility and adaptability Efficient production for stable product lines; emphasis on creativity, research, risk-taking for innovation Reactor No clear organizational approach; design characteristics may shift abruptly depending on current needs Source: Based on Michael Treacy and Fred Wiersema, “How Market Leaders Keep Their Edge,” Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), ; and Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., “Organizational Strategy, Structure, and Process,” Academy of Management Review 3 (1978), Thomson Learning © 2004

20 Contingency Factors Affecting Organization Design
Environment Size/ Life Cycle Technology Culture Strategy Organizational Structure and Design The Right Mix of Design Characteristics Fits the Contingency Factors Thomson Learning © 2004

21 Contingency Approaches to the Measurement of Organizational Effectiveness
External Environment Resource Inputs Organization Internal activities and processes Product and Service Outputs Resource-based approach Internal process approach Goal approach Thomson Learning © 2004

22 Reported Goals of U.S. Corporations
Goal % Corporations Profitability 89 Growth 82 Market Share 66 Social Responsibility 65 Employee welfare 62 Product quality and service 60 Research and development 54 Diversification 51 Efficiency 50 Financial stability 49 Resource conservation 39 Management development 35 Thomson Learning © 2004 Source: Adapted from Y. K. Shetty, “New Look at Corporate Goals,” California Management Review 22, no. 2 (1979), pp

23 Four Models of Effectiveness Values
STRUCTURE Flexibility Human Relations Emphasis Primary Goal: human resource development Subgoals: cohesion, morale, training Open Systems Emphasis Primary Goal: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation F O C U S Internal External Internal Process Emphasis Primary Goal: stability, equilibrium Subgoals: information management, communication Rational Goal Emphasis Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting Control Adapted from Robert E. Quinn and John Rohrbaugh, “A Spatial Model of Effectiveness Criteria: Toward a Competing Values Approach to Organizational Analysis,” Management Science 29 (1983): ; and Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): Thomson Learning © 2004

24 Effectiveness Values for Two Organizations
STRUCTURE FLEXIBILITY Human Relations Emphasis Open Systems Emphasis ORGANIZATION A ORGANIZATION B F O C U S INTERNAL EXTERNAL Internal Process Emphasis Rational Goal Emphasis CONTROL Thomson Learning © 2004

25 Identifying Company Goals and Strategies
Workbook Activity Identifying Company Goals and Strategies Goals from Exhibit 2.8 Strategies from Porter Company #1 Company #2 Company #3 Thomson Learning © 2004

26 Competing Values and Organizational Effectiveness
Workshop Activity Competing Values and Organizational Effectiveness Thomson Learning © 2004

27 Fundamentals of Organization Structure
Chapter Three Fundamentals of Organization Structure Thomson Learning © 2004

28 A Sample Organization Chart
Thomson Learning © 2004

29 The Relationship of Organization Design to Efficiency vs
The Relationship of Organization Design to Efficiency vs. Learning Outcomes Horizontal Organization Designed for Learning Horizontal structure is dominant Shared tasks, empowerment Relaxed hierarchy, few rules Horizontal, face-to-face communication Many teams and task forces Decentralized decision making Dominant Structural Approach Vertical structure is dominant Specialized tasks Strict hierarchy, many rules Vertical communication and reporting systems Few teams, task forces or integrators Centralized decision making Vertical Organization Designed for Efficiency Thomson Learning © 2004

30 Ladder of Mechanisms for Horizontal Linkage and Coordination
H IGH Teams Full-time Integrators Task Forces Coordination Required Amount of Horizontal Direct Contact LOW Information Systems LOW HIGH Cost of Coordination in Time and Human Resources Thomson Learning © 2004

31 Project Manager Location in the Structure
President Finance Department Financial Accountant Budget Analyst Management Engineering Product Designer Draftsperson Electrical Marketing Market Researcher Advertising Specialist Planner Purchasing Buyer Project Manager New Product B Product A Product C Thomson Learning © 2004

32 Teams Used for Horizontal Coordination at Wizard Software Company
President Marketing Vice Pres. Programming Vice Pres Research Vice Pres Videogames Basic Research Supervisor Videogames Sales Manager Videogames Chief Engineer Videogames Product Team Applications and Testing Supervisor Memory Products Sales Manager Memory Products Chief Programmer Memory Products Research Supervisor Memory Products Team Memory Products International Manager Customer Service Manager Procurement Supervisor Advertising Manager Thomson Learning © 2004

33 Structural Design Options for Grouping Employees into Departments
Functional Grouping CEO Engineering Marketing Manufacturing Divisional Grouping Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. Thomson Learning © 2004

34 Strengths and Weaknesses of Functional Organization Structure
Allows economies of scale within functional departments Enables in-depth knowledge and skill development Enables organization to accomplish functional goals Is best with only one or a few products WEAKNESSES: Slow response time to environmental changes May cause decisions to pile on top, hierarchy overload Leads to poor horizontal coordination among departments Results in less innovation Involves restricted view of organizational goals Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 429. Thomson Learning © 2004

35 Strengths and Weaknesses of Divisional Organization Structure
Suited to fast change in unstable environment Leads to client satisfaction because product responsibility and contact points are clear Involves high coordination across functions Allows units to adapt to differences in products, regions, clients Best in large organizations with several products Decentralizes decision-making WEAKNESSES: Eliminates economies of scale in functional departments Leads to poor coordination across product lines Eliminates in-depth competence and technical specialization Makes integration and standardization across product lines difficult Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 431. Thomson Learning © 2004

36 Reorganization from Functional Structure to Divisional Structure at Info-Tech
R&D Manufacturing Accounting Marketing Info-Tech President Divisional Structure Thomson Learning © 2004

37 Structural Design Options for Grouping Employees (Continued)
Multifocused Grouping CEO Manufacturing Marketing Product Division 2 Division 1 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. Thomson Learning © 2004

38 Structural Design Options for Grouping Employees (Continued)
Horizontal Grouping CEO Human Resources Finance Core Process 1 Core Process 2 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. Thomson Learning © 2004

39 Geographical Structure for Apple Computer
CEO Steve Jobs Apple Europe Pacific France Products Asia Japan Australia Americas Canada Latin America/ Caribbean Sales Service and Marketing to Regions Thomson Learning © 2004 Source:

40 Dual-Authority Structure in a Matrix Organization
President Director Design Mfg Marketing Procure- ment of Product Vice President Vice President Vice President Controller Operations Manager Product Manager A Product Manager B Product Manager C Product Manager D Thomson Learning © 2004

41 Strengths and Weaknesses of Matrix Organization Structure
Achieves coordination necessary to meet dual demands from customers Flexible sharing of human resources across products Suited to complex decisions and frequent changes in unstable environment Provides opportunity for both functional and product skill development Best in medium-sized organizations with multiple products WEAKNESSES: Causes participants to experience dual authority, which can be frustrating and confusing Means participants need good interpersonal skills and extensive training Is time consuming; involves frequent meetings and conflict resolution sessions Will not work unless participants understand it and adopt collegial rather than vertical-type relationships Requires great effort to maintain power balance Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,”Organizational Dynamics (Winter 1979): 429. Thomson Learning © 2004

42 Matrix Structure for Worldwide Steel Company
President Industrial Relations Vice Mfg. Services Finance Marketing Metallurgy Field Sales Open Die Business Mgr. Ring Products Wheels & Axles Steelmaking Vertical Functions Horizontal Product Lines Thomson Learning © 2004

43 A Horizontal Structure
Team 3 2 1 Top Management Customer Process Owner Testing Product Planning Research Market Analysis New Product Development Process Distrib. Material Flow Purchasing Procurement and Logistics Process Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, “The Horizontal Corporation,” Business Week, December 20, 1993, 76-81; and Thomas A. Stewart, “The Search for the Organization of Tomorrow,” Fortune, May 19, 1992, Thomson Learning © 2004

44 Strengths and Weaknesses of Horizontal Structure
Flexibility and rapid response to changes in customer needs Directs the attention of everyone toward the production and delivery of value to the customer Each employee has a broader view of organizational goals Promotes a focus on teamwork and collaboration—common commitment to meeting objectives Improves quality of life for employees by offering them the opportunity to share responsibility, make decisions, and be accountable for outcomes WEAKNESSES: Determining core processes to organize around is difficult and time-consuming Requires changes in culture, job design, management philosophy, and information and reward systems Traditional managers may balk when they have to give up power and authority Requires significant training of employees to work effectively in a horizontal team environment Can limit in-depth skill development Sources: Based on Frank Ostroff, The Horizontal Organization: What the Organization of the Future Looks Like and How It Delivers Value to Customers, (New York: Oxford University Press, 1999); and Richard L. Daft, Organization Theory and Design, 6th ed., (Cincinnati, Ohio: South-Western College Publishing, 1998) 253. Thomson Learning © 2004

45 Hybrid Structure Part 1. Sun Petrochemical Products
President Functional Structure Chief Counsel Human Resources Director Technology Vice President Financial Services Vice Pres. Product Structure Fuels Vice President Lubricants Vice President Chemicals Vice President Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): ; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34. Thomson Learning © 2004

46 Hybrid Structure Part 2. Ford Customer Service Division
Vice President and General Manager Functional Structure Finance Strategy and Communication Human Resources Director and Process Owner Teams Teams Parts Supply / Logistics Group Director and Process Owner Horizontal Structure Teams Teams Vehicle Service Group Director and Process Owner Teams Technical Support Group Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): ; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34. Thomson Learning © 2004

47 Organization Contextual Variables that Influence Structure
(learning vs. efficiency) Environment Chapters 4, 6 Culture Chapter 10 Size Chapter 9 Strategy, Goals Chapter 2 Technology Chapters 7,8 Sources: Adapted from Jay R. Galbraith, Competing with Flexible Lateral Organizations, 2nd ed. (Reading, Mass.: Addison-Wesley, 1994), Ch.1; Jay R. Galbraith, Organization Design (Reading, Mass.: Addison-Wesley, 1977), Ch. 1. Thomson Learning © 2004

48 The Relationship of Structure to Organization’s Need for Efficiency vs
The Relationship of Structure to Organization’s Need for Efficiency vs. Learning Matrix Structure Horizontal Structure Functional Structure Functional with cross-functional teams, integrators Divisional Structure Modular Structure Horizontal: Coordination Learning Innovation Flexibility Dominant Structural Approach Vertical: Control Efficiency Stability Reliability Thomson Learning © 2004

49 Symptoms of Structural Deficiency
Decision making is delayed or lacking in quality The organization does not respond innovatively to a changing environment Too much conflict is evident Thomson Learning © 2004

50 The External Environment
Chapter Four The External Environment Thomson Learning © 2004

51 An Organization’s Environment
(a) Competitors, industry size and competitiveness, related issues (b) Suppliers, manufacturers, real estate, services (c) Labor market, employment agencies, universities, training schools, employees in other companies, unionization (d) Stock markets, banks, savings and loans, private investors (e) Customers, clients, potential users of products and services (f) Techniques of production, science, computers, information technology (g) Recession, unemployment rate, inflation rate, rate of investment, economics, growth (h) City, state, federal laws and regulations, taxes, services, court system, political processes (i) Age, values, beliefs, education, religion, work ethic, consumer and green movements (j) Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rates International Context (j) International Sector (a) Industry Sector (i) Sociocultural Sector DOMAIN (b) Raw Materials Sector (c) Human Resources Sector (h) Government Sector ORGANIZATION (g) Economic Conditions Sector (d) Financial Resources Sector (e) Market Sector (f) Technology Sector Thomson Learning © 2004

52 Customers Advertising
Organizational Departments Differentiate to Meet Needs of Sub-environments President Scientific Sub-environment Scientific Research journals centers Professional associations Manufacturing Sub-environment Labor Raw Suppliers materials Production equipment Market Sub-environment Customers Advertising Competitors agencies Distribution system R & D Division Manufacturing Division Sales Division Thomson Learning © 2004

53 Differences in Goals and Orientations Among Organizational Departments
Characteristic R & D Department Manufacturing Sales Goals New developments, quality Efficient production Customer satisfaction Time Horizon Long Short Interpersonal Orientation Mostly task Task Social Formality of Structure Low High Source: Based on Paul R. Lawrence and Jay W. Lorsch, Organization and Environment (Homewood, Ill.: Irwin, 1969), pp Thomson Learning © 2004

54 Environmental Uncertainty and Organizational Integrators
Industry: Plastics Foods Container Environmental Uncertainty High Moderate Low Departmental Differentiation Percent of management in integrating roles 22% 17% 0% Source: Based on Jay W. Lorsch and Paul R. Lawrence, “Environmental Factors and Organizational Integration,” Organization Planning: Cases and Concepts (Homewood, Ill.: Irwin and Dorsey, 1972), 45. Thomson Learning © 2004

55 Organization Forms Mechanistic: Organic:
Tasks are broken down into specialized, separate parts. Tasks are rigidly defined. There is a strict hierarchy of authority and control, and there are many rules. Knowledge and control of tasks are centralized at the top of the organization. Communication is vertical. Employees contribute to the common task of the department. Tasks are adjusted and redefined through teamwork. There is less hierarchy of authority and control, and there are few rules. Knowledge and control of tasks are located anywhere in the organization. Communication is horizontal. Source: Adapted from Gerald Zaltman, Robert Duncan, and Jonny Holbek, Innovations and Organizations (New York: Wiley, 1973), 131. Thomson Learning © 2004

56 High-Moderate Uncertainty Low-Moderate Uncertainty
Contingency Framework for Environmental Uncertainty and Organizational Responses Low Uncertainty 1. Mechanistic structure; formal, centralized 2. Few departments 3. No integrating roles 4. Current operations orientation; low speed response High-Moderate Uncertainty 1. Organic structure, teamwork; participative, decentralized 2. Few departments, much boundary spanning 3. Few integrating roles 4. Planning orientation; fast response High Uncertainty 2. Many departments differentiated, extensive boundary spanning 3. Many integrating roles 4. Extensive planning, forecasting; high speed response Low-Moderate Uncertainty 2. Many departments, some boundary 4. Some planning; moderate speed STABLE ENVIRONMENTAL CHANGE Uncertainty UNSTABLE SIMPLE COMPLEX ENVIRONMENTAL COMPLEXITY Thomson Learning © 2004

57 Organization Strategies for Controlling the External Environment
Establishing Interorganizational Linkages: Ownership Contracts, joint ventures Cooptation, interlocking directorates Executive recruitment Advertising, public relations Controlling the Environmental Domain: Change of domain Political activity, regulation Trade associations Illegitimate activities Thomson Learning © 2004

58 Relationship Between Environmental Characteristics and Organizational Actions
Many departments and boundary roles Greater differentiation and more integrators for internal coordination High complexity High uncertainty Organic structure and systems with low formalization, decentralization, and low standardization to enable a high-speed response High rate of change Environmental domain (ten sectors) Establishment of favorable linkages: ownership, strategic alliances, cooptations, interlocking directorates, executive recruitment, advertising, and public relations Resource dependence Scarcity of valued resources Control of the environmental domain: change of domain, political activity, regulation, trade associations, and illegitimate activities Thomson Learning © 2004

59 Interorganizational Relationships
Chapter Five Interorganizational Relationships Thomson Learning © 2004

60 A Framework of Interorganizational Relationships*
Resource Dependence Collaborative Network Institutionalism Population Ecology Organization Type Organization Relationship Dissimilar Similar Cooperative Competitive Thomson Learning © 2004 *Thanks to Anand Narasimhan for suggesting this framework.

61 Changing Characteristics of Interorganizational Relationships
Traditional Orientation: Adversarial New Orientation: Partnership Trust, addition of value to both sides, high commitment Equity, fair dealing, both profit Electronic linkages to share key information, problem feedback and discussion Mechanisms for close coordination, people on-site Involvement in partner’s product design and production, shared resources Long-term contracts Business assistance beyond the contract Suspicion, competition, arm’s length Price, efficiency, own profits Limited information and feedback Legal resolution of conflict Minimal involvement and up-front investment, separate resources Short-term contracts Contract limiting the relationship Thomson Learning © 2004

62 Elements in the Population Ecology Model of Organizations
Variation Large number of variations appear in the population of organizations Selection Some organizations find a niche and survive Retention A few organizations grow large and become institutionalized in the environment Thomson Learning © 2004

63 Three Mechanisms for Institutional Adaptation
Mimetic Coercive Normative Reasons to become similar: Uncertainty Dependence Duty, obligation Events: Innovation visibility Political law, rules, sanctions Professionalism—certification, accreditation Social basis: Culturally supported Legal Moral Example: Reengineering, benchmarking Pollution controls, school regulations Accounting standards, consultant training Source: Adapted from W. Richard Scott, Institutions and Organizations (Thousand Oaks, Calif.: Sage, 1995). Thomson Learning © 2004

64 Designing Organizations for the International Environment
Chapter Six Designing Organizations for the International Environment Thomson Learning © 2004

65 Four Stages of International Evolution
Domestic II. International III. Multinational IV. Global Strategic Orientation Domestically oriented Export-oriented, multidomestic Stage of Development Initial foreign involvement Competitive positioning Explosion Structure Domestic structure plus export department Domestic structure plus international division Worldwide geographic, product Matrix, trans-national Market Potential Moderate, mostly domestic Large, multidomestic Very large, multinational Whole world Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7-8; and Theodore T. Herbert, “Strategy and Multinational Organization Structure: An Interorganizational Relationships Perspective,” Academy of Management Review 9 (1984): Thomson Learning © 2004

66 Matching Organizational Structure to International Advantage
When Forces for Global Integration are . . . And Forces for National Responsiveness are . . . Strategy Structure Low Export International Division High Globalization Global Product Structure Multidomestic Global Geographic Structure Globalization and Multidomestic Global Matrix Structure Thomson Learning © 2004

67 Domestic Hybrid Structure with International Division
CEO Human Resources Corporate Finance Research & Development Electrical Products Division Scientific Products Division Medical Products Division International Division Europe (Sales) Brazil (Subsidiary) Mid East (Sales) Staff (Legal, Licensing) Thomson Learning © 2004

68 Partial Global Product Structure Used by Eaton Corporation
Chairman Law & Corporate Relations Engineering President Finance & Administration International Regional Coordinators Global Automotive Components Group Global Industrial Group Global Instruments Product Group Global Materials Handling Group Global Truck Components Group Source: Based on New Directions in Multinational Corporate Organization (New York: Business International Corp., 1981). Thomson Learning © 2004

69 Global Matrix Structure
International Executive Committee Country Managers Germany Norway Argentina/ Brazil Spain/ Portugal Business Areas Power Transformers Transportation Industry Local Companies Thomson Learning © 2004

70 Building Global Capabilities
The Global Organizational Challenge Increased Complexity and Differentiation Need for Integration Knowledge Transfer Global Coordination Mechanisms Global Teams Headquarters Planning Expanded Coordination Roles Thomson Learning © 2004

71 Cultural Differences in Coordination and Control
National Value Systems Power Distance Uncertainty Avoidance Three National Approaches to Coordination and Control Centralized Coordination in Japanese Companies European Firms’ Decentralized Approach The United States: Coordination and Control through Formalization Thomson Learning © 2004

72 Transnational Model of Organizations
Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships. Structures are flexible and ever-changing. Subsidiary managers initiate strategies and innovations that become strategy for the corporation as a whole. Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems Thomson Learning © 2004

73 Manufacturing and Service Technologies
Chapter Seven Manufacturing and Service Technologies Thomson Learning © 2004

74 Core Transformation Process for a Manufacturing Company
ENVIRONMENT Organization Core Technology Raw Material Inputs Product or Service Outputs Core Work Processes Materials Handling Assembly Milling Inspection Thomson Learning © 2004

75 Woodward’s Classification Based on System of Production
Group I Small-batch and unit production Group II Large-batch and mass production Group III Continuous process production Thomson Learning © 2004

76 Flexible Manufacturing Systems
Computer-aided design (CAD) Computer-aided manufacturing (CAM) Integrated Information Network Thomson Learning © 2004

77 Relationship of Flexible Manufacturing Technology to Traditional Technologies
Small batch Flexible Manufacturing Mass Customization NEW CHOICES Customized Mass Production PRODUCT FLEXIBILITY TRADITIONAL CHOICES Continuous Process Standardized BATCH SIZE Small Unlimited Source: Based on Jack Meredith, “The Strategic Advantages of New Manufacturing Technologies For Small Firms.” Strategic Management Journal 8 (1987): ; Paul Adler, “Managing Flexible Automation,” California Management Review (Spring 1988): 34-56; and Otis Port, “Custom-made Direct from the Plant.” Business Week/21st Century Capitalism, 18 November 1994, Thomson Learning © 2004

78 Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems Characteristic Mass Production FMS Structure: Span of Control Wide Narrow Hierarchical levels Many Few Tasks Routine, repetitive Adaptive, craft-like Specialization High Low Decision making Centralized Decentralized Overall Bureaucratic, mechanistic Self-regulating, organic Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); ; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, Thomson Learning © 2004

79 Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems (cont.) Characteristic Mass Production FMS Human Resources: Interactions Standalone Teamwork Training Narrow, one time Broad, frequent Expertise Manual, technical Cognitive, social Solve problems Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); ; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, Thomson Learning © 2004

80 Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems (cont.) Characteristic Mass Production FMS Interorganizational: Customer Demand Stable Changing Suppliers Many, arm’s length Few, close relations Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); ; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, Thomson Learning © 2004

81 Differences Between Manufacturing and Service Technologies
Manufacturing Technology Tangible product Products can be inventoried for later consumption Capital asset intensive Little direct customer interaction Human element may be less important Quality is directly measured Longer response time is acceptable Site of facility is moderately important Service Technology Intangible product Production and consumption take place simultaneously Labor and knowledge intensive Customer interaction generally high Human element very important Quality is perceived and difficult to measure Rapid response time is usually necessary Site of facility is extremely important Service: Airlines, Hotels,Consultants, Healthcare, Law firms Product and Service: Fast-food outlets, Cosmetics, Real estate, Stockbrokers, Retail stores Product: Soft drink companies, Steel companies, Auto manufacturers, Food processing plants Sources: Based on F. F. Reichheld and W. E. Sasser, Jr., “Zero Defections: Quality Comes to Services,” Harvard Business Review 68 (September-October 1990): ; and David E. Bowen, Caren Siehl, and Benjamin Schneider, “A Framework for Analyzing Customer Service Orientations in Manufacturing,” Academy of Management Review 14 (1989): Thomson Learning © 2004

82 Configuration and Structural Characteristics of Service Organizations vs. Product Organizations
Structure: Separate boundary roles Few Many Geographical dispersion Much Little Decision making Decentralized Centralized Formalization Lower Higher Human Resources: Employee skill level Skill emphasis Interpersonal Technical Thomson Learning © 2004

83 Departmental Technologies
ROUTINE High analyzability Low variety Examples: Sales Clerical Drafting Auditing CRAFT Low analyzability Low variety Examples: Performing arts Trades Fine goods manufacturing Thomson Learning © 2004

84 Departmental Technologies
ENGINEERING High analyzability High variety Examples: Legal Engineering Tax accounting General accounting NONROUTINE Low analyzability High variety Examples: Strategic planning Social science research Applied research Thomson Learning © 2004

85 Relationship of Department Technology to Structural and Management Characteristics
Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal ENGINEERING Mostly Organic Structure 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal CRAFT Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE Thomson Learning © 2004

86 Thompson’s Classification of Interdependence and Management Implications
Form of Interdependence Demands on Horizontal Communications, Decision Making Type of Coordination Required Priority for Locating Units Close Together Pooled (bank) Low communication Standardization, rules, procedures Divisional Structure Sequential (assembly line) Medium Plans, schedules, feedback Task Forces Reciprocal (hospital) High Mutual adjustment, cross-departmental meetings, teamwork Horizontal Structure Client Client Client Thomson Learning © 2004

87 Primary Means to Achieve Coordination for Different Levels of Task Interdependence in a Manufacturing Firm INTERDEPENDENCE COORDINATION High Reciprocal (new product development) Horizontal structure, cross-functional teams Face-to-face communication, Unscheduled meetings, Full-time integrators Scheduled meetings, task forces Vertical communication Plans Rules Mutual Adjustment Sequential (product manufacture) Planning Pooled (product delivery) Standardization Low Thomson Learning © 2004 Source: Adapted from Andrew H. Van de Ven, Andre Delbecq, and Richard Koenig, “Determinants of Communication Modes Within Organizations,” American Sociological Review 41 (1976): 330.

88 Relationships Among Interdependence and Other Characteristics of Team Play
Baseball Football Basketball Interdependence: Pooled Sequential Reciprocal Physical dispersion of players: High Medium Low Coordination: Rules that govern the sport Game plan and position roles Mutual adjustment and shared responsibility Key management job: Select players and develop their skills Prepare and execute game Influence flow of game Source: Based on William Passmore, Carol E. Francis, and Jeffrey Halderman, “Sociotechnical Systems: A North American Reflection On the Empirical Studies of the 70’s,” Human Relations 35 (1982): Thomson Learning © 2004

89 Sociotechnical Systems Model
The Social System Individual and team behaviors Organizational/team culture Management practices Leadership style Degree of communication and openness Individual needs and desires The Technical System Type of production technology (small batch, mass production, FMS, etc.) Level of interdependence (pooled, sequential, reciprocal) Physical work setting Complexity of production process (variety and analyzability) Nature of raw materials Time pressure Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities Sources: Based on T. Cummings, “Self-Regulating Work Groups: A Socio-Technical Synthesis,” Academy of Management Review 3 (1978): ; Don Hellriegel, John W. Slocum, and Richard W. Woodman, Organizational Behavior, 8th ed. (Cincinnati, Ohio: South-Western College Publishing, 1998), 492; and Gregory B. Northcraft and Margaret A. Neale, Organizational Behavior: A Management Challenge, 2nd ed. (Fort Worth, Tex.: The Dryden Press, 1994), 551. Thomson Learning © 2004

90 Technology Comparison
Workbook Activity Technology Comparison McDonald’s Subway Family Restaurant Organization Goals Authority Structure Woodward’s Technology Type Mechanistic vs. Organic Teamwork vs. Individual Interdependence Routine vs. Nonroutine tasks Task Specialization Task Standardization Technical vs. Social Expertise Centralized vs. Decentralized Thomson Learning © 2004

91 Information Technology and Control
Chapter Eight Information Technology and Control Thomson Learning © 2004

92 Evolution of Organizational Applications of Information Technology
3. Strategic Weapon TOP (strategy, plans, non-programmed) INTERNAL EXTERNAL Knowledge Management Intranets Enterprise resource planning Extranets E-Commerce Integrated Enterprise 2. Business Resource Management Information systems Decision Support Systems Executive information · Management control systems · Balanced Scorecard MANAGEMENT LEVEL Direction of Information System Evolution 1. Operations Transaction processing systems Data warehousing FIRST-LINE (operational, past, programmed) LOW SYSTEM COMPLEXITY HIGH Thomson Learning © 2004

93 A Simplified Feedback Control Model
Set Strategic Goals Establish Standards of Performance Take Corrective Action as Needed Measure Actual Performance and Compare to Standards Thomson Learning © 2004

94 Major Perspectives of the Balanced Scorecard
Financial Do actions contribute to improving financial performance? Examples of measures: profits, return on investment Customers How well do we serve our customers? Examples of measures: customer satisfaction, customer loyalty Internal Business Processes Does the chain of internal activities and processes add value for customers and shareholders? Examples of measures: order-rate fulfillment, cost-per-order Mission Strategy Goals Learning and Growth Are we learning and changing? Examples of measures: continuous process improvement, employee retention, new product introductions Sources: Based on Robert S. Kaplan and David P. Norton, “Using The Balanced Scorecard as a Strategic Management System,” Harvard Business Review, January-February 1996, 71-79; Chee W. Chow, Kamal M. Haddad, and James E. Williamson, “Applying the Balanced Scorecard to Small Companies,” Management Accounting 79, No. 2 (August 1997), 21-27; and Cathy Lazere, “All Together Now,” CFO, February 1998, Thomson Learning © 2004

95 Example of ERP Network Central Database Sales Financial and Accounting
Purchasing Human Resources Inventory and Manufacturing Distribution Thomson Learning © 2004

96 Two Approaches to Knowledge Management
Explicit Provide high-quality, reliable, and fast information systems for access of codified, reusable knowledge Tacit Channel individual expertise to provide creative advice on strategic problems People-to-documents Develop an electronic document system that codifies, stores, disseminates, and allows reuse of knowledge Invest heavily in information technology, with a goal of connecting people with Reusable, codified knowledge Person-to-person Develop networks for linking people so that tacit knowledge can be shared Invest moderately in information technology, with a goal of facilitating conversations and the ex- change of tacit knowledge Knowledge Management Strategy Technology Thomson Learning © 2004 Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney, “What’s Your Strategy for Managing Knowledge?” Harvard Business Review, March-April 1999,

97 Electronic Data Interchange for International Transactions
Manufacturer’s Bank’ Customer’s Bank Suppliers MANUFACTURER Customer Export Freight Forwarder Import Clearing Agent Export Customs Import Customs Thomson Learning © 2004

98 Key Characteristics of Traditional vs
Key Characteristics of Traditional vs. Emerging Interorganizational Relationships Traditional Interorganizational Relationships Emerging Interorganizational Relationships Arm’s-length relationship Use of telephone, mail, some EDI for ordering, invoicing, payments Interactive, electronic relationship Electronic ordering, invoicing, payments Suppliers Limited communication with manufacturer Mix of phone response, mail hard copy information Direct access to manufacturer, real-time information exchange Electronic access to product information, consumer ratings, customer service data Customers Thomson Learning © 2004 Source: Based on Charles V. Callahan and Bruce A. Pasternack, “Corporate Strategy in the Digital Age,” Strategy & Business, Issue 15, Second Quarter 1999,

99 Organization Size, Life Cycle, and Decline
Chapter Nine Organization Size, Life Cycle, and Decline Thomson Learning © 2004

100 Differences Between Large and Small Organizations
Economies of scale Global reach Vertical hierarchy Mechanistic Complex Stable market Career longevity and stability SMALL Responsive Flexible Regional reach Flat structure Organic Simple Niche finding Entrepreneurs Thomson Learning © 2004 Source: Based on John A. Byrne, “Is Your Company Too Big?” Business Week, 27 March 1989,

101 Organizational Life Cycle
Streamlining, small-company thinking Large Development of teamwork Continued maturity S I Z E Addition of internal systems Decline Crisis: Need for revitalization Provision of clear direction Crisis: Need to deal with too much red tape Creativity Crisis: Need for delegation with control Crisis: Need for leadership 1. Entrepreneurial Stage 2. Collectivity Stage 3. Formalization Stage 4. Elaboration Stage Small ORGANIZATION STAGES OF DEVELOPMENT Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): Thomson Learning © 2004

102 Organization Characteristics During Four Stages of Life Cycle
1. Entrepreneurial 2. Collectivity 3. Formalization 4. Elaboration Characteristic Nonbureaucratic Prebureaucratic Bureaucratic Very Bureaucratic Structure Informal, one-person show Mostly informal, some procedures Formal procedures, division of labor, specialties added Teamwork within bureaucracy, small-company thinking Products or services Single product or service Major product or service with variations Line of products or services Multiple product or services lines Reward and control systems Personal, paternalistic Personal, contribution to success Impersonal, formalized systems Extensive, tailored to product and department Innovation By owner-manager By employees and managers By separate innovation group By institutionalized R&D Goal Survival Growth Internal stability, market expansion Reputation, complete organization Top Management Style Individualistic, entrepreneurial Charismatic, direction-giving Delegation with control Team approach, attack bureaucracy Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt, “Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967): 102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard Business Review 51 (March-April 1973): ; Robert E. Quinn and Kim Cameron; “Organizational Life Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): Thomson Learning © 2004

103 Weber’s Dimensions of Bureaucracy and Bases of Organizational Authority
1. Rules and procedures Specialization and division of labor Hierarchy of authority Technically qualified personnel Separate position and incumbent Written communications and records LEGITIMATE BASES OF AUTHORITY Rational-legal Traditional Charismatic Thomson Learning © 2004

104 Percentage of Personnel Allocated to Administrative and Support Activities
Line employees 75 Percentage of Employees Top administrators 50 Professional staff 25 Clerical Small Large Organization Size Thomson Learning © 2004

105 Three Organizational Control Strategies
TYPE Bureaucratic Market Clan REQUIREMENTS Rules, standards, hierarchy, legitimate authority Prices, competition, exchange relationship Tradition, shared values and beliefs, trust Source: Based upon William G. Ouchi, “A Conceptual Framework for the Design of Organizational Control Mechanisms,” Management Science 25 (1979): Thomson Learning © 2004

106 Evaluation of Control On the Job
Workbook Activity Evaluation of Control On the Job Your job responsibilities How your boss controls Positives of this control Negatives of this control How you would improve control 1. 2. 3. 4. Thomson Learning © 2004

107 Evaluation of Control At the University
Workbook Activity Evaluation of Control At the University How Prof. A (small class) controls How Prof. B (large class) controls How these controls influence you What you think is a better control Item 1. 2. 3. 4. Thomson Learning © 2004

108 Organizational Culture and Ethical Values
Chapter Ten Organizational Culture and Ethical Values Thomson Learning © 2004

109 Levels of Corporate Culture
Observable Symbols Ceremonies, Stories, Slogans, Behaviors, Dress, Physical Settings Underlying Values, Assumptions, Beliefs, Attitudes, Feelings Thomson Learning © 2004

110 A Typology of Organizational Rites and Their Social Consequences
Type of Rite Example Social Consequences Passage Induction and basic training; US Army Facilitate transition of person into new social roles and statuses Enhancement Annual awards night Enhance social identities and increase status of members Renewal Organizational development activities Refurbish social structures and improve organization functioning Integration Office holiday party Encourage and revive common feelings that bind members together and commit them to the organization Source: Adapted from Harrison M. Trice and Janice M. Beyer, “Studying Organizational Cultures through Rites and Ceremonials,” Academy of Management Review 9 (1984), Used with permission. Thomson Learning © 2004

111 Relationship of Environment and Strategy to Corporate Culture
Needs of the Environment Flexibility Stability External Adaptability Culture Mission Culture Strategic Focus Clan Culture Bureaucratic Culture Internal Sources: Based on Daniel R. Denison and Aneil K. Mishra, “Toward a Theory of Organizational Culture and Effectiveness,” Organization Science 6, no. 2 (March-April 1995): ; R. Hooijberg and F. Petrock, “On Culture Change: Using the Company Values Framework to Help Leaders Execute a Transformational Study,” Human Resource Management 32 (1993): 29-50; and R. E. Quinn, Beyond Rational Management: Mastering the Paradoxes And Competing Demands of High Performance (San Francisco: Jossey-Bass, 1988). Thomson Learning © 2004

112 Ethical Values in Organizations
Ethics Rule of Law Managerial Ethics Social Responsibility Ethical Dilemma Thomson Learning © 2004

113 Forces That Shape Managerial Ethics
Personal Ethics Organizational Culture Beliefs and Values Moral Development Ethical Framework Rituals, Ceremonies Stories, Heroes Language, Slogans Symbols Founder, History Is Decision or Behavior Ethical and Socially Responsible? Organizational Systems External Stakeholders Structure Policies, Rules Code of Ethics Reward System Selection, Training Government Regulations Customers Special Interest Groups Global Market Forces Thomson Learning © 2004

114 Formal Structure and Systems of the Organization
Ethics committee Chief Ethics Officer Whistle-blowing Code of ethics Training programs Thomson Learning © 2004

115 Shop ‘Til You Drop Culture Item Discount Store Department
Workbook Activity Shop ‘Til You Drop Culture Item Discount Store Department 1. Mission of store: 2. Individual initiative: 3. Reward system: 4. Teamwork: 5. Company loyalty: 6. Dress: 7. Diversity of employees: 8. Service orientation: 9. Human resource development: Thomson Learning © 2004

116 Chapter Eleven Innovation and Change Thomson Learning © 2004

117 Forces Driving the Need for Major Organizational Change
Global Changes, Competition and Markets Technological Change International Economic Integration Maturation of Markets in Developed Countries Fall of Communist and Socialist Regimes More Threats More domestic competition Increased Speed International competition More Opportunities Bigger markets Fewer barriers More international markets More Large-Scale Changes in Organizations Structure change Mergers, joint ventures, consortia Strategic change Horizontal organizing, teams, networks Culture change New technologies, products Knowledge management, enterprise New business processes resource planning E-business Quality programs Learning organizations Source: Based on John P. Kotter, The New Rules: How to Succeed in Today’s Post-Corporate World (New York: The Free Press, 1995). Thomson Learning © 2004

118 Incremental vs. Radical Change
Incremental Change Radical Change Continuous progression Paradigm-breaking burst Affect organizational part Transform entire organization Through normal structure and management processes Create new structure and management Technology improvements Breakthrough technology Product improvement New products, new markets Sources: Based on Alan D. Meyer, James B. Goes, and Geoffrey R. Brooks, “Organizations in Disequilibrium: Environmental Jolts and Industry Revolutions,” in George Huber and William H. Glick, eds., Organizational Change and Redesign (New York: Oxford University Press, 1992), ; and Harry S. Dent, Jr., “Growth through New Product Development,” Small Business Reports (November 1990): Thomson Learning © 2004

119 Four Types of Change Technology Products and Services
Changes in production process Products and Services Changes in outputs Strategy and Structure Administrative changes Culture Changes in values, attitudes, behaviors Thomson Learning © 2004

120 Sequence of Elements for Successful Change
Environment Internal Creativity and Inventions Suppliers Professional Associations Consultants Research literature Organization 1. Ideas 3. Adoption 4.Implementation 2. Needs Customers Competition Legislation Regulation Labor force 5. Resources Perceived Problems or Opportunities Thomson Learning © 2004

121 Division of Labor Between Departments to Achieve Changes in Technology
General Manager Creative Department (Organic Structure) Using Department (Mechanistic Structure) Thomson Learning © 2004

122 Probability of New Product Success
Technical completion (technical objectives achieved) .57 Commercialization (full-scale marketing) .31 Market Success (earns economic returns) .12 Thomson Learning © 2004 Source: Based on Edwin Mansfield, J. Rapaport, J. Schnee, S. Wagner, and M. Hamburger, Research and Innovation in Modern Corporations (New York: Norton, 1971), 57.

123 Horizontal Linkage Model for New Product Innovations
Environment Organization Environment General Manager Technical Developments Customer Needs Linkage R&D Department Linkage Marketing Department Linkage Linkage Linkage Production Department Thomson Learning © 2004

124 Dual-Core Approach to Organization Change
Type of Innovation Desired Administrative Structure Technology Administrative Core Technical Core Direction of Change: Top-Down Bottom-Up Examples of Change: Strategy Production Downsizing techniques Structure Workflow Best Organizational Design for Change: Mechanistic Organic Thomson Learning © 2004

125 Culture Change Reengineering and Horizontal Organization Diversity
The Learning Organization Thomson Learning © 2004

126 OD Culture Change Interventions
Large Group Intervention Team Building Interdepartmental Activities Thomson Learning © 2004

127 Stages of Commitment to Change
Preparation Initial contact Awareness Acceptance Understanding Decision to implement Commitment Installation Institutionalization Thomson Learning © 2004

128 Barriers to Change Excessive focus on costs
Failure to perceive benefits Lack of coordination and cooperation Uncertainty avoidance Fear of loss Thomson Learning © 2004

129 Techniques for Change Implementation
Establish a sense of urgency for change. Establish a coalition to guide the change. Create a vision and strategy for change. Find an idea that fits the need. Develop plans to overcome resistance. Create change teams. Foster idea champions. Thomson Learning © 2004

130 Innovation Measures A B C Measure Your Organization Other Organization
Workbook Activity Innovation Measures Measure A Your Organization B Other Organization C Your Ideal 1. Creativity encouraged 2. Diverse problem-solving 3. Time for creative ideas 4. Rewards for innovation 5. Flexible, open to change 6. Follow orders from top 7. Think and act like others 8. Concern for status quo 9. Don’t rock the boat 10. New ideas not funded Thomson Learning © 2004

131 Decision-Making Processes
Chapter Twelve Decision-Making Processes Thomson Learning © 2004

132 Today’s Business Environment
New strategies Reengineering Restructuring Mergers/Acquisitions Downsizing New product/market development . . . Etc. Thomson Learning © 2004

133 Decisions Made Inside the Organization
Complex, emotionally charged issues More rapid decisions Less certain environment Less clarity about means/outcomes Requires more cooperation Thomson Learning © 2004

134 A New Decision-Making Process
Required because no one person has enough info to make all major decisions No one person has enough time and credibility to convince many Relies less on hard data Guided by powerful coalition Permits trial and error approach Thomson Learning © 2004

135 Steps in the Rational Approach to Decision-Making
IDENTIFICATION PROBLEM SOLUTION Monitor Decision Environment Implement Chosen Alternative Define Problem Specify Objectives Diagnose Develop Solutions Evaluate Alternatives Choose Best 1 2 3 4 5 6 7 8 Thomson Learning © 2004

136 Constraints and Trade-offs During Non-programmed Decision-Making
Bounded Rationality: Limited time, information, resources to deal with complex, multidimensional issues Decision/ Choice: Search for a high-quality decision alternative Trade-off Personal Constraints: Desire for prestige, success; personal decision style; and the need to satisfy emotional needs, cope with pressure, maintain self-concept Trade-off Trade-off Trade-off Organizational Constraints: Need for agreement, shared perspective, cooperation, support, corporate culture and structure, ethical values Trade-off Sources: Adapted from Irving L. Janis, Crucial Decisions (New York: Free Press, 1989); and A. L. George, Presidential Decision Making in Foreign Policy: The Effective Use of Information and Advice (Boulder, Colo.: Westview Press, 1980). Thomson Learning © 2004

137 Choice Processes in the Carnegie Model
Uncertainty Coalition Formation Search Information is limited Managers have many constraints Hold joint discussion and interpret goals and problems Share opinions Establish problem priorities Obtain social support for problem, solution Conduct a simple, local search Use established procedures if appropriate Create a solution if needed Conflict Managers have diverse goals, opinions, values, experience Satisficing Adopt the first alternative that is acceptable to the coalition Thomson Learning © 2004

138 The Incremental Decision Process Model
· Identification Phase Recognition Diagnosis Development Phase Search Screen Design Selection Phase Judgment (evaluation – choice) Analysis (evaluation) Bargaining (evaluation – choice) Authorization Dynamic Factors Thomson Learning © 2004

Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain PROBLEM IDENTIFICATION PROBLEM SOLUTION When problem identification is uncertain, Carnegie model applies Political and social process is needed Build coalition, seek agreement, and resolve conflict about goals and problem priorities When problem solution is uncertain, Incremental process model applies Incremental, trial-and-error process is needed Solve big problems in little steps Recycle and try again when blocked Thomson Learning © 2004

140 Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making
Problems Solutions Middle Management Problems Solutions Choice Opportunities Participants Participants Participants Choice Opportunities Choice Opportunities Department A Solutions Department B Problems Solutions Choice Opportunities Participants Choice Opportunities Problems Solutions Choice Opportunities Participants Problems Participants Solutions Problems Problems Solutions Thomson Learning © 2004 Participants Participants

141 Contingency Framework for Using Decision Models
Problem Consensus Certain Uncertain 1 2 Certain Individual: Rational Approach Computation Organization: Management Science Individual: Bargaining, Coalition Formation Organization: Carnegie Model Solution Knowledge 3 Individual: Judgment Trial-and-error Organization: Incremental Decision Process Model 4 Individual: Bargaining and Judgment Inspiration and Imitation Learning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can Uncertain Thomson Learning © 2004

142 Special Decision Circumstances
High-Velocity Environments Decision Mistakes and Learning Escalating Commitment Thomson Learning © 2004

143 Decision Styles Your decisions Approach used
Workbook Activity Decision Styles Your decisions Approach used Advantages and disadvantages Your recommended decision style 1. 2. Decisions by others Thomson Learning © 2004

144 Conflict, Power and Politics
Chapter Thirteen Conflict, Power and Politics Thomson Learning © 2004

145 Marketing – Manufacturing Areas of Potential Goal Conflict
MARKETING VS MANUFACTURING Operative goal is Operative goal is Goal Conflict customer satisfaction production efficiency Conflict Area Typical Comment Typical Comment Breadth of product line: “Our customers “The product line is too demand variety.” broad, all we get are short, uneconomical runs.” New product introduction: “New products are our “Unnecessary design changes lifeblood.” are prohibitively expensive.” Production scheduling: “We need faster response “We need realistic customer Lead times are too long.” commitments that don’t change like the wind direction Physical distribution: “Why don’t we ever have “We can’t afford to keep huge the right merchandise inventories.” in inventory?” Quality: “Why can’t we have “Why must we always offer reasonable quality options that are too at low cost?” expensive and offer little customer utility?” Sources: Based on Benson S. Shapiro, “Can Marketing and Manufacturing Coexist?” Harvard Business Review 55 (September-October 1977): ; and Victoria L. Crittenden, Lorraine R. Gardiner, and Antonie Stam, “Reducing Conflict Between Marketing and Manufacturing,” Industrial Marketing Management 22 (1993): Thomson Learning © 2004

146 Sources of Conflict and Use of Rational vs. Political Model
Consistent across participants Centralized Orderly, logical, rational Norm of efficiency Extensive, systematic, accurate When Conflict Is Low, Rational Model describes organization Inconsistent, pluralistic within the organization Decentralized, shifting coalitions and interest groups Disorderly, result of bargaining and interplay among interests Free play of market forces, conflict is legitimate and expected Ambiguous, information used and withheld strategically High, Political Model Goals Power and Control Decision Process Rules and Norms Information Organization Variables Sources of Potential Inter-group Conflict Goal Incompatibility Differentiation Task Interdependence Limited Resources Thomson Learning © 2004

147 Individual vs. Organizational Power
Legitimate power Reward power Coercive power Expert power Referent power Thomson Learning © 2004

148 Power vs. Authority POWER AUTHORITY
Ability to influence others to bring about desired outcomes AUTHORITY Flows down the vertical hierarchy Prescribed by the formal hierarchy Vested in the position held Thomson Learning © 2004

149 Vertical Sources of Power
Formal Position Resources Control of Decision Premises and Information Network Centrality Thomson Learning © 2004

150 Horizontal Sources of Power
High Power Low Power Thomson Learning © 2004 Source: Charles Perrow, “Departmental Power and Perspective in Industrial Firms,” in Mayer N. Zald, ed., Power in Organizations (Nashville, Tenn.: Vanderbilt University Press, 1970), 64.

151 Coping with Uncertainty
Strategic Contingencies That Influence Horizontal Power Among Departments Dependency Financial Resources Centrality Department Power Nonsubstitutability Coping with Uncertainty Thomson Learning © 2004

152 Power and Political Tactics in Organizations
Tactics for Increasing the Power Base Political Tactics for Using Power Tactics for Enhancing Collaboration 1. Enter areas of high uncertainty 1. Build coalitions 1. Create integration devices 2. Create dependencies 2. Expand networks 2. Use confrontation and negotiation 3. Provide resources 3. Control decision premises 3. Schedule inter-group consultation 4. Satisfy strategic contingencies 4. Enhance legitimacy and expertise 4. Practice member rotation 5. Make preferences explicit, but keep power implicit 5. Create superordinate goals Thomson Learning © 2004

153 Negotiating Strategies
Win-Win Strategy Define the conflict as a mutual problem Pursue joint outcomes Find creative agreements that satisfy both groups Use open, honest, and accurate communication Avoid threats Communicate flexibility Win-Lose Strategy Define the conflict as a win-lose situation Pursue self outcomes Force other group into submission Use deceitful, inaccurate communication Use threats Communicate rigidity Thomson Learning © 2004 Source: Adapted from David W. Johnson and Frank P. Johnson, Joining Together: Group Theory and Group Skills (Englewood Cliffs, N. J.: Prentice-Hall, 1975),

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