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Presentation on theme: "Thomson Learning © 20041-1 ILMU ORGANISASI Dosen : Dedi Purwana E.S. SKS: 2 HP: 0818605827."— Presentation transcript:


2 Thomson Learning © 20041-1 ILMU ORGANISASI Dosen : Dedi Purwana E.S. SKS: 2 Email: HP: 0818605827

3 Thomson Learning © 20041-2 Chapter One Organizations and Organization Theory

4 Thomson Learning © 20041-3 Organization Theory in Action Topics Current Challenges Global Competition Ethics and Social Responsibility Speed of Responsiveness The Digital Workplace Diversity

5 Thomson Learning © 20041-4 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

6 Thomson Learning © 20041-5 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

7 Thomson Learning © 20041-6 Transformation Process An Open System and Its Subsystems Environment Raw Materials People Information resources Financial resources Input Subsystems Boundary Spanning Production, Maintenance, Adaptation, Management Boundary Spanning Products and Services Output

8 Thomson Learning © 20041-7 Five Basic Parts of an Organization Top Management Technical Support Technical Core Administrative Support Middle Management Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116.

9 Thomson Learning © 20041-8 Goals and Strategy EnvironmentSize Culture Technology Structure 1.Formalization 2.Specialization 3.Hierarchy of Authority 4.Centralization 5.Professionalism 6.Personnel Ratios

10 Thomson Learning © 20041-9 Organization Chart Illustrating the Hierarchy of Authority for a Community Job Training Program Board of Directors Assistant Executive Director for Human Services Executive Committee Executive Director Advisory Committee Director Economic Dev. Assistant Executive Director for Community Service Director Reg. Planning Director Housing Director Criminal Justice Director Finance Director AAA Director CETA Secretary Lead Counsel Lead Counsel Asst. Director Finance Records Clerk SecretaryAdm. AsstPayroll ClerkSecretaryMIS SpecialistStaff ClerkAdm. Asst. Alcohol Coord. Public Info Coord. Account. Contract Fiscal Manager CETA Couns. Devs. Title II D &VI&VII CETA Planner Housing Coord. CETA Couns. Devs. Title II ABC CETA Intake & Orient CETA Couns. Devs. Youth IV Program Spec. AAA Program Planner AAA Level 1 Level 2 Level 3 Level 4 Level 5

11 Thomson Learning © 20041-10 Characteristics of Three Organizations TECHNOLOGY Manufacturing Retailing Government Service SIZE (#employees) 6,000 250,000 35

12 Thomson Learning © 20041-11 Two Organization Design Approaches 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 Mechanical System Design Natural System Design 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)

13 Thomson Learning © 20041-12 Organizational Dimensions High Formalization1 - 45 - 67 - 10Low Formalization High Specialization1 - 4 5 - 67 - 10Low Specialization Tall Hierarchy1 - 4 5 - 67 - 10Flat Hierarchy Product Technology1 - 4 5 - 67 - 10Service Technology Stable Environment 1 - 4 5 - 67 - 10Unstable Environment Strong Culture1 - 4 5 - 67 - 10Weak Culture High Professionalism1 - 4 5 - 67 - 10Low Professionalism Well-Defined Goals1 - 4 5 - 67 - 10Poorly-Defined Goals Small Size1 - 4 5 - 67 - 10Large Size Modern1 - 4 5 - 67 - 10Postmodern Workbook Activity

14 Thomson Learning © 20041-13 Xerox High Formalization1 - 45 - 67 - 10Low Formalization High Specialization1 - 4 5 - 67 - 10Low Specialization Tall Hierarchy1 - 4 5 - 67 - 10Flat Hierarchy Product Technology1 - 4 5 - 67 - 10Service Technology Stable Environment1 - 4 5 - 67 - 10Unstable Environment Strong Culture1 - 4 5 - 67 - 10Weak Culture High Professionalism1 - 4 5 - 67 - 10Low Professionalism Well-Defined Goals1 - 4 5 - 67 - 10Goals Not Defined Small Size1 - 4 5 - 67 - 10Large Size Modern1 - 4 5 - 67 - 10Postmodern Use for 1959-1990, Use for 1990-present Workbook Activity

15 Thomson Learning © 20041-14 Chapter Two Strategy, Organization Design, and Effectiveness

16 Thomson Learning © 20041-15 Top Management Role in Organization Direction, Design, and Effectiveness CEO, Top Management Team External Environment Opportunities Threats Uncertainty Resource Availability Internal Situation Strengths Weaknesses Distinctive Competence Leadership Style Past Performance Strategic Direction Organization Design Effectiveness Outcomes Define mission, official goals Select operational goals, competitive strategies Resources Efficiency Goal attainment Competing values Structural Form – learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages 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): 183-212

17 Thomson Learning © 20041-16 Goal Type and Purpose Type of GoalsPurpose of Goals Official Goals, mission: Legitimacy Operative goals:Employee direction and motivation Decision guidelines Standard of performance

18 Thomson Learning © 20041-17 Porter’s Competitive Strategies Competitive Scope Competitive Advantage StrategyExample BroadLow Cost Low-Cost LeadershipDell Computer BroadUniquenessDifferentiation Starbucks Coffee Co. NarrowLow Cost Focused Low-Cost Leadership Enterprise Rent-a- Car NarrowUniqueness Focused Differentiation Edward Jones Investments

19 Thomson Learning © 20041-18 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), 100-113; 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), 546-562

20 Thomson Learning © 20041-19 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), 100-113; 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), 546-562

21 Thomson Learning © 20041-20 Contingency Factors Affecting Organization Design Strategy Environment Technology Size/ Life Cycle Culture Organizational Structure and Design The Right Mix of Design Characteristics Fits the Contingency Factors

22 Thomson Learning © 20041-21 Contingency Approaches to the Measurement of Organizational Effectiveness Organization Internal activities and processes Resource Inputs Product and Service Outputs Resource-based approach Internal process approach Goal approach External Environment

23 Thomson Learning © 20041-22 Reported Goals of U.S. Corporations Goal% Corporations Profitability89 Growth82 Market Share66 Social Responsibility65 Employee welfare62 Product quality and service60 Research and development54 Diversification51 Efficiency50 Financial stability49 Resource conservation39 Management development35 Source: Adapted from Y. K. Shetty, “New Look at Corporate Goals,” California Management Review 22, no. 2 (1979), pp. 71-19.

24 Thomson Learning © 20041-23 Four Models of Effectiveness Values Human Relations Emphasis Primary Goal: human resource development Subgoals: cohesion, morale, training Internal Process Emphasis Primary Goal: stability, equilibrium Subgoals: information management, communication Rational Goal Emphasis Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting Open Systems Emphasis Primary Goal: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation Flexibility Control Internal External STRUCTURE FOCUSFOCUS 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): 363-377; and Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51.

25 Thomson Learning © 20041-24 ORGANIZATION B ORGANIZATION A Effectiveness Values for Two Organizations Human Relations Emphasis Internal Process Emphasis Rational Goal Emphasis Open Systems Emphasis STRUCTURE FOCUSFOCUS FLEXIBILITY CONTROL INTERNALEXTERNAL

26 Thomson Learning © 20041-25 Identifying Company Goals and Strategies Goals from Exhibit 2.8 Strategies from Porter Company #1 Company #2 Company #3 Workbook Activity

27 Thomson Learning © 20041-26 Competing Values and Organizational Effectiveness Workshop Activity

28 Thomson Learning © 20041-27 Chapter Three Fundamentals of Organization Structure

29 Thomson Learning © 20041-28 A Sample Organization Chart

30 Thomson Learning © 20041-29 The Relationship of Organization Design to Efficiency vs. Learning Outcomes Horizontal Organization Designed for Learning Vertical Organization Designed for Efficiency Dominant Structural Approach Horizontal structure is dominant Shared tasks, empowerment Relaxed hierarchy, few rules Horizontal, face-to-face communication Many teams and task forces Decentralized decision making Vertical structure is dominant Specialized tasks Strict hierarchy, many rules Vertical communication and reporting systems Few teams, task forces or integrators Centralized decision making

31 Thomson Learning © 20041-30 Ladder of Mechanisms for Horizontal Linkage and Coordination HIGHLOW Information Systems Direct Contact Task Forces Full-time Integrators Teams Amount of Horizontal Coordination Required Cost of Coordination in Time and Human Resources H IGH

32 Thomson Learning © 20041-31 Project Manager Location in the Structure President Finance Department Financial Accountant Budget Analyst Management Accountant Engineering Department Product Designer Draftsperson Electrical Designer Marketing Department Market Researcher Advertising Specialist Market Planner Purchasing Department Buyer Project Manager New Product B Project Manager New Product A Project Manager New Product C

33 Thomson Learning © 20041-32 Teams Used for Horizontal Coordination at Wizard Software Company Videogames Chief Engineer Programming Vice Pres Customer Service Manager Videogames Basic Research Supervisor Research Vice Pres Applications and Testing Supervisor Procurement Supervisor Videogames Sales Manager Marketing Vice Pres. Memory Products International Manager Advertising Manager Memory Products Chief Programmer Memory Products Research Supervisor Memory Products Sales Manager President Videogames Product Team Memory Products Team

34 Thomson Learning © 20041-33 Structural Design Options for Grouping Employees into Departments EngineeringMarketingManufacturing CEO Functional Grouping Divisional Grouping Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.

35 Thomson Learning © 20041-34 Strengths and Weaknesses of Functional Organization Structure STRENGTHS: 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.

36 Thomson Learning © 20041-35 Strengths and Weaknesses of Divisional Organization Structure STRENGTHS: 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.

37 Thomson Learning © 20041-36 Reorganization from Functional Structure to Divisional Structure at Info-Tech R&DManufacturingAccountingMarketing Info-Tech President Functional Structure Divisional Structure

38 Thomson Learning © 20041-37 Structural Design Options for Grouping Employees (Continued) Multifocused Grouping CEO ManufacturingMarketing Product Division 2 Product Division 1 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.

39 Thomson Learning © 20041-38 Structural Design Options for Grouping Employees (Continued) Horizontal Grouping CEO FinanceHuman Resources Core Process 2 Core Process 1 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.

40 Thomson Learning © 20041-39 Geographical Structure for Apple Computer CEO Steve Jobs Apple Europe Apple Pacific France Apple Products Asia Japan Australia Apple Americas Canada Latin America/ Caribbean Sales Service and Marketing to Regions Source:

41 Thomson Learning © 20041-40 Product Manager A Product Manager B Product Manager C Product Manager D Director of Product Operations Design Vice President Mfg Vice President Marketing Vice President Controller Procure- ment Manager President Dual-Authority Structure in a Matrix Organization

42 Thomson Learning © 20041-41 STRENGTHS: 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 Strengths and Weaknesses of Matrix Organization Structure Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,”Organizational Dynamics (Winter 1979): 429.

43 Thomson Learning © 20041-42 Matrix Structure for Worldwide Steel Company President Industrial Relations Vice President Mfg. Services Vice President Finance Vice President Marketing Vice President Mfg. Vice President Metallurgy Vice President Field Sales Vice President Open Die Business Mgr. Ring Products Business Mgr. Wheels & Axles Business Mgr. Steelmaking Business Mgr. Vertical Functions Horizontal Product Lines

44 Thomson Learning © 20041-43 A Horizontal Structure Team 3 Team 2 Team 1 Top Management Team 3 Team 2 Team 1 Customer Process Owner Process Owner Testing Product Planning Research Market Analysis New Product Development Process Distrib. Material Flow Purchasing Analysis 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, 92-98.

45 Thomson Learning © 20041-44 Strengths and Weaknesses of Horizontal Structure STRENGTHS: 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, 6 th ed., (Cincinnati, Ohio: South-Western College Publishing, 1998) 253.

46 Thomson Learning © 20041-45 Functional Structure Hybrid Structure Part 1. Sun Petrochemical Products President Technology Vice President Financial Services Vice Pres. Human Resources Director Chief Counsel Chemicals Vice President Lubricants Vice President Fuels Vice President Product Structure Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.

47 Thomson Learning © 20041-46 Hybrid Structure Part 2. Ford Customer Service Division Director and Process Owner Director and Process Owner Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34. Human Resources Strategy and CommunicationFinance Vice President and General Manager Teams Director and Process Owner Teams Technical Support Group Vehicle Service Group Parts Supply / Logistics Group Functional Structure Horizontal Structure Teams

48 Thomson Learning © 20041-47 Organization Contextual Variables that Influence Structure 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, 2 nd ed. (Reading, Mass.: Addison-Wesley, 1994), Ch.1; Jay R. Galbraith, Organization Design (Reading, Mass.: Addison-Wesley, 1977), Ch. 1.

49 Thomson Learning © 20041-48 The Relationship of Structure to Organization’s Need for Efficiency vs. Learning Horizontal Structure Dominant Structural Approach Horizontal: Coordination Learning Innovation Flexibility Vertical: Control Efficiency Stability Reliability Matrix Structure Divisional Structure Functional with cross-functional teams, integrators Functional Structure Modular Structure

50 Thomson Learning © 20041-49 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

51 Thomson Learning © 20041-50 Chapter Four The External Environment

52 Thomson Learning © 20041-51 (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 An Organization’s Environment (j) International Sector (d) Financial Resources Sector (e) Market Sector (f) Technology Sector (g) Economic Conditions Sector (a) Industry Sector (h) Government Sector (c) Human Resources Sector (b) Raw Materials Sector (i) Sociocultural Sector ORGANIZATION DOMAIN

53 Thomson Learning © 20041-52 Market Sub-environment Customers Advertising Competitors agencies Distribution system Manufacturing Sub-environment Labor Raw Suppliers materials Production equipment Scientific Sub-environment Scientific Research journals centers Professional associations Organizational Departments Differentiate to Meet Needs of Sub-environments President R & D Division Sales Division Manufacturing Division

54 Thomson Learning © 20041-53 Differences in Goals and Orientations Among Organizational Departments Characteristic R & D Department Manufacturing Department Sales Department Goals New developments, quality Efficient production Customer satisfaction Time HorizonLongShort Interpersonal OrientationMostly taskTaskSocial Formality of StructureLowHigh Source: Based on Paul R. Lawrence and Jay W. Lorsch, Organization and Environment (Homewood, Ill.: Irwin, 1969), pp. 23-29.

55 Thomson Learning © 20041-54 Environmental Uncertainty and Organizational Integrators Industry: PlasticsFoodsContainer Environmental UncertaintyHighModerateLow Departmental DifferentiationHighModerateLow 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.

56 Thomson Learning © 20041-55 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.

57 Thomson Learning © 20041-56 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 1. Organic structure, teamwork; participative, decentralized 2. Many departments differentiated, extensive boundary spanning 3. Many integrating roles 4. Extensive planning, forecasting; high speed response Low-Moderate Uncertainty 1. Mechanistic structure; formal, centralized 2. Many departments, some boundary spanning 3. Few integrating roles 4. Some planning; moderate speed response Contingency Framework for Environmental Uncertainty and Organizational Responses Uncertainty ENVIRONMENTAL CHANGE STABLE ENVIRONMENTAL COMPLEXITY UNSTABLE SIMPLECOMPLEX

58 Thomson Learning © 20041-57 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

59 Thomson Learning © 20041-58 Relationship Between Environmental Characteristics and Organizational Actions Environmental domain (ten sectors) High complexity Establishment of favorable linkages: ownership, strategic alliances, cooptations, interlocking directorates, executive recruitment, advertising, and public relations Organic structure and systems with low formalization, decentralization, and low standardization to enable a high-speed response Many departments and boundary roles Greater differentiation and more integrators for internal coordination High uncertainty High rate of change Scarcity of valued resources Resource dependence Control of the environmental domain: change of domain, political activity, regulation, trade associations, and illegitimate activities EnvironmentOrganization

60 Thomson Learning © 20041-59 Chapter Five Interorganizational Relationships

61 Thomson Learning © 20041-60 A Framework of Interorganizational Relationships* *Thanks to Anand Narasimhan for suggesting this framework. Resource Dependence Collaborative Network Institutionalism Population Ecology Organization Type Organization Relationship DissimilarSimilar Cooperative Competitive

62 Thomson Learning © 20041-61 Changing Characteristics of Interorganizational Relationships Traditional Orientation: Adversarial New Orientation: Partnership 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 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

63 Thomson Learning © 20041-62 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

64 Thomson Learning © 20041-63 Three Mechanisms for Institutional Adaptation Example: Accounting standards, consultant training Pollution controls, school regulations Reengineering, benchmarking MoralLegal Culturally supported Social basis: Professionalism— certification, accreditation Political law, rules, sanctions Innovation visibility Events: Duty, obligation DependenceUncertainty Reasons to become similar: NormativeCoerciveMimetic Source: Adapted from W. Richard Scott, Institutions and Organizations (Thousand Oaks, Calif.: Sage, 1995).

65 Thomson Learning © 20041-64 Chapter Six Designing Organizations for the International Environment

66 Thomson Learning © 20041-65 Four Stages of International Evolution I. Domestic II. International III. Multinational IV. Global Strategic Orientation Domestically oriented Export-oriented, multidomestic MultinationalGlobal Stage of Development Initial foreign involvement Competitive positioning ExplosionGlobal 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): 259-71.

67 Thomson Learning © 20041-66 Matching Organizational Structure to International Advantage When Forces for Global Integration are... And Forces for National Responsiveness are... StrategyStructure Low ExportInternational Division HighLowGlobalizationGlobal Product Structure LowHighMultidomesticGlobal Geographic Structure High Globalization and Multidomestic Global Matrix Structure

68 Thomson Learning © 20041-67 Domestic Hybrid Structure with International Division Scientific Products Division Research & Development Human Resources Medical Products Division Europe (Sales) Electrical Products Division Corporate Finance CEO International Division Brazil (Subsidiary) Mid East (Sales) Staff (Legal, Licensing)

69 Thomson Learning © 20041-68 Partial Global Product Structure Used by Eaton Corporation EngineeringPresidentInternational Law & Corporate Relations Chairman Finance & Administration 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).

70 Thomson Learning © 20041-69 Global Matrix Structure International Executive Committee Power Transformers GermanyNorway Argentina/ Brazil Spain/ Portugal Transportation Industry Business Areas Country Managers Local Companies

71 Thomson Learning © 20041-70 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

72 Thomson Learning © 20041-71 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

73 Thomson Learning © 20041-72 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

74 Thomson Learning © 20041-73 Chapter Seven Manufacturing and Service Technologies

75 Thomson Learning © 20041-74 Core Transformation Process for a Manufacturing Company ENVIRONMENT Organization Raw Material Inputs Product or Service Outputs Core Work Processes Materials Handling Milling Inspection Assembly

76 Thomson Learning © 20041-75 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

77 Thomson Learning © 20041-76 Flexible Manufacturing Systems Computer-aided design (CAD) Computer-aided manufacturing (CAM) Integrated Information Network

78 Thomson Learning © 20041-77 NEW CHOICES TRADITIONAL CHOICES Mass Production Small batch Flexible Manufacturing Mass Customization Continuous Process Relationship of Flexible Manufacturing Technology to Traditional Technologies BATCH SIZE SmallUnlimited Customized Standardized PRODUCT FLEXIBILITY Source: Based on Jack Meredith, “The Strategic Advantages of New Manufacturing Technologies For Small Firms.” Strategic Management Journal 8 (1987): 249-58; Paul Adler, “Managing Flexible Automation,” California Management Review (Spring 1988): 34-56; and Otis Port, “Custom-made Direct from the Plant.” Business Week/21 st Century Capitalism, 18 November 1994, 158-59.

79 Thomson Learning © 20041-78 Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems CharacteristicMass ProductionFMS Structure: Span of ControlWideNarrow Hierarchical levelsManyFew TasksRoutine, repetitiveAdaptive, craft- like SpecializationHighLow Decision makingCentralizedDecentralized OverallBureaucratic, 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); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64.

80 Thomson Learning © 20041-79 Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems (cont.) CharacteristicMass ProductionFMS Human Resources: InteractionsStandaloneTeamwork TrainingNarrow, one timeBroad, frequent ExpertiseManual, technicalCognitive, 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); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64.

81 Thomson Learning © 20041-80 Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems (cont.) CharacteristicMass ProductionFMS Interorganizational: Customer DemandStableChanging SuppliersMany, 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); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64.

82 Thomson Learning © 20041-81 Differences Between Manufacturing and Service Technologies Manufacturing Technology 1.Tangible product 2.Products can be inventoried for later consumption 3.Capital asset intensive 4.Little direct customer interaction 5.Human element may be less important 6.Quality is directly measured 7.Longer response time is acceptable 8.Site of facility is moderately important Service Technology 1.Intangible product 2.Production and consumption take place simultaneously 3.Labor and knowledge intensive 4.Customer interaction generally high 5.Human element very important 6.Quality is perceived and difficult to measure 7.Rapid response time is usually necessary 8.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): 105-11; and David E. Bowen, Caren Siehl, and Benjamin Schneider, “A Framework for Analyzing Customer Service Orientations in Manufacturing,” Academy of Management Review 14 (1989): 75-95.

83 Thomson Learning © 20041-82 Configuration and Structural Characteristics of Service Organizations vs. Product Organizations ServiceProduct Structure: Separate boundary rolesFewMany Geographical dispersionMuchLittle Decision makingDecentralizedCentralized FormalizationLowerHigher Human Resources: Employee skill levelHigherLower Skill emphasisInterpersonalTechnical

84 Thomson Learning © 20041-83 Departmental Technologies CRAFT Low analyzability Low variety Examples: Performing arts Trades Fine goods manufacturing ROUTINE High analyzability Low variety Examples: Sales Clerical Drafting Auditing

85 Thomson Learning © 20041-84 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 Departmental Technologies

86 Thomson Learning © 20041-85 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 communications ENGINEERING Mostly Organic Structure 1. Moderate formalization 2. Moderate centralization 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal communications CRAFT Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE

87 Thomson Learning © 20041-86 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 Low Sequential (assembly line)Medium communication Plans, schedules, feedback Task Forces Medium Reciprocal (hospital) High communication Mutual adjustment, cross- departmental meetings, teamwork Horizontal Structure High Client

88 Thomson Learning © 20041-87 Primary Means to Achieve Coordination for Different Levels of Task Interdependence in a Manufacturing Firm Reciprocal (new product development) Sequential (product manufacture) Pooled (product delivery) COORDINATIONINTERDEPENDENCE High Low Horizontal structure, cross-functional teams Face-to-face communication, Unscheduled meetings, Full-time integrators Scheduled meetings, task forces Vertical communication Plans Rules Mutual Adjustment Planning Standardization 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.

89 Thomson Learning © 20041-88 Relationships Among Interdependence and Other Characteristics of Team Play BaseballFootballBasketball Interdependence:PooledSequentialReciprocal Physical dispersion of players: HighMediumLow 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): 1179-1204.

90 Thomson Learning © 20041-89 Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities 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 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 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 Sources: Based on T. Cummings, “Self-Regulating Work Groups: A Socio-Technical Synthesis,” Academy of Management Review 3 (1978): 625-34; Don Hellriegel, John W. Slocum, and Richard W. Woodman, Organizational Behavior, 8 th ed. (Cincinnati, Ohio: South-Western College Publishing, 1998), 492; and Gregory B. Northcraft and Margaret A. Neale, Organizational Behavior: A Management Challenge, 2 nd ed. (Fort Worth, Tex.: The Dryden Press, 1994), 551.

91 Thomson Learning © 20041-90 Technology Comparison Workbook Activity McDonald’sSubway 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

92 Thomson Learning © 20041-91 Chapter Eight Information Technology and Control

93 Thomson Learning © 20041-92 Evolution of Organizational Applications of Information Technology 1. Operations 2. Business Resource 3. Strategic Weapon Transaction processing systems Data warehousing Management Information systems Decision Support Systems Executive information systems · Management control systems · Balanced Scorecard Knowledge Management Intranets Enterprise resource planning Extranets E-Commerce Integrated Enterprise INTERNALEXTERNAL LOW SYSTEM COMPLEXITY HIGH Direction of Information System Evolution MANAGEMENT LEVEL TOP (strategy, plans, non-programmed) FIRST-LINE (operational, past, programmed)

94 Thomson Learning © 20041-93 A Simplified Feedback Control Model Set Strategic Goals Measure Actual Performance and Compare to Standards Take Corrective Action as Needed Establish Standards of Performance

95 Thomson Learning © 20041-94 Major Perspectives of the Balanced Scorecard Mission Strategy Goals 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 Financial Do actions contribute to improving financial performance? Examples of measures: profits, return on investment Learning and Growth Are we learning and changing? Examples of measures: continuous process improvement, employee retention, new product introductions Customers How well do we serve our customers? Examples of measures: customer satisfaction, customer loyalty 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, 28-36.

96 Thomson Learning © 20041-95 Example of ERP Network Central Database Financial and AccountingSales Distribution Purchasing Inventory and Manufacturing Human Resources

97 Thomson Learning © 20041-96 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 Knowledge Management Strategy 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 Technology Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney, “What’s Your Strategy for Managing Knowledge?” Harvard Business Review, March-April 1999, 106-116.

98 Thomson Learning © 20041-97 Electronic Data Interchange for International Transactions Export Freight Forwarder Manufacturer’s Bank’ Export Customs Import Customs Import Clearing Agent Customer MANUFACTURER Customer’s Bank Suppliers

99 Thomson Learning © 20041-98 Key Characteristics of Traditional vs. Emerging Interorganizational Relationships Traditional Interorganizational Relationships Emerging Interorganizational Relationships Suppliers Customers Arm’s-length relationship Use of telephone, mail, some EDI for ordering, invoicing, payments Direct access to manufacturer, real-time information exchange Electronic access to product information, consumer ratings, customer service data Limited communication with manufacturer Mix of phone response, mail hard copy information Interactive, electronic relationship Electronic ordering, invoicing, payments Source: Based on Charles V. Callahan and Bruce A. Pasternack, “Corporate Strategy in the Digital Age,” Strategy & Business, Issue 15, Second Quarter 1999, 10-14.

100 Thomson Learning © 20041-99 Chapter Nine Organization Size, Life Cycle, and Decline

101 Thomson Learning © 20041-100 Differences Between Large and Small Organizations LARGE 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 Source: Based on John A. Byrne, “Is Your Company Too Big?” Business Week, 27 March 1989, 84-94.

102 Thomson Learning © 20041-101 Organizational Life Cycle ORGANIZATION STAGES OF DEVELOPMENT 1. Entrepreneurial Stage 2. Collectivity Stage 3. Formalization Stage 4. Elaboration Stage Crisis: Need to deal with too much red tape Crisis: Need for delegation with control Crisis: Need for leadership Creativity Provision of clear direction Addition of internal systems Development of teamwork Crisis: Need for revitalization Decline Continued maturity Streamlining, small-company thinking SIZESIZE Large Small 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): 37-46.

103 Thomson Learning © 20041-102 Organization Characteristics During Four Stages of Life Cycle 1. Entrepreneurial 2. Collectivity 3. Formalization 4. Elaboration CharacteristicNonbureaucraticPrebureaucraticBureaucraticVery 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 serviceMajor product or service with variations Line of products or services Multiple product or services lines Reward and control systems Personal, paternalisticPersonal, contribution to success Impersonal, formalized systems Extensive, tailored to product and department Innovation By owner-managerBy employees and managers By separate innovation group By institutionalized R&D Goal SurvivalGrowthInternal stability, market expansion Reputation, complete organization Top Management Style Individualistic, entrepreneurial Charismatic, direction- giving Delegation with controlTeam 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): 133-48; Robert E. Quinn and Kim Cameron; “Organizational Life Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.

104 Thomson Learning © 20041-103 Weber’s Dimensions of Bureaucracy and Bases of Organizational Authority BUREAUCRACY 1. 1. Rules and procedures 2. Specialization and division of labor 3. Hierarchy of authority 4. Technically qualified personnel 5. Separate position and incumbent 6. Written communications and records LEGITIMATE BASES OF AUTHORITY 1. Rational-legal 2. Traditional 3. Charismatic

105 Thomson Learning © 20041-104 Percentage of Personnel Allocated to Administrative and Support Activities 50 75 25 0 Organization Size Small Large Line employees Top administrators Clerical Professional staff Percentage of Employees

106 Thomson Learning © 20041-105 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): 833-48.

107 Thomson Learning © 20041-106 Evaluation of Control On the Job Workbook Activity 1. 2. 3. 4. Your job responsibilities How your boss controls Positives of this control Negatives of this control How you would improve control

108 Thomson Learning © 20041-107 Evaluation of Control At the University Workbook Activity 1. 2. 3. 4. Item How Prof. A (small class) controls How these controls influence you What you think is a better control How Prof. B (large class) controls

109 Thomson Learning © 20041-108 Chapter Ten Organizational Culture and Ethical Values

110 Thomson Learning © 20041-109 Levels of Corporate Culture Observable Symbols Ceremonies, Stories, Slogans, Behaviors, Dress, Physical Settings Underlying Values, Assumptions, Beliefs, Attitudes, Feelings

111 Thomson Learning © 20041-110 A Typology of Organizational Rites and Their Social Consequences Type of RiteExampleSocial Consequences PassageInduction and basic training; US Army Facilitate transition of person into new social roles and statuses EnhancementAnnual awards nightEnhance social identities and increase status of members RenewalOrganizational development activities Refurbish social structures and improve organization functioning IntegrationOffice holiday partyEncourage 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), 653-659. Used with permission.

112 Thomson Learning © 20041-111 Relationship of Environment and Strategy to Corporate Culture Needs of the Environment Strategic Focus Adaptability Culture Clan Culture Bureaucratic Culture Mission Culture Flexibility External Internal Stability 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): 204-23; 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).

113 Thomson Learning © 20041-112 Ethical Values in Organizations Ethics Rule of Law Managerial Ethics Social Responsibility Ethical Dilemma

114 Thomson Learning © 20041-113 Forces That Shape Managerial Ethics Is Decision or Behavior Ethical and Socially Responsible? Beliefs and Values Moral Development Ethical Framework Rituals, Ceremonies Stories, Heroes Language, Slogans Symbols Founder, History Government Regulations Customers Special Interest Groups Global Market Forces Structure Policies, Rules Code of Ethics Reward System Selection, Training External StakeholdersOrganizational Systems Personal EthicsOrganizational Culture

115 Thomson Learning © 20041-114 Formal Structure and Systems of the Organization Ethics committee Chief Ethics Officer Whistle-blowing Code of ethics Training programs

116 Thomson Learning © 20041-115 Shop ‘Til You Drop Workbook Activity Culture ItemDiscount Store Department Store 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:

117 Thomson Learning © 20041-116 Chapter Eleven Innovation and Change

118 Thomson Learning © 20041-117 Forces Driving the Need for Major Organizational Change 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 More Threats More domestic competition Increased Speed International competition Global Changes, Competition and Markets T echnological Change International Economic Integration Maturation of Markets in Developed Countries Fall of Communist and Socialist Regimes More Opportunities Bigger markets Fewer barriers More international markets Source: Based on John P. Kotter, The New Rules: How to Succeed in Today’s Post-Corporate World (New York: The Free Press, 1995).

119 Thomson Learning © 20041-118 Incremental vs. Radical Change Continuous progression Paradigm-breaking burst Through normal structure and management processes Transform entire organization Affect organizational part 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), 66-111; and Harry S. Dent, Jr., “Growth through New Product Development,” Small Business Reports (November 1990): 30-40. Incremental ChangeRadical Change

120 Thomson Learning © 20041-119 Four Types of Change Technology Changes in production process Products and Services Changes in outputs Strategy and Structure Administrative changes Culture Changes in values, attitudes, behaviors

121 Thomson Learning © 20041-120 Sequence of Elements for Successful Change Environment Suppliers Professional Associations Consultants Research literature Customers Competition Legislation Regulation Labor force 1. Ideas 2. Needs 3. Adoption4.Implementation 5. Resources Internal Creativity and Inventions Perceived Problems or Opportunities Organization

122 Thomson Learning © 20041-121 Division of Labor Between Departments to Achieve Changes in Technology General Manager Creative Department (Organic Structure) Using Department (Mechanistic Structure)

123 Thomson Learning © 20041-122 Probability of New Product Success PROBABILITY Technical completion (technical objectives achieved).57 Commercialization (full-scale marketing).31 Market Success (earns economic returns).12 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.

124 Thomson Learning © 20041-123 Horizontal Linkage Model for New Product Innovations Environment Technical Developments Environment Customer Needs Organization General Manager R&D Department Marketing Department Production Department Linkage

125 Thomson Learning © 20041-124 Dual-Core Approach to Organization Change Type of Innovation Desired Administrative Structure Technology Direction of Change: Top-Down Bottom-Up Examples of Change: Strategy Production Downsizing techniques Structure Workflow Best Organizational Design for Change: Mechanistic Organic Administrative Core Technical Core

126 Thomson Learning © 20041-125 Culture Change Reengineering and Horizontal Organization Diversity The Learning Organization

127 Thomson Learning © 20041-126 OD Culture Change Interventions Large Group Intervention Team Building Interdepartmental Activities

128 Thomson Learning © 20041-127 Stages of Commitment to Change Preparation Initial contact Awareness Acceptance Understanding Decision to implement Commitment Installation Institutionalization

129 Thomson Learning © 20041-128 Barriers to Change Excessive focus on costs Failure to perceive benefits Lack of coordination and cooperation Uncertainty avoidance Fear of loss

130 Thomson Learning © 20041-129 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.

131 Thomson Learning © 20041-130 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 Workbook Activity

132 Thomson Learning © 20041-131 Chapter Twelve Decision-Making Processes

133 Thomson Learning © 20041-132 Today’s Business Environment New strategies Reengineering Restructuring Mergers/Acquisitions Downsizing New product/market development... Etc.

134 Thomson Learning © 20041-133 Decisions Made Inside the Organization Complex, emotionally charged issues More rapid decisions Less certain environment Less clarity about means/outcomes Requires more cooperation

135 Thomson Learning © 20041-134 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

136 Thomson Learning © 20041-135 Steps in the Rational Approach to Decision-Making Monitor Decision Environment Implement Chosen Alternative Define Decision Problem Specify Decision Objectives Diagnose Problem Develop Alternative Solutions Evaluate Alternatives Choose Best Alternative 1 2 3 45 6 7 8

137 Thomson Learning © 20041-136 Trade-off Constraints and Trade-offs During Non-programmed Decision-Making Personal Constraints: Desire for prestige, success; personal decision style; and the need to satisfy emotional needs, cope with pressure, maintain self-concept Organizational Constraints: Need for agreement, shared perspective, cooperation, support, corporate culture and structure, ethical values Bounded Rationality: Limited time, information, resources to deal with complex, multidimensional issues Decision/ Choice: Search for a high-quality decision alternative 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).

138 Thomson Learning © 20041-137 Choice Processes in the Carnegie Model Hold joint discussion and interpret goals and problems Share opinions Establish problem priorities Obtain social support for problem, solution Adopt the first alternative that is acceptable to the coalition Conduct a simple, local search Use established procedures if appropriate Create a solution if needed Managers have diverse goals, opinions, values, experience Information is limited Managers have many constraints UncertaintyCoalition FormationSearch Satisficing Conflict

139 Thomson Learning © 20041-138 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

140 Thomson Learning © 20041-139 Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain 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 PROBLEM IDENTIFICATIONPROBLEM SOLUTION

141 Thomson Learning © 20041-140 Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making Problems Solutions Choice Opportunities Participants Problems Solutions Choice Opportunities Participants Problems Solutions Choice Opportunities Participants Choice Opportunities Participants Middle Management ProblemsSolutions Participants Problems Solutions Choice Opportunities Problems Participants Solutions Department ADepartment B

142 Thomson Learning © 20041-141 CertainUncertain Contingency Framework for Using Decision Models Problem Consensus Individual: Rational Approach Computation Organization: Management Science Individual: Bargaining, Coalition Formation Organization: Carnegie Model Individual: Judgment Trial-and-error Organization: Incremental Decision Process Model Individual: Bargaining and Judgment Inspiration and Imitation Learning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can Solution Knowledge Certain Uncertain 4 21 3

143 Thomson Learning © 20041-142 Special Decision Circumstances High-Velocity Environments Decision Mistakes and Learning Escalating Commitment

144 Thomson Learning © 20041-143 Decision Styles Workbook Activity Your decisions Approach used Advantages and disadvantages Your recommended decision style 1. 2. Decisions by others 1. 2.

145 Thomson Learning © 20041-144 Chapter Thirteen Conflict, Power and Politics

146 Thomson Learning © 20041-145 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): 104-14; and Victoria L. Crittenden, Lorraine R. Gardiner, and Antonie Stam, “Reducing Conflict Between Marketing and Manufacturing,” Industrial Marketing Management 22 (1993): 299-309.

147 Thomson Learning © 20041-146 Sources of Conflict and Use of Rational vs. Political Model Sources of Potential Inter-group Conflict Goal Incompatibility Differentiation Task Interdependence Limited Resources 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 When Conflict Is High, Political Model describes organization Goals Power and Control Decision Process Rules and Norms Information Organization Variables

148 Thomson Learning © 20041-147 Individual vs. Organizational Power Legitimate power Reward power Coercive power Expert power Referent power

149 Thomson Learning © 20041-148 Power vs. Authority POWER 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

150 Thomson Learning © 20041-149 Vertical Sources of Power Formal Position Resources Control of Decision Premises and Information Network Centrality

151 Thomson Learning © 20041-150 Horizontal Sources of Power High Power Low Power 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.

152 Thomson Learning © 20041-151 Strategic Contingencies That Influence Horizontal Power Among Departments Dependency Financial Resources Centrality Nonsubstitutability Coping with Uncertainty Department Power

153 Thomson Learning © 20041-152 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 coalitions1. Create integration devices 2. Create dependencies2. Expand networks2. Use confrontation and negotiation 3. Provide resources3. Control decision premises3. 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

154 Thomson Learning © 20041-153 Win-Win Strategy 1. Define the conflict as a mutual problem 2. Pursue joint outcomes 3. Find creative agreements that satisfy both groups 4. Use open, honest, and accurate communication 5. Avoid threats 6. Communicate flexibility Win-Lose Strategy 1. Define the conflict as a win-lose situation 2. Pursue self outcomes 3. Force other group into submission 4. Use deceitful, inaccurate communication 5. Use threats 6. Communicate rigidity Negotiating Strategies Source: Adapted from David W. Johnson and Frank P. Johnson, Joining Together: Group Theory and Group Skills (Englewood Cliffs, N. J.: Prentice-Hall, 1975), 182-83.

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