Management A Practical Introduction Third Edition Angelo Kinicki & Brian K. Williams

Chapter 8: Organizational Culture, Structure, & Design Building Blocks of the Organization What Kind of Organizational Culture Do We Have? Developing High Performance Cultures What is an Organization? Elements of an Organization Types of Organizational Cultures Creating the Best Structure Building a Learning Organization The Management Toolbox: Mentoring: The New Rules Summary Mentors can be a valuable source of information for new employees. When looking for a mentor try to: choose anyone you can learn from, not just someone higher up choose more than one mentor pick your mentors, don’t wait to be picked do a self-assessment look for someone different from you investigate your prospects show your prospective mentor how you can be helpful agree on how your mentoring relationship will work For Discussion: Does mentoring work, or should new managers be left to find their own way? How do you feel about mentoring? Would it be helpful to you, as a new hire, to have someone to turn to? Now, suppose you’re the senior manager. Do you still believe in mentoring? Why or why not?

8.1 What Kind Of Organizational Culture Will You Be Operating In? WHAT IS AN ORGANIZATIONAL CULTURE? Organizational culture (also called corporate culture) is a system of shared beliefs and values that develops within an organization and guides the behavior of its members It is the organization’s personality There are two levels of corporate culture: The invisible level The visible level Practical Action: How to Stand Out in a New Job: Fitting into an Organization’s Culture in the First 90 Days This Practical Action suggests that the first 90 days on the job can be critical to your future with the firm. To make sure that you’re a success story get to know some people and listen to what they have to say be aware of the power of first impressions make it easy for others to give you feedback overdeliver

Layers of Organizational Culture Invisible Level: Core Culture Not seen by the naked eye. Consists of values, beliefs, and assumptions Core culture might be associated with “it’s the way we do things around here” Often has two sources: Visions, assumptions, and biases of founders Outlook that initial employees learned from their own experiences McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Layers of Organizational Culture Visible Level: Observable culture Manifestations of culture: Symbols Stories Heroes Rites and rituals McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.1 What Kind Of Organizational Culture Will You Be Operating In? -symbols are objects, acts, qualities, or events that convey meaning to others -stories are narratives based on true events which are repeated and sometimes embellished to emphasize a particular value -heroes are people whose accomplishments embody the values of the organization -rites and rituals are the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organization’s life

8.1 What Kind Of Organizational Culture Will You Be Operating In? WHY IS CULTURE IMPORTANT? 1. Culture provides an opportunity to reinforce the company’s message 2. Culture helps to get everyone on board 3. Culture helps companies manage conflict and change effectively 4. Culture helps employees understand why the company does what it does and how it will achieve its long term goals

Four Functions of Organizational Culture It gives members an organizational identity It facilitates collective commitment It promotes social-system stability It shapes behavior by helping employees make sense of their surroundings McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.1 What Kind Of Organizational Culture Will You Be Operating In? Figure 8.1: Four Functions Of Organizational Culture

8.2 Developing High-Performance Cultures WHAT ORGANIZATIONAL CULTURE ENHANCES ECONOMIC PERFORMANCE? There are three perspectives of how culture can enhance performance: 1. The strength perspective assumes that the strength of a corporate culture is related to a firm’s long-term financial success 2. The fit perspective assumes that an organization’s culture must align or fit with its business or strategic context 3. The adaptive perspective assumes that the most effective cultures help organizations anticipate and adapt to environmental changes Studies show that in the long-term, financial performance is highest for firms with an adaptive culture

8.2 Developing High-Performance Cultures HOW CAN CULTURE BE EMBEDDED IN AN ORGANIZATION? The values and beliefs of a culture are shared with members of the organization using a variety of mechanisms: 1. Formal Statements - culture can be embedded in an organization through formal statements of philosophy, mission, vision, and values 2. Slogans & Sayings - corporate cultures can be promoted through slogans and sayings 3. Stories, Legends, & Myths - telling stories, legends, and myths can help embed desirable values in an organization 4. Leader Reactions to Crises - how top managers respond to critical incidents sends a message to employees

8.2 Developing High-Performance Cultures 5. Role Modeling, Training, & Coaching - organizational culture can be promoted through role modeling, training programs, teaching, and coaching 6. Physical Design - the physical design of workspaces, buildings, and so on can also help embed corporate culture 7. Rewards, Titles, Promotions, & Bonuses - companies use rewards, status symbols, promotions, and so on to encourage desirable organizational behavior 8. Organizational Goals & Performance Criteria - desired organizational behavior and goals can be promoted through criteria for recruiting, selecting, promoting, and dismissing people

8.2 Developing High-Performance Cultures 9. Measurable & Controllable Activities - companies can measure and control certain activities to foster a certain culture 10. Organizational Structure - how an organization is structured can send a clear message about its organizational culture 11. Procedures For Self-Development - procedures can be established to help employees develop according to organizational goals

Practical Action: Fitting into an Organization’s Culture Get to know some people and listen to what they have to say Remember the seven second rule for first impressions Make it easy for others to give you feedback Get something done McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Practical Action: When You Should and Shouldn’t Delegate Delegate routine and technical matters Delegate tasks that help your subordinates grow Don’t delegate confidential and personal matters Don’t delegate emergencies Don’t delegate special tasks that your boss asked you to do—unless you have his or her permission Match the tasks delegated to your subordinates’ skills and abilities McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.3 What Is An Organization? Organization: is a system of consciously coordinated activities or forces of two or more people. For profit organizations Formed to make money by offering products or services Not-for-profit organizations Formed to offer services to clients, not to make profit for its owners (hospitals, colleges) Mutual-benefit organizations Voluntary collectives whose purpose is to advance member interests (unions, trade associations) McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.3 What Is An Organization? HOW ARE ORGANIZATIONS STRUCTURED? Organizations can be represented in an organization chart (a box-and-lines illustration showing the formal lines of authority and the organization’s official positions) Practical Action: When Should You Delegate & When Not? Using Your Authority Wisely This Practical Action explores the situations when delegating responsibilities is appropriate and when it makes more sense to handle things yourself. In particular, delegating makes sense when it involves routine and technical matters the tasks can help subordinates grow Delegating doesn’t make sense when it involves confidential and personnel matters it is an emergency it involves special assignments your boss asked you to handle Always try to match the tasks you delegate to your subordinates’ skills and responsibilities

8.3 What Is An Organization? Figure 8.2: Organization Chart

The Organization Chart Board of Directors Strategic Planning Advisor Chief Executive Officer Legal Counsel President Cost Containment Staff Executive Administrative Director Executive Medical Director Director of X-Ray & Laboratory Services Director of Pharmacy Chief Physician Director of Personnel Director of Admissions Director of Nutrition & Food Services Director of Patient & Public Relations Director of Accounting Director of Surgery Director of Outpatient Services McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.3 What Is An Organization? The vertical hierarchy of an organization shows the chain of command, and the official communication network The horizontal specialization shows the different jobs or work specialization of an organization

8.4 The Major Elements Of An Organization WHAT ARE THE COMMON ELEMENTS OF AN ORGANIZATION? There are seven elements common to all organizations: 1. Common Purpose - a common purpose unifies employees or members and gives everyone an understanding of the firm’s reason for being - mission 2. Coordinated Effort - organizations achieve a common purpose by coordinating individual efforts into a group or organization-wide effort 3. Division Of Labor - the arrangement of having discrete parts of a task done by different people is referred to as work specialization

8.4 The Major Elements Of An Organization 4. Hierarchy Of Authority - the control mechanism for making sure the right people do the right things at the right time is called the hierarchy of authority or chain of command 5. Span Of Control - the span of control or span of management refers to the number of people reporting directly to a given manager

Spans of Control: Narrow versus Wide CEO Narrow Key: T = Top manager M = Middle manager F = First-line (supervisory) manager T M Wide CEO M F McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.4 The Major Elements Of An Organization 6. Authority, Responsibility, & Delegation – authority, accountability, responsibility, and the ability to delegate are all part of an organization’s elements 7. Centralization Versus Decentralization - when important decisions are made by higher-level managers, the organization has centralized authority, when important decisions are made by middle-level and supervisory-level managers, the organization has decentralized authority

Chapter 8: Organizational Culture, Structure, & Design CLASSROOM PERFORMANCE SYSTEM The obligation to perform the tasks assigned to the manager is referred to as A) responsibility B) delegation C) accountability D) authority The answer is A.

Eight Organizational Structures Simple structure: for the small firm Functional structure: grouping by similar work specialties Division structure: grouping by similarity of purpose Conglomerate structure: grouping by industry Hybrid structure: functional & divisional used within the same organization Matrix structure: a grid of functional & divisional for two chains of command Team-based structure: eliminating functional barriers to solve problems Network structure: connecting a central core to outside firms by computer connections McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.5 Basic Types Of Organizational Structures WHAT ARE THE BASIC TYPES OF ORGANIZATIONAL STRUCTURES? 1. The simple structure has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization and is often used in the very early stages of a firm Lecture Note: Ask students to compare the organizational charts of several different types of firms. What do the structures indicate about the organizations? How are decisions likely to made? Why might an organization be structured the way it is?

8.5 Basic Types Of Organizational Structures Figure 8.4: Simple Structure: An Example There is only one hierarchical level of management beneath the owner

8.5 Basic Types Of Organizational Structures WHAT ARE THE BASIC TYPES OF ORGANIZATIONAL STRUCTURES? 2. In a functional structure, common in both profit and nonprofit organizations, people with similar occupational specialties are put together in formal groups Lecture Note: Ask students to compare the organizational charts of several different types of firms. What do the structures indicate about the organizations? How are decisions likely to made? Why might an organization be structured the way it is?

8.5 Basic Types Of Organizational Structures Figure 8.5: Functional Structure: Two Examples

8.5 Basic Types Of Organizational Structures 3. When people with diverse occupational specialties are put together in formal groups, a divisional structure is in place Product divisions group activities around similar products or services Customer divisions group activities around common customers or clients Geographic divisions group activities around regional locations

Chapter 8: Organizational Culture, Structure, & Design Figure 8.6: Divisional Structure: Three Examples

Divisional Structure Product Divisional Structure President Motion Pictures & TV Division Music Magazine & Book Internet Products Product Divisional Structure President Consumer Loans Mortgage Business Agriculture Customer Divisional Structure President Western Region Northern Southern Eastern Geographic Divisional Structure McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.5 Basic Types Of Organizational Structures 4. The conglomerate structure groups divisions or business units around similar businesses or industries

8.5 Basic Types Of Organizational Structures Figure 8.7: Conglomerate Structure

Conglomerate Structure This resembles the structure of Tyco International President Electronics Fire & Security Healthcare Plastics & Adhesives Engineered Products & Services McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.5 Basic Types Of Organizational Structures 5. A hybrid structure uses functional and divisional structures in different parts of the same organization

Hybrid Structure A Hypothetical example of what GM might use President Cadillac Buick Pontiac Chevrolet Product Divisional Structure Vice- President, Production Marketing Finance Human Resources Functional divisional structure Manager Region I Region II Region III Region IV Geographical divisional structure A Hypothetical example of what GM might use McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.5 Basic Types Of Organizational Structures Figure 8.8: Hybrid Structure

8.5 Basic Types Of Organizational Structures 6. When an organization combines functional and divisional chains of command in a grid so that there a two command structures, vertical and horizontal, a matrix structure is used

8.5 Basic Types Of Organizational Structures Example of Ford motor company

Matrix Structure Example of Ford motor company Functional Structure President Vice President, Engineering Finance Production President. Marketing Project Manager, Taurus Manager, Mustang Manager, Explorer Manager, Expedition Functional Structure Project structure Subordinate reports to both Vice President of marketing & to project Manager for Mustang Example of Ford motor company McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.5 Basic Types Of Organizational Structures 7. In a team-based structure, teams, both temporary and permanent, are used to improve horizontal relations and solve problems throughout the organization

Chapter 8: Organizational Culture, Structure, & Design CLASSROOM PERFORMANCE SYSTEM Which type of structure combines functional and divisional chains of command? A) functional B) divisional C) geographic D) matrix The answer is D.

8.5 Basic Types Of Organizational Structures Figure 8.10: Team-Based Structure

8.5 Basic Types Of Organizational Structures 8. The network structure or virtual organization has a central core that is linked to outside independent firms by computer connections which are used to operate as if all were a single organization

Network Structure Core of personal computer company USA Design Studio Sweden Components Assembly Mexico, Asia Core of personal computer company USA Engineering Company Japan Distribution Company Canada Accounting & Finance USA McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.5 Basic Types Of Organizational Structures Figure 8.11: Network Structure

8.6 Contingency Design: Factors In Creating The Best Structure WHAT IS THE BEST STRUCTURE? Contingency Design is the process of fitting the organization to its environment Firms must consider: 1. The environment (mechanistic versus organic) Mechanistic organizations are characterized by centralized authority, clearly specified tasks and rules, and close supervision of employees When authority is decentralized, there are few rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks, an organic organization exists

Mechanistic Vs. Organic Mechanistic organizations: authority is centralized, tasks and rules are clearly specified, and employees are closely supervised. When rigidity and uniformity work best McDonald's Organic organizations: authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks. When looseness and flexibility work best Information and Technology “adhocracies” McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 8: Organizational Culture, Structure, & Design CLASSROOM PERFORMANCE SYSTEM Which of the following is not a characteristic of a mechanistic organization? A) clearly specified tasks B) decentralized authority C) close supervision D) clearly specified rules The answer is B.

Chapter 8: Organizational Culture, Structure, & Design CLASSROOM PERFORMANCE SYSTEM Which of the following is not a characteristic of a mechanistic organization? A) clearly specified tasks B) decentralized authority C) close supervision D) clearly specified rules The answer is B.

8.6 Contingency Design: Factors In Creating The Best Structure 2. The Environment (differentiation versus integration) Differentiation is the tendency of the parts of an organization to disperse and fragment Integration is the tendency to come together to achieve a common purpose 3. Size Organizational size is usually measured by the number of full-time employees

8.6 Contingency Design: Factors In Creating The Best Structure 4. Technology Technology (the tools and ideas for transforming materials, data, or labor into goods and services) influences organizational design 5. Organizational life cycle The organizational life cycle involves birth, youth, midlife, and maturity

Life Cycle: Four Stages in the Life of an Organization The organizational life cycle has a natural sequence of stages: Birth Youth Midlife Maturity McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Life Cycle: Four Stages in the Life of an Organization As organization moves through the stages, it becomes not only larger, but more mechanistic, specialized, decentralizes, and bureaucratic There are different managerial challenges and different organizational design issues in each stage McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Life Cycle: Four Stages in the Life of an Organization Stage 1: The Birth Stage – nonbureaucratic Stage which organization is created No written rules and little supporting staff Founder may be a lone entrepreneur or two friends who have gotten together Text: Apple Computer’s early development McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Life Cycle: Four Stages in the Life of an Organization Stage 2: The Youth Stage – prebureaucratic Stage of growth and expansion People are added to the payroll, and some division of labor and setting of rules is instituted Text: Apple Computer from 1978 to 1981 with Apple II product line McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Life Cycle: Four Stages in the Life of an Organization Stage 3: The Midlife Stage – bureaucratic Period of growth evolving into stability Organization has formalized bureaucratic structure, staff of specialists, decentralization of functional divisions, and many rules Text: Apple Computer in the 1980s under John Scully McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Life Cycle: Four Stages in the Life of an Organization Stage 4: The Maturity Stage – very bureaucratic Organization large and mechanistic Danger at this point is lack of flexibility and innovation Text: Apple Computer floundered in the late 1980s until Steve Jobs returned McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Life Cycle: Four Stages in the Life of an Organization Holding on to the prebureaucratic way of life for too long hinders the organization’s ability to deliver goods and services efficiently McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 8: Organizational Culture, Structure, & Design CLASSROOM PERFORMANCE SYSTEM Which of the following is not a stage in the organization lifecycle? A) birth B) youth C) maturity D) decline The answer is D.

Chapter 8: Organizational Culture, Structure, & Design CLASSROOM PERFORMANCE SYSTEM At which stage of the organizational life cycle is an organization likely to be most mechanistic? A) birth B) youth C) midlife D) maturity The answer is D.

Building Learning Organizations A Learning Organization is an: Organization that actively creates, acquires, and transfers knowledge within itself and is able to modify its behavior to reflect new knowledge McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Building Learning Organizations Organizations must continually learn new things or face obsolescence A key challenge for managers is to establish a culture that will enhance their employees ability to learn But, there may be resistance, and some firms unconsciously resist learning because: McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.7 Toward Building A Learning Organization WHY DO ORGANIZATIONS RESIST LEARNING? -people believe that competition is always better than collaboration -fragmentation leads to specialized fiefdoms that resist learning -unless encouraged, people won’t take risks, the basis for learning Lecture Note: Many firms today are shifting toward a learning firm philosophy. Ask students to identify several learning firms. How are these firms different from their peers? What advantages does being a learning organization bring to them?

The New Paradigm: “We’re All Stakeholders” Paradigms are generally accepted ways of viewing the world The paradigm underlying American business today is that competition is superior to collaboration Many established paradigms have outlived their usefulness McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8.7 Toward Building A Learning Organization WHAT IS THE NEW PARADIGM? A new paradigm suggests that everyone in an organization is business together- and everyone has a responsibility for working toward common goals

The New Paradigm: “We’re All Stakeholders” One challenge is to create a climate in which managers and employees stop thinking in terms of “us” versus “them” and start thinking of themselves as mutual stakeholders McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.