1. Organizational Behavior, 8e Schermerhorn, Hunt, and Osborn Prepared by Michael K. McCuddy Valparaiso University John Wiley & Sons, Inc.

2. Organizational Behavior: Chapter 122 COPYRIGHT Copyright 2003 © John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

3. Organizational Behavior: Chapter 123 Chapter 12 Strategic Competency and Organizational Design Study questions. – What is a co-evolution view of strategy, and what is its linkage to organizational design? – What is organizational design, and how do the designs of small and large firms differ? – Do the operations and information technology of the firm influence its organizational design?

4. Organizational Behavior: Chapter 124 Chapter 12 Strategic Competency and Organizational Design Study questions cont. – What is the relationship between environmental conditions and organizational design? – What is strategy, and how do organizational learning and information technology influence strategic competency?

5. Organizational Behavior: Chapter 125 What is a co-evolution view of strategy, and what is its linkage to organizational design? Two aspects of strategy. – Strategy involves: Formulation the positioning of the firm in its environment to provide it with the capability to succeed. Implementation the stream of decisions that enable the firm to fulfill its capability.

6. Organizational Behavior: Chapter 126 What is a co-evolution view of strategy, and what is its linkage to organizational design? Two aspects of strategy cont. – Traditional advice on organization design relative to strategy. Adopt a mechanistic type (or machine bureaucracy) to achieve efficiency. Adopt an organic type (or professional bureaucracy) to achieve innovation.

7. Organizational Behavior: Chapter 127 What is a co-evolution view of strategy, and what is its linkage to organizational design? Two aspects of strategy cont. – Contemporary advice on organization design relative to strategy. The structural configuration should facilitate carrying out the strategy formulated by senior management, as well as allow for individuals to experiment, grow, and develop competencies so that the firms strategy can evolve.

8. Organizational Behavior: Chapter 128 What is a co-evolution view of strategy, and what is its linkage to organizational design? Strategy and co-evolution. – Co-evolution. The firm can adjust to external changes even as it shapes some of the challenges facing it. – Aspects of co-evolution. Repositioning the firm in its environmental setting even as the setting changes. Shaping the capabilities of the organizations members and its administrative and technical systems.

9. Organizational Behavior: Chapter 129 What is organizational design, and how do the designs of small and large firms differ? Organizational design. – The process of choosing and implementing a structural configuration. – The choice of an appropriate organizational design depends on the firms: Size. Operations and information technology. Environment. Strategy for growth and survival.

10. Organizational Behavior: Chapter 1210 What is organizational design, and how do the designs of small and large firms differ? Organizational size. – Larger organizations cannot be bigger versions of their smaller counterparts. Large firms have a much larger number of direct personal contacts that must be managed. Large firms have many core operations technologies in a wide variety of specialized units. Large firms are bureaucracies.

11. Organizational Behavior: Chapter 1211 What is organizational design, and how do the designs of small and large firms differ? The simple design for smaller units and firms. – A configuration involving one or two ways of specializing individuals and units. – Vertical specialization and control emphasize levels of supervision without elaborate formal mechanisms. – Appropriate for many smaller firms because of simplicity, flexibility and responsiveness to a central manager.

12. Organizational Behavior: Chapter 1212 Do the operations and information technology of the firm influence its organizational design? Organizational design must be adjusted to fit technological opportunities and requirements. – Operations technology. The combination of resources, knowledge, and techniques that creates a product or service output. – Information technology. The combination of machines, artifacts, procedures, and systems used to gather, store, analyze, and disseminate information for translating it into knowledge.

13. Organizational Behavior: Chapter 1213 Do the operations and information technology of the firm influence its organizational design? Thomsons view of technology. – Technologies classified according to the degree of specification and degree of interdependence of work units. – Intensive technology. Uncertainty as to how to produce desired outcomes.

14. Organizational Behavior: Chapter 1214 Do the operations and information technology of the firm influence its organizational design? Thomsons view of technology cont. – Mediating technology. Links parties that want to become interdependent. – Long-linked technology. The way to produce desired outcomes is known and broken down into a number of sequential steps.

15. Organizational Behavior: Chapter 1215 Do the operations and information technology of the firm influence its organizational design? Woodwards view of technology. – Small-batch production. The organization tailor makes a variety of custom products to fit customer specifications. – Mass production. The organization produces one or a few products through an assembly line system.

16. Organizational Behavior: Chapter 1216 Do the operations and information technology of the firm influence its organizational design? Woodwards view of technology cont. – Continuous-process technology. The organization produces a few products using considerable automation. – The proper matching of structure and technology is critical to organizational success.

17. Organizational Behavior: Chapter 1217 Do the operations and information technology of the firm influence its organizational design? Where operations technology dominates: the adhocracy. – When managers and employees do not know the appropriate way to service a client or produce a particular product, an adhocracy might be an appropriate technological design.

18. Organizational Behavior: Chapter 1218 Do the operations and information technology of the firm influence its organizational design? An adhocracy is characterized by: – Few rules, policies, and procedures. – Substantial decentralization. – Shared decision making among members. – Extreme horizontal specialization. – Few levels of management. – Virtually no formal controls.

19. Organizational Behavior: Chapter 1219 Do the operations and information technology of the firm influence its organizational design? An adhocracy is useful when: – The tasks facing the firm vary considerably and provide many exceptions. – Problems are difficult to define and solve.

20. Organizational Behavior: Chapter 1220 Do the operations and information technology of the firm influence its organizational design? Organizational impacts of information technology (IT). – IT provides a partial substitute for: Some operations. Some process controls. Some impersonal methods of coordination. – IT provides a capability for transforming information to knowledge for learning. – IT provides a strategic capability.

21. Organizational Behavior: Chapter 1221 Do the operations and information technology of the firm influence its organizational design? Information technology as a substitute. – Initial implementation of IT often displaced routine, highly specified, and repetitious jobs. Did not alter fundamental character or design of the organization. – A second wave of substitution replaced process controls and informal coordination mechanisms with IT. Brought some marginal changes in organizational design.

22. Organizational Behavior: Chapter 1222 Do the operations and information technology of the firm influence its organizational design? Information technology as a capability for learning. – IT provides individuals throughout the organization the information they need to plan, decide, coordinate, and control. – Real impact of adding IT capability occurred when it became broadly available throughout the organization.

23. Organizational Behavior: Chapter 1223 Do the operations and information technology of the firm influence its organizational design? Information technology as a capability for learning cont. – Impact of IT. Individuals are empowered and their jobs are expanded. Narrowly defined jobs with process controls are replaced by broadly-defined jobs with output controls. Provides new information-based coordination devices. Can help flatten and streamline the organization structure. Can be linked to total quality management programs.

24. Organizational Behavior: Chapter 1224 Do the operations and information technology of the firm influence its organizational design? Information technology as a strategic capability. – IT has spawned e-businesses, thereby creating new strategic capability. – IT is transforming aging bricks and mortar firms, thus altering and enhancing strategic capability.

25. Organizational Behavior: Chapter 1225 Do the operations and information technology of the firm influence its organizational design? IT as a strategic capability for e-business. – Many dot.com firms adopted some variation of adhocracy. – As the dot.coms grew, the adhocracy design became problematic. Limits on the size of an effective adhocracy. Actual delivery of products and services rested more on responsiveness to clients and maintaining efficiency than on continual innovation.

26. Organizational Behavior: Chapter 1226 Do the operations and information technology of the firm influence its organizational design? IT as a strategic capability for bricks and mortar firms. – ITs most profound effect is in firms that rely on mediating technology. – More firms are recognizing the strategic value of IT and are using IT as a basis for global operations.

27. Organizational Behavior: Chapter 1227 What is the relationship between environmental conditions and organizational design? Understanding the environment is important because an organization is an open system. – General environment. The set of cultural, economic, legal-political, and educational conditions found in the areas in which the organization operates. – Specific environment. The owners, suppliers, distributors, government agencies, and competitors with which an organization must interact to grow and survive.

28. Organizational Behavior: Chapter 1228 What is the relationship between environmental conditions and organizational design? Environmental complexity. – The magnitude of problems and opportunities in the organizations environment, as reflected in: The degree of richness. The degree of interdependence. The degree of uncertainty. – More complex environments provide more problems and opportunities.

29. Organizational Behavior: Chapter 1229 What is the relationship between environmental conditions and organizational design? Degree of environmental richness. – The environment is richer when: The economy is growing. Individuals are improving their education. Those on whom the organization relies are prospering. – The opposite of richness is decline.

30. Organizational Behavior: Chapter 1230 What is the relationship between environmental conditions and organizational design? Degree of environmental interdependence. – Linkage between environmental independence and organization design may be subtle and indirect. Organization may co-opt powerful outsiders Organization may absorb or buffer demands of powerful external elements.

31. Organizational Behavior: Chapter 1231 What is the relationship between environmental conditions and organizational design? Degree of environmental uncertainty. – Uncertainty and volatility can be particularly damaging to large bureaucracies. – A more organic form is the appropriate organizational design response to uncertainty and volatility.

32. Organizational Behavior: Chapter 1232 What is the relationship between environmental conditions and organizational design? Using alliances where environmental factors dominate. – In high-tech areas and businesses dominated by IT, interfirm alliances are used. – Interfirm alliances are announced cooperative agreements or joint ventures between two independent firms.

33. Organizational Behavior: Chapter 1233 What is the relationship between environmental conditions and organizational design? Interfirm alliances. – Known as informal combines or cartels in Europe. – Known as keiretsu in Japan. – The network organization is beginning to evolve in the United States.

34. Organizational Behavior: Chapter 1234 What is strategy, and how do organizational learning and information technology influence strategic competency? Strategic competency can be acquired through organizational learning. – Organizational learning is the process of knowledge acquisition, information distribution, information interpretation, and information retention in adapting successfully to changing circumstances.

35. Organizational Behavior: Chapter 1235 What is strategy, and how do organizational learning and information technology influence strategic competency? Knowledge acquisition. – Mimicry. Is important to new firms. Provides workable, if not ideal, solutions to many problems. Reduces the number of decisions that need to be analyzed separately. Establishes legitimacy or acceptance and narrows the choices requiring detailed explanation.

36. Organizational Behavior: Chapter 1236 What is strategy, and how do organizational learning and information technology influence strategic competency? Knowledge acquisition cont. – Experience. All organizations and managers learn through experience. Learning by doing. Learning through structured programs. – Vicarious learning. Capturing the lessons of others experiences.

37. Organizational Behavior: Chapter 1237 What is strategy, and how do organizational learning and information technology influence strategic competency? Knowledge acquisition cont. – Individual social learning. Social learning is achieved through the reciprocal interactions among people, behavior, and the environment. The individual learns behaviors by observing and imitating others. Symbolic processes, self-control, and self-efficacy are important in social learning.

38. Organizational Behavior: Chapter 1238 What is strategy, and how do organizational learning and information technology influence strategic competency? Knowledge acquisition cont. – Scanning. Involves looking outside the firm and bringing back useful solutions. – Grafting. The process of acquiring individuals, units, or firms to bring in useful knowledge. – Contracting out (or outsourcing). Asking outsiders to perform a particular function.

39. Organizational Behavior: Chapter 1239 What is strategy, and how do organizational learning and information technology influence strategic competency? Information distribution. – Once information is obtained, managers must establish mechanisms for distributing relevant information. – Key challenges of information distribution in large organizations. Quickly locating who has needed information. Quickly locating who needs specific types of information.

40. Organizational Behavior: Chapter 1240 What is strategy, and how do organizational learning and information technology influence strategic competency? Information interpretation. – Interpreted information reflects a collective understanding within the firm. – Interpretation problems. Self-serving interpretations managers and employees seeing what they want to see, rather than seeing what is. Managerial scripts a series of well-known routines for problem identification and alternative generation and analysis that are commonly used by a firms managers.

41. Organizational Behavior: Chapter 1241 What is strategy, and how do organizational learning and information technology influence strategic competency? Information interpretation cont. Organizational myths commonly held cause- effect relationships or assertions that cannot be empirically supported. There is a single organizational truth. The presumption of competence. The denial of tradeoffs.

42. Organizational Behavior: Chapter 1242 What is strategy, and how do organizational learning and information technology influence strategic competency? Information retention. – Important retention mechanisms. Individuals. Organizational culture. Transformation procedures. Formal organizational structures. Physical structures (or ecology). External archives. Internal information technologies.

43. Organizational Behavior: Chapter 1243 What is strategy, and how do organizational learning and information technology influence strategic competency? Deficit cycles of strategic organizational learning. – A deficit cycle is a pattern of deteriorating performance that is followed by even further deterioration. – The same problems keep reoccurring, and the firm fails to develop adequate mechanisms for learning.

44. Organizational Behavior: Chapter 1244 What is strategy, and how do organizational learning and information technology influence strategic competency? Deficit cycles of strategic organizational learning cont. – Factors associated with deficit cycles. Organizational inertia. Hubris. Detachment.

45. Organizational Behavior: Chapter 1245 What is strategy, and how do organizational learning and information technology influence strategic competency? Benefit cycles of strategic organizational learning. – A benefit cycle is a pattern of successful adjustment followed by further improvements. – The same problems do not keep reoccurring as the firm develops adequate mechanisms for learning. – Firms that successfully co-evolve can ride the benefit cycle.