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Michael A. Hitt

C. Chet Miller

Adrienne Colella

Chapter 13 Organizational Organizational

Structure Structure and Cultureand Culture

Slides by Ralph R. Braithwaite

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Integrated Portfolio at FedExIntegrated Portfolio at FedEx

Exploring Behavior in Action

With all the acquisitions by FedEx, there was a need to change their structure. It adopted a multi-divisional structure. Corporate provides strategic direction and consolidated financial reporting. Significant authority has been delegated to the divisions. Each division manages its own specialized network of services.

Do you know of other companies that operate in a similar fashion?

Is this a good model for organizations to follow as they grow and develop?

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FedExFreight

FedExSupplyChain

FedExKinko’sServices

FedExExpress

FedExFedExCorp.Corp.

FedExCustomCritical

FedExTrade

Network

FedExGround

FedEx OrganizationFedEx Organization

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Organizational Structure and Organizational Structure and CultureCulture

OrganizationalStructure

OrganizationalCulture

The formal system of work roles andauthority relationships that govern

how associates and managersinteract with one another.

Involves the values and normsshared by managers and associates

that influence behavior. It is apowerful force in organizations.

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Knowledge ObjectivesKnowledge Objectives1. Define key elements of organizational structure,

including both structural and structuring dimensions.

2. Explain how corporate and business strategies relate to structure.

3. Explain how environment, technology, and size relate to structure.

4. Define organizational culture, and discuss the competing-values cultural framework.

5. Discuss socialization.

6. Describe cultural audits and subcultures.

7. Explain the importance of a fit between individual values and organizational culture.

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Fundamental Elements of Fundamental Elements of Organizational StructureOrganizational Structure

Structural Characteristics

Structuring Characteristics

Hierarchy

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Structural CharacteristicsStructural Characteristics

Span of Control

HeightDepartmentation

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Span of ControlSpan of Control

Adapted from Exhibit 13-1: Average Span of Control: Effects on Height of the Hierarchy

Average span of Four Average span of TenHighest

Lowest

Org

an

iza

tio

na

l Le

vel

1000

100

10

1

Associates

250

63

17

4

1

Associates

1000

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Functional OrganizationFunctional Organization

Adapted from Exhibit 13-2: Simplified Functional Organization

VPResearch andDevelopment

VPResearch andDevelopment

VPOperations

VPHuman

Resources

VPFinance

VPMarketing

CEO

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Divisional OrganizationDivisional Organization

Adapted from Exhibit 13-3: Simplified Divisional Organization

CEO

Head of Operations

Head of R&D

Head of Human

Resources

Head of Finance

Head of Marketing

V.P. Product/Service

Area 1

Head of Operations

Head of R&D

Head of Human

Resources

Head of Finance

Head of Marketing

V.P. Product/Service

Area 1

Head of Operations

Head of R&D

Head of Human

Resources

Head of Finance

Head of Marketing

V.P. Product/Service

Area 1

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Structuring CharacteristicsStructuring Characteristics

Centralization Standardization

Formalization Specialization

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The Modern OrganizationThe Modern OrganizationFlexible empowering type of structure

Organic

Learning

Boundaryless

Mechanistic

Non-Learning

Traditional

Fewer management levels, broader spans of control, less centralization, standardization, formalization and specialization.

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FreedomFreedomSubstantial freedom may exist, but

1. Freedom is not unlimited

2. Alternative mechanisms are used to ensure that individuals are working for the good of the organization

3. Values are shared

4. Reward systems are used to promote appropriate behavior

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Factors Affecting StructureFactors Affecting Structure

CorporateStrategy

Growth

Diversification

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Diversification Strategy and Diversification Strategy and StructureStructure

Adapted from Exhibit 13-4: Matches between Diversification Strategy and Structure

Holding CompanyUnrelated product

DivisionalUnrelated product

DivisionalRelated product

DivisionalDominant product (several products)

FunctionalDominant product (few products)

FunctionalSingle product

StructureDiversification

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Business StrategyBusiness Strategy

• Low cost/low price

• Product/service differentiation

• Supporting structure including strategic business units – SBUs

How a firm competes for success against other organizations in a particular market.

13-17ExperiencingStrategic OB

IDEO and Differentiation StrategyIDEO and Differentiation StrategyIDEO demonstrates a differentiation strategy, highlights that occasionally organizations supplement their human capital, and they value teams with diverse members.

Is this an effective approach to business?

How can this approach help other businesses and organizations?

What are your thoughts about IDEO’s approaches:

• Form a diverse team

• Team members brainstorm

• Team members engage in rapid prototyping

• Team members implement the fruits of their labors

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Environment and Basic Environment and Basic StructureStructure

• Effective organizations experiencing high environmental uncertainty tend to be more organic.

• Effective organizations experiencing low environmental uncertainty tend to be less organic.

Environmental uncertainty – the degree to which an environment is complex and changing; uncertain environments are difficult to monitor and understand.

Jay W. Lorsch

Paul R. Lawrence

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Environment and IntegrationEnvironment and Integration

Adapted from Exhibit 13-5: Integration in Organizations

Slack Resources

Self-Contained Tasks

Information Technology

Lateral Relations

Increasing Implementation Complexity

Incr

ea

sin

g R

ich

ne

ss o

f In

form

ati

on

Pro

ces

sin

g

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Alternative Lateral ProcessesAlternative Lateral Processes

Liaison RolesDirect Contact

Matrix Designs

Managerial Linking Roles

Integrating Roles

Teams

Taskforces

Lateral Processes

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Technology and Technology and StructureStructure

Small-Batch Technology

Mass Production Technology

Process Production Technology

Mass Customization

Manufacturing

Joan Woodward

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Technology and StructureTechnology and Structure

Charles Perrow

Task VariabilityTask Variability Task AnalyzabilityTask Analyzability

Four categories of technology

Routine Craft

Engineering Nonroutine

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Organizations and TechnologyOrganizations and Technology

Adapted from Exhibit 13-6: Organizations and Technology

High LowTask Analyzability

High

Low

Tas

k V

aria

bili

ty

Specialized Engineering

Consulting Firm

Engineering

Public School

Craft

Research and Development

Firm

Non-Routine

Mass-Production Firm

Routine

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Google Culture Attracts Google Culture Attracts High-Quality AssociatesHigh-Quality Associates

Larry Page and Sergy Brin

Do you think Google would have enjoyed its success had a different type of structure and culture been introduced?

What types of organizations could benefit with a similar structure and culture? What types of organizations might have difficulty?

As Google continues to grow, will the culture survive or will it possibly be replaced by a more traditional culture?

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Developing Organizational CultureDeveloping Organizational Culture

Adapted from Exhibit 13-7: Process of Developing Organizational Culture

Organizational Culture

NormsReinforcing Outcomes

Shared Values

Individual and Group Behavior

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Organizational CultureOrganizational Culture

Adapted from Exhibit 13-8: Competing Values Model of Organizational Culture

EffectivenessCohesion and Morale

LeadershipMentors and Coaches

Clan

EffectivenessCreativity and Innovation

LeadershipEntrepreneurs and

Innovators

Adhocracy

EffectivenessGoal Achievement and

Winning

LeadershipHard Drivers and

Competitors

Market

EffectivenessEfficiency and Order

LeadershipMonitors and Organizers

Hierarchy

Internal Focus/Integration External Focus/Differentiation

Sta

bili

ty/C

on

tro

lF

lex

ibili

ty/

Dis

cret

ion

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Cultural SocializationCultural SocializationA process through which an organization imparts its

values to newcomers

Context Content

SocialDynamics

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Cultural AuditCultural AuditA tool for assessing and understanding the culture of an organization. Use these five steps for conducting the cultural audit:

Analyze process

and content

Analyze responses to critical incidents

Analyze values

and beliefs of culture

creators

Explore anomalies

or puzzling features

Examine linkage – culture

with goals

Subcultures – groups that share values that differ from the main values of the

organization.

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ManagerialAdvice

Finding a Fit at Finding a Fit at Home DepotHome Depot

Robert Nardelli

Do you agree that an individual’s management style and values should agree with the organization’s culture? Why or why not?

Do you think Nardelli is what Home Depot needed at the time?

Have you worked with a leader whose style was very different than the culture of the organization? What was that like?

Can some organizations benefit from a major change in leadership philosophy?

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Person-Organization FitPerson-Organization Fit

Abstract ideals that relate to proper life

goals and methods for reaching those goals.

Values

Types of personal goalsTypes of personal goalsthat one ought to havethat one ought to have

Types of behaviors thatTypes of behaviors thatone ought to use in one ought to use in reaching those goalsreaching those goals

End-Means Dimension

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Types of Personal ValuesTypes of Personal Values

Means(Behavior)

Values

End(Goal)Values

Adapted from Exhibit 13-9: Types of Personal Values

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The Strategic LensThe Strategic Lens

1. Consider an organization of which you are a member or an associate. What is the structure in this organization? Is it centralized or decentralized? Is it organic and flexible? How would you change the structure in this organization to make it more effective?

2. How would you describe the culture in the organization discussed in question #1? How does the culture affect members’ behavior in the organization?

3. When you become a manager, what type of culture will you establish in your unit? What values do you want to emphasize? Why?

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QuestionsQuestions