Organizational Culture, Structure, and Design

Chapter 8

Organizational Structure(Organizational Culture)

A system of shared beliefs and values that develops within an organization and guides the behavior of its members.

the personality of the organization

Organizational cultures can be classified into four types: Clan Adhocracy Market Hierarchy

Clan Culture An employee-focused culture valuing

flexibility, not stability A clan culture has an internal focus and

values flexibility rather than stability and control Family type – values collaboration, cohesion

through consensus, job satisfaction

Adhocracy Culture A risk-taking culture valuing flexibility An adhocracy culture had an external focus

and values flexibility Adaptable, creative, and quick to respond to

changes

Market Culture A competitive culture valuing profits over

employee satisfaction A market culture has a strong external focus

and values stability and control Driven by competition and a strong desire to

deliver results Customers, productivity, and profits take

precedence over employee development and satisfaction

Hierarchy Culture A structured culture that has an internal focus

and values stability and control over flexibility. Formalized, structured work environment

aimed at achieving effectiveness through a variety of control mechanisms that measure efficiency, timeliness, and reliability in the creation and delivery of products

Three Levels of Organizational Culture Observable artifacts Espoused values Basic assumptions

Observable Artifacts The most visible level Physical manifestations

Manner of dress Awards Myths and stories about the company Rituals and ceremonies Decorations

Espoused Values The explicitly stated values and norms

preferred by an organization Hewlett Packard – the “HP Way”

Basic Assumptions Core values of the organization Non observable Represent the core values of an

organization’s culture

Culture is transmitted to employees in several ways;

Symbols Stories Heroes Rites and rituals

WAL-MART CheerGive me a W! Give me an A!Give me an L!

Give me a Squiggly!Give me an M!Give me an A!Give me an R!Give me a T!

What's that spell?Wal-Mart!

Who's number one?The Customer! Always!

Symbols Objects, acts, qualities, or events that convey

meaning to others. e.g. 3M has a trophy known as the Gold Step

Award that is presented every year to employees whose new products achieve significant revenue levels

Stories A story is a narrative based on true events,

which is repeated- and sometimes embellished upon – to emphasize a particular value Stories of events that go above and beyond the

call of duty

Heroes A person whose accomplishments embody

the values of an organization.

Rites and Rituals The activities and ceremonies, planned and

unplanned, that celebrate important occasions and accomplishments in the organization’s life. Mary Kay Cosmetics – conventions to reward

sellers – pink Cadillacs

An organization’s culture has four functions:

1. It gives members an organizational identity2. It facilitates collective commitment3. It promotes social-system stability4. It shapes behavior by helping employees

make sense of their surroundings

Cultures for enhancing economic performance The Strength Perspective: assumes that the

strength of a corporate culture is related to a firm’s long-term financial performance.

2. The Fit Perspective: assumes that an organization’s culture must align, or fit, with its business or strategic context

a correct fit is expected to foster higher financial performance.

3. The Adaptive Perspective: Assumes that the most effective

cultures help organizations anticipate and adapt to environmental changes.

Ways cultures become embedded in organizations Formal Statements

Wal-Mart: States three basic values as the core of their culture:

Respect for individual Service to customers Striving for excellence

Slogans and Sayings

Snack, Crackle, Pop

Rice Crispies

Let your fingers do the walking

Yellow pages

Plop Plop fizz fizz oh what a relief it is

Alka Seltzer

Mm Mm Good

Campbell’s soup

Look ma, no cavities.

Crest

Stories, legends, and myths Leader reactions to crises Role modeling, training, and coaching Physical design Rewards, titles, promotions, and bonuses Organizational goals and performance criteria

Measurable and controllable activities Organizational structure Organizational systems and procedures

Organization A system of consciously coordinated

activities or forces of two or more people.

Three types of organizations; For-profit organizations: Formed to make

money, or profits, by offering products or services

Nonprofit organizations: formed to offer services to some clients, not to make a profit (hospitals, colleges)

Mutual Benefit organizations: Voluntary collectives whose purpose is to advance members’ interests (unions, trade associations)

Organization Chart A box-and-lines illustration showing the

formal lines of authority and the organization’s official positions or work specializations. Vertical hierarchy of authority (who reports to

whom) Horizontal specialization (who specializes in what

works)

Common elements of Organizations (Edgar Schein) Common Purpose: unifies employees or

members and gives everyone an understanding of the organization’s reason for being

Coordinated Effort: the coordination of individual efforts into a group or organization-wide effort

Division of Labor: (work specialization) the arrangement of having discrete parts of a

task done by different people Hierarchy of Authority: (chain of

command) a control mechanism for making sure the right people do the right things at the right time

Other Elements Span of Control: the number of people

reporting directly to a particular manager Authority, Responsibility, and Delegation:

Authority: the rights inherent in a managerial position to make decisions, give orders, and utilize resources.Accountability: managers must report and justify work results to the managers above them.

Responsibility – the obligation you have to perform the tasks assigned to you.

Delegation – the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy.

Line Position: Line managers have authority to make decisions and usually have people reporting to them.

Staff Position: Staff personnel have authority functions – they provide advice, recommendations, and research to line managers

Centralization of Authority vs Decentralization of Authority Centralized Authority – Important decisions

are made by higher-level managers McDonalds, Kmart

Decentralized Authority – Important decisions are made by middle level and supervisory-level managers General Motors, Harley-Davidson

Simple Structure An organization with a simple structure has

authority centralized in a single person, a flat hierarchy, a few rules, and low work specialization Mom and pop stores

Functional Structure In a functional structure, people with similar

occupational specialties are put together in formal groups. Departments: Production Department, Marketing

Department, Finance, etc.

Divisional Structure – Grouping by similarity of purpose Product Divisions – group activities around similar

products or services Time Warner (magazines, cable tv, recordings, movies)

Customer Divisions – tend to group activities around common customers or clients Ford: passenger car customers, large trucking customers

Geographic Divisions – group activities around defined regional locations Federal Reserve Bank – has 12 separate districts around the

US

Matrix Structure An organization combines functional and

divisional chains of command in a grid so that there are two command structures Vertical and horizontal

See p 258

Team Based Structure Teams or workgroups, either temporarily or

permanently, are used to improve horizontal relations and solve problems throughout the organization. See page 259

Network Structure The 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. See page 259

Modular Structure A firm assembles product chunks, or

modules, provided by outside contractors.

Contingency Design The process of fitting the organization to its

environment Environment Size Technology Life Cycle

Life Cycle of an Organization Four stages

The birth stage The youth stage The midlife stage The maturity stage

Birth Stage Nonbureaucratic stage

The stage in which the organization is created

Youth Stage Prebureaucratic

The organization is in a prebureaucratic stage, s stage of growth and expansion

Midlife Stage The organization becomes bureaucratic

A period of growth evolving into stability

Maturity Stage The organization becomes very bureaucratic,

large, and mechanistic.