OB271: Dynamics of Organizations
Graduate School of Business, Stanford University
Fall 2002
Professor
Office:
E-mail:
Phone:
Glenn Carroll
Knight 311
carroll_glenn@gsb.stanford.edu
736-1152
Assistant: Su Supnet
Office: Littlefield 226
E-mail: supnet_susan@gsb.stanford.edu
Phone:
724-6916
Professor
Office:
E-mail:
Phone:
Michael Hannan
Knight 315
hannan@stanford.edu
723-1511
Assistant:
Office:
E-mail:
Phone:
Professor
Office:
E-mail:
Phone:
Mikołaj Jan Piskorski
Knight 305
mpiskorski@stanford.edu
724-1875
Assistant: Sandra Davis
Office: Littlefield 370
E-mail: davis_sandra@gsb.stanford.edu
Phone:
736-0939
Annabelle Neves-Valdivia
Littlefield 258
stneves@stanford.edu
723-1123
Overview
This course examines fundamental issues in organizational design and organizational change.
It emphasizes the interplay among formal architecture, routines, informal networks, and
culture in shaping organizational action. It also explores the sources of organizational inertia
and their implications for managing change
Questions about organizational phenomena--such as design, change and conflict are
complex and rarely have any context-invariant “correct” answers. So, rather than teach
formulaic “solutions” to problems involving human behavior, we offer instead a set of
concepts, frameworks, and theories chosen:
1. To give you an understanding of the nature of organizational structure and action,
based on current theory and research.
2. To develop a set of foundational tools for analyzing and managing organizational
problems.
3. To help you develop an understanding of the problems associated with change in
organizations, in particular inertia and the unintended outcomes of change efforts.
Position within the MBA Core
Organizational theory is taught in many places throughout the MBA core curriculum,
including most notably OB285 (Managing Through Mutual Agreement), OB270
(Organizational Behavior), HRMGT280 (Human Resource Management), and
STRAMGT250 (Strategic Management). Although some overlaps are unavoidable (and
perhaps desirable), this course stands out for its singular focus on matters of organizational
structure (both formal and informal) and change. It addresses some of the foundations of
OB 271: Dynamics of Organizations
structure; and later courses will build on the concepts and theories examined here. (The
MBA Handbook describes Foundations courses as those that use “rigorous and disciplined
thought.”)
Text and Readings
Students are expected to do all of the assigned reading. We will be using a readings packet
containing conceptual readings as well as cases. We will also use a series of Teaching Notes,
developed specifically for this course and available for downloading on the class web page.
Attendance and Participation in Class
The course is short and involves intensive analysis and case discussion. Attendance and
participation are essential parts of the learning process for this course. We expect students
to attend all scheduled sessions and to come prepared to contribute to the discussion.
Grades will reflect this orientation. We will also “cold call” on students, asking them direct
questions in class without warning (this might even happen to you several times in one
class). If you have a compelling reason for not making a particular class, then we ask that
you inform us in advance (email is best) and then submit a written case analysis as a makeup
exercise.
Terminology
We have learned from experience that, while many GSB students are well–versed in the
languages of business and social science, others are not when they arrive here.
Unfortunately, these differences often prove to be embarrassing to admit in class and lead to
a failure to participate, even when one has good ideas. To overcome these problems, we
encourage you to speak with us or email us about terms and language that you find
confusing.
Students with Documented Disabilities
Students who have a physical or mental impairment that may necessitate an academic
accommodation or the use of auxiliary aids and services in class must initiate the request
with the Disability Resource Center (DRC). The DRC will evaluate the request along with
the required documentation, recommend appropriate accommodations, and prepare a
verification letter dated in the current academic term in which the request is being made.
Please contact the DRC as soon as possible; timely notice is needed to arrange for
appropriate accommodations. The DRC is located at 123 Meyer Library, and can be reached
by calling 723-1066 or 725-1067 TTY.
Page 2
OB 271: Dynamics of Organizations
Evaluation
Final grades will be computed as:
Participation
Final Exam
30%
70%
Participation
Class participation is a very important part of the learning process in this course. Thirty
percent of your final grade will be based on an assessment of the quality of your
contributions to class discussions. Quality of contribution and insights is important to
enhance our class. Quality comments possess one or more of the following attributes:
They offer a unique, relevant perspective on the issue being discussed.
They bring the conceptual issues treated in the readings to the analysis of the case.
They contribute to moving the discussion and analysis forward.
They build on others’ comments. Too often managers and students fail to listen to
what others are saying; simply repeating a previous comment is not participation.
They transcend the “I feel” syndrome. That is, they include evidence or analysis of
the inherent tradeoffs managers face in almost all decisions.
Final Exam
The final exam will assess your ability to analyze particular organizational situations and to
show understanding of the course concepts as they apply to them. You will be evaluated on
the basis of your ability to use the conceptual frameworks developed in the course, to
analyze the antecedent factors that contributed to organizational problems, and to generate
appropriate and creative solutions to the problems while maintaining an awareness of
potential pitfalls and problems that might arise in implementing your solutions. The final
exam will be administered at the date and time set by the Registrar.
Page 3
OB 271: Dynamics of Organizations
Session
Date
Topic
1
Tuesday, November 5th
Organizational Architecture (1)
Required readings
Teaching Note: “Organization Theory: An Overview”
Teaching Note: “Organizational Design and Alignment”
Required cases
American Heart Association (Stanford GSB: OD–2)
Case description
Organizational design is intended to address effectively the problems of control and
coordination inherent in large complex organizations. In this session, we consider the most
basic design decisions, those about which activities and people to group together formally
and how to link together the separated groups. The case provides a chance to develop and
apply the principles.
Assignment questions
1.
2.
3.
4.
What is the Western States Affiliate's strategy? Its industry?
Why did Bowser change the architecture of his organization?
What are the advantages of the old and new architectures? The disadvantages?
Evaluate the change process that put the new architecture in place. What would you
have done differently?
Page 4
OB 271: Dynamics of Organizations
Session
Date
Topic
2
Friday, November 8th
Organizational Architecture (2)
Required readings
Teaching Note “Analyzing Organizational Architectures” (download from the
course web page)
Goold, Michael and Andew Campbell 2002. “Do you have a well-designed
organization?” Harvard Business Review. March. Reprint: R0203K.
Required case
Johnson & Johnson (HBS: 9-392-050)
Case description
This case concerns a change in the architecture of a very decentralized company. The
change entails building strong links across parts of the organization. It provides an
opportunity to think analytically about choice of architecture and about issues of aligning
architectures and strategies.
Assignment Questions
1. What was the J&J grouping logic prior to the formation of the HSG? Was the
creation of the HSG consistent with that logic?
2. What problems and conflicts are likely to arise in J&J concerning the HSC? To what
extent are these related to complexity and opacity?
3. Would the new architecture (containing the HSC) make J&J faster to change in
response to changing conditions in its hospital markets? Why?
Page 5
OB 271: Dynamics of Organizations
Session
Date
Topic
3
Tuesday, November 12th
Local/Tacit Knowledge and Linking Mechanisms
Required readings
Nelson, Richard R. and Sidney G. Winter 1982. “Skills, routines and tacit
knowedge.” Pp. 74–82, 99–107, 124–126 in An Evolutionary Theory of Economic Change.
Cambridge, MA: Harvard University Press
Required case
Novo Nordisk (A) – Global Coordination (GSB case IB20A)
Case description
This case concerns a leading pharmaceutical firm that was blind-sided by an environmental
change in the regulations of the American Food and Drug Administration. The case
illustrates both the difficulty of moving crucial information around a decentralized
organization and possible architectural linking mechanisms that might ameliorate some of
these problems.
Assignment questions
1. What was Novo’s architecture before 1993? How would you characterize it in terms
of complexity and opacity? Reliability and accountability?
2. What role, if any, did this architecture play in the problems that arose with
compliance with FDA regulations? How would you account for the failure of crucial
information to pass from the US subsidiary to the center in Copenhagen?
3. Evaluate the introduction of the Facilitators program. In what ways would this
revised architecture solve information problems? Is the change in architecture
enough?
Page 6
OB 271: Dynamics of Organizations
Session
Date
Topic
4
Friday, November 15th
Coordination and Control through Networks (1)
Required reading
Krackhardt, David and Jeffrey R. Hanson. 1993. “Informal networks: The company
behind the chart.” Harvard Business Review July-August 104–111. Reprint: 94306.
Required case
Digital Equipment Company: The Kodak Outsourcing Agreement (A)
(HBS: 9–191–039)
Case description
Social networks often provide critical information and access to resources. This session
focuses on the roles social networks play in mobilizing resources, control and information.
Assignment questions
1. Draw the network connecting actors involved in making decisions about the
Telstar project.
2. What characteristics of this network allowed Digital to winning the opportunity
to manage Kodak’s internal communication network?
3. What are the advantages and disadvantages of this highly informal mode of
organization?
4. What steps should Gulloti take to facilitate an effective transition?
Page 7
OB 271: Dynamics of Organizations
Session
Date
Topic
5
Tuesday, November 19th
Coordination and Control through Networks (2)
Required readings
Podolny, Joel M. and James N. Baron. 1997. “Resources and relationships: Social
networks and mobility in the workplace.” American Sociological Review 62:673-693.
Burt, Ronald S. 2001. “Structural holes versus network closure as social capital.”
Pp. 31–56 in Social Capital: Theory and Research, edited by Nan Lin, Karen S. Cook and
Ronald S. Burt. Hawthorne, NY: Aldine de Gruyter.
Required case
John Clendenin and Managing Xerox’s Multinational Development Center
(HBS: 9-490-029)
Case description:
The case describes Clendenin’s use of the Multinational Development Center to enhance the
efficiency of Xerox’s worldwide logistics and inventory management. He has done this
though the development and implementation of a wide range of improvements in
multinational computer and management systems. The structure of Xerox creates numerous
difficulties in creating cross unit cooperation. The case describes Clendenin’s multiple
strategies for overcoming these difficulties. As such, it serves to illustrate how the
appropriate coordination strategy varies with the situation.
Assignment questions
1. What were John Clendenin’s objectives at Xerox? Did he have sufficient formal
authority to achieve these objectives?
2. Make a diagram of Clendenin’s social network. How would you characterize
Clendenin’s social network? His management style? What role do these play in his
success?
3. What obstacles did he confront in accomplishing his objectives? For each type of
obstacle confronted, identify the strategies he used to overcome them.
Page 8
OB 271: Dynamics of Organizations
Session
Date
Topic
6
Friday, November 22nd
Organizational Culture (1)
Required reading
O’Reilly, Charles. 1989. “Corporations, culture and commitment: Motivation and
social control in organizations.” California Management Review 31:9–25.
Teaching Note: “Organizational Demography and Culture” (download from class
website)
Required case
Dreyer's Grand Ice Cream (A) (Stanford GSB: OB–35)
Case description
Organizational culture is another major component of organizational design. Culture can be
a powerful tool to motivate and direct employees; if an oppositional culture develops, it can
greatly hinder organizational action. In this session, we will analyze a firm's culture, looking
at where its origins and how it can be sustained and managed strategically. We will also
examine the relationship between the culture and the architecture. The company we
examine finds itself in difficult times. Questions of both strategy and cultural management
arise.
Assignment questions
1. Describe the culture at Dreyer's.
2. What, if any, strategic roles does the culture play at Dreyer's?
3. Can you identify the architectural features of the Dreyer's organization that produce
and support the culture? Make a list.
4. Beyond the financial restructuring, what else should Rogers and Cronk focus on
during the June 1998 Tahoe meeting?
5. What actions should Rogers and Cronk take after the June 1998 Tahoe meeting?
What should be their key concerns?
Page 9
OB 271: Dynamics of Organizations
Session
Date
Topic
7
Tuesday, November 26th
Organizational Identity
Required readings
Teaching Note: “Organizational Identity: The Case of Microbrewing”
Podolny, Joel M. 2001. “Networks as the pipes and prisms of the market.” American
Journal of Sociology 107:33-45.
Required case
Ben and Jerry’s Homemade Ice Cream (HBS: 9–392–025)
Case description
Organizations, like persons, can develop clear identities that make their behavior predictable.
Because, as potential customers and as potential employees, we generally prefer to transact
with predictable actors, having a clear identity will often prove beneficial to organizations.
Yet, clear identity serves as constraint that limits what an organization can do and how it can
change. This session is concerned with understanding the bases of organizational identity.
It considers a firm with one such clear identity, Ben and Jerry’s Homemade Ice Cream.
Assignment questions
1. What is Ben and Jerry’s Homemade Ice Cream’s organizational identity?
2. What are the advantages and disadvantages of having the firm’s identity tied closely
to particular charismatic individuals?
3. How does its identity provide an advantageous position in the market? What kinds
of constraints does the identity impose on the firm?
4. In what sense do decisions about the firm’s internal organization affect Ben and
Jerry’s identity to outsiders (external identity)?
5. If you were Chico, what would you decide about the 5 to 1 rule?
6. Ben and Jerry’s (the organization and the brand) has (since the time of the case) been
sold to Unilever. What are the implications for identity and brand?
Page 10
OB 271: Dynamics of Organizations
Session
Date
Topic
8
Tuesday, December 3rd
Organizational Change (1)
Please note that that there will be no class on Friday, November 29th due to
Thanksgiving Holiday
Required readings
Teaching Note “Complexity, Opacity, and Cascades of Organizational Change”
Required cases
The Philips Group: 1987 (HBS: 9–388–050)
The Philips Group: 1990 (HBS: 9–391–245)
Case description
Changing an organization’s architecture and culture can be extremely difficult and take
enormous amounts of time. In this session, we will look at the case of Philips, a large
multinational that needed deep restructuring in last part of the 20th century. Consider the
magnitude of the attempted changes and the various forces favoring inertia, including the
embeddedness of information, political resistance due to self–interest, and cultural
resistance.
Assignment Questions
1. The organizational arrangements put in place to maintain Philips as a company
through World War II still powerfully shaped the company forty years later. How
would you account for this stability? What, if any, were the benefits of such stability?
The disadvantages?
2. How would you rate the Philips matrix architecture (as of 1987) in terms of
complexity and opacity?
3. What kinds of resistance developed to the attempted changes attempted by Dekker
and van der Klugt? Is there any pattern in the strength of resistance across different
parts of the company?
4. Do you agree that the “only way (to break though the Philips culture) is to destroy
it”? If yes, then how exactly should Timmer go about doing this? If no, then what
exactly should Timmer try to change.
Page 11
OB 271: Dynamics of Organizations
Session
Date
Topic
9
Friday, December 6th
Organizational Change (2)
Required cases
Agilent Technologies: Organizational Change (A) (Stanford GSB: OD–1)
Agilent Technologies: Organizational Change (B) (Stanford GSB: OD–1)
Case description
When industries, technologies or environments change, firms often need to change strategies
and organizational designs. This session looks at two major organizational changes: a first at
Hewlett-Packard that resulted in the spin-off of Agilent Technologies, and a second that
involved the redesign of the organizational structures involved in the spin-off. This case is
something of a capstone: it provides an opportunity to integrate materials from all previous
sessions of the course.
Assignment questions
1. What is the motivation for Agilent’s spin-off from Hewlett-Packard? What other
options might have been chosen? Evaluate the spin-off choice.
2. Identify the specific major architectural design changes undertaken at Agilent. Try to
identify as many as you can; we will go through these in some detail. What is the
organizational rationale for each? Evaluate using the principles about formal
grouping earlier in the course.
3. How does Agilent's organizational structure rate on opacity and complexity? Why?
What are the possible implications?
4. How long do you think Aglient will be in the “reorganization mode”? Why?
5. What are the biggest challenges facing Ned Barnholt and his management team?
Page 12