Organization Structure,
Culture, and Change
Introductory Concepts
 Chapter 8 describes a variety of approaches to
subdividing work at the organizational and unit
levels.
 Structure is the hard side of organizations.
 Culture and change are the soft side of
organizations.
 Topics of structure, culture, and change are vital to
understanding organizations.
Principles of Organization in a
Bureaucracy
1.
2.
3.
Hierarchy of authority (organizational units
controlled by a higher one)
Unity of command (subordinates receive assigned
duties from one superior, and only accountable to
that superior)
Task specialization (each organizational unit and
each employee concentrates on one function)
Principles of Organization in a Bureaucracy,
continued
4.
5.
Responsibilities and job descriptions (each
employee has precise job description; policy and
procedure manuals kept current and accessible)
Line and staff functions (line deal with primary
outputs of firm, staff deals with support activities,
and advise line units)
Advantages of a Bureaucracy
 Allows for high level of accomplishment.
 Workers know who is responsible for what, and
whether they have the authority to make a given
decision.
 Facilitates vertical integration, allowing for control of
product development, manufacturing, and
distribution.
 Prevents problem of workers not having enough
direction.
Disadvantages of a Bureaucracy
 Can be rigid in handling people and problems.
 Rules and regulations can lead to inefficiency, such
as getting approvals.
 High frustration often caused by red tape (tight
procedures that must be followed).
 Slow decision making because layers of approval are
necessary.
Functional Departmentalization
 Departments are defined by functions each one
performs (e.g., accounting).
 Well suited for large-batch processing and for
specialization.
 Can have problems due to its size and complexity.
 People within unit may not communicate well with
workers in other units (functional silo problem).
Geographic Departmentalization
 Departments are arranged according to geographic
area or territory served.
 A natural unit in global business, such as Honda of
America.
 Allows for decision making at local level.
 Can lead to high costs because of duplication of
effort, and management may not be able to control
local units well.
Product-Service
Departmentalization
 Departments arranged according to products or
services they provide.
 Makes most sense when product or service has own
unique demands.
 In well-run firm, units cooperate for mutual benefit.
 Some problems with duplication of effort, and
control of separate units.
Modifications of the Bureaucratic
Organization
 Project and Matrix Organization
 Flat Structures, Downsizing, Outsourcing
 Horizontal Structure (Organization by Team and
Process)
 Informal Structures and Communication Networks
 Power Sharing (Chairman and CEO)
 Selection of an Organization Structure
Project and Matrix Organization
 Projects good for performing special tasks involving




multiple specialties.
Matrix organization is project structure superimposed
on functional structure.
Capitalizes on advantages of both.
Big projects function as mini-companies.
Project managers borrow resources from functional
departments.
Flat Structures
 Organization with many layers is sometimes




converted to flat structure.
Less bureaucratic because fewer managers review
work of others.
Wider span of control because managers now have
fewer direct reports.
IT a force for flatter structures.
Flat structures can eliminate too many managers
needed for decision making.
Downsizing
 Can lead to simplified, less bureaucratic structure,
better profits and stock prices.
 Can backfire with lowered morale and return on
assets.
 Effective downsizing: (a) make it part of business
strategy, (b) eliminate low-value work, (c) link to
future work needs, (d) lay off sensibly, (e) help laid
off workers, and (f) involve employees in resizing
process.
Outsourcing
 Part of globalization, but also having work performed
by other organizations.
 Company can operate with fewer employees and
physical assets, focus on activities it performs best.
 Both basic and more advanced business functions
can be outsourced.
 Homeshoring moves customer service activities into
homes of telecommuters.
Horizontal Structure (Organization by
Team and Process)
 Group of people is concerned with a process such as




order fulfillment.
Instead of task focus, all workers focus on purpose
of the activity.
Horizontal structure uses teams responsible for
accomplishing a process.
Reengineering switches emphasis from task to
process.
Caution—expertise is still important.
Informal Structures and Communication
Networks
 Informal structure supplements formal structure by
adding flexibility and speed.
 Also referred to as informal networks because of
focus on using personal contacts to obtain
information.
 Social network analysis maps and measures links
throughout organization.
 Nodes are people, links are relationships.
Power Sharing at Highest Level of
Management
 Concerns about complexity of top job has led to (a)
splitting roles of chairman and CEO, and (b) use of
co-CEOs.
 One person as chairman and CEO could lead to
unchecked power.
 When CEO focuses on operations, chairperson can
focus on strategy.
 Co-CEO arrangement better for family business than
large, public company.
Key Factors that Influence Selection of
Organization Structure
1.
2.
3.
4.
5.
Strategy and goals—structure follows strategy.
Technology—high technology firms rely more on
flexible structures.
Size—bigness leads to centralized controls and
some formalization.
Financial condition—flat costs less.
Environmental stability—flexible structure for
unstable environment.
Delegation of Responsibility and
Empowerment

a.
b.
c.
d.
e.
To delegate and empower effectively, manager
should:
Assign duties to right people.
Delegate whole task, avoid details.
Give as much instruction as needed.
Retain some important tasks.
Obtain feedback on the delegated task.
Decentralization
 Refers to passing authority to lower levels, as
opposed to centralization.
 Favored when key decisions are made low in
management hierarchy.
 Centralized firm exercises more control than does
decentralized firm.
 Advanced technique is for decentralized units to be
autonomous yet cooperate for common good.
Determinants of Organizational Culture
 Origins could lie in values, administrative practices,
and personality of founder.
 Culture mirrors choices, behavior, and prejudices of
top-level managers.
 Society influences organizational culture.
 Industry in which firm operates can be influential,
such as steel mill versus investment bank.
Dimensions of Organizational Culture
 Values (almost synonymous with culture)
 Relative diversity of members
 Resource allocation and rewards (which behavior or
units gets the most)
 Degree of change (stable versus rapidly changing)
 Sense of ownership (of workers)
 Strength of culture (extent of impact)
How Workers Learn the Culture
 Socialization is major approach.
 Contacts with others lead to understanding values,
norms, and customs essential for adapting to the
organization.
 Teachings of leaders can also help impart culture to
organizational members.
Consequences and Implications of
Organizational Culture
 Competitive advantage and financial success
 Productivity, quality, and morale
 Innovation (culture of innovation)
 Compatibility of mergers and acquisitions
 Person-organization fit (fitting the firm)
 Direction of leadership activity (points leader toward
what needs to be done)
Managing and Sustaining the Culture

a.
b.
c.
d.
e.
Managers bring about culture change by
Being a role model for change.
Using rewards to reinforce the culture
Selecting people with values that match the
culture
Sponsoring training in support of culture
Disseminating type of change required
Creating Change at Individual versus
Organizational Level
 Many useful changes take place at individual and
small group level, rather than organizational level.
 “Movers and shakers” seek results rather than to
avoid offending people.
 Organizational level change is change in fundamental
way company operates.
 All employees must be eager for change.
Unfreezing-Changing-Refreezing Model
of Change
 Unfreezing is reducing or eliminating resistance to
change.
 Changing or moving to a new level involves
considerable two-way communication including
group discussion.
 Refreezing includes rewarding people for
implementing the change.
Resistance to Change
 Fear of an unfavorable outcome.
 Not wanting to break old habits.
 Concern about upsetting balance of an activity, such
as in-person contact.
 Desire to cling to the old, however flawed.
 Awareness of the weakness of a proposed change.
 Resistance can be feedback from workers about
potential problems.
Gaining Support for Change
1.
2.
3.
4.
5.
6.
7.
8.
Allow for discussion and negotiation.
Allow for participation.
Point to reasons for, including finances.
Establish sense of urgency.
Use a visual people can relate to.
Avoid change overload.
Allow for first-hand observation of change.
Get best people behind program.
Six Sigma and Planned Change
 Shift to quality-conscious firm is total systems
approach to change.
 Six Sigma can means (a) 3.4 errors in 1 million
opportunities, (b) philosophy of driving out waste
and improving quality, and (c) data-driven method
for achieving near-perfect quality with emphasis on
preventing problems.
 To work well, Six Sigma must fit culture.