Organization Theory:
Strategy Implementation
Process
Steven E. Phelan
Introduction
Who am I?
Assistant Professor of Strategic Management at
UNLV
Formerly at UT Dallas
I have taught MBA students in 5 countries:
Australia, Hong Kong, Singapore, Italy, and US.
Taught EMBA students at UT Dallas and UT Austin
Practitioner background:
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Telecom Australia
Ansett Airlines
Bridges Management Group (worked on credit cards,
loyalty schemes, distribution strategy, new product
development, and acquisitions)
What is this course about?
Organization Theory
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Lots of academic textbooks
Large membership in AOM (2000+)
Dry as dust
Strategy Implementation
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No textbook since 1980s
We know a plan is no good unless it is implemented –
kind of important then
The chosen path…
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Cover the interesting parts from OT and explore
something useful in strategy implementation (Org Design
& Change).
Goals
To be able to view organizational life through
different lenses
To develop a critical appreciation of
organizational discourse
To have an understanding of the major issues in
organizational design and change
To have acquired skills in designing and
changing organizations
To gain an appreciation of some of the issues in
strategy implementation
Assessment
Field Study (20%+5%)
In groups of 3-4, apply as many of the eight
metaphors you have learned as possible to
describe the functioning of an organization with
which you are familiar (Paper Due: 7/10,
Presentation 8/13)
Case Solution (25%)
Write a solution to one of the two cases on
organizational design (Due: 7/23)
Book Review (25%)
Review a recent book on organizational change in
the context of the course material and present your
report (Due: 8/13)
Teaching Philosophy
I am not into one-way transmissions of information
I favor a collaborative learning environment:
We learn from each other
We learn from the problems and issues we identify
and how we solve them
I see myself as a coach or mentor guiding the
learning experience
Thus, the ultimate responsibility for learning is with
you
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Read the materials
Come to class prepared to discuss relevant aspects of your
organizational life (or lives)
PLEASE interrupt, discuss, question, argue, debate, clarify
Overview of Today
Metaphor in organizations
Organizations as machines
Exploring the metaphor
Strengths and limitations, implications for strategy
Perrow’s Defense of Bureaucracy
It limits particularism
It limits self-interest
Rules are not so bad
Hierarchy is not so bad
Organizations as organisms
Open systems
Contingency theory
Organizational ecology
Strengths and limitations, implications for strategy
Brains and Cultures
Metaphor in organizations
We learn how to
see…
Eskimos are able to
identify many
different types of
snow that are
indistinguishable to
the average person
Asians can identify
many different
varieties of rice
Can you see the
old/young woman?
Morgan on Metaphor
What, then, is truth if different people learn to see
the same thing in different ways?
Is there value in teaching people to see their
organizations in different ways?
“If you only have a hammer, does every problem
become a nail?”
“The test of a first-rate intelligence is the ability to
hold two opposed ideas in mind at the same time
and still retain the ability to function” -- F. Scott
Fitzgerald
“It is easy to teach anybody a new fact…but it
needs light from heaven to enable a teacher to
break the old framework in which the student has
been accustomed to seeing” -- Arthur Koestler
Developing multiple
interpretations 1
A week ago, the grave-diggers at Green Mountain
cemetery laid down their tools and declared an
indefinite strike. Their spokesman, Norman Babitt,
said that they were “fed up with the city council’s
stonewalling.” Their demands for a pay increase and
improved benefits had been rejected. The effects of
the strike were immediate. A number of funerals had
to be canceled and replaced with cremations. In two
instances, bodies were placed in storage pending a
resolution of the strike. No immediate return to work
is expected.
Interpret this event from at least
3 different viewpoints or angles…
Share your viewpoints with
a class member
Developing multiple
interpretations 2
“At Foxboro, a technical advance was desperately needed
for survival in the company’s early days. Late one evening, a
scientist rushed into the president’s office with a working
prototype. Dumbfounded at the elegance of the solution and
bemused about how to reward it, the president bent forward
in his chair, rummaged through most of the drawers in his
desk, found something, leaned over the desk to the
scientist, and said, “Here!” In his hand was a banana, the
only reward he could immediately put his hands on. From
that point on, the small ‘gold banana’ pin has been the
highest accolade for scientific achievement at Foxboro.”
Can you develop 3 different angles or viewpoints on this
story?
Share your views with a class member
Viewing your organization as if
you were from a foreign land…
On first joining…
What struck you as being novel, strange, or different about
the way things happened compared to your expectations or
what you had become used to elsewhere?
Think of another organization with which you are familiar…
What do you consider to be odd, novel, or interesting about
the way in which they do things which would be
inconceivable in your present organization?
About us…
If you wanted to convey the essence of how things are done
in your organization, capturing both the good and bad, can
you think of a recent event or happening that seems to sum
things up? What would it illustrate to an outside who wanted
to learn about your organization?
De Bono’s Approach to
Creativity
We need to be able to recognize and escape from
the dominant ideas that structure a situation, or
one’s interpretation of a situation.
The trouble is, these ideas may be so ingrained
that they are very hard to see.
It is often difficult to identify the truly
fundamental assumption and beliefs that are
shaping one’s thoughts and actions but we need
to do this to avoid being dominated by them
It is much easier to become aware of alternatives
when these dominant ideas are made explicit
On metaphors
What are the dominant assumptions and beliefs
that shape
How Republicans think of issues in this country?
How Democrats think of issues in this country
How the French think of issues in the US?
How Iraqis think of issues in the US?
Is this sort of analysis useful?
Is it useful to do this sort of thinking about our
organizations and about how stakeholders might
perceive our organization?
Morgan believes it is very valuable and identifies
eight metaphors or ways of thinking about
organizations.
Organization as machine
Pre-determined goals and objectives
A rational structure of jobs and activities
Its blueprint becomes an organizational
chart
People are hired to operate the machine
and behave in a predetermined way
When an organization is seen as a
machine it is expected to operate in a
routinized, efficient, reliable, and
predictable way
My life as a machine
“Whoever uses a machine does all his work like a
machine. He who does his work like a machine
grows a heart like a machine” He loses his soul!
The industrial age left its mark on the
imagination, thoughts, and feelings of humans
Organizational life is often routinized with the
precision demanded of clockwork
People arrive at work at a given time, perform a
predetermined set of activities, rest at appointed
hours, and then resume their tasks until work is
over.
Employees are expected to behave as if they
were parts of a machines
Do you agree?
Origins
Organon – means a tool or instrument in Greek
Clearly, ancient cultures had sophisticated
organizations
But, the use of machines required that
organizations be adapted to the needs of
machines (was this radical?)
Steam power and division of labor
Enclosure movement and ‘wage slaves’
Are there many wage slaves today?
Real wages have fallen for bottom 20% of income
earners over the last 20 years
Price to wage ratio is at all time post WW2 high
Frederick the Great’s
innovations
Major Innovations:
Ranks and uniforms
Extension and standardization of regulations
Increased specialization of tasks
Standardized equipment (c.f. Eli Whitney in 1801)
Command language
Systematic training and drilling
Less obvious outcomes:
Standard training made parts interchangeable
Fear of officers led to tight discipline under fire
Distinction between line and staff officers
Decentralization
Max Weber
The bureaucratic form routinizes the process of
administration exactly as the machine routinizes
production.
Bureaucracies provide:
Precision, speed, clarity, regularity, reliability, and
efficiency
Through:
A fixed division of tasks, hierarchical supervision,
and detailed rules and regulations
Perrow and Bureaucracy
Key elements of rational-legal bureaucracy:
Equal treatment for all employees
Reliance on expertise, skills, and experience
relevant to the position
No extra-organizational prerogatives – the position
belongs to the organization not the individual
Specific standards of work and output
Extensive record keeping
Establishment and enforcement of rules and
regulations
Rules and regulations bind managers as well as
employees
Purging Particularism
According to Perrow, one of the major benefits of
bureaucracy is purging particularism (incl. nepotism and
favoritism)
Loyalty to the king was once everything, incompetence
counted for little
Tenure was a early invention that provided freedom from
unjust authority, separating the office from the person
further controlled it.
However, nepotism is still a big problem in a lot of countries
– e.g. Italy, Mexico, China
Why is it so bad?
Because there is often little relationship between the social
criteria for hiring or promoting people and the characteristics
that affect performance in the organization
It may even hurt performance (lower morale, motivation etc.)
Perrow on corruption
Corruption (or enlightened self-interest) is also a
likely accompaniment of favoritism
Perrow argues corruption is good for the individual
and sometimes even good for the organization
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“one of the best ways to seize or retain control [of an
organization] is to surround oneself with loyal people”
It doesn’t hurt to have a sympathetic friend in
government
Bureaucracy limits corruption:
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“since official goals are proclaimed, unofficial,
unpublicized, and unlegitimated uses can be held up to
scrutiny when they are found, and action can be taken.”
“The hidden uses of organizations, always present, can
be exposed and addressed”
Feathering the Nest
Bureaucracy partially solved the problem of separating the
interests of the person from the interests of the
organization
People still tend to act as if they own their positions
They use them to generate income, status, and other things
– free phone calls, show tickets, private jets etc.
Bureaucracy reduces (but doesn’t eliminate) this tendency
The position is seen as independent of the employee
Rules govern acceptable behavior
Records are kept on performance and behavior
Perrow argues: “The growth of bureaucracy was equivalent
to putting a label of ‘company property’ on the skills,
experience, and creativity of the employee…we no longer
question this extraction at all in the case of blue collar
workers and most white-collar ones”
Rules are good!
Why rules?
Bureaucracies are usually criticized for being rule-laden and
‘bureaucratic’
Perrow argues that rules are needed to deal with complexity
and to make the organization more flexible
Reducing rules makes an organization more impersonal,
more inflexible, and more standardized . The last thing you
want in complex situations is to let people do their own thing
Perrow makes little distinction between explicit and implicit
rules and argues that professionals have ‘built-in’ rules
Good effective rules are rarely noticed, bad rules stand out
The problem is not rules in general but particular ones that
need changing
Rules are often scapegoats for poor business models
Hierarchy is good!
Downside to hierarchy:
Lack of motivation - ‘not my problem’
Fear of passing bad news or suggesting
changes
Buck passing
Delays and sluggishness
Dictatorial/ignorant decisions by superiors
Stifling of independence and creativity
Perrow argues that:
Lack of coordination between departments, failure to exercise
authority or be decisive, and lack of accountability are, in fact, much
worse problems.
He also kills a couple of other sacred cows
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that a high span of control means more autonomy
that the formal organization is dominated by the informal organization
That there is conflict of professional and bureaucratic values
Strengths of the machine
metaphor
For Morgan, mechanistic approaches work well
when:
There is a straightforward task to perform
The environment is stable and predictable (to
enable efficient division of labor)
When one produces the same product time and
again
When efficiency and precision are at a premium
When the human parts are compliant and behave
as they have been designed
For Perrow:
Bureaucracies limit particularism and self-interest,
and promote coordination
Limitations of the machine
metaphor
Bureaucracies have difficulty adapting to change
They are designed to achieve predetermined goals not
innovation
It takes time to get an efficient division of labor through
detailed job analysis
Mechanistic approaches result in mindless and
unquestioning bureaucracy
Problems can be ignored
Communication can be ineffective
Paralysis and inaction can lead to backlogs
Senior managers can become remote
Specialization creates myopia and NIH syndrome
Employees know what is expected of them but also what is
not expected of them
Initiative is discouraged
Using the machine metaphor
Discuss how thinking about organizations like
machines might help or hinder the strategy
implementation process.
How much do practices like business process reengineering (BPR) rely on a machine metaphor?
Could this be a reason that 70% of BPR projects
failed?
Organizations as organisms
This metaphor has its roots in biology and natural
selection
Perhaps certain organizations are more
“adapted” to specific environmental conditions
than others
Led to concepts such as:
Open systems
Organizational life cycles
Fit and the process of adaptation to environment
Organizational ecology and different species of
organizations
Organizational Needs
The Hawthorne studies of the 1920s and 1930s shifted the
focus from organization as a technical problem to the
human side of organization, especially motivation
Maslow’s hierarchy of needs
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Physiological, security, social, ego, self-actualizing needs
The idea of integrating the needs of individuals and
organizations became a powerful force
Job enrichment, autonomy, responsibility, recognition,
democracy, focus on turnover and absenteeism, HRM
Socio-technical systems (STS)
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“The design of a technical system always has human
consequences and vice versa”
Optimization involves reconciling human needs and technical
efficiency
Isn’t this obvious? Why was it so controversial at the
at the time (1950s)?
Open systems
Variants of the open systems philosophy became popular
with managers in the 1960s with Forrester’s system
dynamics and in the 1990s with Senge’s “Fifth discipline”
Defined as a system with input OR an entity that changes
its behavior in response to conditions outside its
boundaries.
Systems are rarely ever either open or closed but open to
some and closed to other influences
Animals are open to food, plants to sunlight
Computers and people are open to information
Organizations and societies are open to structure
Whether or not a system has outputs does not enter the
distinction between open and closed systems.
Systems without inputs are not controllable
Open systems ctd.
What is:
A closed system? A subsystem?
Homeostasis and positive/negative
feedback
Entropy and negative entropy (negentropy)
Equifinality
Holism
Practical implications
Open systems theory emphasizes the importance
of the environment (not seen in machine
metaphor)
Organizations are seen as sets of interrelated
subsystems
Molecules, cells, organs, lifeforms, social systems,
world, solar system, galaxy, universe
The approach encourages congruencies or
alignments between different sub-systems (‘fit’)
This led to the development of contingency
theory
Contingency theory
There is no best way of organizing. The
appropriate form depends on the kind of
task or environment – many species of
organizations
Management’s job is achieving alignment
or fit
Fit applies not only to the org-env but also
between sub-systems in an organization
First distinction
Mechanistic vs organic (Burns and Stalker)
Changing technology or market conditions pose
new problems and challenges that require open
and flexible styles of organization and
management
Lawrence and Lorsch showed that styles of
organization might need to vary between
organizational subunits
e.g. R&D departments need to be organized
differently from production departments)
How is this different from an ideal bureaucracy?
Typologies
This research led to the development of
typologies of organizations:
Miles and Snow
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Prospectors, analyzers, defenders
Mintzberg
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Machine bureaucracy, divisionalized form, professional
bureaucracy, simple structure, adhocracy
BCG
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Cash cows, dogs, stars, question marks
Porter
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Cost leadership, differentiation, focus
Other developments
Organization development
The belief that we can diagnose the environment and thus
improve internal and external fit
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What is the nature of the organization’s environment?
What kind of strategy is being employed?
What kind of technology is being used?
What kinds of people are employed and what is the dominant
culture?
How is the organization structured, and what are the dominant
management philosophies?
This can be done at the top level or at sub-levels
Expert Systems
Burton and Obel even developed an expert system to
choose the right structure for an organization
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Conflicts are resolved using fuzzy logic
Why am I suspicious of both these approaches?
Organizational Ecology
Researchers have tracked the births and deaths
of companies over time
Liability of newness, smallness, oldness
Faced with new types of competition or
environmental circumstances, whole industries
or types of organizations may come and go
Legitimacy and inertia prevent one type of
organization (or species) from changing into
another
Debate: How ‘inert’ are companies in the face of
competitive or environmental threats?
Co-evolution
Evolution is a pattern of a pattern of relations
embracing organisms and their environments
Survival of the fitting not just survival of the
fittest
Concepts of symbiosis, co-evolution, punctuated
equilibrium, co-opetition, business ecosystems
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Ford or Yahoo are not single companies – they have a
whole web of suppliers and collaborators and alliances
Strengths of the Organismic
Metaphor
Organizations must always pay close attention to
their external environments
Survival and evolution become central concerns
Achieving congruence with the environment
becomes a key managerial task
What are the implications for strategy
implementation?
Limitations of the Organismic
Metaphor
Organizations are not organisms
Environments are not concrete
Actual vs perceived vs enacted
Metaphor overstates degree of functional unity
and cohesion in most organizations and top
management’s ability to choose subsystem
settings
Can lead to social Darwinism and other
ideological traps
i.e. the best performing organizations are the
fittest and thus the ‘best’
No guarantee the best today will be the best
tomorrow
Organizations as brains
The brain has both specialized functions (speech)
and distributed functions (memory)
Is it possible [and desirable] to design “learning
organizations” that have the capacity to be as
flexible, resilient, and inventive as the functioning
of the brain?
Is it possible [and desirable] to distribute
capacities for intelligence and control throughout
an enterprise so that the system as a whole can
self-organize and evolve along with emerging
challenges (holographic organizations)?
Applications of this
metaphor in strategy
Learning organizations
Knowledge management
E-Commerce, CRM, Data mining, SCM
Virtual Organizations
Self Directed Teams
Why is information so
important?
Information is needed to coordinate the firm’s
resources
faster innovation of new products,
reduced duplication of efforts,
savings in research and development costs,
learning from expensive mistakes
transmission of best practice
enhanced employee satisfaction.
Knowledge management
Where should this information come from?
From top management?
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Centralization versus decentralization issue
From information systems?
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Explicit versus tacit knowledge issue
From people?
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Coordination versus cooperation issue
How should this knowledge be collected, stored,
used? Who should have access?
How should people be motivated to share
information?
Garvin
In most discussions of organizational learning, 3
critical issues are left out
a plausible definition of learning organizations
clear guidelines for practice
tools for assessing the rate and level of learning
Definition
an organization skilled at creating, acquiring and
transferring knowledge, and at modifying its
behavior to reflect new knowledge and insights
(Garvin, 1994)
Garvin: Distinctive Policies
systematic problem solving
experimentation with new approaches
learning from your own experiences and
history
learning from the experiences and best
practices of others
transferring knowledge quickly and
efficiently throughout the organization
Garvin: Distinctive Practices
insisting on data rather than assumptions (PDCA)
an incentive system that favors risk-taking
demonstration projects that start with a clean
slate
widely disseminated case studies and postproject reviews of successes and failures concept of learning from mistakes
training in best practice
transferring and rotating staff - learning by doing
Why is effective learning so hard?
Argyris and Schon start with 2 theories of action
Theory in use (Model I)
 what we actually do in practice
Espoused Theory (Model II)
 what we would like others to think we do
Learning occurs when we explore the fit between
model 1 and model 2 and correct errors
But we hate doing this! Why?
Because…
Exposing inconsistency is threatening and
psychologically painful
People want to avoid embarrassment and blame
They want to be seen as ‘winners’ not ‘losers’
However, this also prevents them from
discovering the causes of their emotions
Redirecting blame causes defensiveness,
misunderstanding, and mistrust in organizations
Executives are so skilled at this behavior that
they see no other way of behaving - it is a tacit
and automatic way of behaving
Organizational defensive routines
Design and manage situations unilaterally
Advocate our views without encouraging inquiry
Evaluate the thoughts and actions of others in ways that do
not encourage testing the validity of the evaluation;
Attribute causes for whatever we are trying to understand-without necessarily validating those attributions;
Unilaterally save face by withholding information or making
certain things "undiscussable" in order to minimize
upsetting others or making them defensive.
Engage in defensive actions such as blaming, stereotyping,
intellectualizing
Keep premises and inferences tacit, lest we lose control.
Remain ‘logical’ by suppressing emotions and conflict
Loops
Single Loop Learning
learning within existing premises of the organization (e.g.
how do I make a better widget)
Double Loop Learning
Double loop learning involves surfacing and challenging
deeply rooted assumptions and norms of an organization
that have previously been inaccessible, either because they
were unknown, or known but undiscussable. (e.g. Should
we be making widgets at all.)
Triple loop learning
Requires double loop learning in a sensitive way
TLL requires trust, listening skills, sharing of power,
tolerance of diverse views, and ability to resist saving face
Exercise: Surfacing undiscussables
With a partner, discuss some of the
“undiscussables” in your organization
Strengths of the brain metaphor
Clear guidelines for creating a learning
organization
We learn how information technology can
support organizations
We gain a new theory of management
based on self-organization
What about holographs??
We recognize the importance of dealing
with paradox
Limitations of the brain metaphor
There may be conflict between the
requirements of learning and the realities
of power and control
Learning for the sake of learning can
become just another ideology
Implications for implementation
Investments in IT systems and
applications for transfer and analysis of
explicit knowledge
We need to create systems for tacit
knowledge transfer and organizational
learning
We need to decentralize decision making
where possible
Organizations as Cultures
Culture: “the way we do things around here”
National cultures
Regional cultures
Organizational cultures
Departmental cultures
How is culture like:
A language, an iceberg, an onion, an umbrella,
sticky glue?
What else could be a metaphor for culture?
National cultures
Concept that management style should change to
remain effective in different countries
Ethnocentric vs polycentric styles
Cultural dimensions:
Hofstede: masculinity, power-distance, uncertainty
avoidance, individuality
Trompenaars: universalism/particularism,
neutral/affective, time orientation,
achievement/ascription
How can we become more effective managers in
global situations?
Exercise: Corporate cultures
Take some time to share the following answers to
these questions about your organization:
What kinds of beliefs and values dominate the
organization (officially…unofficially)
What are the main norms (do’s and don’ts)
What are the dominant stories and rituals?
What are the favorite topics of informal
conversations?
Think of three influential people in the
organization. How do they symbolize the character
of the organization?
Are there subcultures? Are they in conflict or
harmony?
Debrief
What struck you as abnormal or strange
about your partner’s answers? Why?
What management challenges do you
think your partner’s organization might
present? How hard would it be to change
the culture?
What are the implications for strategy
implementation?
Some key questions
Where does culture come from? How is it
sustained?
How do we create or change a culture?
Where does culture come from?
Leadership (setting mission/vision)
Selznick (1957) says purpose-setting is essence of
leadership
Shared values
Religious groups, etc.
Stories, legends, myths, symbols
Reward systems
Professional values
e.g. engineers, doctors, accountants
Historical accidents
Morgan makes a big deal about enactment – what is
it and why is it important?
Hegemony
Indoctrination of masses, coalition with powerful
Changing a culture
trigger shifts in the established mindset
breakdown habitual behavior patterns including
routines, structures and rewards
move outside established information channels
use data and analysis to shock people
introduce new people and outsiders
co-opt or break adversarial political alliances
revamp employee communication mechanisms
training and development
use symbolism , ritual, and enactment
reward new behavior, celebrate success
provide leadership
Strengths of the cultural
metaphor
Emphasizes the symbolic significance of what we do
We learn that organization and shared meaning are one and
the same
We see how success hinges on the creation of shared
meaning
Leaders and managers gain a new understanding of their
impacts and roles
We see that organizations and their environments are
enacted domains
Strategic management is understood as an enactment
process
The metaphor offers a fresh perspective on organizational
change
Limitations of the cultural
metaphor
The metaphor can be used to support
ideological manipulation and control
Culture is holistic and cannot readily be
managed by a simple checklist
Important dimensions are invisible and
what is easily seen may be relatively
unimportant
Culture usually has a deep political
dimension