Principles of Management MGT 2010
Chapter 9 Organizational Design, Culture & Change
Designing Organizational Structure
Design – The creation of or a change to an organization’s structure.
Objectives of Organizational Design
• Respond to change. Nothing lasts forever. Must stay competitive.
• Integrating new elements. Response to change often adds new positions, and new
departments.
• Coordinating the Components. New elements must be integrated into the
organization.
• Encourage Flexibility. Differs from change in that it focuses on decision making,
redirecting energies, and spotlighting people’s talents.
• Balancing the elements makes the design outcomes to be very different.
Distinguish Between Mechanistic & Organistic Structures
Mechanistic
• Rigidly defined task.
• Many rules and regulations.
• Centralized decision making.
• Vertical structure is very tight with emphasis on controls from the top
management.
• The military is a vivid example.
Organic
• Free flowing information. Few rules and regulations.
• Decentralizes decision making right down to the employees.
• Highly adaptive form that is workable to the needs of change.
Contingency Factors Affecting Organizational Design
Strategy
• When structure changes, strategy changes.
• Chapter 6 introduced various business level strategies.
• The foundation of strategy is the mission and strategic goals.
Environment
• The organizational environment provides a major influence on the design of the
structure.
• Stable & Predictable environments should have a mechanistic structure.
Size of the Organization
• Large organizations usually differ structurally than smaller ones.
• Smaller organizations should have an Organistic structure.
Age of the Organization – Life Cycle
Birth Stage
• Entrepreneur creates the organization.
• It is informal with centralized decision making
Youth Stage
• The organization is growing and its’ product succeeds.
• Division of labor begins to emerge with a few rules.
• Decision making remains centralized.
Midlife Stages
• The company has done well and grown quite large.
• Extensive rules and systems to guide specialized employees.
• Control systems are put in place.
• Professional and clerical staff is hired to support activities.
Maturity Stages
• Large and mechanistic
• Vertical control structure becomes overwhelming.
• Face stagnation.
• It is critical to shape and adjust the structure to eliminate the mechanistic outcome
of this stage.
Technology
• Includes knowledge, machinery, work procedures, and materials that transform
the inputs into outputs.
Structural Options in Organizational Design
Functional Structure
• Groups positions into departments based on skills.
• Advantage is that grouping skills is economical by minimizing duplication.
• Employees tend to be more comfortable in this functional structure.
• Disadvantages are that separating functions limits an employees understanding
functions outside their areas.
Divisional Structure
• Group departments based on organizational outputs.
• These are self contained business units that produce a single product.
• Advantage’s is that employees and managers stay focused on their product.
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Disadvantage is the duplication of activities and resources.
Matrix Structure
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Combines advantages of functional specialization with the focus and
accountability of the divisional structure.
Employs dual lines of authority.
Advantage is flexibility and can be dissolved without a major problem.
Increases the motivation of the individual.
Disadvantage is the potential for conflict and confusion.
Team Structure
• Places separate functions or processes into a group according to one overall
objective.
• Advantage is that it can break down barriers between departments.
• Disadvantage depends on the employee’s ability to learn and train for success.
Network Structure
• Small central organization relies on other organizations to perform manufacturing,
marketing, engineering, or other critical functions on a contract basis.
• Advantage is flexibility because you purchase only the services that you need.
• Disadvantage is a lack of control. You rely on contractors to meet your
specifications and timelines.
Organizational Culture
Factors Shaping the Culture
1) Key organizational processes.
2) Dominant coalition.
3) Employees and other tangible assets.
4) Formal organizational arrangements.
5) Social System
6) Technology
7) External Environment.
Manifestations of Culture
Statements of Principle
1) Quality.
2) Responsibility.
3) Mutuality.
4) Efficiency.
5) Freedom.
Stories
• Illustrate the culture.
• Acquaints new employees with the culture’s values.
• Reaffirms those values for existing employees.
Slogans
• A phrase that clearly expresses a key organizational value.
• Must be genuinely backed by the actions of the company.
Heroes
• A person in the organization who exemplifies the values of the culture.
Ceremonies
• Exemplify and reinforce company values.
• These events increase the employee’s identification with the organization’s
values.
Symbols
• An object or image that conveys meaning to others.
• May include job titles and perks such as a parking spot, desk size, or location of
office.
Climate
• The quality of the work environment experienced by the employee
• How does the employee feel about working there?
Physical Environment
• Simple but powerful force.
• The type of setting influences employees and their comfort level in the work
place.
Creation of Culture Figure 9.14 Page 287
Roles of Managers
• Clearly define the company’s mission and goals.
• Identify the core values.
• Determine the amount of individual autonomy and the degree to which people
work separately or in groups.
• Structuring the work in accordance with the corporation’s values to achieve its
goals.
• Develop reward systems that reinforce the values and goals.
• Create methods of socialization that will bring employees inside the culture.
Role of Employees
• Subculture is based on the shared values, beliefs and norms of its members.
• Employees shape the culture.
Factors Contributing to the Effectiveness of Culture
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Coherence is how ell the culture fits the mission and other organizational
elements.
Pervasiveness and Depth is the extent to which employees adopt the culture of the
organization.
Adaptability to the External Environment.
Nature of Change
Change is any alteration in the current work environment.
Sources of Change
• External may come from the political, social, technological, or economic
environment.
• Internal changes include managerial policies or styles, systems, technology or
employee attitudes.
Types of Change
• Strategic is changing the mission of the organization.
• Structural may be caused with the need to downsize or create team building.
• Process Orientated requires reengineering and it may have dramatic effects on the
organization and its culture.
• People centered are directed at the attitudes behaviors, skills and performance of
the company’s employees.
Rates of Change
• Evolutionary focuses on the incremental steps taken to bring about progress and
change.
• Revolutionary focuses on bold advances which push the change envelope.
How to Manage Change
• Planned involves trying to anticipate what changes will occur in both the internal
and external environments.
• Management by reaction is trying to respond after change occurs. This can invite
disaster.
• Change agent is the person who implements the planned change. Not the creator
but the person in front of the organization taking responsibility to see the change
through.
Need for Change: Diagnosing & Predicting
1) Creativity is the birth stage.
2) Direction is the implementation of rules and procedures.
3) Delegation is when profit centers are created under territorial managers
who are given leeway to act and held accountable for results.
4) Coordination is the process of seizing control by emphasizing
coordination.
5) Collaboration has managers exhibiting more spontaneity and an attitude of
risk taking and innovation.
Steps in Planned Change
1) Recognize the need for change.
2) Develop goals.
3) Select a change agent.
4) Diagnose the problem through data gathering.
5) Select the method of intervention to achieve the change.
6) Develop a Plan.
7) Plan for the Implementation by deciding the “when”, “where”, and “how” of the
plan.
8) Implement the Plan.
9) Follow up and evaluating.
Qualities Promoting Change
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Mutual trust. Allows individuals to continue to function while maintaining a hope
that things will improve.
Organizational Learning allows you to integrate new ideas into established
systems.
Adaptability takes energy and commitment.
Implementation of Change
Resistance to Change
• Loss of security
• Fear of economic loss.
• Loss of power and control.
• Reluctance to change old habits.
• Selective Perception.
• Awareness of weaknesses in the proposed change.
Techniques for Overcoming Resistance
1) Participation.
2) Open Communication.
3) Advance warning.
4) Sensitivity
5) Security.
Why Change Efforts Fail
1) Faulty Thinking
2) Inadequate Process
3) Lack of Resources
4) Lack of acceptance and commitment
5) Lack of Time and Poor Timing
6) A resistance culture.
Organizational Development
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Organizational Development (OD) is the thorough analysis of problems and then
implement long term solutions to solve them.
Purpose is to create a system of organizational renewal that can effectively cope
with environmental changes.
Choice of strategies depends on circumstances.
Evaluate the effectiveness by comparing results to thegoals.
Homework
Page 310 Application Case “A Cultural Mismatch”, answer 4 questions.