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Summary Organizational Behaviour - chapters 12-14
Management And Organizational Behaviour (The University of British Columbia)
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How should decisions be made?
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Decision – the choice made from two or more alternatives
Decision making – reaction to a problem or opportunity
Problem – discrepancy between some current state of affairs and some desired state
Opportunity – when something unplanned happens, giving rise to thoughts about new ways
of proceeding

Top management decisions: org’s goals, what products/services to offer, how to finance
operations

Middle/low management decisions: production schedules, select new employees, decide
how pay raises are to be allocated
The Rational Decision-Making Process

Rational – refers to choices that are consistent and value-maximizing within
specified restraints

Rational decision making model – a six-step model that describes how individuals
should behave in order to maximize some outcome
Define the problem

Identify the criteria
Allocate weights to
the criteria
Develop
alternatives
Evaluate the
alternatives
Select best option
Identify the criteria: determine what is relevant in making the decision – interests, values,
personal preferences
o Any factors not identified in this step are considered irrelevant by the decision maker
Assumptions of the Model
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Problem clarity – problem is clear and unambiguous; decision maker has complete info
Known options – DM can identify all relevant criteria and can list all possible alternatives;
aware of all consequences of each alternative

Clear preferences – criteria/alternatives are ranked and weighted based on perceived
importance
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Constant preferences – criteria/alternatives and weights assigned are stable over time
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No time or cost constraints
Maximum payoff – DM will choose whichever yields highest perceived value
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How do individuals actually make decisions?
Most decisions in the real world do not follow the rational model.
Most significant decisions are made by judgment, rather than by a defined prescriptive model.
Bounded Rationality in Considering Alternatives

Bounded rationality – limitations on a person’s ability to interpret, process, and act
on information
o Not being able to discover and consider every alternative

Usually, the list of alternatives will represent familiar criteria and previously tested solutions
o Settle on the alternative that is “good enough” – meets acceptable level of
performance
o First alternative that meets a good enough solution will end the search

Decision makers choose a final solution that satisfices (provide a solution that is
satisfactory and sufficient) rather than optimizes
Intuition

Intuitive decision making – subconscious process created out of a person’s many
experiences
o Least rational way
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Occurs outside of conscious thought
Relies on holistic associations or links between disparate pieces of information
Affectively charged – engages the emotions
Experience allows one to recognize a pattern in a situation and draw on previously learned
information associated with that pattern to arrive at a decision quickly
Judgment Shortcuts
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Systematic bias and errors creep into judgments
Attempts to shortcut the decision making process

Minimize effort and avoid difficult tradeoffs  rely heavily on experience, impulses, gut
feeling, convenient rules of thumb
Overconfidence Bias
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Error in judgment that arises from being far too optimistic about one’s performance
Those individuals whose intellectual and interpersonal abilities are weakest are most likely
to overestimate their performance/ability
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The more knowledgeable one becomes, the less likely they display overconfidence
Arises when members are considering issues or problems that are outside area of
expertise
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Anchoring Bias
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A tendency to fixate on initial information, form which one then fails to adequately
adjust for subsequent information
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Our mind gives disproportionate amount of emphasis to the first information it receives
Confirmation Bias
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The tendency to seek out information that reaffirms past choices and to discount
info that contradicts past judgments
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Case of selective perception
Accept easily info that confirms our views
Are critical and skeptical of those that challenge our views

Influences where we go to collect evidence; seek out sources that will tell us what we want
to hear
Availability Bias
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The tendency for people to base their judgments on info that is readily available to
them rather than complete data
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Events that evoke emotion/occurred recently are more available in our memory
Can explain why managers tend to give more weight to recent behaviors of an employee
rather than historical performance (during performance appraisals)
Escalation of Commitment
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An increased commitment to a previous decision despite negative information
Staying with a decision even when there is clear evidence that it’s wrong
Individuals escalate commitment to a failing course of action when they view themselves as
responsible for the failure
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They do this to demonstrate that their initial decision was not wrong, and to avoid having to
admit they made a mistake
Randomness Error
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The tendency of individuals to believe that they can predict the outcome of random
events
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DM becomes impaired when we try to create meaning out of random events
Turning imaginary patterns into superstitions or evolve from a certain patterns of behavior
that has been reinforced previously
Winner’s Curse
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The tendency for the winning participants in an auction to pay too much for the item
won
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“The winner, the highest bidder, was the one who overestimated the value most”
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Winner’s curse gets stronger as the number of bidders increases
Hindsight Bias
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The tendency to believe falsely, after an outcome of an event is actually known, that
one could have accurately predicted that outcome
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Seem to be good at concluding that the outcome was relatively obvious
Reduces ability to learn from the past
Makes us think we’re better at making predictions than we really are  end up becoming
more confident about the accuracy of future decisions than we have a right to be
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Improving DM through Knowledge Management
Knowledge management – the process of organizing and distributing an organization’s
collective wisdom so that the right information gets to the right people at the right time
KM  makes employees smarter  improved org performance  competitive edge

Org’s that can quickly tap into employees’ collective experience & wisdom are more likely
to outsmart competition

With baby boomers leaving the workforce, there is increasing awareness that their wealth
of knowledge will be lost if not captured/documented

KM system reduces redundancy  more efficient
How do you record the knowledge and expertise of employees? How do you make it accessible?
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Develop computer databases – identify what knowledge matters to the org
Create a culture that promotes, values and rewards sharing knowledge
Develop mechanisms that allow employees who have built up expertise and insights to
share them with others
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More knowledge ≠ better knowledge
Avoid info overload – design system to capture only pertinent info and then organizing it so
it can be quickly accessed by people whom it can help
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Group Decision Making
Groups vs. the Individual
Criteria of Effectiveness
Groups
More complete info
~
Diversity of views
~
Decision quality
~
Accuracy
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Creativity
~
Degree of acceptance
~
Individuals
Speed
~
Efficiency
~
Weaknesses of Group Decision Making
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Time consuming
Conformity pressures – desire to be accepted in a group
Group discussion can be dominated by one or a few members
Ambiguous responsibility – responsibility of any single member is watered down
Effectiveness and Efficiency
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Group decision making  highly effective (except when it comes to speed)
However, group DM is highly inefficient  takes too much time
Groupthink and Groupshift
Groupthink
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A phenomenon in which group pressures for conformity prevent the group from
critically appraising unusual, minority or unpopular views
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Deterioration in mental efficiency, reality testing, and moral judgment
Symptoms of Groupthink:
o Illusion of invulnerability – members become overconfident among themselves 
take extraordinary risks
o Assumption of morality – do not feel the need to debate the ethics of their actions
o Rationalized resistance – no matter how strongly the evidence may contradict their
basic assumptions
o Peer pressure
o Minimized doubts – others stay silent even if they disagree with the consensus
o Illusion of unanimity – if someone doesn’t speak, it’s assumed that they are all in
agreement; abstention = yes
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What can managers do to minimize groupthink?
o Monitor group size – hesitation and intimidation increases with size
 Individuals feel less personal responsibility when groups get larger than 10
o Encourage group leaders to play an impartial role
o Appoint one group member to play the role of devil’s advocate
o Stimulate active discussion of diverse alternatives to encourage dissenting views
and more objective evaluations
Groupshift
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A phenomenon in which the initial positions of group members become exaggerated
because of the interactions of the group
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Discussion leads to a significant shift in the positions of members toward a more extreme
position in the direction in which they were already leaning
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Conservative types  more cautious
More aggressive types  assume more risk
Discussion creates familiarity among members  more comfortable with each other 
become bolder and more daring
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Another argument: our society values risk, admire those who are willing to take risks
Most plausible argument: the group diffuses responsibility
o Free any single member from accountability for the group’s final choice
o Greater risk can be taken because if the decision fails, no one can be held wholly
responsible
Group Decision Making Techniques
Interacting Groups
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Typical groups, where members interact with each other face to face
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Rely on verbal and non-verbal cues to communicate
To reduce possibility of groupshift/think: brainstorm, use the nominal group technique,
electronic meetings
Brainstorming
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An idea-generation process that specifically encourages any and all alternatives,
which withholding any criticism for those alternatives
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Ideal: 6-12 people
“Lighting round”, analysis and comments are reserved for later
Research says: brainstorming is more effecting on an individual level; individuals come up
with more ideas on their own
o Due to production blocking – many people talking at once, blocks thought process
Nominal Group Technique
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A group DM method in which individual members meet face to face to pool their
judgments in a systematic but independent fashion
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Restricts discussion or interpersonal communication during DM-process
Members are physically present, but operate independently
Process
1. Each member writes down their idea on the problem (silent period)
2. Each member presents one idea to the group. Take turns in presenting a single idea.
Still no discussion happens.
3. Discuss the ideas for clarity and evaluate them.
4. Each group member silently ranks the ideas. Idea with highest aggregate ranking
determines final decision.
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Advantage: permits groups to meet formally but does not restrict independent thinking
Electronic Meetings
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A meeting where members interact on computers, allowing for anonymity of
comments and aggregation of votes
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Advantage: anonymity, honesty, speed; brutally honest without penalty; chit chat is
eliminated
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Research shows: led to decreased effectiveness, time consuming, reduced member
satisfaction
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Creativity in Organizational Decision Making
Creativity – the ability to produce novel and useful ideas
Creativity allows the DM to more fully appraise and understand the problem, including seeing
problems others can’t see.
Evaluating Group Effectiveness: Types of Groups
Effectiveness Criteria
Interacting
Brainstorming
Nominal
Electronic
Number and quality of ideas
Low
Mod
High
High
Social pressure
High
Low
Mod
Low
Money costs
Low
Low
Low
High
Speed
Mod
Mod
Mod
Mod
Task orientation
Low
High
High
High
Potential for interpersonal
conflict
High
Low
Mod
Low
Commitment to solution
High
n/a
Mod
Mod
Development of group
cohesiveness
High
High
Mod
Low
Creative Potential
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Learn how to think about a problem in divergent ways
More likely to be creative:
o High openness to experience
o Intelligent
o Independent
o Self confident
o Risk taker
o Positive core self evaluation
o Tolerant of ambiguity
o Low need for structure
o Perseverance in the face of frustration
Three Component Model of Creativity
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The proposition that individual creativity requires expertise, creative-thinking skills,
and intrinsic task motivation
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Expertise is the foundation for all creative work
o Potential for creativity is enhanced when people have abilities, knowledge,
proficiencies and expertise in their field
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Creative thinking skills – personality characteristics: ability to use analogies, talent to see
the familiar in a different light
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o We are more creative when we are in a good mood
o Being around others who are creative makes us more inspired
o Use of analogies: allows DMs to apply an idea from one context to another
o See problems in a new way – able to make the strange familiar and the familiar
strange
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Intrinsic task motivation – desire to work on something because it’s interesting, involving,
exciting, satisfying, or challenging
o Turns creativity potential to actual creative ideas
o Determines extent to which individuals fully engage their expertise and creative skills
Organizational Factors that Affect Creativity
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Expected evaluation
Surveillance
External motivators – focusing on external, tangible rewards
Competition – facing win-lose situations with peers
Constrained choice – limits on how you can do your work
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What about ethics in decision making?
Ethics – the study of moral values or principles that guide our behavior and inform us whether
actions are right or wrong
Four Ethical Decision Criteria
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Utilitarianism – a decision focused on outcomes or consequences that emphasizes the
greatest good for the greatest number
o Consistent with goals of productivity, efficiency, high profits
o Usually used as a defense for business decisions
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Focus on rights – make decisions that are consistent with fundamental liberties and
privileges as set forth
o Respecting and protecting the basic rights to privacy, free speech, due process
o Would be used to protect whistle blowers (individuals who report unethical
practices by their employer to outsiders)
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Justice – impose and enforce all rules fairly and impartially so there’s an equitable
distribution of benefits and costs
o Protects interests of the underrepresented and less powerful
o Encourages sense of entitlement that reduces risk taking, innovation & productivity
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Care – care in protecting the special relationships that individuals have with each other
o Should be aware of the needs, desires, and well-being of those who we are closely
connected with
Factors that Influence Ethical DM Behavior
Stages of Moral Development
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Developmental stages that explain a person’s capacity to judge what is morally right
The higher a person’s moral development, the less dependent they are on outside
influences  more ethical behavior
1. Pre-conventional level
i. Sticking to rules to avoid physical punishment
ii. Following rules only when doing so is in your immediate interest
2. Conventional level
i. Living up to what is expected by people close to you
ii. Maintaining conventional order by fulfilling obligations to which you have agreed
3. Principled level
i. Valuing rights of others and upholding absolute values and rights regardless of
majority’s opinion
ii. Following self-chosen ethical principles even if they violate the law
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Locus of Control
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When people believe their lives are controlled by outside forces (luck/chance)
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Less likely to take responsibility for consequences of their behavior
Rely on external influences to determine their behavior
Internal locus of control = believe they are responsible for their destiny
o Rely on their own internal standards of right or wrong to guide their behavior
Organizational Environment
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Employees’ perceptions of org expectations
Orgs that foster high ethical DM: have a code of ethics, high moral behavior by senior
management, realistic performance expectations, performance appraisals that evaluate
means as well as ends, recognition and promotions for those with high moral behavior,
punishment for those who act unethically
Making Ethical Decisions
1. Is the decision motivated by self-serving interests? (No.)
a. Addresses self-interest vs. organizational goals
2. Does the decision respect the rights of the individuals affected? (Yes.)
a. Concerns the rights of other parties
3. Is the decision fair and equitable? (Yes.)
a. Whether the decision conforms to standards of equity and justice
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However, keep in mind that powerful, articulate, and persuasive people are the most likely
ones to be able to get away with unethical actions.
Organizational Response to Demands for Ethical Behavior
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Corporate ethics officers
Developing a Code of Ethics
o State basic principles and expectations
o
o
o
o
Focus on potential ethical dilemmas
Distribute to all employees
Train individuals so they understand the code
Enforce violations
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Employees must be instructed in how to follow the policy
Hiring an ethics auditor
o Hired to double check an org’s perception of its own morals
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Create mechanisms that encourage employees to speak up when they see wrongdoing
What about national culture?
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No global ethical standards because what is considered unethical in some countries might
be fine in others
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Companies with operations in other countries usually face tough decisions: clash between
their own values vs. the values/practices in the country they’re living in
o Do they stick to ethical Canadian standards? Or the foreign country’s?
Corporate Social Responsibility
Corporate social responsibility – an organization’s responsibility to consider the impact of its
decisions on society
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Charitable contributions
Providing better wages
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Seek ways to improve society because they feel it is the right thing to do
Today’s corporations have many of the same characteristics as a psychopathic personality
o Self interested
o Lacking empathy
o Manipulative
o Reckless in their disregard of others
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The only legal responsibility corporations have is to max org profits for stockholders
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What is Organizational Structure?
Chapter 13
Organizational structure – defines how job tasks are formally divided, grouped,
and coordinated
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Tall pyramid vs. relatively flat
More layers vs. few layers
Structure determines the reporting relationships of people
Restructuring – when org.’s change its structure from time to time (often
involves layoffs)
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Six key elements that managers need to address when they design an
organization’s structure:
Work Specialization
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Aka division of labour – the degree to which tasks in the organization are
subdivided into separate jobs

Broken down into a number of steps, each being completed by a different
person

Results in specialization: the more one does a task, the better they become
at it
o Easier and less costly to find and train workers to do specific and
repetitive tasks rather than finding someone that can do all tasks well
o Increases efficiency
o Can lead to boredom, fatigue, stress, absenteeism, high turnover

Solution/balance: put them into teams with interchangeable skills  gives
employees a variety of activities to do
Individual Responses to Work Specialization
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Work specialization contributes to higher employee productivity but reduced job
satisfaction

Productivity suffers when human diseconomies (satisfaction) overtake
economies of specialization
Departmentalization
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Departmentalization – the basis on which jobs are grouped together for
increased coordination of similar/related tasks
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Risk: if they become silos – a separate organization within the organization –
disconnected
o Protect own turf  poor inter-department interaction  narrow vision
with respect to organizational goals
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Functional Departmentalization
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Separated by function
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Ex. accounting department, HR department, marketing department
Ex. research department, patient care, accounting
Advantage: obtaining efficiencies from putting people with common skills and
orientations together
Product Departmentalization
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Separated by type of product the organization produces
Ex. fake lashes, blushes, mascara, lipstick
Advantage: increased accountability for product performance
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Ex. bank: banking, investment, insurance
Geographic Departmentalization
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Separated by physical place/territory
Useful in sales function – similar needs based on their location
Process Departmentalization
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Separated by different steps in a process
Ex. aluminum tubing manufacturer: casting, press, tubing, finishing, inspecting,
packing, shipping
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Common in manufacturing industry
Homogenous categorizing of activities --. Each process requires different skills
Customer Departmentalization
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Separated by the type of customer the organization wishes to reach
Ex. office supply firm: wholesale, retail, government customers
Underlying assumption: each department have a common set of problems and
needs that can best be met by having specialists for each
Organizational Variety in Departmentalization
Trends in departmentalization:

Many organizations give greater emphasis to customer
departmentalization
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Rigid, functional departmentalization is being increasingly complemented by
teams that cross over traditional departmental lines
Taking departmentalization a step further: Divisions

Separate profit centers
Chain of Command
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
Chain of command – continuous line of authority that extends from upper org
levels to the lowest level and clarifies who reports to whom

Delegation – assignment of authority to another person to carry out specific
duties, allowing the employee to make some of the decisions
o Usually happens because manager does not have enough time to do
everything
o Ensures that the right people are involved in decision making process
o Empowers employees to make decisions that were previously reserved
for managers

Self managed and cross functional teams  decreased relevance in chain
of command
Span of Control

Span of control – the number of employees that report to a manager
o Determined by the number of employees a manager can efficiently and
effectively direct
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The wider/larger the span, the more efficient the organization
Wider spans = lesser management salary costs BUT be careful not to make the
span so wide or else employee performance will suffer (no leadership/support)

Narrow spans = manager can maintain close control. Drawbacks:
o More costly
o Slow down decision making
o Isolate upper management
o Encourage overly tight supervision, discourage employee autonomy

Trend in recent years: wider spans of control  downsizing, move to
teamwork
o Reduce costs, cut overhead, speed up decision making, increase
flexibility, get closer to customers, empower employees
o To make sure performance doesn’t suffer, orgs have been investing
heavily in employee training – so they know their
jobs/tasks/responsibilities very well  can turn to co-workers when they
have minor questions
Individual Responses to Span of Control
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Research fails to support notion that it leads to higher employee performance
No relationship has been found
Related to contingency theories of leadership

Manager’s job satisfaction increases as the number of employees he or she
supervises increases
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Centralization and Decentralization

Centralization – the degree to which decision making is concentrated at a
single point in the organization
o Formal authority; rights inherent in one’s position
o Top management makes decisions without input from lower level
employees

Decentralization – the degree to which decision making is distributed to
lower-level employees
o Lower level employees provide more input and given discretion to
make decisions
o Action can be taken more quickly to solve problems
o Employees are less likely to feel alienated from those who make the
decisions that affect their work life
o Easier to address customer concerns
o Lower-level managers are “closer to the action”  more detailed
knowledge about problems
Individual Responses to Centralization

Centralization linked with job satisfaction
o Less centralized  greater amount of participation in decision making
 positively affects job satisfaction

Decentralization-satisfaction relationship is strongest with employees who have
low self esteem
o Less confidence in abilities  higher value on shared decision making 
not held solely responsible for outcomes
Formalization

Formalization – the degree to which jobs within the organization are
standardized

Highly formalized – explicit job descriptions, many rules, clearly defined
procedures
o Expected to handle the same input exactly the same way  consistent
and uniform output

Low formalization – more freedom to exercise discretion
o Discretion inversely related to the amount of behavior in the job that is
preprogrammed

Standardization eliminates the possibilities of employees engaging in
alternative behaviors & removes need for employees to consider
alternatives
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Mechanic and Organic Organizations
Mechanistic Model
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High specialization
Rigid departmentalization
A clear chain of command
Limited information network
Centralization
Ex. government bureaucracies
Organic Model

Flat
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Uses cross-functional and cross-hierarchal teams
Comprehensive information network
Wide spans of control
Low formalization
Ex. High tech firms – a lot of collaboration
Individual Responses to Organizational Structure

Your
o
o
o
o
response to an organization’s structure will depend on:
Experience
Personality
Work task
Cultural differences

High degree of bureaucracy = heavy reliance on higher authority, prefer
formalized and specific rules, prefer formal relationships with others
o Mechanistic structure

Low degree of bureaucracy = organic structure
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Traditional Organizational Designs
The Simple Structure
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Low degree of departmentalization
Wide spans of control
Authority centralized in one person
Little formalization
Flat organization – two or three vertical levels
o Loose body of employees + 1 decision-making authority

Widely practiced in small businesses – manager and owner are same
person

Strength of structure lies in its simplicity – fast, flexible, inexpensive to
maintain and accountability is clear

Weakness: difficult to maintain in anything other than small orgs.
o Tends to create info overload at top levels
o Must change structure as organization starts to grow in size  otherwise
decision making process will slow down significantly  lose momentum
o Risky because it all depends on one person
The Family Business


70% of Canadian employment, 30% of GDP
Have more complex dynamics than nonfamily businesses because of personal
relations vs. management relations


Shareholders = family members
Must manage the conflicts found within families as well as the normal business
issues

Needs good governance  helps family manage the conflicts that arise
o Sense of direction
o Values to live and work by
o Well-understood and accepted policies for behavior
o Plays key role in CEO succession  tricky because personal and emotional
factors determine succession

Pressure to balance business needs and family needs
The Bureaucracy


STANDARDIZATION
Highly routine operating tasks achieved through:
o Specialization
o Formalized rules and regulations
o Tasks that are grouped into functional departments
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o Central authority
o Narrow spans of control
o Decision making that follows the chain of command
Strengths of Bureaucracy






Alternative to the traditional administrative form (Max Weber)
Strength: ability to perform standardized activities in a highly efficient manner
Economies of scale
Minimum duplication of staff and equipment
Employees have the opportunity to talk “the same language”
Little need for innovative and experienced decision makers below the level of
senior executives

Effective structure for ensuring consistent application of policies and
practices and ensures accountability
Weaknesses of Bureaucracy

Create subunit conflict
o Each department may think they are the most important/superior
o Acts like silo: focus more on what perceives as its own value and
contribution
o Fails to understand the interdependency of departments

Concentrated power
o Other expected to follow their orders without question
o There may be pressure to perform tasks that are unethical

Obsessive concern with following the rules
o No room for modification
o Problems already have premeditated, textbook solutions  not always
effective
The Matrix Structure

Combines functional and product departmentalization
o Without their drawbacks
o Functional: groups specialists together – minimizes number necessary
o Product: coordination among specialties to achieve on-time completion
and meet budget targets


Dual chain of command
Frequent in advertising agencies, aerospace firms, R&D labs, construction
companies, hospitals, universities

Breaks the unity of command concept
o Two bosses – functional department managers and product managers
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Advantages of a Matrix Structure

Ability to foster coordination when an org carries out complex and
interdependent activities

As it becomes larger, info processing can become overloaded  solved by
increased communication and flexibility


Information is more free-flowing and gets to who needs to hear it quicker
Dual lines of authority  reduce tendency of silos (doesn’t identify with just
one department)

Facilitates efficient allocation of specialists
Disadvantages of a Matrix Structure


Creates confusion
Fosters power struggles – who reports to whom
o Product managers fight over the best specialists

Stresses individuals
o For those who desire security and absence of ambiguity
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New Design Options
The Team Structure





The use of teams as the central device to coordinate work activities
Breaks down departmental barriers
Decentralizes decision making to the level of the work team
Require employees to be generalists as well as specialists
In large orgs: Team structure can complement a typically bureaucratic
structure
o Achieve efficiency (from bureaucracy standardization) and flexibility (from
teams)

In small orgs: team structure can define the entire org
The Modular Organization


A small core organization that outsources major business functions
Need to create network of relationships that allow the org to contract out
manufacturing, distribution, marketing and other business functions
o If others can do it better and for less money


Outsources many functions and focuses on what it does best
Managers: spend some time coordinating and controlling external relations

Advantages:
o Devote technical and managerial talent to most critical activities
o Respond more quickly to environmental changes
o Increased focus on customers and markets

Drawback: reduces management’s control over key parts of the
business
o Rely on outsiders – decreased operational control
o Ex. Nike: There is a need to make decisions for trade-offs between lowcost production strategies and criticisms from potential customers
The Virtual Organization

A continually evolving network of independent companies – suppliers,
customers, even competitors – linked together to share skills, costs, and
access to one another’s markets
o Units of different firms joining in an alliance to pursue common strategic
objectives

Participants give up some of their control and act more interdependently
(compared to modular approach)


Orgs come together to exploit specific opportunities/attain specific objectives
Advantage:
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o Allow orgs to share costs and skills
o Provide access to global markets
o Increase market responsiveness

Disadvantage:
o Boundaries between companies are blurred (interdependent)
o Companies must relinquish operational and strategic control
o Requires new managerial skills:
 build relationships
 be able to negotiate win-win deals
 find compatible business partners (in terms of values and goals)
 develop appropriate communication systems
The Boundaryless Organization

An organization that seeks to eliminate the chain of command, have
limitless spans of control, and replace departments with empowered
teams
o Attempt to break down internal and external boundaries


Relies heavily on information technology  aka T-form organization
Breaking down internal boundaries:
o Flattening the hierarchy
Creating cross-hierarchal teams – includes all levels of upper and
lower level management/employees in one team
o Using participative decision making practices
o 360-degree performance appraisals – peers superior AND inferior to you
evaluate performance


Breaking down external boundaries:
o Barriers to external constituencies: suppliers, customers, regulators
o Barriers by geography
o How? Globalization, strategic alliances, supplier-organization and
customer-organization linkages and telecommuting

Common technological thread: networked computers
o Allow people to communicate across intra-organizational and interorganizational boundaries

Drawback: difficult to manage
o Difficult to overcome political and authority boundaries
o Time-consuming and difficult to manage the coordination necessary
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What major forces shape an organization’s structure?
Strategy


Means to help management achieve its objectives
Overall strategy  objectives  structure
Innovation Strategy
 Strategy that emphasizes the introduction of major new products and services
 Ex. 3M
Cost-Minimization Strategy

Strategy that emphasizes tight cost controls, avoidance of unnecessary
innovation or marketing expenses, and price cutting
 Ex. Walmart
Imitation Strategy

Strategy of moving into new products or new markets only after their viability
has already been proven by other innovators

Capitalizing on the best of both of the previous strategies: minimize risk and
maximize opportunity for profit

Copy successful ideas of innovators
Summary:

Strategy: Innovation
Structure: Organic

Strategy: Cost Minimization
structure: Mechanistic

Strategy: Imitation
Structure: Mechanistic and Organic
Organization Size

Larger in size  more departments, more specialization, more vertical levels,
more rules and regulations

Size affects structure at a decreasing rate (not a linear relationships)
o The impact of size becomes less important as an organization expands
o Adding 500 members to a org with 3000 members vs. adding 500 to an
org of 300 members
Technology

The way in which an organization transfers its inputs into outputs

Financial, human and physical resources  products and services
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Variations in Technology

Differentiates technologies  degree of routineness
o Routine: assembly line at a factory
o Non-routine: furniture restoring, custom shoe-making
The Relationship between Technology and Structure



Routine tasks are more associated with taller, departmentalized structures
Routineness  formalization
Technology-centralization relationship is moderated by degree of formalization
o More associated with centralized control though
o But if formalization is high, routine tech can be accompanied by
decentralization
o Therefore, routine technology would only lead to centralization if
formalization is low
Environment

Those institutions or forces outside the organization that potentially affect the
organization’s performance

Suppliers, customers, competitors, government regulatory agencies, public
pressure groups


Static vs. Constantly changing environments
Uncertainty = threat to org’s effectiveness  managers should try to minimize
this
o Through adjustments in structure
Capacity


Capacity of an environment – degree to which it can support growth
Growing environments  generate resources  buffer the org in times of
scarcity

Leaves room for the org to make mistakes
Volatility


Degree of instability in an environment
High degree of unpredictable change = dynamic environment
o Difficult to predict probabilities with decision alternatives

Stable environment
Complexity


The degree of heterogeneity and concentration among environmental elements
Simple environments = homogenous and concentrated
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o Relatively few players
o Easy for firms to keep a close eye on competition

Complex environments = heterogeneity and dispersion
o “there’s a new company entering the market everyday”
Dynamic + Scarce + Complex = Very unpredictable environment
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What causes change?
Chapter 14

Mergers, acquisitions, divestitures, global competition, management and/or
organization structure

Integrating different function areas, modifying the degree of centralization,
downsizing, relying on job rotation and/or multi-skilling, outsourcing,
collaborating on R&D

Degree of change varies by size
Forces for Change

Nature of the workforce
o Ex. adjusting to a multicultural environment or aging workforce
o Human resource policies and practices have to change

Technology
o Now perceived as necessities

Economic shocks
o Ex. Dot com bubble, financial crisis in 2008

Competition
o Global competitors
o Growth of e-commerce


Social trends
World politics
Opportunities for Change



Job redesign  more autonomy  increased job satisfaction
Importance of how you motivate employees to attain specific outcomes
Reorganizing the workplace  changing the structure  to flatter structures 
more interconnections within

Change in org. culture
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Change Agents

Change agents = people who act as catalysts and assume the responsibility for
managing change activities

Possibility: hire services of someone outside the firm (consultants) to provide
advice and assistance with major change
o Objective perspective
o Disadvantage: inadequate understanding of the org’s history, culture,
procedures, and personnel. Prone to initiating more drastic change than
necessary.
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Approaches to Managing Change
Lewin’s Three Step Model

Unfreezing – change efforts to overcome the pressures of both individual
resistance and group conformity
o Increase driving forces – direct behavior away from the status quo
o Decrease restraining forces – forces that hinder movement from the
existing equilibrium
o Combine the two methods
o Companies with strong cultures excel at incremental change but are
overcome by restraining forces against radical change
o Use positive incentives to encourage acceptance of change



Pay increases
Low-cost mortgage funds
Counseled individuals

Moving – efforts to get employees involved in the change process

Refreezing – stabilizing change intervention by balancing driving and
restraining forces
o Replace temporary forces with permanent ones
o Ex. new bonus ststem tied to the specific changes desired

Conception of change as an episodic activity
Kotter’s Eight Step Plan for Implementing Change
1. Establish sense of urgency – compelling reason why change is needed
2. Form coalition with enough power to lead the change
3. Create new vision to direct the change and strategies for achieving the vision
4. Communicate the vision throughout the organization
5. Empower others to act on the vision by removing barriers to change and
encouraging risk-taking and creative problem-solving
6. Plan for, create, and reward short-term wins that move the org. towards the
new vision
7. Consolidate improvements, reassess changes and make necessary adjustments
8. Reinforce the changes by demonstrating relationship between new behaviors
and org success
Action Research
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
Action research – a change process based on the systematic collection of data
and then selection of a change action based on what the analyzed data indicate


Provides scientific method for managing planned change
People who will be involved in any change program has to be actively involved
in determining what the problem is and in solution creation
1. Diagnosis – find what’s wrong
i. Interview employees
ii. Review records
2. Analysis – Primary concerns, problem areas, possible actions
3. Feedback
i. Sharing with employees what has been found
ii. Develop action plans for bringing about new change
4. Action – Carry out actions to correct the problems identified
5. Evaluation
Benefits:
o Problem-focused
 Change agent objectively looks for the problem
 Type of problem will dictate what solution is necessary
o Resistance to change is reduced


Because the employees are so involved
Esp. in feedback stage
Appreciative Inquiry

Appreciative inquiry – An approach to change that seeks to identify the unique
qualities and special strengths of an org, which can then be built on to improve
performance

Accentuates the positive
Focus on org’s successes rather than on its problems
Discovery – Find out what people think are the strengths of the company
Dreaming – Speculate possible futures for the organization
Design – Focus on finding a common vision of how the org will look and agree
on its unique qualities
4. Destiny – Discuss how the org is going to fulfill its dream
i. Action plans, development of implementation strategies

1.
2.
3.
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Resistance to Change

Even when employees are shown the data that calls for change, they are in
denial and latch onto any small piece of evidence that goes against the change.

Resistance to change = positive
o Degree of stability and predictable behavior
o Source of functional conflict  healthy debate


Hinders adaptation and progress
Can be overt, implicit, immediate or deferred
o Easiest to deal with: overt and immediate (respond immediately and
voice concerns)
o Challenge: resistance that is implicit and deferred
 Loss of loyalty
 Loss of motivation
 Increased errors and mistakes
 Increased absenteeism
o Deferred and stockpiled: Reactions to change can build up and explode in
some response that seems totally out of proportion
Individual Resistance
1. Self-interest – people worry they will lose something they value
2. Misunderstanding and lack of trust – when they don’t understand nature of
change and fear that the cost of change will outweigh gains for them
3. Different assessments – when they see it differently than their managers do
4. Low tolerance for change – worry they don’t have the skills required for the
new situation

Worry that it is a way of management saying that everything they’ve been
doing in the past is wrong
Cynicism
Usually happens when there have been several rounds of change, but they have not
experienced the positive effects of this  they become cynical
Major contributing elements:
1. Feeling uninformed about what was happening
2. Lack of communication and respect from manager
3. Lack of communication and respect from union representative
4. Lack of opportunity for meaningful participation in decision making
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

More likely with negative personalities
Cynicism leads to lower commitment, less satisfaction, reduced motivation to
work hard
Organizational Resistance
 Organizations, by nature, are very conservative  actively resist change
Six major sources of organization resistance:
1. Structural inertia – organizations have built in mechanisms to provide
stability. Structural inertia counters change to sustain stability.
2. Limited focus of change – interdependent subsystems: one cannot be
changed without changing the others
3.
4.
5.
6.
i. Changes in subsystems are nullified by the larger system
Group inertia – even if individuals want to change, group norms may act as a
constraint
Threat to expertise – especially to specialized groups
Threat to established power relationships – redistribution of decisionmaking power
Threat to established resource allocations – tend to be content with the
way things are
Overcoming Resistance to Change



Important to note: not all change is good
Speedy decisions can often lead to bad decisions
“Fog of change” – those who are initiating change fail to realize the full
magnitude of the effects they are causing or to estimate the true costs to the
organization
o Change agents need to carefully think through the implications
Seven Tactics to deal with resistance to change:

Education and Communication
o Help them see logic of change
o Fights the effects of misinformation and poor communication
o Communication is helpful in “selling” the need for change
o Change is more likely when the necessity of changing is packaged
properly

Participation and Involvement
o Those opposed to the decision can be brought into the decision process
o More resistant if they feel like they did not participate in making the
decision

Building Support and Commitment
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o Employee counseling and therapy  to deal with fears and anxiety
o New skills training
o Short paid leave
o Build support with employees  help them emotionally commit

Implementing changes fairly
o Procedural fairness
o Make sure employees see the reason for the change and perceive its
implementation as consistent and fair

Manipulation and Co-optation
o Manipulation – covert influence attempts
 Twisting facts to make them seem more attractive
 Withholding unpleasant inf
o Co-Optation – form of manipulation and participation


Seeks to “buy off” leaders of a resistance group
Give them key role in the change decision

Selecting people who accept change
o Related to personality
o Positive self concept + high risk tolerance = better with org change

Explicit and Implicit coercion
o Application of direct threats or force upon resisters
o Threats of transfer, loss of promotions, negative performance
evaluations, poor letter of recommendation
The Politics of Change

Major impediments to change: managers who have spent their whole career in
one company and are now of senior level position
o Real threat to their status and position
o They have the power to convey to various constituencies that they are on
top of problems and adapting to a dynamic environment

First-order change – change that is incremental and straightforward
o Radical change is too threatening
o Explains why boards of directors that recognize the need for the rapid
introduction of second-order change turn to outside candidates for new
leadership

Second-order change – change that is multidimensional, multilevel,
discontinuous and radical
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Contemporary Change Issues for Today’s Managers
Stimulating Innovation


Characteristics: Structural, cultural and human resource categories
Message to change agents: consider introducing these characteristics into their
organization if you want a more innovative climate
Definition of Innovation

Innovation – a new idea applied to initiating or improving a product, process or
service


All innovations involve change, but not all changes stimulate innovation
Range from radical breakthroughs to incremental improvements
Sources of Innovation
Structural variables:

Organic structures positively influence innovation
o Lower in vertical differentiation, formalization, centralization  adoption
of innovation is easier

Long tenure in management is associated with innovation
o Legitimacy of knowledge of how to accomplish tasks

Innovation is nurtured when there are slack resources
o Allows an organization to afford to purchase innovations and absorb
failures

Inter-unit communication is high in innovative organizations
o High users of committees, task forces, cross-functional teams

Tend to have similar cultures
o Reward both successes and failures
o Celebrate mistakes
o Recognize failures are a natural by-product of venturing into the unknown
Human Resource Category:




Actively promote the training and development of their members
Offer high job security
Encourage individuals to become champions of change
Idea champions – individuals who actively and enthusiastically promote an
idea, build support for it, overcome resistance to it and ensure that the idea is
implemented
o Transformational leadership
o Energize and inspire others with their vision
o Personal conviction in their mission
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Creating a Learning Organization

Looking for new ways to successfully respond to a world of interdependence
and change
What is a learning organization?

Learning organization – an org that has developed the continuous capacity to
adapt and change
o Fundamental requirement for their sustained existence
o Use double loop learning

Single loop learning – a process of correcting errors using past routines and
present policies

Double loop learning – a process of correcting errors by modifying the
organization’s objectives, policies and standard routines
o Challenges deeply rooted assumptions and norms
o Provides opportunities for radically different solutions to problems
o Dramatic jumps in improvement
Five Basic Characteristics of a Learning Organization:
1. Shared vision that everyone agrees on
2. People discard their old ways of thinking and the standard routines they use for
solving problems
3. Members think of organizational processes, activities, functions and interactions
with the environment as part of a system of interrelationships.
4. People openly communicate with each other (vertically and horizontally)
without fear of criticism
5. People suppress their personal self interest and fragmented departmental
interests to work together
Managing Learning: How do you change an org to make it into a continual learner?


Establish a strategy
Redesign the organization’s structure
o Formal structure = impediment to learning
o Flatten the structure; less departments
o Increase interdependence and cross-functional teams

Reshape the org’s culture
o Risk taking, openness, and growth
o Managers set the tone by what they say (strategy) and do (behavior)
o Rewarding people who take chances and make mistakes
o Encourage functional conflict
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Managing Change: It’s Culture-Bound

If people believe they’re in control of their environment, they will be open to
change.
If a culture sees itself as subjugated to change, they will take a passive
approach to change.

Culture’s time orientation
o Societies that focus on the long term  considerable patience for positive
outcomes in change efforts
o Short term focus  people expect quick improvements

Reliance on tradition
o Culture that emphasizes past (Italians)  more resistant to change
o Cultures that emphasize the present

Power distance
o High power distance  easier to implement change (very authoritative)
o Low power distance  seek democratic processes  will be more
cynical/questionable of change
 Would require greater participation from lower level employees
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