Chapter 7: Organizational Structure and Change
Learning Objectives
 Define organizational
structure and its basic
elements
 Describe matrix,
boundaryless, and learning
organizations
 Describe why and how
organizations change
 Understand reasons why
people resist change, and
strategies for planning and
executing change effectively
 Develop your own strategy
to promote change.
Organizing in the
P-O-L-C-Framework
Building Blocks of Structure
Centralization
Formalization
Organizational
Structure
Hierarchical Levels
Departmentalization
Establishing Balance
Centralized
Decentralized
Can lead to
inefficiencies in
decision making in an
uncertain or highly
competitive market
Decisions can be
made more quickly
In a stable
environment, can
lead to more efficient
operations
Can provide greater
levels of procedural
fairness to employees
Caterpillar
Once decision making became more decentralized,
Caterpillar was better equipped to compete at the global level
Formalization is the extent to which an organization’s
policies, procedures, job descriptions, and rules are
written and explicitly articulated
Written
Rules
Formalization
Explicit
Regulations
Hierarchical Levels
Tall
• Several layers of management between
frontline employees and the top level
• Fewer employees report to each
manager
• Greater opportunities for managers to
supervise and monitor employee
activities
Flat
• Few management layers
• Larger number of employees reporting
to each manager
• Can lead to greater levels of freedom for
each employee
Departmentalization
Organizations using
functional structures
group jobs based on
similarity in functions
–
–
–
–
–
–
Marketing
Manufacturing
Finance
Accounting
Human Resources
Information
Technology
In organizations using
divisional structures,
departments represent
the unique products,
services, customers, or
geographic locations
the company is serving
– Each unique product or
service the company is
producing will have its
own department
Functional/Divisional Departmentalization
Departmentalization options
Contemporary Forms of
Organizational Structures
Matrix
Organizations
balance a
traditional
functional
structure with a
product structure
Boundaryless
Organizations
eliminate
traditional
barriers between
departments and
the external
environment
Learning
Organizations
actively seeks to
acquire
knowledge and
change behavior
as a result of the
newly acquired
knowledge
In a Matrix Structure each person reports to a department
manager as well as a project or product manager
Nike successfully utilizes the
matrix organization
Advantages of Matrix
Structures are created in response to uncertainty and dynamism
of the environment
May increase communication and cooperation among
departments
Increases the frequency of informal and formal communication
within the organization
Provides quick responses to technical problems and customer
demands
Disadvantages of the Matrix Organization
Two managers per individual can result in
power struggles
More effort is required to coordinate work flow
Potential for interpersonal conflict with team
members as well as with leaders
Can create role ambiguity and role conflict
Boundaryless Organizations
Modular Organization – where
all nonessential functions are
outsourced
• Toyota manages
relationships with
hundreds of suppliers
Strategic Alliances - two or
more companies combine their
efforts to create a partnership
that is beneficial for both parties
• Starbucks achieved
distribution success of
Frappuccino by
partnering with Pepsi
Learning Organizations
Learning new
things
Experimenting
Reflecting on new
knowledge
Forms of Organizational Change
culture
company
structure
technology
procedures
strategy
policies
The Impact of Technology
Moore’s law
dictates that the
overall
complexity of
computers will
double every
18 months with
no increase in
cost
Such change is
motivating
corporations to
change their
technology
rapidly
http://upload.wikimedia.org/wikipedia/commons/c/c5/PPTMooresLawai.jpg
Growth Drives Change
Owned and granted permission by Widmer Brothers Brewing Co.
Resistance to change takes many forms
Resistance prohibited the Dvorak keyboard
from becoming the norm
Disrupted
Habits
Perceived
Loss of
Power
Prevalence
of Change
Personality
Why
people
resist
change
Personal
Impact of
Change
Feelings of
Uncertainty
Fear of
Failure
Fear of failure!
Fear of failure is a common reason employees resist change
Lewin’s Three-Step Model of
Planned Change
What can organizations do before change
occurs to prepare employees?
Communicate a Plan for Change
Develop a Sense of Urgency
Build a Coalition
Provide Support
Allow Employees to Participate
Executing and Facilitating Change
Continue to
provide
support
Create small
wins
Eliminate
obstacles
Refreezing and Making Change
Part of the Culture
Publicize success
Share concrete results with employees
Reward change adoption
Publicly recognize those who are giving
support to the change effort
Your Professional Strategy for Promoting Change
Listen for clues
from naysayers
Propose the
change by
reinforcing the
benefit
Seek and retain
involvement
Appeal your
proposal to the
audience’s
ideals
Be prepared to
defend and
provide
evidence
Acquire trust
and expert
power
Understand
and respect the
reasons for
resistance