Chapter 8
The Structure and Culture of a Business Organization
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Discuss organizational structure and culture are important determinants of a
company’s ability to pursue a profitable business model.
Identify the relationship between organizational design, structure, culture and the
environment.
Identify the main types of organizational structure companies can choose from to
group their activities, employees and resources.
Explain why the need to coordinate functions and divisions is an important
element in organizational design and list the main methods companies use to
coordinate their activities.
Identify the nature and sources of organizational culture and understand the way
it influences and shapes employee behavior and attitudes.
Structure
• A company’s approach to leadership, its incentive structure, the use of
empowered teams are some of the many methods mangers use to
increase employees’ motivation to work hard and perform at a high
level
Structure
• Organizational structure and culture affect a company’s ability to follow
its business model successfully
• Organizational structure and culture affect employee work motivation
and behavior and a company’s effectiveness and efficiency
Structure and Culture
• Implementing a successful business model requires a good
organizational design that creates a structure and culture
Structure and Culture
• Motivates and coordinates employees to perform at a high level in
group, teams, and departments
• Also, it solves problems stemming from misaligned goals,
organizational conflict and lack of cooperation
Structure and Culture
• Allows companies to operate more efficiently
• Create new products customers want to buy reduces operating costs
• Increases operating revenues respectively
• All lead to an increase in company profitability
Definitions
• Organizational structure- framework of task and authority relationships
in a company to coordinate/motivate people
Definitions
• Organizational culture- Set of shared company values and norms shape
employees and groups interactions
Definitions
• Organizational design- No “one best way” to structure/culture, reflects
the forces in the global environment
Structure
• Problems in companies with too many levels in the managerial
hierarchy
• Slow communication
• Increased bureaucracy
• Distortion of information
• Too many managers
Structure
• Slow communication and decision making frustrates a company’s
ability to pursue its business model successfully
Structure
• Increased bureaucracy and unwillingness to make decisions slows a
company’s response to a changing environment
Structure
• Distortion of information for intentional and unintentional reasons leads
to poor quality decision making
Structure
• The excess of managers results in increasing operating costs, reduced
profitability and major layoffs
Culture
• Sources of a company’s culture
• Values of the founder
• Ceremonies and rites
• Organizational socialization
• Stories and language
Organizational Design
• A contingency approach to organizational design reflects no “one best
way” to structure and culture but reflects the changing forces in the
global environment
Functional Structure
• Helps a company pursue in business model successfully in a changing
environment
Functional structure
• Employees benefit from increased coordination, communication and
motivation
Functional structure
• Disadvantages include coordination problems with serving the needs of
customers given a larger product line and expanding geographic region,
country, or continent
Functional structure
• A division subdivides the specific function by product lines while a
market structure creates market divisions and all functions service a
particular type of customer (example: corporate, small business,
consumer, government)
Divisional Structure
• Companies evolve from functional to divisional structure and although
there are more autonomous managers in the latter structure there is
greater accountability increasing the coordination and motivation within
the divisional structure
Divisional Structure
• Disadvantages of divisional include needing additional human resources
and subsequent increasing operating costs
• In addition, divisions compete for the scarce corporate resources
Matrix structure
• Groups people by both function and by product and results in a complex
network of reporting relationships among product teams and functions
that make this structure very flexible
Matrix structure
• Develops new products very rapidly
• Maximizes communication
• Cooperates between team members
• Innovates and creates products/services
• Maintains a competitive advantage
Matrix Structure
• Employees are highly motivated as they are given freedom and
autonomy in challenging jobs
• The dual reporting relationship may be difficult for managers and
employees to operate effectively
Managerial Structure
• The number of managerial levels in a hierarchy is called tall (many
levels) and flat (fewer levels)
Managerial Structure
• The taller the organization the more channels of communication (from
top to first-line) and possible miscommunications but fewer employees
per manager or a narrow span of control
Managerial Structure
• The flatter the organization the less channels of communication and the
broader span of control (more employees per manager)