Chapter 13
Organizational
Structure
and Culture
Michael A. Hitt
C. Chet Miller
Adrienne Colella
Slides by Ralph R. Braithwaite
13-1
Integrated Portfolio at FedEx
With all the acquisitions by FedEx, there was a need to
change their structure. It adopted a multi-divisional
structure. Corporate provides strategic direction and
consolidated financial reporting. Significant authority has
been delegated to the divisions. Each division manages
its own specialized network of services.
Do you know of other companies that operate in a similar
fashion?
Is this a good model for organizations to follow as they
grow and develop?
Exploring Behavior in Action
13-2
FedEx Organization
FedEx
Freight
FedEx
Express
FedEx
Kinko’s
Services
FedEx
Supply
Chain
FedEx
Custom
Critical
FedEx
Corp.
FedEx
Trade
Network
FedEx
Ground
13-3
Organizational Structure and
Culture
Organizational
Structure
The formal system of work roles and
authority relationships that govern
how associates and managers
interact with one another.
Organizational
Culture
Involves the values and norms
shared by managers and associates
that influence behavior. It is a
powerful force in organizations.
13-4
Knowledge Objectives
1. Define key elements of organizational structure,
including both structural and structuring dimensions.
2. Explain how corporate and business strategies relate
to structure.
3. Explain how environment, technology, and size relate
to structure.
4. Define organizational culture, and discuss the
competing-values cultural framework.
5. Discuss socialization.
6. Describe cultural audits and subcultures.
7. Explain the importance of a fit between individual
values and organizational culture.
13-5
Fundamental Elements of
Organizational Structure
Structural
Characteristics
Hierarchy
Structuring
Characteristics
13-6
Structural Characteristics
Departmentation
Height
Span of Control
13-7
Span of Control
Organizational Level
Highest
Average span of Four
Average span of Ten
1
1
4
17
63
10
100
1000
250
Associates
1000
Associates
Lowest
13-8
Adapted from Exhibit 13-1: Average Span of Control: Effects on Height of the Hierarchy
Functional Organization
CEO
VP
Research and
Development
VP
Operations
VP
Finance
Adapted from Exhibit 13-2: Simplified Functional Organization
VP
Human
Resources
VP
Marketing
13-9
Divisional Organization
CEO
V.P.
Product/Service
Area 1
Head of
R&D
Head of
Operations
Head of
Finance
Head of
Human
Resources
Head of
Marketing
V.P.
Product/Service
Area 1
Head of
R&D
Head of
Operations
Head of
Finance
Head of
Human
Resources
Head of
Marketing
Adapted from Exhibit 13-3: Simplified Divisional Organization
V.P.
Product/Service
Area 1
Head of
R&D
Head of
Operations
Head of
Finance
Head of
Human
Resources
Head of
Marketing
13-10
Centralization
Standardization
Structuring Characteristics
Formalization
Specialization
13-11
The Modern Organization
Flexible empowering type of structure
Organic
Mechanistic
Learning
Non-Learning
Boundaryless
Traditional
Fewer management levels, broader spans of control, less
centralization, standardization, formalization and
specialization.
13-12
Freedom
Substantial freedom may exist, but
1. Freedom is not unlimited
2. Alternative mechanisms are used to ensure that
individuals are working for the good of the
organization
3. Values are shared
4. Reward systems are used to promote appropriate
behavior
13-13
Factors Affecting Structure
Corporate
Strategy
Growth
Diversification
13-14
Diversification Strategy and
Structure
Diversification
Structure
Single product
Functional
Dominant product (few products)
Functional
Dominant product (several products)
Divisional
Related product
Divisional
Unrelated product
Divisional
Unrelated product
Holding Company
Adapted from Exhibit 13-4: Matches between Diversification Strategy and Structure
13-15
Business Strategy
How a firm competes for success against other
organizations in a particular market.
• Low cost/low price
• Product/service differentiation
• Supporting structure including strategic
business units – SBUs
13-16
IDEO and Differentiation Strategy
IDEO demonstrates a differentiation strategy, highlights
that occasionally organizations supplement their human
capital, and they value teams with diverse members.
Is this an effective approach to business?
How can this approach help other businesses and
organizations?
What are your thoughts about IDEO’s approaches:
•
•
•
•
Form a diverse team
Team members brainstorm
Team members engage in rapid prototyping
Team members implement the fruits of their
labors
Experiencing
Strategic OB
13-17
Environment and Basic
Structure
Environmental uncertainty – the degree to which
an environment is complex and changing;
uncertain environments are difficult to monitor
and understand.
Paul R. Lawrence
• Effective organizations experiencing high
environmental uncertainty tend to be more
organic.
• Effective organizations experiencing low
environmental uncertainty tend to be less
organic.
Jay W. Lorsch
13-18
Environment and Integration
Increasing Richness of
Information Processing
Lateral
Relations
Information
Technology
Self-Contained
Tasks
Slack
Resources
Increasing Implementation Complexity
Adapted from Exhibit 13-5: Integration in Organizations
13-19
Alternative Lateral Processes
Direct Contact
Liaison Roles
Taskforces
Matrix Designs
Managerial
Linking Roles
Lateral
Processes
Teams
Integrating Roles
13-20
Technology and
Structure
Mass Production
Technology
Small-Batch
Technology
Manufacturing
Process
Production
Technology
Mass
Customization
13-21
Joan Woodward
Technology and Structure
Task Variability
Four categories
of technology
Task Analyzability
Routine
Craft
Engineering
Nonroutine
13-22
Charles Perrow
Organizations and Technology
Task Variability
High
Low
Engineering
Non-Routine
Specialized
Engineering
Consulting Firm
Research and
Development
Firm
Routine
Craft
Mass-Production
Firm
Public School
High Task Analyzability Low
Adapted from Exhibit 13-6: Organizations and Technology
13-23
Google Culture Attracts
High-Quality Associates
Do you think Google would have enjoyed its success had
a different type of structure and culture been introduced?
What types of organizations could benefit with a similar
structure and culture? What types of organizations might
have difficulty?
As Google continues to grow, will the culture survive or
will it possibly be replaced by a more traditional culture?
Experiencing
Strategic OB
Larry Page and Sergy Brin
13-24
Developing Organizational Culture
Shared
Values
Reinforcing
Outcomes
Organizational
Culture
Norms
Individual and
Group Behavior
Adapted from Exhibit 13-7: Process of Developing Organizational Culture
13-25
Stability/Control
Flexibility/
Discretion
Organizational Culture
Clan
Adhocracy
Leadership
Mentors and Coaches
Leadership
Entrepreneurs and
Innovators
Effectiveness
Cohesion and Morale
Effectiveness
Creativity and Innovation
Hierarchy
Market
Leadership
Monitors and Organizers
Leadership
Hard Drivers and
Competitors
Effectiveness
Efficiency and Order
Effectiveness
Goal Achievement and
Winning
Internal Focus/Integration
External Focus/
Differentiation
13-26
Adapted from Exhibit 13-8: Competing Values Model of Organizational Culture
Cultural Socialization
A process through which an organization imparts its
values to newcomers
Content
Context
Social
Dynamics
13-27
Cultural Audit
A tool for assessing and understanding the culture
of an organization. Use these five steps for
conducting the cultural audit:
Analyze
process
and
content
Analyze
responses
to critical
incidents
Analyze
values
and
beliefs of
culture
creators
Explore
anomalies
or
puzzling
features
Examine
linkage –
culture
with
goals
Subcultures – groups that share values
that differ from the main values of the
organization.
13-28
Managerial
Advice
Finding a Fit at
Home Depot
Do you agree that an individual’s management
style and values should agree with the
organization’s culture? Why or why not?
Do you think Nardelli is what Home Depot
needed at the time?
Have you worked with a leader whose style
was very different than the culture of the
organization? What was that like?
Robert Nardelli
Can some organizations benefit from a major
change in leadership philosophy?
13-29
Person-Organization Fit
Types of personal goals
that one ought to have
Values
Abstract ideals that
relate to proper life
goals and methods for
reaching those goals.
End-Means Dimension
Types of behaviors that
one ought to use in
reaching those goals
13-30
Types of Personal Values
End
(Goal)
Values
Adapted from Exhibit 13-9: Types of Personal Values
Means
(Behavior)
Values
13-31
The Strategic Lens
1. Consider an organization of which you are a member
or an associate. What is the structure in this
organization? Is it centralized or decentralized? Is it
organic and flexible? How would you change the
structure in this organization to make it more effective?
2. How would you describe the culture in the organization
discussed in question #1? How does the culture affect
members’ behavior in the organization?
3. When you become a manager, what type of culture will
you establish in your unit? What values do you want to
emphasize? Why?
13-32
Questions
13-33