MNGT 5590
Organizational Behavior
Week 8: Chapters 13, 14, 15
Dr. George Reid
1
• Chapter 13: Designing
Organizational Structures
• Chapter 14: Organizational
Culture
• Chapter 15: Leadership
2-2
13
Designing
Organizational
Structures
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Valve Corporation’s
Organizational Structure
Valve Corporation has a flat, organic organizational
structure to leverage the creative and entrepreneurial
potential of its 300 employees
13-4
Organizational Structure
Defined
 Division of labor and patterns of coordination,
communication, workflow, and formal power that
direct organizational activities
 Relates to many OB topics (job design, teams,
power)
13-5
Division of Labor and
Coordination
 Division of labor
 Results in specialization, separate jobs for different people
 Improves work efficiency
 Coordination of work
 Value of division of labor is limited to ability to coordinate
that work
 Coordinating work can be costly
 Three coordinating mechanisms
 informal communication
 formal hierarchy
 standardization
13-6
Coordination Through Informal
Communication
Informal communication coordinates work in
all firms
Vital in nonroutine and ambiguous situations
Easiest in small firms, but technology extends
its use in large firms
Larger firms also apply informal
communication through
 Liaison roles
 Integrator roles
 Temporary teams
13-7
Other Coordinating
Mechanisms
Formal hierarchy
 Direct supervision
 Assigns legitimate power to manage others
 Necessary in most firms, but has problems
Standardization – create routine
behavior/output
 Standardized processes (e.g., job descriptions)
 Standardized outputs (e.g., sales targets)
 Standardized skills (e.g., training)
13-8
Elements of Organizational
Structure
Departmentalization
Span of
Control
Elements of
Organizational
Structure
Formalization
Centralization
13-9
KenGen’s Flatter Structure
KenGen, Kenya’s leading electricity
generation company, reduced its
hierarchy from 15 layers to just 6
layers. “This flatter structure has
reduced bureaucracy and it has also
improved teamwork,” explains
KenGen executive Simon Ngure.
13-10
Span of Control
 Number of people directly reporting
to the next level
 Wider span of control possible when:
 Other coordinating mechanisms are
present
 Routine tasks
 Low employee interdependence
13-11
Tall vs Flat Structures
 As companies grow, they:
 Build a taller hierarchy
 Widen span, or both
 Problems with tall hierarchies
 Poorer upward information
 Overhead costs
 Focus power around managers, so staff
feel less empowered
13-12
Centralization/Decentralization
 Centralization – Formal
decision making authority
is held by a few people,
usually at the top
 Decentralization increases
as companies grow
 Varying degrees of
centralization in different
areas of the company
 Example: sales
decentralized; info systems
centralized
Production
Information
Systems
Sales
Upper Mgt
Upper Mgt
Upper Mgt
Middle Mgt
Middle Mgt
Middle Mgt
Supervisory
Supervisory
Supervisory
Front line
Front line
Front line
= locus of decision making authority
13-13
Formalization
Standardizing behavior through rules,
procedures, training, etc
Increases as firms get older, larger, regulated
Problems with formalization
 Less organizational flexibility
 Discourages organizational learning/creativity
 Less work efficiency
 Increases job dissatisfaction and work stress
 Rules/procedures become focus of attention
13-14
Mechanistic vs. Organic
Structures
 Mechanistic Structure
 Narrow span of control
 High centralization
 High formalization
 Organic Structure
 Wide span of control
 Decentralized decisions
 Low formalization
13-15
Functional Organizational
Structure
 Organizes employees around specific knowledge or
other resources (e.g., marketing, production)
CEO
Finance
Production
Marketing
13-16
Evaluating Functional Structures
Benefits
 Economies of scale
 Supports professional identity and career paths
 Easier supervision
Limitations
 Emphasizes subunit more than organizational goals
 Higher dysfunctional conflict
 Poorer coordination – requires more controls
13-17
Divisional Structure
 Organizes employees around outputs,
clients, or geographic areas
CEO
Healthcare
Lighting
Products
Consumer
Lifestyle
13-18
Divisional Structure
Best type of divisional structure depends on
environmental diversity or uncertainty
Geographic structures becoming less
common because:
 Less need for local representation
 Reduced geographic variation
 More global clients
13-19
Evaluating Divisional Structures
Benefits
 Building block structure – accommodates growth
 Focuses on markets/products/clients
 Limitations
 Duplication, inefficient use of resources
 Silos of knowledge – expertise isolated across
divisions
 Executive power affected by shifting divisional
structure – common with complex environment
13-20
Team-Based Structure
 Self-directed work teams organized around work
processes
 Typically organic structure
 Usually found within divisionalized structure
13-21
Evaluating Team-Based
Structures
 Benefits
 Responsive, flexible
 Lower admin costs
 Quicker, more informed decisions
 Limitations
 Interpersonal training costs
 Slower coordination during team development
 Role ambiguity increases stress
 Team leader issues – less power, ambiguous
roles/career
 Duplication of resources
13-22
ABB’s* Geographic-Product
Matrix Structure
Regional Groups
Product Groups
North
America
South
America
Europe
Middle East,
Africa/ India
Asia
Pacific
Power Products
Power Systems
Discrete Automation
and Motion
Low Voltage
Products
Process
Automation
*Simplification of ABB’s actual structure
Product leader in that region
13-23
Project-based Matrix Structure
Employees ( ) are temporarily assigned to a specific
project team and have a permanent functional unit
CEO
Game1
Project Leader
Game2
Project Leader
Game3
Project Leader
Art Dept
Leader
Software
Dept Leader
Audio Dept
Leader
13-24
Evaluating Matrix Structures
 Benefits
 Uses resources and expertise effectively
 Potentially better communication, flexibility, innovation
 Focuses specialists on clients and products
 Supports knowledge sharing within specialty
 Solution when two divisions have equal importance
 Limitations
 More conflict among managers who share power
 Two bosses dilutes accountability
 More conflict, organizational politics, and stress
13-25
External Environment & Structure
Dynamic
• High rate of change
• Use team-based, network, or
other organic structure
Complex
• Many elements (such as
stakeholders)
• Decentralize
Stable
• Steady conditions,
predictable change
• Use mechanistic structure
Simple
• Few environmental elements
• Less need to decentralize
13-26
Effects of Organizational Size
As organizations grow, they:
1. Increase division of labor (job
specialization)
2. Increase standardization
and formal hierarchy as
coordinating mechanisms
3. Become more decentralized
13-27
Organizational Strategy
 Structure follows strategy
 Strategy points to the environments in
which the organization will operate
 Leaders decide which structure to apply
 Innovation strategy
 Providing unique products or attracting
clients who want customization
 Cost leadership strategy
 Maximize productivity in order to offer
competitive pricing
13-28
13
Designing
Organizational
Structures
13-29
14
Organizational
Culture
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Zappos’ Organizational Culture
Zappos, the world’s largest online shoe retailer,
relies on recruitment, selection, socialization,
and other practices to maintain a strong
organizational culture
14-31
Organizational Culture Defined
 The values/assumptions shared within an
organization
 Defines what is important
 Provides direction toward the “right way” of
doing things
 Company’s DNA – invisible to the eye, yet a
powerful template that shapes employee
behavior
14-32
Artifacts of
organizational
culture
Elements of
Organizational
Culture
Organizational
culture
14-33
Content of
Organizational Culture
 The relative ordering of values.
 A few dominant values
 Example: Facebook – creative, proactive, risk-oriented
 Problems with measuring org culture
 Oversimplifies diversity of possible values
 Ignore shared assumptions
 Adopts an “integration” perspective
 An organization’s culture is fuzzy:
 Diverse subcultures (“fragmentation”)
 Values exist within individuals, not work units
14-34
Organizational Culture Profile
Org Culture
Dimensions
Dimension Characteristics
Innovation
Experimenting, opportunity seeking, risk taking, few
rules, low cautiousness
Stability
Predictability, security, rule-oriented
Respect for people
Fairness, tolerance
Outcome orientation
Action oriented, high expectations, results oriented
Attention to detail
Precise, analytic
Team orientation
Collaboration, people-oriented
Aggressiveness
Competitive, low emphasis on social responsibility
Source: O’Reilly et al (1991)
14-35
Organizational Subcultures
Dominant culture – most widely shared
values and assumptions
Subcultures
 Located throughout the organization
 Can enhance or oppose (countercultures) firm’s
dominant culture
Two functions of countercultures:
 provide surveillance and critique, ethics
 source of emerging values
14-36
Cultural Artifacts at
Goldman Sachs
The language of Goldman Sachs employees may
be artifacts of underlying cultural values. “Elephant
trades” and “muppet” clients suggest that the
investment firm values profitability and individual
performance more than customer service.
14-37
Organizational Culture Artifacts
 Observable symbols and signs of culture
 Physical structures, ceremonies, language, stories
 Maintain and transmit organization’s culture
 Need many artifacts to accurately decipher a
company’s culture
14-38
Artifacts: Stories and Legends
Social prescriptions of desired (or
dysfunctional) behavior
Realistic human side to expectations
Most effective stories and legends:
 Describe real people
 Assumed to be true
 Known throughout the organization
 Are prescriptive
14-39
Artifacts: Rituals, Ceremonies,
Language
 Rituals
 programmed routines
 (e.g., how visitors are greeted)
 Ceremonies
 Planned activities for an audience
 e.g., award ceremonies
 Language
 How employees address each other and outsiders,
express emotions, describe stakeholders, etc.
 Leaders use language to anchor or change culture
 Language also differentiates subcultures
14-40
Artifacts: Physical
Structures/Symbols
 Building structure – may shape and reflect culture
 Office design conveys cultural meaning
 Furniture, office size, wall hangings, art deco
14-41
Organizational Culture Strength
How widely and deeply employees hold the
company’s dominant values and
assumptions
 Most employees understand/embrace the culture
 Institutionalized through artifacts
 Long-lasting – possibly back to founder(s)
Three functions of strong cultures :
 Control system
 Social glue
 Sense-making
14-42
Organizational Culture
and Effectiveness
Culture strength
advantages depend on:
• Environment fit
• Moderate strength
• Adaptive culture
Functions of
Strong Cultures
• Control system
• Social glue
• Sense-making
Organizational
Outcomes
• Org performance
• Employee well-being
14-43
Merging Cultures:
Bicultural Audit
Part of due diligence in merger
Minimizes cultural collision by diagnosing
companies
Three steps in bicultural audit:
1. Identify cultural artifacts
2. Analyze data for cultural conflict/compatibility
3. Identify strategies and action plans to bridge
cultures
14-44
Merging Organizational
Cultures
Assimilation
Deculturation
Acquired company embraces acquiring
firm’s cultural values
Acquiring firm imposes its culture on
unwilling acquired firm
Integration
Cultures combined into a new composite
culture
Separation
Merging companies remain separate with
their own culture
14-45
Changing/Strengthening
Organizational Culture
14-46
Changing/Strengthening
Organizational Culture
1. Actions of founders/leaders
 Founder’s values/personality
 Transformational leaders can reshape culture –
organizational change practices
2. Aligning artifacts
 Artifacts keep culture in place
14-47
Changing/Strengthening
Organizational Culture
3. Introducing culturally consistent rewards
 Rewards are powerful artifacts
4. Support workforce stability and
communication
 High turnover weakens org culture
 Strong culture depends on frequent,
open communication
5. Attracting, selecting, and
socialization of employees
 Attraction-selection-attrition theory
 Socialization practices
14-48
Attraction-Selection-Attrition
Theory
Organizations become more homogeneous
(stronger culture) through:
 Attraction – applicants self-select and weed out
companies based on compatible values
 Selection – applicants selected based on values
congruent with organization’s culture
 Attrition – employees quit or are forced out when
their values oppose company values
14-49
Organizational Socialization
 The process by which individuals learn the values,
expected behaviors, and social knowledge
necessary to assume their roles in the organization
 Learning Process
 Newcomers make sense of the organization’s physical,
social, and strategic/cultural dynamics
 Adjustment Process
 Newcomers adapt to new work roles, team norms, etc.
14-50
Stages of Socialization
Pre-Employment
Stage
Encounter
Stage
Role
Management
• Outsider
• Newcomer
• Insider
• Gathering
information
• Testing
expectations
• Changing roles
and behavior
• Forming
psychological
contract
• Resolving
conflicts
14-51
Improving Organizational
Socialization
Realistic job preview (RJP)
 A balance of positive and negative information
about the job and work context
Socialization agents
 Supervisors – technical information, performance
feedback, job duties
 Co-workers – ideal when accessible, role models,
tolerant, and supportive
14-52
14
Organizational
Culture
14-53
15
Organizational
Change
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Organizational Change
at LG Group
LG Group chairman Koo Bon-moo (shown) is creating
an urgency to change Korea’s second largest
conglomerate into a more proactive, marketplace
leader rather than a follower of Samsung
15-55
Force Field Analysis Model
Driving forces
 Push organizations toward change
 External forces or leader’s vision
Restraining
Forces
Restraining forces
 Resistance to change – employee
behaviors that block the change process
Driving
Forces
15-56
Force Field Analysis Model
Restraining
Forces
Desired
Conditions
Restraining
Forces
Restraining
Forces
Current
Conditions
Driving
Forces
Before
Change
Driving
Forces
Driving
Forces
During
Change
After
Change
15-57
Restraining Forces
(Resistance to Change)
 Many forms of resistance
 complaints, absenteeism, passive noncompliance
 View resistance as a resource
1. Symptoms of deeper problems in the change process
2. A form of task conflict – may improve change decisions
3. Form of voice – procedural justice
15-58
Why People Resist Change
1.Negative valence of change
 Negative cost-benefit analysis
2.Fear of the unknown
 People assume worst when future unknown
 Perceive lack of control
3. Not-invented-here-syndrome
 Staff oppose the change to prove their ideas were
better
 successful change threatens self-esteem
15-59
Why People Resist Change
4. Breaking routines
 Cost of moving away from our “comfort zones”
 Time/effort to learn new routines
5. Incongruent team dynamics
 Norms contrary to desired change
6.Incongruent organizational systems
 Systems/structures reinforce status quo
 rewards, information systems, patterns of authority,
career paths, selection criteria
15-60
Creating an Urgency for
Change
Inform employees about driving forces
Most difficult when organization is doing well
Customer-driven change
 Human element energizes employees
 Reveals problems and consequences of inaction
Sometimes need to create urgency to
change without external drivers
 Requires persuasive influence
 Use positive vision rather than threats
15-61
Reducing the Restraining Forces
1. Communication
 Highest priority and first strategy for change
 Generates urgency to change
 Reduces uncertainty (fear of unknown)
 Problems: time consuming and costly
2. Learning
 Provides new knowledge/skills
 Includes coaching and other forms of learning
 Helps break old routines and adopt new roles
 Problems: potentially time consuming and costly
15-62
Reducing the Restraining Forces
3. Involvement
 Employees participate in change process
 Helps saving face and reducing fear of unknown
 Includes task forces, future search events
 Problems: time-consuming, potential conflict
4. Stress management
 When previous strategies do not minimize stress enough
 Potential benefits
 More motivation to change
 Less fear of unknown
 Fewer direct costs
 Problems: time-consuming, costly, doesn’t help all
15-63
Reducing the Restraining Forces
5. Negotiation
 Influence by exchange – reduces direct costs
 May be necessary when people clearly lose something and
won’t otherwise support change
 Problems: expensive, gains compliance, not commitment
6. Coercion




When all else fails
Assertive influence
Radical form of “unlearning”
Problems
 Reduces trust
 May create more subtle resistance
 Encourage politics to protect job
15-64
Alan Mulally: Change Agent
Alan Mulally’s “One Ford” vision and his
transformational leadership were key factors in the
successful turnaround of Ford Motor Company.
15-65
Change Agents
 Change agent – possesses knowledge and
power to guide and facilitate the change effort
 Involves transformational leadership
 Strategic visions and change
 Provides a sense of direction
 Identifies critical success factors to valuate change
 Links employee values to the change
 Minimizes employee fear of the unknown
 Clarifies role perceptions
15-66
Coalitions, Social Networks and
Viral Change
 Guiding coalition
 Representative across the firm
 Influence leaders – respected
 Viral change
 Information seeded to a few people, then transmitted
through social networks
 Social networks influence others due to:
 high trust
 referent power
 behavior observation
15-67
Diffusion of Change
Begin change as pilot projects
Effective diffusion applies the MARS model
 Motivation
 Pilot project employees rewarded; motivate others to
adopt pilot project
 Ability
 Train employees to adopt pilot project
 Role perceptions
 Translate pilot project to new situations
 Situational factors
 Provide resources to implement pilot project elsewhere
15-68
Action Research Approach
Action orientation and research orientation
 Action – to achieve the goal of change
 Research – testing application of concepts
Action research principles
1. Open systems perspective
2. Highly participative process
3. Data-driven, problem-oriented process
15-69
Action Research Process
Form
clientconsultant
relations
Diagnose
need for
change
Introduce
intervention
Evaluate/
stabilize
change
Disengage
consultant’s
services
15-70
Appreciative Inquiry Approach
Frames change around positive and possible future,
not problems.
1. Positive principle
 focus on positive, not problems
2. Constructionist principle
 conversations shape reality
3. Simultaneity principle
 inquiry and change are simultaneous
4. Poetic principle
 we can choose how to perceive situations (glass half full)
5. Anticipatory principle
 people are motivated by desirable visions
15-71
Four-D Model of
Appreciative Inquiry
Discovery
Dreaming
Designing
Delivering
Discovering
the best of
“what is
Forming
ideas about
“what might
be”
Engaging in
dialogue
about “what
should be”
Developing
objectives
about “what
will be”
15-72
Large Group Interventions
Future search, open space, and other
interventions that involve “the whole system”
 Large group sessions
 May last a few days
 High involvement with minimal structure
Limitations of large group interventions
 Limited opportunity to contribute
 Risk that a few people will dominate
 Focus on common ground may hide differences
 Generates high expectations about ideal future
15-73
Parallel Learning Structure
Approach
Highly participative social structures
Members representative across the formal
hierarchy
Sufficiently free from firm’s constraints
Develop change solutions – then applied
back into the larger organization
15-74
Cross-Cultural and Ethical Concerns
with Managing Change
Cross-Cultural Concerns
 Linear and open conflict assumptions different
from values in some cultures
Ethical Concerns
 Privacy rights of individuals
 Management power
 Individuals’ self-esteem
15-75
Organizations are About People
“Take away my people, but leave my factories,
and soon grass will grow on the factory floors.
Take away my factories, but leave my people,
and soon we will have a new and better
factory.”
Andrew Carnegie (1835-1919)
15-76
15
Organizational
Change
15-77