Organizational
Behavior, 8e
Schermerhorn, Hunt, and
Osborn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc.
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Organizational Behavior: Chapter 11
2
Chapter 11
Strategy and the Basic
Attributes of Organizations
 Study questions.
– What is strategy?
– What types of contributions do organizations
make, and what types of goals do they adopt?
– What is the formal structure of the
organization, and what is meant by the term
division of labor?
Organizational Behavior: Chapter 11
3
Chapter 11
Strategy and the Basic
Attributes of Organizations
 Study questions — cont.
– How is vertical specialization used to allocate
formal authority within the organization?
– How does an organization control the actions
of its members?
– What different patterns of horizontal
specialization can be used within the
organization?
Organizational Behavior: Chapter 11
4
Chapter 11
Strategy and the Basic
Attributes of Organizations
 Study questions — cont.
– Which personal and impersonal coordination
techniques should the organization use?
– What are bureaucracies and what are the
common types?
Organizational Behavior: Chapter 11
5
What is strategy?
 Strategy.
– The process of positioning the organization in
the competitive environment and
implementing actions to compete successfully.
– A pattern in a stream of decisions.
• Choices regarding goals and the way the firm
organizes to accomplish them.
Organizational Behavior: Chapter 11
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What types of contributions do organizations make,
and what types of goals do they adopt?
 Strategy, contributions, and goals.
– Establishing goals represent one of a firm’s
most important choices.
– By selecting goals, executives begin to
formulate strategy.
Organizational Behavior: Chapter 11
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What types of contributions do organizations make,
and what types of goals do they adopt?
 Societal contributions of organizations.
– Societal goals.
• An organization’s intended contributions to the
broader society.
– Mission statements.
• Written statements of organizational purpose.
• Should capture the firm’s societal goals.
• Often the first visible outcome of developing a
strategy.
Organizational Behavior: Chapter 11
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What types of contributions do organizations make,
and what types of goals do they adopt?
 Societal contributions of organizations —
cont.
– By claiming to provide societal contributions,
an organization can make legitimate claims
over:
•
•
•
•
Resources.
Individuals.
Markets.
Products.
Organizational Behavior: Chapter 11
9
What types of contributions do organizations make,
and what types of goals do they adopt?
 Societal contributions of organizations —
cont.
– Organizations need to target their societal
contributions toward a primary beneficiary.
• Secondary beneficiaries may be identified as well.
Organizational Behavior: Chapter 11
10
What types of contributions do organizations make,
and what types of goals do they adopt?
 Output goals.
– Define the type of business the organization is
in.
– Provide some substance to the more general
aspects of mission statements.
Organizational Behavior: Chapter 11
11
What types of contributions do organizations make,
and what types of goals do they adopt?
 Systems goals.
– Concerned with the conditions within the
organization that are expected to increase the
organization’s survival potential.
– Typical systems goals include growth,
productivity, stability, harmony, flexibility,
prestige, and human resource maintenance.
Organizational Behavior: Chapter 11
12
What types of contributions do organizations make,
and what types of goals do they adopt?
 Systems goals — cont.
– Reflect the short-term organizational
characteristics that senior managers wish to
promote.
– Different organizational units may be asked to
pursue different systems goals.
– Help link together various organizational units
to assure survival.
Organizational Behavior: Chapter 11
13
What is the formal structure of the organization,
and what is meant by the term division of labor?
 Successful organizations develop a
structure consistent with the pattern of
goals established by senior management.
 The formal structure shows the planned
configuration of positions, job duties, and
the lines of authority among different parts
of the organization.
Organizational Behavior: Chapter 11
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What is the formal structure of the organization,
and what is meant by the term division of labor?
 Organization charts.
– Diagrams that depict the formal structures of
organizations.
– Typically shows the various positions, the
position holders, and the lines of authority
linking them together.
Organizational Behavior: Chapter 11
15
How is vertical specialization used to allocate
formal authority within the organization?
 Vertical specialization.
– A hierarchical division of labor that distributes
formal authority and establishes where and
how critical decisions are to be made.
– Creates a hierarchy of authority.
• An arrangement of work positions in order of
increasing authority.
Organizational Behavior: Chapter 11
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How is vertical specialization used to allocate
formal authority within the organization?
 Chain of command.
– A listing of who reports to whom up and down
the organization.
– Traditional management theory argues for
unity of command — each person has only
one boss and each unit one leader.
Organizational Behavior: Chapter 11
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How is vertical specialization used to allocate
formal authority within the organization?
 Span of control.
– The number individuals reporting to a supervisor.
– Complex tasks require narrower spans of control.
– Narrow spans yield many organizational levels.
– New information technologies enable organizations to
broaden spans of control, flatten organizations, and
still maintain control.
Organizational Behavior: Chapter 11
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How is vertical specialization used to allocate
formal authority within the organization?
 Line and staff units.
– Line units and personnel conduct the major
business of the organization.
• Examples: production and marketing.
– Staff units and personnel assist the line units
by providing specialized expertise and
services.
• Examples: accounting and public relations.
Organizational Behavior: Chapter 11
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How is vertical specialization used to allocate
formal authority within the organization?
 Distinctions between line and staff.
– The nature of the relationship of a unit in the
chain of command.
– The amount and types of contacts line or staff
maintains with organizational outsiders.
•
•
•
•
Internal line units.
External line units.
Internal staff units.
External staff units.
Organizational Behavior: Chapter 11
20
How is vertical specialization used to allocate
formal authority within the organization?
 Key decisions in configuring staff and
information systems for implementation.
– Deciding whether to assign staff units to
senior, middle, or lower level managers.
– Deciding whether to outsource some staff
functions.
– Deciding whether and how to use information
technology to streamline operations and
reduce staff.
Organizational Behavior: Chapter 11
21
How is vertical specialization used to allocate
formal authority within the organization?
 The most appropriate pattern of vertical
specialization depends on the
organization’s:
– Environment.
– Size.
– Technology.
– Goals.
Organizational Behavior: Chapter 11
22
How does an organization control the
actions of its members?
 Control.
– The set of mechanisms used to keep actions or
outputs within predetermined limits.
– Deals with:
• Setting standards.
• Measuring results against standards.
• Instituting corrective action.
Organizational Behavior: Chapter 11
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How does an organization control the
actions of its members?
 Output controls.
– Focus on desired targets and allow managers
to use their own methods to reach defined
targets.
– Promote flexibility and creativity.
– Facilitate dialogue concerning corrective
action.
– Separate what is to be accomplished from how
it is accomplished.
Organizational Behavior: Chapter 11
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How does an organization control the
actions of its members?
 Process controls.
– Specify the manner in which tasks are
accomplished.
– Types of process controls.
• Policies, procedures, and rules.
• Formalization and standardization.
• Total quality management controls.
Organizational Behavior: Chapter 11
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How does an organization control the
actions of its members?
 Policies, procedures, and rules.
– Policies.
• Guidelines for action that outline important
objectives and broadly indicates how activities are
to be carried out.
– Procedures.
• Identify the best method for performing a task,
show which aspects of a task are most important,
or outline how an individual is to be rewarded.
Organizational Behavior: Chapter 11
26
How does an organization control the
actions of its members?
 Policies, procedures, and rules — cont.
– Rules.
• Describe in detail how a task or a series of tasks is
to be performed, or they indicate what cannot be
done.
– Policies, procedures, and rules are often used
as substitutes for direct managerial
supervision.
Organizational Behavior: Chapter 11
27
How does an organization control the
actions of its members?
 Formalization.
– The written documentation of policies,
procedures, and rules to guide behavior and
decision making.
– Substitutes for direct supervision.
– Used to simplify jobs.
Organizational Behavior: Chapter 11
28
How does an organization control the
actions of its members?
 Standardization.
– The degree to which the range of allowable
actions in a job or series of jobs is limited.
– Establishes guidelines so that similar work
activities are repeatedly performed in a similar
fashion.
Organizational Behavior: Chapter 11
29
How does an organization control the
actions of its members?
 Total quality management controls.
– Draws on W. Edwards Deming’s approach to
continual improvement based on statistical analyses of
the firm’s operations.
– Deming’ approach is articulated through 14 points.
– All levels of management must be involved in the
TQM program.
– Works well in conjunction with empowerment and
participative management.
Organizational Behavior: Chapter 11
30
How does an organization control the
actions of its members?
 Centralization and decentralization.
– Centralization.
• Decision making responsibility is moved upward in
the hierarchy of authority.
– Decentralization.
• Decision making responsibility is moved
downward in the hierarchy of authority.
– Greater centralization is often used by firms
facing a single major threat to its survival.
Organizational Behavior: Chapter 11
31
How does an organization control the
actions of its members?
 Centralization and decentralization —
cont.
– Benefits of decentralization.
• Higher subordinate satisfaction.
• Quicker response to a series of unrelated problems.
• Assists in on-the-job training of subordinates for
higher level positions
– Participation is closely related to
decentralization.
Organizational Behavior: Chapter 11
32
What different patterns of horizontal specialization
can be used within the organization?
 Horizontal specialization.
– A division of labor that establishes specific
work units or groups within an organization.
– Often referred to as departmentation.
– Pure forms of departmentation.
• By function.
• By division.
• By matrix.
Organizational Behavior: Chapter 11
33
What different patterns of horizontal specialization
can be used within the organization?
 Functional departmentation.
– Grouping individuals by skill, knowledge, or
action.
– The functional pattern dominates in many
small firms.
– Large firms use the functional pattern in
technically demanding areas.
Organizational Behavior: Chapter 11
34
What different patterns of horizontal specialization
can be used within the organization?
 Advantages of functional departmentation.
– Yields very clear task assignments, consistent
with an individual’s training
– Individuals within a department can easily
build on one another’s knowledge, training,
and experience.
– Provides an excellent training ground for new
managers.
– It is easy to explain.
Organizational Behavior: Chapter 11
35
What different patterns of horizontal specialization
can be used within the organization?
 Disadvantages of functional departmentation.
– May reinforce the narrow training of individuals.
– May yield narrow, boring, and routine jobs.
– Communication across technical areas is complex and
difficult.
– “Top management overload” with too much attention
to cross-functional problems.
– Individuals may look to the organizational hierarchy
for direction and reinforcement rather than focusing
attention on products, services or clients.
Organizational Behavior: Chapter 11
36
What different patterns of horizontal specialization
can be used within the organization?
 Divisional departmentation.
– Groups individuals and resources by products,
territories, services, clients, or legal entities.
– Often used to meet diverse external threats and
opportunities.
Organizational Behavior: Chapter 11
37
What different patterns of horizontal specialization
can be used within the organization?
 Advantages of divisional departmentation.
– Promotes adaptability and flexibility in meeting the
demands of important external groups.
– Allows for spotting external changes as they emerge.
– Provides for the integration of specialized personnel.
– Focuses on the success or failure of particular
products, services, clients, or territories.
Organizational Behavior: Chapter 11
38
What different patterns of horizontal specialization
can be used within the organization?
 Disadvantages of divisional departmentation.
– Does not provide a pool of highly trained individuals
with similar expertise to solve problems and train
others.
– Allows duplication of effort, as each division tries to
solve similar problems.
– May give priority to divisional goods over the health
and welfare of the entire organization.
– Creates conflict between divisions over shared
resources.
Organizational Behavior: Chapter 11
39
What different patterns of horizontal specialization
can be used within the organization?
 Matrix departmentation.
– Uses functional and divisional forms
simultaneously.
– Workers and supervisors in the middle of a
matrix organization have two bosses — one
functional and one divisional.
– Many firms use elements of a matrix structure
without officially designating the organization
as a matrix.
Organizational Behavior: Chapter 11
40
What different patterns of horizontal specialization
can be used within the organization?
 Advantages of matrix departmentation.
– Combines strengths of both functional and
divisional departmentation.
– Blends technical and market emphases.
– Provides a series of managers able to converse
with both technical and marketing personnel.
Organizational Behavior: Chapter 11
41
What different patterns of horizontal specialization
can be used within the organization?
 Disadvantages of matrix departmentation.
– Very expensive.
– Unity of command is lost.
– Authority and responsibilities of managers
may overlap, causing conflicts and gaps in
effort across units and inconsistencies in
priorities.
– It is difficult to explain to employees.
Organizational Behavior: Chapter 11
42
What different patterns of horizontal specialization
can be used within the organization?
 Mixed forms of departmentation.
– Organizations often use a mixture of
departmentation forms.
– Using a mixture of forms helps balance the
advantages and disadvantages of each.
– Mixed forms are discussed in Chapter 12.
Organizational Behavior: Chapter 11
43
Which personal and impersonal coordination
techniques should the organization use?
 Coordination.
– The set of mechanisms that an organization
uses to link the actions of its units into a
consistent pattern.
– In small organizations, much of the
coordination is handled by its manager(s).
– As the organization grows, more efficient and
effective methods of coordination are required.
Organizational Behavior: Chapter 11
44
Which personal and impersonal coordination
techniques should the organization use?
 Personal methods of coordination.
– Produce synergy by promoting dialogue,
discussion, innovation, creativity, and
learning, both within and across units.
– Types of personal methods.
• Direct contact between and among organizational
members.
• Assignment to committees to improve coordination
across departments.
• Use of task forces.
Organizational Behavior: Chapter 11
45
Which personal and impersonal coordination
techniques should the organization use?
 Impersonal methods of coordination.
– Produce synergy by stressing consistency and
standardization so that individual pieces fit
together.
– Often are refinements and extensions of
process controls.
Organizational Behavior: Chapter 11
46
Which personal and impersonal coordination
techniques should the organization use?
 Impersonal methods of coordination —
cont.
– Matrix departmentation has the most highly
developed form of impersonal coordination.
– Information technologies provide significant
impersonal coordination potential.
Organizational Behavior: Chapter 11
47
What are bureaucracies and
what are the common types?
 Max Weber’s view of bureaucracy.
– Emphasizes legal authority, logic, and order.
– Relies on:
• Division of labor.
• Hierarchical control.
• Promotion by merit with career opportunities for
employees.
• Administration by rule.
– The ideal form of organization.
Organizational Behavior: Chapter 11
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What are bureaucracies and
what are the common types?
 Types of bureaucracies.
– The mechanistic type.
– The organic type.
– The hybrid type.
Organizational Behavior: Chapter 11
49
What are bureaucracies and
what are the common types?
 Characteristics of the mechanistic type of
bureaucracy (machine bureaucracy).
– Emphasizes vertical specialization and control
– Relies on rules, procedures, and policies.
– Has well-documented control systems backed
by strong middle management and supported
by a centralized staff.
Organizational Behavior: Chapter 11
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What are bureaucracies and
what are the common types?
 Characteristics of the mechanistic type —
cont.
– Specifies techniques for decision making.
– Often uses functional departmentation.
Organizational Behavior: Chapter 11
51
What are bureaucracies and
what are the common types?
 Benefits of the mechanistic type.
– Efficiency.
 Limitations of the mechanistic type.
– Employees dislike rigid designs, which makes work
motivation problematic.
– Unions may further solidify rigid designs.
– Key employees may leave.
– Hinders organization’s capacity to adjust to subtle
environmental changes or new technologies.
Organizational Behavior: Chapter 11
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What are bureaucracies and
what are the common types?
 Characteristics of the organic type of
bureaucracy (professional bureaucracy).
– Horizontal specialization.
– Procedures are minimal, and those that do
exist are not highly formalized.
– Relies on the judgments of experts and
personal means of coordination.
Organizational Behavior: Chapter 11
53
What are bureaucracies and
what are the common types?
 Characteristics of the organic type — cont.
– Controls back up professional socialization,
training, and individual reinforcement.
– Staff units are placed toward the middle of the
organization.
Organizational Behavior: Chapter 11
54
What are bureaucracies and
what are the common types?
 Benefits of the organic type.
– Good for problem solving and serving
individual customer needs.
– Good at detecting external changes and
adjusting to new technologies.
 Limitations of the organic type.
– Less efficient than mechanistic type.
– Sacrifices ability to respond to central
management direction.
Organizational Behavior: Chapter 11
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What are bureaucracies and
what are the common types?
 The hybrid type of bureaucracy.
– Many very large firms have found that neither
the mechanistic type nor the organic type was
suitable for all their operations, and therefore
have adopted a hybrid type.
– Two hybrid types.
• Extension of divisionalized pattern with different
divisions being more or less organic or
mechanistic.
• Conglomerate.
Organizational Behavior: Chapter 11
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