Chapter 1 Topic 2 OB

Organizational Structure and

Culture

BCS 2743 ORGANIZATION BEHAVIOR

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Learning Objectives

Identify the factors that influence managers choice of an organizational structure.

Explain how managers group tasks into jobs that are motivating and satisfying for employees.

Describe the types of organizational structures managers can design, and explain why they choose one structure over another.

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Learning Objectives

Explain why managers must coordinate jobs, functions, and divisions using the

hierarchy of authority and integrating

mechanisms

List the four sources of organizational culture and differentiate between a

strong, adaptive culture and a weak,

inert culture

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Organizational Structure

Organizational Architecture

The organizational structure, control systems, culture, and human resource

management systems that together

determine how

efficiently and

effectively

organizational

resources are used.

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Designing Organizational Structure

Organizing The process by which managers establish

working relationships among employees to achieve goals.

Organizational Structure Formal system of task and reporting

relationships showing how workers use resources.

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Designing Organizational Structure

Organizational design

The process by which managers create a specific type of organizational structure and

culture so that a company can operate in

the most efficient and effective way

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Factors Affecting Organizational Structure

Figure 10.1

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The Organizational Environment


The quicker the environment changes, the more problems face managers.

Structure must be more flexible (i.e., decentralized authority) when environmental

change is rapid.

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Strategy

Different strategies require the use of different structures.

A differentiation strategy needs a flexible structure, low cost may need a more

formal structure.

Increased vertical integration or diversification also requires a more

flexible structure.

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Technology

The combination of skills, knowledge, tools, equipment, computers and machines used

in the organization.

More complex technology makes it harder for managers to

regulate the

organization.

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Technology

Technology can be measured by:

Task variety: the number of new problems a manager encounters.

Task analyzability: the availability of programmed solutions to a manager to solve problems.

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Human Resources

Highly skilled workers whose jobs require working in teams usually need a more

flexible structure.

Higher skilled workers (e.g., CPAs and doctors) often have internalized professional

norms and values.

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Human Resources

Managers must take into account all four factors (environment, strategy, technology

and human resources) when designing the

structure of the organization.

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The way an organizations structure works depends on the choices managers

make about:

1. How to group tasks into individual jobs

2. How to group jobs into functions and

divisions

3. How to allocate authority and

coordinate functions and divisions

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Types of Organizational Structucture

1. Functional Structure

An organizational structure composed of all the departments that an organization requires to produce its goods or services.

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Functional Structure

Advantages

Encourages learning from others doing similar jobs.

Easy for managers to monitor and evaluate workers.

Allows managers to create the set of functions they need in order to scan and

monitor the competitive environment

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Functional Structure

Disadvantages

Difficult for departments to communicate with others.

Preoccupation with own department and losing sight of organizational goals.

10-18 Figure10.3

The

Functional

Structure of

Pier 1

Imports

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Divisional Structures

Divisional Structure

Managers create a series of business units to produce a specific kind of product for a

specific kind of customer

10-20 Figure 10.4

Product,

Market, and

Geographic

Structures

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Types of Divisional Structures

2. Product Structure

Managers place each distinct product line or business in its own self-contained division

Divisional managers have the responsibility for devising an appropriate business-level

strategy to allow the division to compete

effectively in its industry

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Product Structure

Allows functional managers to specialize in one product area

Division managers become experts in their area

Removes need for direct supervision of division by corporate managers

Divisional management improves the use of resources

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3. Geographic Structure

Divisions are broken down by geographic location

Global geographic structure

Managers locate different divisions in each of the world regions where the organization

operates.

Generally, occurs when managers are pursuing a multi-domestic strategy

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Global Product Structure

Each product division takes responsibility for deciding where to manufacture its

products and how to market them in foreign

countries worldwide

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Global Geographic and

Global Product Structures

Figure 10.5

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Market Structure Groups divisions according to the particular

kinds of customers they serve

Allows managers to be responsive to the needs of their customers and act flexibly in making decisions in response to customers changing needs

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Matrix Design Structure

Matrix Structure An organizational structure that

simultaneously groups people and resources by function and product.

Results in a complex network of superior-subordinate reporting relationships.

The structure is very flexible and can respond rapidly to the need for change.

Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.

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Matrix Structure

Figure 10.6

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Discussion Question?

Which is the most effective and efficient

organizational structure?

A. Matrix structure

B. Divisional structure

C. Market structure

D. Geographic structure

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Product Team Design Structure

Product Team Structure Does away with dual reporting relationships

and two-boss managers

Functional employees are permanently assigned to a cross-functional team that is

empowered to bring a new or redesigned

product to work

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Product Team Design Structure

Product Team Structure Cross-functional team is composed of a

group of managers from different

departments working together to perform

organizational tasks.

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Product Team Structure

Figure 10.6

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Hybrid Structures

Hybrid Structure The structure of a large organization that

has many divisions and simultaneously uses many different organizational structures

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Federateds Hybrid Structure

Figure 10.7

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Question?

What is the power vested in a manager to

make decisions?

A. Power

B. Influence

C. Authority

D. Control

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Coordinating Functions:

Allocating Authority

Authority

The power vested in a manager to make decisions and use resources to achieve

organizational goals by virtue of his position

in an organization

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Coordinating Functions:


Hierarchy of Authority

An organizations chain of command, specifying the relative authority of each

manager.

Span of Control: the number of subordinates who report directly to a

manager

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Line Manager

Someone in the direct line or chain of command who has formal authority over

people and resources

Staff Manager

Managers who are functional-area specialists that give advice to line

managers.

10-39 Figure 10.8

The

Hierarchy

of Authority

and Span

of Control

at

McDonalds Corporatio

n

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Tall and Flat Organizations

Tall structures have many levels of authority and narrow spans of control.

As hierarchy levels increase, communication gets difficult creating delays

in the time being taken to implement

decisions.

Communications can also become distorted as it is repeated through the firm.

Can become expensive

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Tall Organizations

Figure 10.9

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Tall and Flat Organizations

Flat structures have fewer levels and wide spans of control.

Structure results in quick communications but can lead to overworked managers.

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Flat Organizations

Figure 10.9

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Minimum Chain of Command

Minimum Chain of Command

Top managers should always construct a hierarchy with the fewest levels of authority

necessary to efficiently and effectively use

organizational resources

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Centralization and Decentralization of

Authority

Decentralizing authority

giving lower-level managers and non-managerial employees the right to make

important decisions about how to use

organizational resources

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Decentralizing Authority

Disadvantages

Teams may begin to pursue their own goals at the expense of organizational goals

Can result in a lack of communication among divisions

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Integrating Mechanisms

Figure 10.10

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Organizational Culture

Organizational culture

shared set of beliefs, expectations, values, and norms that influence how members of

an organization relate to one another and

cooperate to achieve organizational goals

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Sources of an Organizations Culture

Figure 10.11

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Characteristics of Organizational

Members

Ultimate source of organizational culture is the people that make up the

organization

Members become similar over time which may hinder their ability to adapt

and respond to changes in the

environment

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Organizational Ethics

Organizational Ethics

moral values, beliefs, and rules that establish the appropriate way for an

organization and its members to deal with

each other and people outside the

organization

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Employment Relationship

Human resource policies:

Can influence how hard employees will work to achieve the organizations goals,

How attached they will be to it

Whether or not they will buy into its values and norms

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In a centralized organization:

people have little autonomy

norms that focus on being cautious, obeying authority, and respecting traditions emerge

predictability and stability are desired goals

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In a flat, decentralized structure:

people have more freedom to choose and control their own activities

norms that focus on being creative and courageous and taking risks appear

gives rise to a culture in which innovation and flexibility are desired goals.

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Strong, Adaptive Cultures Versus

Weak, Inert Cultures

Adaptive cultures

values and norms help an organization to build momentum and to grow and change

as needed to achieve

its goals and be

effective

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Strong, Adaptive Cultures Versus

Weak, Inert Cultures

Inert cultures

Those that lead to values and norms that fail to motivate or inspire employees

Lead to stagnation and often failure over time

A Useful Description of Culture

A pattern of basic assumptions invented, discovered

or developed by a given group as it learns to cope

with its problems of external adaptation and internal

integration that has worked well enough to be

considered valid, and to be taught to new members

as the correct way to perceive, think, and feel in

relation to these problems.

(Ed Schein Organizational culture: What it is and how to change it in: Human Resource

Management in International Firms, P.Evans (ed.) London, Macmillan, 1990)

Another practical and useful definition of culture

Culture comes from within people and is put together by them to reward the capacities that they have in common.

Culture gives continuity and identity to the group. It balances contrasting contributions, and operates as a self-steering system which learns from feedback. It works as a pattern of information and can greatly facilitate the exchange of understanding. The values within a culture are more or less harmonious.

(Charles Hampden-Turner, Corporate Culture, J. Piatkus, 1994, p.21)

Characteristics of Corporate Culture

Each organization has behavioral norms for getting things done.

Strong culture is a powerful force in the organization, one that can shape the firms overall effectiveness and long-term success.

As an organization grows, its culture is modified,

shaped and refined by symbols, stories, heroes,

slogans and ceremonies.

Major power sources/bases in culture

types

Power/club culture personal, and resource

power

Role culture position power

Task culture expert power

Organisations can change their culture

Most start as power cultures, e.g. when

they are small, as they grow, they may

shift to a role culture, when confronted

with the need for greater flexibility, can

shift to task culture

Different departments - different

cultures

Within the organization different parts,

e.g.

departments can have different cultures

and

all of them can be combined.

Cultural diversity within oganizations: four

main activity types (Handy, C.)

Organizational Culture Profiles - Deal and Kennedy

Deal and Kennedy, Corporate Cultures

Driving c. Tough-guy, macho culture

Outgoing c. Work hard/play hard culture

Specialist c. Bet-your-company culture

Control c. Process culture

10-66

Movie Example: Apollo 13

What organizational

structure does

NASA use

to handle a moon

launch?

Chapter 1 Topic 2 OB

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