organizational theory, design, and change · organizational theory, design, and change sixth...

10-Copyright © 2010 Pearson Education, Inc. 1

Organizational Theory, Design, and Change

Sixth EditionGareth R. Jones

Chapter 10

Types and Forms of Organizational

Change


Learning Objectives1. Understand the relationship among

organizational change, redesign, an organizational effectiveness

2. Distinguish among the major forms or types of evolutionary and revolutionary change organizations must manage

3. Recognize the problems inherent in managing change and the obstacles that must be overcome


Learning Objectives (cont.)4. Describe the change process and

understand the techniques that can be used to help an organization achieve its desired future state


What is Organizational Change?

Organizational change: the process by which organizations move from their present state to some desired future state to increase their effectiveness

Goal is to find improved ways of using resources and capabilities in order to increase an organization’s ability to create value


What is Organizational Change?(cont.)

Targets of change include improving effectiveness at four different levels

Human resourcesFunctional resourcesTechnological capabilitiesOrganizational capabilities


Targets of Change: Human Resources

Typical kinds of change efforts directed at human resources include:

1. Investment in training and development2. Socializing employees into the

organizational culture3. Changing organizational norms and

values to motivate a multicultural and diverse workforce

4. Promotion and reward systems5. Changing the composition of the top-

management team


Targets of Change: Functional Resources

Change efforts directed at functional resources by transferring resources to the functions where the most value can be created in response to environmental changeAn organization can improve the value that its functions create by changing its structure, culture, and technology

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Targets of Change: Technological Capabilities

Change efforts directed at technological capabilities are intended to give an organization the capacity to change itself in order to exploit market opportunitiesTechnological capabilities are a core competence

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Targets of Change: Organizational Capabilities

Change efforts directed at organizational capabilities alter organizational culture and structure, thereby permitting the organization to harness its human and functional resources to exploit technological opportunities


Forces for ChangeCompetitive forces: organization must make changes to attempt to match or exceed its competitors on at least one of the following dimensions:

EfficiencyQualityInnovation


Forces for Change (cont.)Economic, political, and global forces: affect organizations by forcing them to change how and where they produce goods and services

Need to change organizational structure to:

Allow expansion in foreign marketAdapt in a variety of national culturesHelp expatriates adapt to the cultural values of where they are located


Forces for Change (cont.)Demographic and social forces:changes in the composition of the workforce and the increasing diversity of employees has presented many challenges for organizations

Increased need to manage diversityEthical forces: government, political, and social demands for more responsible corporate behavior

Creation of ethics officer positionEncourage employees to report unethical behaviors


Resistances to ChangeOne of the main reasons for some organizations’ inability to change is organizational inertia that maintains the status quoResistance to change lowers an organization’s effectiveness and reduces its chances of survival


Resistances to Change (cont.)Organization-level resistance to change stems from:

Power and conflictWhen change causes power struggle and conflicts, there is resistance

Differences in functional orientationMechanistic structureOrganizational culture


Resistances to Change (cont.)Group-level resistance to change stems from:

Group normsGroup cohesivenessGroupthink Escalation of commitment


Resistances to Change (cont.)Individual-level resistance to change stems from:

Uncertainty and insecuritySelective perception and retentionHabit


Figure 10.1: Forces for and Resistances to Change


Levin's Force-Field Theory of Change

This theory of change argues that two sets of opposing forces within an organization determine how change will take place

Forces for change and forces making organizations resistant to changeWhen forces for and against change are equal, the organization is in a state of inertiaTo change an organization, managers must increase forces for change and/or decrease forces resisting change


Figure 10.2: Levin's Force-Field Theory of Change


Types of Change in Organizations

Evolutionary change: change that is gradual, incremental, and narrowly focusedRevolutionary change: change that is sudden, drastic, and broadly focused


Developments in Evolutionary ChangeSociotechnical systems theory: a theory that proposes the importance of changing role and task or technical relationships to increase organizational effectiveness

Managers must fit or “jointly optimize” the workings of an organization’s technical and social systems or culture—to promote effectivenessManagers need to make changes in the technical system slowly to allow group norms and cohesiveness are not disrupted


Developments in Evolutionary Change (cont.)

Total quality management (TQM):an ongoing and constant effort by all of an organization’s functions to find new ways to improve the quality of the organization’s goods and services

Quality circles: groups of workers who meet regularly to discuss the way work is performed in order to find new ways to increase performanceChanging cross-functional relationships is very important to TQM



Flexible workers: employees who have acquired and developed the skills to perform any of the tasks necessary for assembling a range of finished goods

Compensation frequently tied to the number of different tasks that a person can performWorkers can substitute for one another



Flexible work teams: a group of workers who assume responsibility for performing all the operations necessary for completing a specified stage in the manufacturing process

Team members jointly assign tasks and transfer workers from one task to anotherManager’s role is to facilitate the team’s activities


Figure 10.3: The Use of Flexible Work Teams to Assemble Cars


Developments in Revolutionary Change

Reengineering: managers redesign how tasks are bundled into roles and functions to improve organizational effectiveness

Instead of focusing on an organization’s functions, the managers of a reengineered organization focus on business processesCompanies reengineer the work people do


Developments in Revolutionary Change (cont.)

Business process: any activity that cuts across functional boundaries and which is vital to the quick delivery of goods and services, or that promotes high-quality or low costsThis forces managers to no longer focus on functions in isolation

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Reengineering (cont.)Deliberately ignores the existing arrangement of tasks, roles, and work activitiesGuidelines for performing reengineering successfully include:

Organize around outcomes, not tasksHave those who use the output of the process perform the processDecentralize decision making to the point where the decision is made


Figure 10.4: Improving Integration in Functional Structure in Creating a Materials Management Function



E-engineering: refers to companies’attempts to use information systems to improve their performanceRestructuring: changing task and authority relationships and redesigning organizational structure and culture to improve organizational effectiveness

Downsizing: the process of streamlining the organizational hierarchy and laying off managers and workers to reduce bureaucratic costs



Innovation: the process by which organizations use their skills and resources to:

Create new technologiesDevelop new goods and servicesBetter respond to the needs of their customersOne of the most difficult instruments of change to manage


Managing Change: Action Research

Action research: a strategy for generating and acquiring knowledge that managers can use to define an organization’s desired future state

Used to plan a change program that allows the organization to reach that state


Figure 10.5: Levin's Three-Step Change Process


Figure 10-6: Steps in Action Research


Steps in Action ResearchDiagnosing the organization

Recognize problems and need to solve problems

Gap perceived between actual and desired performance

A complex process to distinguish between symptoms and causesInformation should be collected from all levels of the organization and outside stakeholders such as customers and suppliers


Steps in Action Research (cont.)

Determining the desired future stateA difficult planning process including deciding what the structure and strategy should beManagers need to work out various alternative courses of action that could move the organization to where they would like it to be

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Steps in Action Research (cont.)Implementing action

Identify impediments to changeDecide who will be responsible for making the changes and controlling the change process

External change agents: people who are outside consultants who are experts in managing changeInternal change agents: managers from within the organization who are knowledgeable about the situation to be changed


Steps in Action Research (cont.)Implementing action (cont.)

Decide which specific change strategy will most effectively unfreeze, change, and refreeze the organization

Top-down change: change that is implemented by managers at a high level in the organizationBottom-up change: change that is implemented by employees at low levels in the organization and gradually rises until it is felt throughout the organization


Steps in Action Research (cont.)Evaluating the action

Evaluating the action that has been taken and assessing the degree to which the changes have accomplished the desired objectives

Institutionalizing action researchMust become a norm of the organizationNecessary at all levels of managementMembers at all levels must be rewarded for their efforts


Organizational Development (OD)

Organizational development (OD):a series of techniques and methods that managers can use in their action research program to increase the adaptability of their organization


Organizational Development (cont.)OD techniques to deal with resistance to change

Education and communication: inform workers about change and how they will be affectedParticipation and empowerment:involve workers in changeFacilitation: help employees with changeBargaining and negotiationManipulation: change the situation to secure acceptanceCoercion: force workers to accept change


Organizational Development (cont.)

OD techniques to promote changeCounseling: help people understand how their perception of the situation may not be right

May learn how to manage their interactions with other people more effectively

Sensitivity training: intense counseling in which group members, aided by a facilitator, learn how others perceive them and may learn how to deal more sensitively with others



Techniques to promote change (cont.)Process consultation: a trained consultant works closely with a manager on the job to help the manager improve his or her interactions with other group members

Consultant acts as a sounding boardTeam building: an OD technique in which a facilitator first observes the interactions of group members and then helps them become aware of ways to improve their work interactions



Techniques to promote change (cont.)Intergroup training: uses team building to improve the joint activities of different functions or divisionsOrganizational mirroring: a facilitator helps two interdependent groups explore their perceptions of each other and their relations in order to improve their work interactions

Each group takes turns describing the other group



Total organizational interventionsOrganizational confrontation meeting: brings together all of the managers of an organization to meet to confront the issue of whether the organization is effectively meeting its goals




Chapter 11

Organizational Transformations: Birth,

Growth, Decline, and Death


Learning Objectives1. Appreciate the problems involved in

surviving the perils of organizational birth and what founders can do to help their new organizations to survive

2. Describe the typical problems that arise as an organization grows and matures, and how an organization must change if it is to survive and prosper


Learning Objectives (cont.)3. Discuss why organizational decline

occurs, identify the stages of decline, and how managers can change their organizations to prevent failure and eventual death or dissolution


The Organizational Life CycleOrganizational life cycle: a predictable sequence of stages of growth and changeThe four principal stages of the organizational life cycle:

BirthGrowthDeclineDeath


Figure 11.1: A Model of the Organizational Life Cycle


Organizational BirthOrganizational birth: the founding of an organizationOccurs when entrepreneurs take advantage of opportunities to use their skills and competences to create valueA dangerous life cycle stage associated with the greatest chance of failure

Liability of newness: the dangers associated with being the first in a new environmentA new organization is fragile because it lacks a formal structure


Organizational Birth (cont.)Developing a plan for a new business

Begins when an entrepreneur notices an opportunity to develop a new or improved product or serviceTests the feasibility of the new product idea

SWOT analysis

Examine the strengths and weaknesses of the ideaDecide whether the new product idea is feasible


Organizational Birth (cont.)Developing a plan for a new business (cont.)

Plan should include:Statement of the organization’s mission, goals, and financial objectivesStatement of the organization’s strategic objectivesList of all the functional and organizational resources required to implement the ideaTimeline that contains specific milestones used to measure the progress of the venture


Table 11.1: Developing a Business Plan


A Population Ecology Model of Organizational Birth

Population ecology theory: a theory that seeks to explain the factors that affect the rate at which new organizations are born (and die) in a population of existing organizations

Population of organizations: the organizations that are competing for the same set of resources in the environmentEnvironmental niches: particular sets of resources or skills


Population Ecology Model (cont.)

Number of births determined by the availability of resources

Population density: the number of organizations that can compete for the same resources in a particular environmentFactors that produce a rapid birthrate

Availability of knowledge and skills to generate similar new organizationsNew organizations that survive provide role models and confer legitimacy



As the environment is populated with a number of successful organizations, birthrate tapers off because:

Fewer resources are available for newcomers

First-mover advantages: benefits derived from being an early entrant into a new environment

Difficulty of competing with existing companies


Figure 11.2: Organizational Birthrates Over Time



Survival strategiesStrategies that organizations can use to gain access to resources and enhance their chances of survival in the environmentr-strategy versus K-strategy

r-strategy: a strategy of entering a new environment earlyK-strategy: a strategy of entering an environment late, after other organizations have tested the environment



Survival strategies (cont.)Specialists: organizations that concentrate their skills to pursue a narrow range of resources in a single nicheGeneralists: organizations that spread their skills thin to compete for a broad range of resources in many niches



Process of natural selectionTwo sets of strategies result in: r-Specialist, r-Generalist, K-Specialist, K-Generalist

Early in an environment, new organizations are likely to become r-Specialists

Move quickly to focus on serving the needs of a particular groupAs r-Specialists grow, they often become generalists and compete in new niches

K-Generalists often move into the market and threaten the weaker r-SpecialistsEventually, the market is dominated by the strongest r-Specialists, r-Generalists, and K-Generalists


Figure 11.3: Strategies for Competing in the Resource Environment


Population Ecology Model(cont.)

Natural selection: the process that ensures the survival of organizations that have the skills and abilities that best fit with the environment

Over time, weaker organizations die because they cannot adapt their procedures to fit changes in the environmentNatural selection is a competitive process


The Institutional Theory of Organizational Growth

Organizational growth: the life-cycle stage in which organizations develop value-creation skills and competences that allow them to acquire additional resources

Organizations can develop competitive advantages by increasing division of laborCreates surplus resources that foster greater growthGrowth should not be an end-in-itself


The Institutional Theory of Organizational Growth (cont.)

Institutional theory: a theory that studies how organizations can increase their ability to grow and survive in a competitive environment by becoming legitimate in the eyes of their stakeholdersInstitutional environment: values and norms in an environment that govern the behavior of a population of organizations



Organizational isomorphism: the similarity among organizations in a population

Three processes that explain why organizations become similar are:

Coercive isomorphismMimetic isomorphismNormative isomorphism



Coercive isomorphism: exists when an organization adopts certain norms because of pressures exerted by other organizations and by society in general

Increasing dependence of one organization on another leads to greater similarity

Mimetic isomorphism: exists when organizations intentionally imitate one another to increase their legitimacy

Environmental uncertainty increases the likelihood of imitation



Normative isomorphism: exists when organizations indirectly adopt the norms and values of other organizations in the environment

Organizations acquire norms and values when:

Employees move from one organization to another and bring with them the norms and values of their former employerThey participate in the activities of industry, trade, and professional associations



Disadvantages of isomorphismOrganizations may learn ways to behave that have become outdated and no longer lead to organizational effectivenessPressure to imitate may reduce the level of innovation in the environment


Greiner’s Model of Organizational Growth Greiner proposes 5 sequential growth stages

Each stage results in a crisisAdvancement to the next stage requires successfully resolving the crisis in the previous stage

Stage 1: Growth through creativityEntrepreneurs develop the skills to create and introduce new productsOrganizational learning occursCrisis of leadership – entrepreneurs may lack management skills


Greiner’s Model of Organizational Growth (cont.)Stage 2: Growth through direction

Crisis of leadership results in recruitment of top-level managers who take responsibility for the organization’s strategyCrisis of autonomy

Creative people lose control over new product developmentProfessional managers run the showDecision making becomes centralized


Greiner’s Model of Organizational Growth (cont.)Stage 3: Growth through delegation

To solve the crisis of autonomy, managers must delegate

Strike a balance between the need for professional management and the opportunity for entrepreneurshipMovement toward product team structure

Crisis of control as power struggles over resources emerge between top-level and lower-level managers


Greiner’s Model of Organizational Growth (cont.)

Stage 4: Growth through coordinationTo resolve crisis of control, managers must find right balance of centralized and decentralized controlTop management takes on role of coordinating different divisionsCrisis of red tape

Increasing reliance on rules and standard proceduresOrganization becomes overly bureaucratic and stifles entrepreneurship


Greiner’s Model of Organizational Growth (cont.)

Stage 5: Growth through collaborationEmphasizes greater spontaneity in management actionSocial control and self-discipline take over formal controlGreater use of product team and matrix structuresCollaboration makes an organization more organic which can be a difficult task


Figure 11-4: Greiner’s Model of Organizational Growth


Organizational Decline and Death

Organizational decline: the life-cycle stage that an organization enters when it fails to anticipate, recognize, avoid, neutralize, or adapt to external or internal pressures that threaten its long-term survival

May occur because organizations grow too much


Organizational Decline and Death (cont.)

Effectiveness and profitabilityAssessing an organization’s effectiveness involves comparing its profitability relative to others

Profitability: measures how well a company is making use of its resources by investing them in ways to create goods and services that generate profit when sold

Short-term profits say little about how well managers are using resources to generate future profits


Figure 11.5: The Relationship Between Organizational Size and Organizational Effectiveness



Organizational inertia: the forces inside an organization that make it resistant to change

Risk aversion: managers become unwilling to bear the uncertainty of change as organizations growThe desire to maximize rewards:managers may increase the size of the company to maximize their own rewards even when this growth reduces organizational effectiveness



Organizational inertia (cont.)Overly bureaucratic culture: in large organizations, property rights can become so strong that managers spend all their time protecting their specific property rights instead of working to advance the organization



Uncertain and changing environmentAffect an organization’s ability to obtain scarce resources, thereby leading to declineMakes it difficult for top management to anticipate the need for change and to manage the way organizations change and adapt to the environment


Weitzel and Jonsson’s Model of Organizational Decline5 stages of decline

Stage 1: Blinded: organizations are unable to recognize the internal or external problems that threaten their long-term survivalStage 2: Inaction: despite clear signs of deteriorating performance, top management takes little actions to correct problems

Gap between acceptable performance and actual performance increases


Weitzel and Jonsson’s Model (cont.)

5 stages of decline (cont.)Stage 3: Faulty action: managers may have made the wrong decisions because of conflict in the top-management team, or they may have changed too little too late fearing more harm than good from reorganizationStage 4: Crisis: by the time this stage has arrived, only radical changes in strategy and structure can stop the declineStage 5: Dissolution: decline is irreversible and the organization cannot recover


Figure 11.7: Weitzel and Jonsson’s Model of Organizational Decline




Chapter 12

Decision Making, Learning, Knowledge

Management, and Information Technology


Learning Objectives1. Differentiate between several models

of decision making that describe how managers make decisions

2. Describe the nature of organizational learning and the different levels at which learning occurs

3. Explain how organizations can use knowledge management and information technology to promote organizational learning to improve the quality of their decision making


Learning Objectives (cont.)4. Identify the factors, such as the

operation of cognitive biases, that reduce the level of organizational learning and result in poor decision making

5. Discuss some techniques that managers can use to overcome these cognitive biases and thus open the organization up to new learning


Organizational Decision MakingOrganizational decision making:the process of responding to a problem by searching for and selecting a solution or course of action that will create value for organizational stakeholdersProgrammed decisions: decisions that are repetitive and routineNonprogrammed decisions:decisions that are novel and unstructured


Models of Organizational Decision Making

The rational model: decision making is a straightforward, three-stage process

Stage 1: Identify problems that need to be solvedStage 2: Design and develop a list of alternative solutions and courses of action to solve the problemsStage 3: Compare likely consequences of each alternative and decide which course of action offers the best solution


Figure 12.1: The Rational Model of Decision Making


Models of Organizational Decision Making (cont.)

The rational model (cont.)Underlying assumptions

Decision makers have all the information they needDecision makers can make the best decisionDecision makers agree about what needs to be done



The rational model (cont.)Criticisms of the assumptions

Information and uncertainty: the assumption that managers are aware of allalternative courses of action and their consequences is unrealisticManagerial abilities: managers have only a limited ability to process the information required to make decisionsPreferences and values: assumes managers agree about what are the most important goals for the organization


The Carnegie ModelIntroduces a new set of more realistic assumptions about the decision-making process

Satisficing: limited information searches to identify problems and alternative solutionsBounded rationality: a limited capacity to process informationOrganizational coalitions: solution chosen is a result of compromise, bargaining, and accommodation between coalitions


Table 12.1: Differences Between the Rational and Carnegie Models



The incrementalist model:managers select alternative courses of action that are only slightly, or incrementally, different from those used in the past

Perceived to lessen the chances of making a mistakeCalled the science of “muddling through”They correct or avoid mistakes through a succession of incremental changes



The unstructured model: describes how decision making takes place in environments of high uncertainty

Unstructured model recognizes uncertainty in the environmentManagers rethink their alternatives when they hit a roadblockDecision making is not a linear, sequential processTries to explain how organizations make nonprogrammed decisions


Models of Organizational Decision Making (cont.)The garbage can model: a view of decision making that takes the unstructured process to the extreme

Decision makers are as likely to start decision making from the solution side as the problem sideCreate decision-making opportunities that they can solve with ready-made solutions based on their competencies and skills Different coalitions may champion different alternativesDecision making becomes a “garbage can” in which problems, solutions, and people all mix and contend for organizational actionSelection of an alternative depends on which person’s or group’s definition of the current situation holds sway


The Nature of Organizational Learning

Organizational learning: the process through which managers seek to improve organization members’desire and ability to understand and manage the organization and its environment

Creates an organizational capacity to respond effectively to the changing business environment


The Nature of Organizational Learning (cont.)

Types of organizational learningExploration: organizational members search for and experiment with new kinds or forms of organizational activities and proceduresExploitation: organizational members learn ways to refine and improve existing organizational activities and procedures


The Nature of Organizational Learning (cont.)Learning organization: an organization that purposefully designs and constructs its structure, culture, and strategy so as to enhance and maximize the potential for organizational learning to take place

Employees at all levels must be able to analyze the way an organization performs and experiments with change to increase effectiveness

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Levels of Organizational Learning

Individual-level learning: managers need to facilitate the learning of new skills, norms, and values so that individuals can increase their own personal skills and abilities

Employees develop a sense of personal mastery to create and explore what they wantEmployees must develop a commitment and attachment to their job so they will enjoy experimenting and risk takingOrganizations should encourage employees to assume more responsibility for their decisions


Levels of Organizational Learning (cont.)

Group-level learning: managers need to encourage learning by promoting the use of various kinds of groups so that individuals can share or pool their skills and abilities

Allows for the creation of synergyGroup routines can enhance group effectivenessGroup learning is even more important than individual learning in promoting organizational learning

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Organizational-level learning:managers can promote organizational learning through the way they create an organization’s structure and cultureCultural values and norms are an important influence on learning

Adaptive cultures: value innovation and encourage and reward experimentation and risk taking by middle and lower-level managersInert cultures: are cautious and conservative, and do not encourage risk taking by middle and lower-level managers



Organizations can improve their effectiveness by copying and imitating each others’ distinctive competences

Encourages explorative and exploitative learning by cooperating with suppliers and distributors to discover new ways to handle inputs and outputsSystems thinking: argues that in order to create a learning organization, managers must recognize the effects of one level of learning on another


Figure 12.2: Levels of Organizational Learning


Knowledge Management and Information Technology

Knowledge management: a type of IT-enabled organizational relationship that has important implications for both organizational learning and decision making

Involves sharing and integrating of expertise within and between functions and divisions through real-time, interconnected IT


Knowledge Management (cont.)Codification approach: knowledge is carefully collected, analyzed, and stored in databases where it can be retrieved easily by users who input organization-specific commands and keywords

Suitable for standardized product or service

Personalization approach: IT designed to identify who in the organization might possess the information required for a custom job

More reliance on know-how, insight, and judgment to make decisions


Factors Affecting Organizational Learning

Several factors may reduce organizational learning over time

Managers may develop rules and standard operating procedures to facilitate programmed decision makingPast success with SOPs inhibits learningProgrammed decision making drives out nonprogrammed decision making


Factors Affecting Organizational Learning (cont.)

Cognitive structure: system of interrelated beliefs, preferences, expectations, and values that predetermine responses to and interpretations of situations

These shape the way managers make decisions and perceive environmental opportunities and threats

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Types of cognitive biasesCognitive biases: systematically bias cognitive structures to cause misperception and misinterpretation of information, thereby affecting organizational learning and decision making Cognitive dissonance: state of discomfort or anxiety experienced when there is an inconsistency between one’s beliefs and actions

Managers seek or interpret information that confirms and reinforces their beliefs and ignore information that does not



Types of cognitive biases (cont.)Illusion of control: causes managers to overestimate the extent to which the outcomes of an action are under their personal controlFrequency: deceives people into assuming that extreme instances of a phenomenon are more prevalent than they really areRepresentativeness: leads managers to form judgments based on small and unrepresentative samples



Types of cognitive biases (cont.)Projection: allows managers to justify and reinforce their own preferences and values by attributing them to othersEgo-defensiveness: leads managers to interpret events in such a way that their actions appear in the most favorable lightEscalation of commitment: leads managers to remain committed to a losing course of action and refuse to admit that they have made a mistake


Figure 12.3: Distortion of Organizational Decision Making by Cognitive Biases


Improving Decision Making and Learning

Strategies for organizational learningCause managers to continuously unlearn old ideas and confront errors in their beliefs and perceptions

Listening to dissentersConverting events into learning opportunitiesExperimenting


Improving Decision Making and Learning (cont.)

Game theory: tool to help managers improve decision making and enhance learning

Interactions between organizations are viewed as a competitive game

Two basic types of gameSequential move game: players move in turn, and one player can select a strategy to pursue after considering its rival’s choice of strategiesSimultaneous move game: the players act at the same time, in ignorance of their rival’s current actions

Useful for organizations competing against a limited number of rivals that are highly interdependent


Figure 12.4: A Decision Tree for UPS’s Pricing Strategy



Nature of the top-management teamThe way the top management is constructed and the type of people who are on it affect organizational learningWheel configuration decreases org learning because managers report separately to the CEO

Wheel works best when problems are simple and require minimal coordination

Circle configuration works best for team and organizational learning



Learning occurs best when there is heterogeneity of the top-management team

Groupthink: the conformity that emerges when like-minded people reinforce one another’s tendencies to interpret events and information in similar ways

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Figure 12.5: Types of Top-Management Teams



Devil’s advocate: a person who is responsible for critiquing ongoing organizational learning

A method for overcoming cognitive biases and promoting organizational learning by institutionalizing dissent

Dialectical inquiry: teams of decision makers generate and evaluate alternative scenarios and provide recommendations


Improving Decision Making and Learning (cont.)Collateral organizational structure:an informal organization of managers that is set up parallel to the formal organization structure to “shadow” the decision making and actions of managers in the formal organization

Allows an organization to maintain its capacity for change at the same time that it maintains its stability


Figure 12.6: How Devil’s Advocacy and Dialectical Inquiry Alter the Rational Approach to Decision Making




Chapter 13

Innovation, Intrapreneurship,

and Creativity


Learning Objectives1. Describe how innovation and

technological change affect each other

2. Discuss the relationship among innovation, intrapreneurship, and creativity

3. Understand the many steps involved in creating an organizational setting that fosters innovation and creativity


Learning Objectives (cont.)4. Identify the ways in which

information technology can be used to foster creativity and speed innovation and new product development


Innovation and Technological Change

Innovation: process by which new goods and services or new production and operating systems are developed

Enables better response to customer needs


Types of InnovationQuantum technological change:a rare, fundamental shift in technology that revolutionizes products or the way they are produced

Quantum innovation: new products or operating systems that incorporate quantum technological improvementThese can cause major changes in the environment

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Types of Innovation (cont.)Incremental technological change:technological change that represents a continual refinement of some base technology

Incremental innovations: products or operating systems that incorporate refinements of some base technology


Types of Innovation (cont.)Technology cycle

Quantum innovations occur rarelyTechnological discontinuity

Dominant design emergesEra of incremental change and innovation during which competition is based on technologyTechnological discontinuity may occur again and the process starts all over


Figure 13.1: The Technology Cycle


Property RightsInnovation is expensive and needs to be protected

PatentsCopyrightsTrademarks

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Innovation, Entrepreneurship, and Creativity

Intrapreneurs: leaders of innovation and new product development in established organizations

Notice opportunitiesManage product developmentMay leave organization if their ideas are not supported

Become entrepreneurs


Innovation, Entrepreneurship, and Creativity (cont.)

Creativity: ideas going beyond the current boundaries, whether those boundaries are based on technology, knowledge, social norms, or beliefs

Most people are creative at some timeMay involve combining and synthesizing new things

Knowledge-creating organization:an organization where innovation is going on at all levels and in all areas


Entrepreneurship as Creative Destruction

“Creative destruction”: new companies use new global and technological opportunities to make better products that drive old, inefficient companies out of businessOld inefficient companies are driven out of businessEmergence of new industries

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Innovation and the Product Life Cycle

Product life cycle: the changes in demand for a product that occur over time

Demand for most successful products passes through four stages:

The embryonic stageThe growth stageThe maturity stageThe decline stage


Innovation and the Product Life Cycle (cont.)

Product life cycle (cont.)Embryonic stage: a product has yet to gain widespread acceptance

Minimal demandGrowth stage: a product has been accepted by customers

Demand increasesMature stage: market demand peaks because most customers have already bought the productDecline stage: occurs if and when demand for a product falls


Innovation and the Product Life Cycle (cont.)Determinants of the length of the product life cycle

Rate of technological changeFaster the rate of change, the shorter the product life cycle

Role of fads and fashionDetermine the attractiveness of products to customers


Figure 13.2: Technological Change and Length of the Product Life Cycle


Managing the Innovation Process

Project management: the process of leading and controlling a project so that it results in the effective creation of new or improved products

Project: a subunit whose goal centers on developing the products or service on time, within budget, and in conformance with predetermined performance specifications


Managing the Innovation Process (cont.)Project management (cont.)

Effective product management often begins with a clearly articulated plan

Takes a product through the concept, initial test, modification, and manufacturing phases

Project manager’s tasks are different from regular managers

Manage high proportion of highly skilled and educated professionalsPlan to deal with top corporate executives

Must keep project on trackOften quantitative modeling is used


Managing the Innovation Process (cont.)

Project management (cont.)Quantitative modeling

Examples include PERT/CAM network of Gantt ChartFlowcharts of a project that can be built with many proprietary software packages

These software packages focus on:Modeling the sequence of actions necessary to reach a project’s goalRelating these actions to cost and time criteriaSorting out and defining the optimal path for reaching the goal



Quantitative modeling (cont.)Critical path method

Goal is to determine:Which particular tasks or activities of the many that have to be performed are critical in their effect on project time and costHow to sequence or schedule critical tasks so that a project can meet a target date at minimum cost

Optimal sequencing of tasks is often worked out by a team

Analysis is an important learning tool


Figure 13.3: CPM Project Design


Managing the Innovation Process (cont.)Stage-gate development funnel

A structured and coherent innovation process that improves control over the product development effort Forces managers to make choices among competing new product development projects so that resources are not spread thinly over too many projects



Stage-gate development funnel (cont.)Stage 1: Funnel has a wide mouth to encourage as many new product ideas as possible from both new and established project managersStage 2: Specify all of the information required to make a decision about whether to go ahead with a full-blown product development effort

Plans are either accepted, revised, or rejected

Stage 3: Proceed to development phase


Figure 13.4: A Stage-Gate Development Funnel



Cross-functional teams Coordinating R&D function with other functions is critical but often difficult

New product development teamsMarketing, engineering, and manufacturing need to be core members of product teamsCore members: refers to a nucleus of three to six people who bear primary responsibility for the product development effort


Figure 13.5: Innovation as a Cross-Functional Activity



Team leadershipHaving cross-functional teams is not sufficient for innovation – they have to be managed properlyLightweight team leader: a mid-level functional manager who has lower status than the head of a functional departmentHeavyweight team leader: a true project manager who has higher status within the organization



Skunk works: a temporary task force that is created to expedite new product design and to promote innovation by coordinating the activities of functional groups

An island of innovation located away from the organizationDissolved when the product is brought to market



New venture divisions: a new division that is allocated a complete set of value-creating functions to manage a project from beginning to end

Assumes full responsibility for the commercialization of the productNormally an independent divisionBalance of control between the division and the corporate center is problematic



Joint venture: a strategic alliance among two or more organizations that agree to jointly establish and share the ownership of a new business

Allows organizations to combine their skills and technologies and pool their resources to embark on risky projectsPartners may disagree over future development plans



Creating a culture for innovationOrganizational structure

Creating the right setting is important to fostering innovationIncreasing organization size, age, and complexity may slow innovationOrganic structures tend to promote innovation

People – organizations need to guard against too much similarityProperty rights – create career paths to show that success is closely linked with future promotion and rewards


Innovation and Information Technology

Information efficiencies: the cost and time savings that occur when IT allows employees to perform current tasks at a higher level

Enables employees to assume additional tasksEnables employees to expand their roles in the organization due to advances in the ability to gather and analyze data also allows information efficiencies


Innovation and Information SynergiesInformation synergies: the knowledge building created when individuals or subunits pool their resources and collaborate across boundariesBoundary-spanning activity: the interactions of people/groups across the organizational boundary to obtain valuable information and knowledge from the environment


IT and Organizational Structure and Culture

IT affects the innovation process through its many effects on organizational structureIT gives lower-level employees more detailed and current knowledge of consumer and market trends and opportunitiesIT can produce information synergies

Facilitates increased communication and coordination between decentralized decision makers and top managers


IT and Organizational Structure and Culture (cont.)

IT means that fewer levels of managers are needed to handle problem solving and decision makingIT provides lower-level employees with more freedom to coordinate their actions

Information synergies may emerge as employees experiment and find better ways of performing their tasks


IT and Organizational Structure and Culture (cont.)

IT facilitates the sharing of beliefs, values, and norms

Allows for the quick transmission of rich and detailed information between people and subunits




Chapter 14

Managing Conflict, Power, and Politics


Learning Objectives1. Describe the nature of organizational

conflict, its sources, and the way it arises between stakeholders and subunits

2. Identify the mechanisms by which managers and stakeholders can obtain power and use that power to influence decision making and resolve conflict in their favor


Learning Objectives (cont.)3. Explain how and why individuals and

subunits engage in organizational politics to enhance their control over decision making and obtain the power that allows them to influence the change process in their favor

4. Appreciate the importance of managing an organization’s power structure to overcome organizational inertia, and to bring about the type of changing that promotes performance


What is Organizational Conflict?The clash that occurs when the goal-directed behavior of one group blocks or thwarts the goals of anotherAlthough conflict is often perceived as something negative, research suggests that some conflict can actually improve organizational effectiveness

Can overcome inertia and lead to learning and change


Figure 14.1: Cooperation and Competition Among Organizational Stakeholders


What is Organizational Conflict? (cont.)Beyond a certain point, conflict becomes a cause for organizational decline

Conflict leads to inability to reach consensus and indecisionToo much time spent on bargaining rather than acting swiftly to resolve problems

On balance, organizations should be open to conflict and recognize its value


Figure 14.2: Relationship Between Conflict and Organizational Effectiveness


Pondy’s Model of Organizational ConflictConflict is a process that consists of five sequential stagesStage 1: Latent conflict: no outright conflict exists, but there is potential for conflict because of several latent factors

Sources of conflict include:InterdependenceDifference in goals and prioritiesBureaucratic factorsIncompatible performance criteriaCompetition for scarce resources


Pondy’s Model of Organizational Conflict (cont.)

Stage 2: Perceived conflict: subunits become aware of conflict and begin to analyze it

Conflict escalates as groups battle over the cause of conflict

Stage 3: Felt conflict: subunits respond emotionally to each other, and attitudes polarize into “us-versus-them”

Cooperation between units decreasesWhat began as a small problem escalates into huge conflict


Pondy’s Model of Organizational Conflict (cont.)

Stage 4: Manifest conflict: subunits try to get back at each other

Fighting and open aggressionPassive aggression – doing nothingOrganizational effectiveness suffers

Stage 5: Conflict aftermath:conflict is resolved in some way

If sources of conflict are not resolved, the dispute will arise againConflict aftermath


Figure 14.3: Pondy’s Model of Organizational Conflict


Managing Conflict: Resolution Strategies

Organizational conflict can escalate rapidly and sour an organization’s culture

Managing conflict is an important priority

Organizations must balance the need to have some “good” conflict without letting it escalate into “bad” conflictChoice of conflict-resolution method depends on the source of the problem


Managing Conflict: Acting at the Level of Structure

Because task interdependence and differences in goals produce conflict, alter the level of differentiation and integration to change relationshipsIncrease the number of integrating rolesAssign top managers to solve conflictRethink the hierarchy/reporting chain to make sure there is no loss of control


Managing Conflict: Acting at the Level of Individuals

Establish a procedural system that allows parties to air their grievances

Important for conflict between management and unions

Use a third-party negotiatorExchange/rotate/terminate individualsCEOs can also use their power to resolve conflicts and motivate units to cooperate


What is Organizational Power?

Organizational power: the ability of one person or group to overcome resistance by others to achieve a desired objective or result

Conflict and power are intimately related


Figure 14.4: Sources of Organizational Power


Sources of Organizational PowerAuthority: power that is legitimized by the legal and cultural foundations on which an organization is based

Empowerment: the deliberate decentralization of authority

Control over resources: as the organization controls more and more resources in its environment, power within an organization comes from the control of resources


Sources of Organizational Power (cont.)

Control over information: access to strategic information and the control of the information are sources of considerable power Nonsubstitutability: if no one else can perform the tasks that a person or subunit performs, that person or subunit is nonsubstitutable



Centrality: the subunits that are most central to resource flows have the ability to reduce the uncertainty facing other subunitsControl over uncertainty: a subunit that can actually control the principal sources of uncertainty has significant power

Changes in contingencies facing the organization alter which subunits have this power



Unobtrusive power: controlling the premises of decision making

Unobtrusive power: the power flowing from the ability to control the premises behind decision makingThe power of a coalition resides in its ability to control the assumptions, goals, norms, or values that managers use to judge alternative solutions to a problem


Using Power: Organizational Politics

Organizational politics: activities taken within organizations to acquire, develop, and use power and other resources to obtain one’s preferred outcomes in a situation in which there is uncertainty or disagreement about choices


Using Power: Tactics for Playing Politics

Increasing indispensability: become indispensable to the organization Increasing nonsubstitutability: develop specialized skills or knowledge that enables one to control a crucial contingency facing the organizationIncreasing centrality: accept responsibilities that enhance one’s reputation or that of one’s functionAssociating with powerful managers:supporting a powerful manager who is clearly on the way to the top


Using Power: Tactics for Playing Politics (cont.)

Building and managing coalitionsForming relationships with stakeholders and other subunits around some common issueSkills in coalition building are important

Influencing decision makingMust be circumspect in the use of power

Controlling the agenda By setting the agenda, managers can control the issues and problems to be considered

Bringing in an outside expertUse supposedly neutral outsiders to support the views of the coalitions


Costs and Benefits of Organizational Politics

To manage organizational politics and gain its benefits, an organization must establish a balance of power in which alternative views and solutions can be offered and considered by all parties and dissenting views can be heardBalance of power should shift over time toward the party that can best manage the uncertainty and contingencies confronting the organization


Costs and Benefits of Organizational Politics (cont.)

If balance of power does not encourage allocation of resources to where value is created, the organization suffersIf powerful managers can suppress views against their interests, debates become restricted, checks and balances fade, bad conflict increases, and organizational inertia increases


Figure 14.5: Maintaining a Balance of Power

organizational theory, design, and change · organizational theory, design, and change sixth...

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