Section 2: Organizational Culture

Chapter 4: Organizational Culture

What is Organizational Culture? -culture provides stability to organization & gives employees clear understanding of “way things are done around here” -culture sets tone for how organizations operate and how individuals within organisation interact Organizational culture-pattern of shared values, beliefs & assumptions considered to be appropriate way to think & act in organization -key features of culture: -shared by members of organization -helps members of organization solve & understand things encountered (internally & externally)

-assumptions, beliefs, & expectations are taught to new members of organization & strongly influence how people perceive, think, feel & behave within the organization -not every group has culture (high turnover will may not develop culture)

Levels of Culture Artifacts- aspects of organizations culture that you see, hear, feel -(two offices with different dress codes, two offices with different wall art paintings/work memos) Beliefs-understanding of how objects & ideas relate to each other Values- stable, long-lasting beliefs about what is important (furniture company promotes corporate values: “demonstrate integrity in all relationships, promote dignity & value of each other, respect environment, support out community & strive for excellence in all we do”) Assumptions-taken-for-granted notions of how something should be

Characteristics if Culture -seven primary characteristics that capture organisations culture (based on low-to-high continuum) ● Innovation & Risk Taking- degree employees are encouraged to be innovative & take risks ●Attention to Detail- degree employees are expected to work with precision, analysis & attention to detail ●Outcome Orientation- degree management focuses on results or outcomes, rather than techniques & processes used to achieve these outcomes ●People Orientation- degree management decisions take into consideration effect of outcomes on people in organization ● Team Orientation- degree work activities are organized around teams rather than individuals ●Aggressiveness- degree people are aggressive & competitive rather than easygoing & s supportive ●Stability- degree organizational activities emphasize maintaining status quo in contrast to growth

Culture’s Functions -culture can influence ethical behaviour (lower-level employees see manager padding reports, sends message that

their firm tolerates dishonesty; firms that record individual sales may encourage unhealthy competition among sales staff) -has boundary-defining role because it creates distinction between one organization and others -conveys sense of identity to organization members -helps create commitment to something larger than individual’s self-interest -enhances stability; social glue that helps hold organization together by providing appropriate standards for what employees should say and do -serves as control mechanism that guides & shapes the attitudes & behaviour of employees, & helps them make sense of the organization

Uniform Cultures -different level or backgrounds in organizations should have the same perception of the culture -subcultures can exist in organizations (different departments have subcultures) Dominant cultures- system of shared meaning that expresses the core values shared by majority of organization members Subcultures-mini-cultures in organization (usually defined by department designations & geographical

separation)

Core values- primary (dominant) values that are accepted throughout organization

Reading Organizations Culture Strong culture- culture in which core values are intensely held & widely shared (members who accept core values, show greater commitment to those values, create stronger culture) *Stories- circulate through organization typically telling about founders, rule breaking, rags-to-riches successes, reductions in workforce relocation of employees, reactions to past mistakes, & organizational coping *Rituals- repetitive sequences of activities that express and reinforce the key values of the organization; what goals are more important; and which people are important, and which ones are expendable (chants) *Material Symbols- convey to employees, customers, & clients who’s important, degree of egalitarianism desired by top management & the kinds of behavior that are appropriate(layout of

corporate headquarters, types of cars given to top executives, size of offices, elegance of furnishings, dress code, signs, brochures, advertisements)

*Language- many organizations use language as way to identify members of culture or subcultures, by learning the language, members show they accept culture there in -organizations develop unique terms, acronyms, jargon, that often confusing to new members, but soon, over time, becomes fully part of their language

Numerous studies have shown that effective leadership occurs in a culture with: -Clearly defined jobs -Communicating and listening -Credibility -Trust developed from honesty and sincerity

Contrasting Organizational Cultures

Organization A Organization B

-managers must fully document all decisions -creative decisions, change, & risks are not encouraged -extensive rules & regulations exist for all employees -productivity is valued over employee morale -employees are encouraged to stay within their own department -individual effort is encouraged

-management encourages & rewards risk-taking and charge -employees are encouraged to ‘run with’ ideas, & failures are treated as learning experiences -employees have few rules and regulations to follow -productivity is balanced with treating its people right -team members are encouraged to interact with people at all levels of function -many rewards are team-based

Creating & Sustaining Organizations Culture -once organizations culture’s established, it rarely fades away

The Liabilities of Organizational Culture Culture as a Barrier to Change: -culture’s liability when shared values no longer further organizations effectiveness -(when company goes through rapid change, the organization’s entrenched culture may no longer be appropriate) -employees are less likely to have shared values when organizations environment is dynamic

Culture as a Barrier to Diversity -management wants new employees to share core cultural values, but also hire people so they are acknowledged that they support differences in workplace -strong cultures pressure employees to conform, removing unique strengths different backgrounds bring; bad when they support institutional bias or become insensitive to people who are different

Culture as a Barrier to Mergers & Acquisitions -while financial statement & product lines have been initial attraction of mergers & acquisitions, whether merger or acquisition works has more to do with how well organizations cultures match up

Strategies for Merging Cultures -organizations use several strategies when considering how to merge cultures of two organizations: ●Assimilation- new organization takes culture of one of the merging organizations -works best when one organization has weak culture; -rarely works when culture is imposed on organization ●Separation- organizations stay separate and keep individual culture -works best when organizations have little overlap in industries in which they operate ●Integration- new cultures formed by merging each organizations culture -works best when aspects of each organization’s culture could be improved

Bicultural audit- examination of differences between two potential merger partners prior to merger to determine whether the cultures will be able to work together (through interviews, questionnaire, focus

groups, differences in values, visions, structure, management practices & behaviours are examined)

-can bridge cultural gaps by: -defining structure that is appropriate for both organizations, along with a reorganization plan -identify & implement management style that is appropriate for both organizations -reinforce internal communication to make sure employees are kept aware of changes that will occur -getting agreement on what will be considered in performance evaluations (including expected behaviours

& performance criteria) Changing Organizational Culture -changing culture of organization is difficult & requires many other aspects of organization to change at the same time, especially reward structure (changed measured in years)

-John Kotter made list of failures that occur when managers try to initiate change: -inability to create sense of urgency about need for change -failure to create coalition for managing change process -absence of vision for change -not effectively communicating vision -not removing obstacles that could impede achievement of vision -failure to provide short-term and achievable goals -tendency to declare victory too soon -not anchoring the changes in organizations culture -two kinds of changes organizations can make to their culture are: 1. Creating an Ethical Culture -content & strength of culture influence ethical climate & ethical behavior of members -organizational culture that’s most likely to shape high ethical standards is one that’s high in risk tolerance, low-moderate in aggressiveness & focuses on means as well as outcomes -practices management can implement to create more ethical culture: -be visible role model- employees look up to top management behavior as benchmark for defining appropriate behavior (when managers are seen taking ethical high rode, they provide

positive message for all employees)

-communicate ethical training- ethical ambiguities can be minimized be creating & disseminating organizational code of ethics -should state organizations primary values & ethical rules employees are expected to follow -provide ethics training- set up seminars, workshops, & training programs to reinforce organizations standards of conduct, clarify practices that aren’t allowed and address possible ethical dilemmas -visibly reward ethical acts & punish unethical ones- performance appraisals of managers should include a point-by-point evaluation of how their decisions measured against the organization’s code of ethics -appraisals must include means taken to achieve goals as well as the ends themselves -provide protective mechanisms- organization needs to provide formal mechanisms so employees can discuss ethical dilemmas & report unethical behavior without fear of reprimand (may include appointing ethics counselor, ombudsperson, or ethics officer)

2. Creating a Positive Organizational Culture Positive organizational culture- emphasizes building on employee’s strengths, rewards more than punishes, & emphasizes individual vitality & growth -positive shows employees how they can capitalize on their strengths

Rewarding More Often Than Punishing: -there’s of course time & place for punishment, but also for rewards -many firms use pay & promotion, but forget about power of smaller (cheaper) rewards like praise -many managers don’t praise because they think either employees will coast or think it isn’t valued

Emphasizing Vitality & Growth: -employees need to see themselves as more than just tools or parts of the organization -positive culture shows interest in what the employee does to contribute to organizational effectiveness & what the organization does to contribute to employee growth -employees should feel that they are learning and growing on the job

Limits of Positive Culture: -not all cultures value being positive as much as US & Canada does -benefits to establishing positive culture, but organization needs to be careful to be objective & not pursue past the point of effectiveness

Chapter 5: Decision Making, Creativity, and Ethics How Should Decisions Be Made? Decision- choice made from two or more alternatives -decision making occurs as reaction to problem or opportunity Problem- discrepancy between some current state of affairs & some desired state, requiring consideration of alternative courses of action Opportunity- occurs when something unplanned happens,make thoughts about new ways of proceeding -decision making happens at all levels of organization -top management-determines things such as organizations goals, what products or services to offer, how best to finance operations, where to locate new high-tech research & development facilities -middle & lower management- determines things such as production schedules, select new employees, decide how pay raises are to be allocated

Rational Decision Making Process: Rational- choices that are consistent & value-maximising with specified constraints Rational decision-making process- six step decision-making model that describes how individuals should behave in order to maximise some outcome

Assumptions of the Decision-Making Model: -problem clarity: problem’s clear & unambiguous (decision maker is assumed to have complete information

regarding decision situation)

-known options: assumed decision maker can identify all relevant criteria and can list all the workable alternatives, and aware of all the possible consequences of each alternative -clear preferences: rationality assumes that criteria & alternatives can be ranked & weighted to reflect their importance -constant preferences: assumed that specific decision criteria are constant & that the weights assigned to them are stable over time -no time or cost constraints: decision maker can obtain full information about criteria & alternatives because its assumed there are no time or cost constraints -maximum payoff: decision maker will choose alternative that yields highest perceived value

How Individuals Actually Make Decisions -rational model provides fairly accurate description of decision process when decision makers are faced with simple problem with few alternatives -most decisions don’t follow rational decision process because people are usually content to find acceptable or reasonable solutions to their problems rather than optimizing one

Bounded Rationality In Considering Alternatives Bounded rationality- limitations on a person’s ability to interpret, process & act on information -difficult for individuals to identify & consider every possible alternative available to them, instead they identify limited list of most conspicuous choices (usually represent familiar criteria & previously tested solutions) -settle on alternative that’s “good enough” & meets acceptable level of performance Satisfice- to provide solution that is both satisfactory & sufficient -(rather than mangers interviewing 10 applicants at once and choosing the best one, they interview one at a time until they find someone that is “good enough”- first candidate who meets minimum criteria for job)

Intuition -least rational way of making decision, but doesn’t necessarily make it wrong -can improve decision making Intuitive decision making- subconscious process created out of a person’s many experiences -because so unquantifiable hard to know when hunches are right or wrong

Judgment Shortcuts -attempting to make shortcuts in decision making process leads to systematic biases & errors Overconfidence Bias- arises from being far too optimistic about one’s own performance -individuals whose intellectual & interpersonal abilities are weakest are most likely to overestimate their performance & ability -most likely to occur when organizational members are considering issues/problems that are outside their area of expertise Anchoring Bias- tendency to fixate on initial information, from which one then fails to adequately adjust for subsequent information -occurs because mind gives disproportionate amount of emphasis to first information it receives -anytime negotiation takes place, so does anchoring Confirmation Bias- tendency to seek out information that reaffirms past choices & to discount information that contradicts past judgments -we selectively gather information (not objectively as rational decision making process assumes)

-tend to accept at face value information that confirms our perceived views (skeptical of those

that challenge these views) -information we gather is typically biased toward supporting views we already hold -influences where we go to collect evidence (tend to seek sources most likey to tell us what we

want to hear)

Availability Bias- tendency to base judgments on information that’s readily available rather than complete data -events that evoke emptions, are vivid, occurred more recently tend to be remembered -tend to overestimate unlikely events (airplane crashes compared with more likely events, car crashes) -explains why managers, when doing performance appraisals, tend to give more weight on recent behaviours of an employee, than those of 6 months ago Escalation of Commitment- increased commitment to a previous decision despite negative information -staying with decision even when there’s clear evidence that it’s wrong -avoid having to admit they made mistake, and hat their initial decision was wrong -many organizations suffer because manager was determined to prove their original decision was right by continuing to commit resources to what was a lost cause from the beginning Randomness Error- tendency of individuals to believe that they can predict the outcome of random events -humans have difficulty dealing with change, most like to believe they have some control over world & our destiny -decision making becomes impaired when we try to create meaning out of random events -(“I never make decisions on Friday the 13

th)

-some decision makers become controlled by their superstitions, making it hard for them to change their routines or objectively process new information Winners Curse- tendency for winning participants in an auction to pay too much for the item they won -some buyers underestimate value of an item & others will overestimate it (winner’s one who

overestimates it the most)

-unless bidders dramatically undervalue, winner will pay too much (winner’s curse gets stronger when

number of bidders increases)

Hindsight Bias- tendency to believe falsely, after an outcome of an event is actually known, that one could have accurately predicted that outcome -“what is clear in hindsight, is rarely clear before the fact” -reduces ability to learn from the past, permits us to think that we are better at making predictions than we actually are, and can result in out being more confident about accuracy of future decisions than we have the right to be

Improving Decision Making through Knowledge Management Knowledge management (KM)- process of organizing & distributing an organizations collective wisdom so that the right information gets to the right people at the right time -KM provides organization with competitive edge & improved organizational performance because it makes employees smarter -KM is increasingly important today because: -organizations that can quickly & effectively tap into their employees collective experiences and wisdom are more likely to outsmart their competition -as baby-boomers begin to leave workforce, there is an increasing awareness that they represent a wealth of knowledge that will be lost if there are no attempts to capture it -well designed KM system reduces redundancy & makes organization more efficient (when

employees in large organization undertake new project, they need to start from scratch. They can access what previous employees have learned and avoid making previous mistakes) -organizations need to develop computer databases of pertinent infor that employees can readily access -organizations need to create culture that promotes, values, & rewards sharing knowledge -people can be reluctant to share information, because knowledge is power, but KM will not work unless culture supports information sharing -organization needs to develop mechanisms to allow employees who have built up valuable expertise & insights to share with others

Group Decision Making -many decisions in firms are made by groups, teams, committees “two heads are better than one”

Strengths Weaknesses

-groups generate more complete information & knowledge (by combining recourses of several

individuals) -groups bring increased diversity of views (opportunity to consider more approaches & alternatives) -group will almost always outperform individual -groups generate higher-quality decision -group decisions tend to be accurate, creative & lead to increased acceptance of a solution (many decisions

fail after there made because people don’t accept them)

-time consuming (typically take more time to reach

solution than individual), so not always efficient -conformity pressures in groups (desire by group

members to be accepted and considered asset to group can result in squashing any overt disagreement)

-can be dominated by one of a few members (groups

overall effectiveness will suffer) -group decisions suffer from ambiguous responsibility (in individual decision, it’s clear who’s accountable for final outcome)

Group Vs. Individual Decision Making Criteria of Effectiveness Groups Individuals

More complete information

Diversity of views

Decision quality

Accuracy & Creativity

Degree of acceptance

Speed

Efficiency

Groupthink Groupthink- phenomenon in which group pressures for conformity prevent the group from critically appraising unusual, minority, or unpopular views -deterioration in individuals mental efficiency, reality testing, & moral judgment as result of group pressures -symptoms of groupthink phenomenon: -illusion of invulnerability- group members become overconfident among themselves, allowing them to take extraordinary risks -assumption of morality- group members believe highly in the moral rightness of the group’s objectives & do not feel the need to debate the ethics of their actions -rational resistance- group members rationalise any resistance to the assumptions, members behave so as to reinforce those assumptions continually -peer pressure-group members apply direct pressures on those who momentarily express doubts about any of the groups shared views or who question the validity of arguments supporting the alternative favoured by the majority -minimised doubts- the groups members who have doubts or hold differing points of view seek to avoid deviating from what appears to be group consensus by keeping silent about misgivings & even minimising to themselves the importance of their doubts -illusion of unanimity- if someone does not speak, its assumed the abstention becomes viewed as a yes vote -individuals who hold position that’s different from dominant majority are pressured to suppress, withhold or modify their true feelings & beliefs -to minimize group think, managers can: -monitor group size- more intimidated & hesitant as group size increases, & individuals feel less personal responsibility when groups get larger than 10 -encourage leaders to play an impartial role- leaders should actively seek input from all members & avoid expressing their own opinions, especially in the early stages of deliberation -appoint 1 group member to play devil’s advocate-members role is to overtly challenge majority position & offer divergent perspectives -stimulate active discussion of diverse alternatives to encourage dissenting views & more objective evaluations Groupshift -in some cases, group decisions are more conservative than individual decisions, but more often are riskier Groupshift- phenomenon in which initial positions of individual group members become exaggerated because of the interactions of the group -group discussion leads to significant shift in positions of members toward more extreme position in direction in which they were already leaning before the discussion (conservatives become cautious;

aggressive types assume more risk)

-discussion creates familiarity among members & as they become more comfortable with each other they become bolder and more daring -group decisions exaggerate initial position of the individual members -shift has been shown more often to be toward greater risk -pre-discussion inclinations help determine whether group will shift toward greater risk or caution

Group Decision-Making Techniques -groups can use variety of techniques to stimulate decision making; Interacting Groups: members interact with each other face to face, relying on verbal & nonverbal interaction to communicate to each other -often censor themselves & pressure individual members toward conformity of opinion Brainstorming: idea-generation process that specifically encourages any & all alternatives, while withholding any criticism -meant to overcome pressures for conformity in interacting group’ -encourages any & all alternatives while withholding any criticism of those alternatives -typically group leader states problem and all members say as many alternatives they can in given time period where no criticism is allowed, and all alternatives are recorded for later discussion and analysis -variant is electronic brainstorming -generates ideas, but not efficiently because everyone is talking at once, blocking thought process and impeding the sharing of ideas Nominal Group Techniques: method in which individual members meet face to face to pool their judgments in a systematic but independent fashion - nominal-“in name only” -members are present in meeting, but operated independently -problems presented and: -members meet as group, but before discussion takes place, each member writes down their ideas on the problem -after the silent period, each member presents one idea to the group, until all the ideas have been presented and recorded (no discussion takes place until all ideas have been recorded) -the group then discusses ideas for clarity & evaluates them -each group member silently & independently ranks the ideas and the idea with the highest aggregate ranking determines the final decision

Electronic Meetings (computer-assisted group): members interact on computers, allowing for anonymity of comments & aggregation of votes -most recent approach to decision making -blends nominal group technique with sophisticated computer technology -up to 50 people sit at horseshoe-shaped table with computers in front of them -advantages: anonymity, honesty, speed -participants anonymously type message they want and it flashes on screens of all members, allowing people to be brutally honest without penalty -fast, because chit-chat is eliminated

Evaluating Group Effectiveness

Type of Group

Effectiveness of Criteria Interacting Brainstorming Nominal Electronic

Number & Quality of ideas Low Moderate High High

Social Pressure High Low Moderate Low

Money Costs Low Low Low High

Speed Moderate Moderate Moderate Moderate

Talk Orientation Low High High High

Potential for Interpersonal Conflict High Low Moderate Low

Commitment to Solution High N/A Moderate Moderate

Development of Group Cohesiveness High High Moderate Low

Creativity in Organizational Decision Making Creativity- ability to produce novel & useful ideas -ideas that are different from what has been done before, but are appropriate to problem or opportunity presented -allows decision makers to more fully appraise & understand the problem (seeing problems others can’t

see)

Creative Potential -most people have creative potential they can use when facing a problem, but to unleash potential they have to get out of psychological ruts that many of us fall into & learn how to think about problem in different ways -people who score high on openness to experience, intelligent, self-confident, risk-taking, or positive core self-evaluation, tolerance for ambiguity, low need for structure, perseverance in face of frustration are more likely to be creative Three Component Model of Creativity Three-component model of creativity- proposition that individual creativity requires expertise, creative-thinking skills, & intrinsic task motivation (higher level of these three components = higher creativity) -expertise- foundation for all creative work (creativity enhanced when individuals have abilities, knowledge, proficiencies, & similar expertise in their field of endeavour) -(ie. wouldn’t expect person with minimal knowledge on programming to be as creative as software engineer) -creative-thinking skills- encompasses personality characteristics associated with creativity, ability to use analogies, and the talent to see the familiar in a different light -research suggests were more creative when in good mood (so if need to be creative should do things we like- listen to music, eat favorite foods, watch funny movies) -intrinsic task motivation- desire to work on something because its intrinsic, involving, satisfying, exciting, or personally challenging -turns potential into actual creative ideas Ethics In Decision Making Ethics- study of moral values or principles that guide our behaviour & uniform us whether actions are right or wrong -ethical principles guide our behaviour

Four Ethical Decision Criteria 1. Utilitarian- decision focused on outcomes or consequences that emphasize the greatest good for the greatest number -consistent with goals such as efficiency, productivity, & high profits 2. Rights -individuals make decisions consistent with fundamental liberties & privileges as set forth in documents such as Canadian Charter of rights & freedoms -respecting & protecting basic rights of individuals (privacy, free speech & due process) -used to protect whistle blowers-person who reports unethical practices by their employer to outsiders 3. Justices -individuals impose & enforce riles fairly & impartially so there’s equitable distribution of benefits & costs -union members typically favour this view -justifies people getting paid same wage for given job, regardless of performance differences & uses seniority as primary determination in making layoff decision 4. Care -“The morally correct action is the one the expresses care in protecting the special relationship that individuals have with each other” -suggests we be aware of needs, desires, & wellbeing of those whom we are closely connected to Factors that influence ethical decision-making behaviour -immoral individuals and work environments promote unethical activity

Stages of Moral Development: Stages of Moral Development- developmental stages that explain a person’s capacity to judge what is morally right -three stages of moral development, each with two stages -the higher the person’s moral development, the less dependent he or she is outside influences & more likely to behave ethically

Locus of Control: ●Locus of Control -set of beliefs about whether one’s behaviour is controlled mainly by internal or external forces -people with external locus of control (believe their lives are controlled by outside factors – luck/chance) are less likely to take responsibility for their consequences of their behavior and more likely to rely on external influences to determine their behaviour -people with internal locus of control (believes they control their own destiny) are more likely to rely on their own internal standards of what is right and wrong to guide there behaviour

Organizational Environment: -refers to employees perception of organizational expectations -written codes of ethics, high moral behaviour by senior management, realistic performance expectations, performance appraisals, promotions increase likelihood of ethical decision making -people who lack strong moral sense are much less likely to make unethical decisions

Making Ethical Decisions -powerful people can make unethical behaviour seem ethical in terms of organizations best interests -immoral people can justify almost any behaviour

Organizational Response to Demands for Ethical Behaviour -develop code of ethics, and instruct employees how to follow policy -new trend is hiring ethics auditor to double check organisations perception of its own morals -create mechanisms that encourage employees to speak up when they see wrongdoing -

National Culture -what is considered unethical in one country may not be viewed similarly in another -no global ethical standards -(US company in China caught employee stealing and reported them to local authorities and was executed- consequences if particular acts not universal)

Corporate Social Responsibility Corporate Social Responsibility- firm responsibility to consider the impact of its decisions on society -organizations may try to better society through charitable contributions or providing better wages to employees working in offshore factories (may engage in these activities because they feel pressured or

because they feel it’s the right thing to do)

Chapter 6: Organizational Structure Organizational Structure Organizational Structure- how job tasks are formally divided, grouped, & coordinated -structure can represent tall pyramid or can be relatively flat -organizations do change their structure from time to time (called restructuring) -six key elements that managers need to address when they design their organization structure:

1. Work specialization (division of labour) Work specialization- degree to which tasks in organization are subdivided into separate jobs -individuals specialise in doing part of an activity rather than the entire activity -efficient & productive- employee’s improve at task through repetition, saves time -can lead to boredom, fatigue, stress, low productivity, poor quality, increased absenteeism & high turnover (giving employees variety can help with this)

Individual Responses to Work Specialization: -generally, contributes to higher employee productivity but at price of reduced job satisfaction -many (usually highly educated) demand more complex jobs -some want to work with minimal intellectual demands & provides the security of routine (for these, high

work specialization is source of job satisfaction)

2. Departmentalization Departmentalization- basis on which jobs are grouped together -group jobs together so that common tasks can be coordinated -sometimes departments don’t interact well with other departments, which can lead to narrow vision with respect to organizational goals

Functional Departmentalization-one of most popular ways to group activities is by functions performed (separate human resources, marketing, accounting, engineering)

Product Departmentalization-can be departmentalized by type of product organization produces (Estee

Lauder product lines include MAC cosmetics, Clinique, Perspectives, Origins) -all activities of product line are under single manager -if organizations activities are service, each service would be group autonomously (Royal bank offers

banking, investing, insurance, each with own service manager)

Geographic Departmentalization-departmentalize on basis of geography or territory (sales department

divided for BC, te Praries, Central Canada)

Process Departmentalization-organize departments by processing that occurs (aluminum tubing

manufacturer may have following departments: packing & shipping, casting, tubing, finishing, inspecting) -each department specialises in one specific phase in production -each process requires different skills, so this method offers basis for homogeneous categorising of activities

Customer Departmentalization-departmentalize based on particular customer organization seeks to reach (office supply firm divides based on service, wholesale, government customers)

Organizational Variety in Departmentalization- -large organizations change departmentalization to reflect new needs or emphases (TD Canada Trust combined 3 of its businesses (private client, discount brokerage & financial planning) under TD Waterhouse banner to help better meet customer needs (originally product oriented structure, change because customers now prefer to have all investment needs within same unit

3.Chain of Command Chain of Command- continuous line of authority that extends from upper organizational levels to the lowest level and clarifies who reports to whom -helps employees answer “Who do I go to if I have a problem?” Delegation- assignment of authority to another person to carry out specific duties, allowing the employee to make some of the decisions (used when managers don’t have enough time & knowledge)

4.Span of Control Span of Control- the number of employees that report to a manager -vary by organization, by unit within an organization -determined by number employees manager can efficiently & effectively direct -(manager, in assembly line, can direct numerous employees because work is well defined and controlled by machinery, but sales manager by contrast may have to give one-on-one supervision to individual sales reps & therefore fewer would report to sales manager)

-wider or larger the span, the more efficient the organisation -by keeping narrow/small span, managers can maintain close control but is expensive (because they add

levels of management), more complex (added levels of hierarchy slow down decision making and tend to isolate

upper management), encourage overly tight supervision & discourage employee autonomy -trend in recent years has been toward wider spans of control

Individual Responses to Span of Control -research shows there’s no evidence to support relationship between span of control & employee performance -some people like to be left alone while others prefer the security of manager who is quickly available at all times -some evidence supports managers job satisfaction increases as number of employees they supervise increases

5.Centralization & Decentralization Centralization- degree to which decision making concentrated at single point in the organization -top management makes organizations key decisions with little or no input from lower-level employees Decentralization- degree to which decision making is distributed to lower-level employees -action can be taken more quickly to solve problems, more people provide input into decisions and employees are less likely to feel alienated from those who make decision that affect their work lives -easier to address customer concerns -lower management is closer to the “action” & typically have more detailed knowledge about problems than top management

Individual Responses to Centralization: -strong evidence linking centralization & job satisfaction -organizations less centralized have greater amount of participative decision making which is positively related to job satisfaction -decentralization-satisfaction relationships strongest with employees with low self-esteem because they have less confidence n their abilities they place higher value on shared decision making

6.Formalization Formalization-degree to which jobs within the organization are standardised -if jobs are highly formalized, there explicit job descriptions, lots of organizational rules, clearly defined procedures covering work processes in organizations -employees expected to handle same input exactly the same, resulting in consistent & uniform output -low formalization, job behaviours are reality non-programmed, individuals discretion on a the job is inversely related to amount of behaviour in that job that is programmed by the organization, the greater standardization the less input the employee has into how their work is done -standardisation eliminates possibility of employees engaging in alternative behaviours and removes need for employees to consider alternatives

Mechanistic and Organic Organizations -organizations range from mechanistic to organic

Mechanistic model- hierarchy structure -mostly downward communication -little participation by lower-level members in decision making high specialization rigid departmentalization clear chain of command Narrow spans of control (division of labour): Much hierarchy, many levels of administration limited information network High Centralization of decision-making High formalization of work procedures (rules and regulations, standardization) -government bureaucracies

Organic Model- flat structure -lateral , upward, downward communication -uses cross-functional & cross hierarchical teams -comprehensive information network Wide division of labour: Jobs “enriched” De-centralization of decision-making Low formalization of work procedures (rules and regulations, standardization) Wide Span of control: Little hierarchy, few levels of administration -high tech firms

Individual responses to organizational structure: -response to organizational design affected by factors such as experience, personality, & work task -people with high degree of bureaucratic orientation tend to rely heavier on authority, prefer formalized & specific riles –mechanistic structure -low degree of bureaucratic orientation probably fit organic better -cultural background influences preference for structure –high power distance countries (Malaysia, Guatemala, Philippines) more accepting of mechanics structure than those who come from low power distance countries

Traditional Organizational Designs Simple Structure- organizational design characterised by low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization -not elaborate; “flat” organization -only has two or three vertical levels, loose body of employees and one individual whom the decision-making authority is centralized -most widely practiced in small businesses in which manager & owner are the same (local corner grocery store) -strength lies in its simplicity -fast, flexible, inexpensive to maintain, accountability is clear -doesn’t work as well as organization grows bigger (decision making

becomes slower, and eventually to standstill as single person tries to continue making all decision)

-risky, everything depends on one person

Family Business: -represent 70% of Canadian employment and more than 30% of gross domestic product -many have relatively simple structures -have more complex dynamics than nonfamily businesses, because they face both family/personal relations and business/management relations -may or may not be public companies (listed on stock exchange) -good governance structures help family businesses manage the conflicts that may arise (sense of

direction, values to live/work by, well understood and accepted policies that tell organization members how they should behave) -succession doesn’t always work because personal and emotional factors determine who the next leader will be rather than suitability (father may want his first born son to take over the business even if his daughter ma make a better CEO) –becomes even more complex when 2nd and 3rd generation family members get involved in business

-emphasis on teams and on product developments -broadly defined jobs with general job descriptions The Bureaucracy Bureaucracy- organizational design with highly routine operating tasks achieved though specialization, formalized rules, & regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, & decision making that follows chain of commands -standardisation is key -clothing store (collect taxes, enforce health regulations) rely on standardised work processes for coordination and control -top-down management approach -many levels and hierarchical communication -highly specialised jobs with narrowly defined job descriptions -focus on independent performance

Matrix Structure Matrix Structure- organizational design that combines functional & product decentralization; dual chain of command -each job has two components: functional and product

Strengths Weaknesses ●Efficient Information Exchange ●Increased Motivation ●Efficient use of resources: (individuals & equipment can be shared across projects) ● Project Integration(clear &

workable mechanism for coordinating work across functional lines)

● Improved information flow ●Flexibility (Frequent contact between members from different departments expedites decision-making and adaptive resources) ● Discipline retention( functional

experts and specialists are kept even

though projects come and go) ● Improved Motivation & commitment

●Internal Complexity ●Expensive to Maintain and Internal Conflict ●Power struggle(Conflicts occur because

boundaries of authority and responsibility overlap) ●Heightened Conflict(competition over

scarce resources especially when personnel are being shared across projects) ●Slow reaction time: Heavy emphasis on consultation and shared decision-making retards timely decision-making. ●Difficulties in monitoring and controlling ●Excessive overheads: (double

management is created by creating project managers necessarily increases overheads)

New Design Options -involve breaking down boundaries in some fashion (internally, externally, or both)

Team Structure Team structure- use of teams as the central device to coordinate work activities -modifies internal boundaries -teams have become extremely popular means around to which to organize work activities -breaks down departmental barriers & decentralizes decision making to the level of team work -require employees to be generalists & specialists

Modular Organization -modifies external organizational boundaries Modular organization- small core organization that outsources major business functions -“why do it at all when sometimes someone else can do some of it better -organizations create networks of relationships that allow them to contract out manufacturing, distribution, marketing, or any other business function where management believes others can do it better or cheaper -organizations can devote their technical & managerial talent to their most critical activities -respond more quickly to environmental changes -increased focus on customers and markets -reduces managements control over key parts of its business -focused to rely on outsiders, decreasing operational control -have to make decision on trade-offs between low-cost production strategies and criticism from potential customers concerned about human rights (child labour)

Virtual Organization -modifies external organizational boundaries Virtual organization- continually evolving network of independent companies (suppliers, customers, even competitors) linked together to share skills, costs, and access to one another’s markets -units of different firms join together in alliance to purse common strategic objectives -participants give up some of their control and act more interdependently -about one in 9 Canadian companies engage in some sort of alliance -allow organizations to share costs & skills -provide access to global markets -increase market responsiveness -boundaries between companies become blurred due to interdependence (companies must relinquish operational and strategic control) -requires new managerial skills (managers must build relations with other companies, negotiate “win-win” deals, find compatible partners in terms of values & goals and then develop appropriate communication systems to keep everyone informed Boundaryless Organization -attempts to break down both internal & external organizational boundaries Boundaryless Organization- organization that seeks to eliminate the chain of command, have limitless spans of control, & replace departments with empowered teams -relies heavily on information technology, some call structure T-form (technology based) organization -breaks down barriers internally by flattening hierarchy, creating cross-hierarchical teams (include top executives, middle managers, supervisors, operative employees), use participative decisions making practices and 360-degree performance appraisals (where peers & others above and below employee evaluate their performance) -breaks down external barriers: constituencies (suppliers, customers, regulators) & geography barriers -globalization, strategic alliances, supplier-organization and customer-organization linkages, & telecommuting are examples of practices to reduce external boundaries -difficult to manage (time consuming, and hard to overcome political & authority boundaries,

New Style VS Old Style Organizations

New Old

Dynamic learning Information rich Global Small and large Product/customer oriented Skills oriented -team oriented -involvement oriented -lateral/networked -customer oriented

Stable Information scarce Local Large Functional oriented Job oriented Individual oriented Command/control oriented Hierarchal Job requirements oriented

Major Forces That Shape Organizational Structure Strategy -organization’s structure is a means to help management achieve its objectives -structure should support strategy -most current strategy frameworks focus on three strategy dimensions: 1. Innovation Strategy- emphasizes the introduction of major new products & services -meaningful & unique innovation (not simple or cosmetic change) -organic structure: loose structure, low specialization, low formalization, decentralized 2. Cost-Minimization Strategy- emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting (Walmart) -mechanistic-tight control, extensive work specialization, high formalization, high centralization 3. Imitation Strategy- moving into new products or new markets after their viability has been proven -seek to minimize risk and maximize opportunity for profit -take successful ideas of innovators and copy them -(knock off handbags)

-both mechanistic & organic: mix of loose with tight properties, tight controls over current activities & looser controls for new undertakings

Organizational Size -organizations size significantly affects its structure -large organizations tend to have more specialization, more departmentalization, more vertical levels, and more rules & regulations than small organizations -size affects structure at decreasing rate (as organization expends, size becomes less important_

Technology Technology- way in which an organization transfers its inputs to its outputs -every organization has at least one technology for converting financial, human, and physical resources into products & services (assembly line, lectures, case-analysis method, experiential exercise method) Variations in Technology: degree of routines- tend toward either routine (automated or standardized operations) or non-routine activities (customized operations)

Relationship Between Technology & Structure -small relationship shows routine tasks are associated with taller & more departmentalized structures -stronger relationship between technology and formalization (routines associated with presence of rules manuals, job descriptions & other formalized documentation)

Environment Environment- institutions or forces outside the organization that potentially affect the organizations performance (include suppliers, customers, competitors, government regulatory agencies, public pressure

groups) -some organizations face relatively static environments (few forces change) – no new competition, technological breakthroughs by current competitors, little activity by public pressure groups to influence the organization – significantly less uncertainty for managers -some organizations face dynamic environments (rapidly changing)—new government regulations affecting there business, new preferences by customers -since uncertainty is threat to organizations effectiveness, management tries to minimize it -one way to minimize environment uncertainty is through adjustments in organizations structure

Capacity: refers to degree to which it can support growth -rich & growing environments generate excess resources, which can buffer organization in times of relative scarcity -abundant capacity leaves room for organization to make mistakes, while scarce capacity doesn’t

Volatility: degree of instability in environment is captured in volatility dimension -high degree of unpredictable change, environment is dynamic (difficult for management to accurately predict probabilities associated with various decision alternatives)

Complexity: degree of heterogeneity and concentration among environmental elements -simple environments are homogeneous and concentrated (tobacco industry, since there are few players, easy fir firms to keep close eye on competition) -complex environments are heterogeneity and dispersion (firms competing in cellular connection business)

OB On The Edge: Stress Stress Stress- dynamic condition in which individual’s confronted with opportunity, demand, or resource related to what individual desires & outcome is perceived to be both uncertain and important -major factor in lives of Canadians -women more stressed then men -stress leads to less productivity -some individuals use stress positively to rise the occasion and perform at or near their maximum -stress has a "inverted U relationship" -as stress increases, performance increases up to a certain point and then can't handle it and then performance falls (stress & job performance - inverted U relationship)

Challenge stressors- associated with workload, pressure to complete tasks and time urgency Hindrance stressors-keep you from reaching your goal -typically stress is associated with demands (responsibilities, pressures, obligations, uncertainties individuals

face in workplace) & resources (things within individuals control-being prepared)

Causes: -environmental factors- uncertainty is biggest reasons people have trouble coping with organizational changes (economic uncertainties & technological change) -organizational factors -task demands-related to persons jobs (design of job, working conditions, physical work layout) -role demands-pressures from function person plays in organization -interpersonal demands-pressures created by other employees (lack of social support) -personal factors-non work related problems (marriage/children problems) -economic problems-individuals overextending their financial resources

Consequences of stress: -high blood pressure, ulcers, irritability, difficulty in making routine decisions, loss of appetite, accident proneness -physiological symptoms: changes in metabolism, increase heart and breathing rates, cause headaches, induce heart attacks -psychological symptoms: job dissatisfaction, tension, anxiety, irritability, boredom, procrastination -behavioural symptoms: changes in productivity, absence, turnover, eating habits, increased smoking, or consumption of alcohol, rapid speech, fidgeting, sleep disorders