Chapter 8: Organizational Culture, Structure, and Design

8.1 Aligning Strategy, Culture, and Structure

organizational culture

-sometimes called corporate culture, is defined as the set of shared, taken-for-granted implicit assumptions that a group
holds and that determines how it perceives, thinks about, and reacts to its various environments.

-These are the beliefs and values shared among a group of people in the workplace that are passed on to new
employees by way of socialization and mentoring, which significantly affect work outcomes at all levels.

-culture helps employees understand why the organization does what it does and how it intends to accomplish its long-
term goals.

-The cultural tone is often set in the hiring process.

-Culture can vary considerably, with different organizations having differing emphases on risk taking, treatment of
employees, teamwork, rules and regulations, conflict and criticism, and rewards.

-As such, culture can have both positive and negative effects on employees and overall corporate performance.

What Drives an Organizational Culture?

•  Founder’s values

•  Industry and business environment

•  National culture

•  Organization’s vision and strategies

•  Behavior of leaders

Organizational structure

- is a formal system of task and reporting relationships that coordinates and motivates an organization’s members so
that they can work together to achieve the organization’s goals.

-concerned with who reports to whom and who specializes in what work.

-challenge for top managers is to align the organization’s vision and strategies with its organizational culture and
organizational structure.
 8.2 characteristics of an organization’s culture.
The Three Levels of Organizational Culture
(1) observable artifacts

-most visible level.

-physical manifestations such as manner of dress, awards, myths and stories about the company, rituals and
ceremonies, and decorations, as well as visible behavior exhibited by managers and employees.

(2) espoused values

-Espoused (adopt) values are the explicitly stated values and norms preferred by an organization, as may be put forth by
the firm’s founder or top managers.

-Although managers may hope the values they espouse will directly influence employee behavior, employees don’t
always follow. Usually they are more influenced by enacted values, which represent the values and norms actually
exhibited in the organization.

(3) basic assumptions.

-not observable

-represent the core values of an organization’s culture— those that are taken for granted and, as a result, are difficult to
change.

Four Types of Organizational Culture

-The competing values framework (CVF) provides a practical way for managers to understand, measure, and change
organizational culture.

-organizational effectiveness varied along two dimensions:

■ The horizontal dimension—inward or outward focus? This dimension expresses the extent to which an organization
focuses its attention and efforts inward on internal dynamics and employees (“internal focus and integration”) versus
outward toward its external environment and its customers and shareholders (“external focus and differentiation”).

■ The vertical dimension—flexibility or stability? This dimension expresses the extent to which an organization prefers
flexibility and discretion versus stability and control. Combining these two dimensions creates the four types of
organizational culture based on different core values—namely, clan, adhocracy, market, and hierarchy.
1. Clan Culture

-A clan culture has an internal focus and values flexibility rather than stability and control.

-a family-type organization, it encourages collaboration among employees, striving to encourage cohesion through
consensus and job satisfaction and to increase commitment through employee involvement.

- Clan organizations devote (give over) considerable resources to hiring and developing their employees, and they view
customers as partners.

-Employees have generous perks and are empowered to participate in the way the company is run. The end results are
profitability and an enviably low turnover rate.

2. Adhocracy Culture

-An adhocracy culture has an external focus and values flexibility.

-Creation of new products and services is the strategic thrust of this culture, which attempts to create innovative
products by being adaptable, creative, and quick to respond to changes in the marketplace.

-Employees are encouraged to take risks and experiment with new ways of getting things done.

- Adhocracy cultures are well suited for start-up companies, those in industries undergoing constant change, and those
in mature industries that are in need of innovation to enhance growth.

3. Market Culture

-A market culture has a strong external focus and values stability and control.

-Because market cultures are focused on the external environment and driven by competition and a strong desire to
deliver results, customers, productivity, and profits take precedence over employee development and satisfaction.

-Employees are expected to work hard, react fast, and deliver quality work on time; those who deliver results are
rewarded.

4. Hierarchy Culture

-A hierarchy culture has an internal focus and values stability and control over flexibility.

-Companies with this kind of culture are apt to have a formalized, structured work environment aimed at achieving
effectiveness through a variety of control mechanisms that measure efficiency, timeliness, and reliability in the creation
and delivery of products.

Ways Employees Learn Culture

1. Symbols- A symbol is an object or action that represents an idea or quality. With respect to culture, symbols are
artifacts used to convey an organization’s most important values.

2. Stories A story- is a narrative based on true events, which is repeated—and sometimes embellished upon—to
emphasize a particular value. Stories are oral histories that are told and retold by members about incidents in the
organization’s history.

3. Heroes -A hero is a person whose accomplishments embody the values of the organization.

4. Rites and Rituals -Rites and rituals are the activities and ceremonies, planned and unplanned, that celebrate
important occasions and accomplishments in the organization’s life.

5. Organizational Socialization - is defined as the process by which people learn the values, norms, and required
behaviors that permit them to participate as members of an organization.
-occurs 3 phases :

i. anticipatory socialization phase

-occurs before one joins the organization, when a person learns—from career advisors, from web sources, from
current employees—what the organization’s job needs and values are and how one’s own needs, values, and
skills might fit in.
ii. encounter phase
-takes place when a person is first hired and comes to learn what the organization is really like and how to
adjust his or her expectations.
-The company may help to advance this socialization process through various familiarization programs
(onboarding/orientation program)
iii. change and acquisition phase
-comes about once the employee understands his or her work role and now must master the necessary skills
and tasks and learn to adjust to the work group’s values and norms.
-The company may advance this phase of socialization through goal setting, incentives, employee feedback,
continued support, and ceremonies (“graduation”) that celebrate completion of the process.

The Importance of Culture

Anticipating a Job Interview

-the interviewer is trying to find out is how well you will fit in—what is called person–organization (PO) fit, which
reflects the extent to which your personality and values match the climate and culture in an organization.

-A good fit of this kind is important because it is associated with more positive work attitudes and task performance,
lower stress, and fewer expressions of intention to quit.

-How well an applicant will fit in with the institution’s organizational culture is considered a high priority by many
interviewers.

8.3 The Process of Culture Change

There are 12 ways a culture becomes established in an organization .
1. Formal Statements

- The first way to embed preferred culture is through the use of formal statements of organizational philosophy,
mission, vision, and values, as well as materials used for recruiting, selecting, and socializing employees.

-example: Walmart’s website promotes four basic values that represent the core of the retailer’s culture: (1) service to
customers, (2) respect for the individual, (3) strive for excellence, and (4) act with integrity

2. Slogans and Sayings

-The desirable corporate culture can be expressed in language, slogans, sayings, and acronyms.

-example: The slogan “The force” is short for “focused, responsible, collaborative, and empowered.”

3. Rites and Rituals

- rites and rituals represent the planned and unplanned activities and ceremonies that are used to celebrate important
events or achievements.

4. Stories, Legends, and Myths

-A story is a narrative about an actual event that happened within the organization and that helps to symbolize its vision
and values to employees.

5. Leader Reactions to Crises

-How top managers respond to critical incidents and organizational crises sends a clear cultural message.

6. Role Modeling, Training, and Coaching

- Many companies provide structured training to provide an in-depth introduction to their organizational values. Others
build learning into their culture.

7. Physical Design

- There is constant experimenting to find the best office layout that will encourage employee productivity and send a
strong message about the culture.

8. Rewards, Titles, Promotions, and Bonuses

- Rewards and status symbols are among the strongest ways to embed organizational culture.

9. Organizational Goals and Performance Criteria

-Many organizations establish organizational goals and criteria for recruiting, selecting, developing, promoting,
dismissing, and retiring people, all of which reinforce the desired organizational culture.

10. Measurable and Controllable Activities

- An organization’s leaders can pay attention to, measure, and control a number of activities, processes, or outcomes
that can foster a certain culture.

11. Organizational Structure

-The hierarchical structure found in most traditional organizations is more likely to reinforce a culture oriented toward
control and authority compared with the flatter organization that eliminates management layers in favor of giving
employees more power.

12. Organizational Systems and Procedures- Companies are increasingly using electronic networks to increase
collaboration among employees, to improve innovation, quality, and efficiency.

8.4
8.4 Organizational Structure
-The challenge for top managers is, first, to create a culture that will motivate its members to work together and,
second, a structure that will coordinate their actions to achieve the organization’s strategic goals.

-organization is a system of consciously coordinated activities or forces of two or more people.

THREE TYPES OF ORGANIZATIONS

■ For-profit organizations. These are formed to make money, or profits, by offering products or services.

■ Nonprofit organizations. These are formed to offer services to some clients, not to make a profit (examples: hospitals,
colleges).

■ Mutual-benefit organizations. These are voluntary collectives whose purpose is to advance members’ interests
(examples: unions, trade associations).

The Organization Chart

-is a box-and-lines illustration showing the formal lines of authority and the organization’s official positions or work
specializations.

-Two kinds of information that organization charts reveal about organizational structure are :

(1) the vertical hierarchy of authority, who reports to whom, and

(2) the horizontal specialization, who specializes in what work.

8.5 The Major Elements of an Organization

4 Common Elements of Organizations: Proposed by Edgar Schein

1. Common Purpose

-An organization without purpose soon begins to drift and become disorganized.

-The common purpose unifies employees or members and gives everyone an understanding of the organization’s reason
for being.

2. Coordinated Effort
-The common purpose is realized through coordinated effort, the coordination of individual efforts into a group or
organizationwide effort.

3. Division of Labor

-Division of labor, also known as work specialization, is the arrangement of having discrete parts of a task done by
different people.

-With division of labor, an organization can parcel out the entire complex work effort to be performed by specialists,
resulting in greater efficiency.

4. Hierarchy of Authority

-The hierarchy of authority, or chain of command, is a control mechanism for making sure the right people do the right
things at the right time.

- If coordinated effort is to be achieved, managers need to have more authority, or the right to direct the work of others.

-authority is most effective when arranged in a hierarchy. Without tiers or ranks of authority, a lone manager would
have to confer with everyone in his or her domain, making it difficult to get things done.

-Even in newer organizations that flatten the hierarchy, there still exists more than one level of management.

- A flat organization is defined as one with an organizational structure with few or no levels of middle management
between top managers and those reporting to them.

-a principle stressed by early management scholars was that of unity of command, in which an employee should report
to no more than one manager in order to avoid conflicting priorities and demands.

3 Common Elements of Organizations That Most Authorities Agree On

5. Span of Control

The span of control, or span of management, refers to the number of people reporting directly to a given manager.
-There are two kinds of spans of control: narrow (or tall) and wide (or flat).

 Narrow Span of Control: This means a manager has a limited number of people reporting—three vice
presidents reporting to a president, for example, instead of nine vice presidents.
 Wide Span of Control; This means a manager has several people reporting—a firstline supervisor may have 40
or more subordinates, if little hands-on supervision is required, as is the case in some assembly-line workplaces.

-An organization is said to be flat when there are only a few levels with wide spans of control.

-In general, when managers must be closely involved with their subordinates, as when the management duties are
complex, they are advised to have a narrow span of control.

-Wider spans also fit in with the trend toward allowing workers greater autonomy in decision making.

6. Authority, Responsibility, and Delegation

-Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources.

-Authority means accountability—managers must report and justify work results to the managers above them. Being
accountable means you have the responsibility for performing assigned tasks.

-Responsibility With more authority comes more responsibility. Responsibility is the obligation you have to perform the
tasks assigned to you

-Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the
hierarchy. To be more efficient, most managers are expected to delegate as much of their work as possible.

-Line Position: Line managers have authority to make decisions and usually have people reporting to them
-Staff Position: Staff personnel have authority functions; they provide advice, recommendations, and research to line
managers.

7. Centralization versus Decentralization of Authority

-Centralized Authority : With centralized authority, important decisions are made by higher-level managers. Very small
companies tend to be the most centralized, although nearly all organizations have at least some authority concentrated
at the top of the hierarchy.

- Kmart and McDonald’s are examples of companies using this kind of authority.

-An advantage in using centralized authority is that there is less duplication of work, because fewer employees perform
the same task; rather, the task is often performed by a department of specialists.

Another advantage of centralization is that procedures are uniform and thus easier to control; all purchasing, for
example, may have to be put out to competitive bids.

-Decentralized Authority ;With decentralized authority, important decisions are made by middle-level and supervisory-
level managers. Here, obviously, power has been delegated throughout the organization.

-Among the companies using decentralized authority are General Motors and Harley-Davidson.

-An advantage in having decentralized authority is that managers are encouraged to solve their own problems rather
than to buck the decision to a higher level. In addition, decisions are made more quickly, which increases the
organization’s flexibility and efficiency.

8.6 Basic Types of Organizational Structures

-Organizational design is concerned with designing the optimal structures of accountability and responsibility that an
organization uses to execute its strategies.

-We can categorize organizational designs as three types:

(1) traditional designs,

I. The Simple Structure

- has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization.

II. The Functional Structure

-people with similar occupational specialties are put together in formal groups.
 III. The Divisional Structure
- people with diverse occupational specialties are put together in formal groups by similar products or services,
customers or clients, or geographic regions.
-Product divisions group activities around similar products or services.
-Customer divisions tend to group activities around common customers or clients.
-Geographic divisions group activities around defined regional locations.

IV. The Matrix Structure

-an organization combines functional and divisional chains of command in a grid so that there are two command
structures—vertical and horizontal. The functional structure usually doesn’t change—it is the organization’s
normal departments or divisions, such as Finance, Marketing, Production, and Research & Development. The
divisional structure may vary—as by product, brand, customer, or geographic region.

(2) horizontal designs

- In a horizontal design, also called a team-based design, teams or workgroups, either temporary or permanent, are
used to improve collaboration and work on shared tasks by breaking down internal boundaries.

-For instance, when managers from different functional divisions are brought together in teams—known as cross-
functional teams—to solve particular problems, the barriers between the divisions break down. The focus on narrow
divisional interests yields to a common interest in solving the problems that brought them together.

-Yet team members still have their full-time functional work responsibilities and often still formally report to their own
managers above them in the functional-division hierarchy.

(3) designs that open boundaries between organizations

-is a fluid, highly adaptive organization whose members, linked by information technology, come together to collaborate
on common tasks. The collaborators may include not only co-workers but also suppliers, customers, and even
competitors.

-This means that the form of the business is ever-changing, and business relationships are informal.

a) Hollow structure
-often called the network structure, the organization has a central core of key functions and outsources other
functions to vendors who can do them cheaper or faster.
-A company with a hollow structure might retain such important core processes as design or marketing and
outsource most other processes, such as human resources, warehousing, or distribution.
-A firm with a hollow structure might operate with extensive, even worldwide operations, yet its basic core
could remain small, thus keeping payrolls and overhead down. The glue that holds everything together is
information technology, along with strategic alliances and contractual arrangements with supplier companies.

b) The Modular Structure

-a firm assembles product chunks, or modules, provided by outside contractors.
 -it is oriented around outsourcing certain pieces of a product.
c) The Virtual Structure
-virtual structure, an organization whose members are geographically apart, usually working with e-mail and
other forms of information technology, yet which generally appears to customers as a single, unified
organization with a real physical location.
-it can radically alter any industry or activity that depends heavily on the flow of information
-they mainly transmit messages via text-based internal blogs or, when misunderstandings occur, talk on the
phone. With a virtual structure, companies can “tap into a wider talent pool not limited by geography”.

8.7 Contingency Design: Factors in Creating the Best Structure

-According to the contingency approach to organization design, organizations are more effective when they are
structured to fit the demands of the situation, and when the structure is aligned with the strategies and internal
actions of the organization.

Three Factors to Be Considered in Designing an Organization’s Structure

1. Environment—mechanistic versus organic.

-in mechanic org, authority is centralized, tasks and rules are clearly specified, and employees are closely supervised.

-Mechanistic organizations, then, are bureaucratic, with rigid rules and top-down communication.

-This kind of structure is effective in certain aspects of hotel work because the market demands uniform product quality
and cleanliness.

-mechanistic design works best when an organization is operating in a stable environment

-In an organic organization, authority is decentralized, there are fewer rules and procedures, and networks of
employees are encouraged to cooperate and respond quickly to unexpected tasks.

-this kind of organization a “loose” structure

-Organic organizations are sometimes termed “adhocracies” because they operate on an ad hoc basis, improvising as
they go along.

-information-technology companies favor the organic arrangement because they constantly have to adjust to
technological change. Companies that need to respond to fast-changing consumer tastes also favor organic
arrangements.

2. Environment—differentiation versus integration.

-Differentiation is the tendency of the parts of an organization to disperse and fragment. The more subunits into which
an organization breaks down, the more highly differentiated it is.

-This impulse toward dispersal arises because of technical specialization and division of labor. As a result, specialists
behave in specific, delimited ways, without coordinating with other parts of the organization.

-Integration is the tendency of the parts of an organization to draw together to achieve a common purpose. In a highly
integrated organization, the specialists work together to achieve a common goal.

-The means for achieving this are a formal chain of command, standardization of rules and procedures, and use of cross-
functional teams and computer networks so that there is frequent communication and coordination of the parts.

3. Link between strategy, culture, and structure.

-a company’s organizational culture and organizational structure should be aligned with its vision and strategies.
-if the managers of an organization change its strategy, , they need to change the organization’s culture and structure to
support that strategy.