148 PART Il l • ORGANIZING
governs these work arrangements. How can team
BMW Group operates as a
boundaryless organization in
t he development and
production of its BMW, Rolls-
Royce, and M ini cars. The
company uses virtual tools such
as computer-aided desig n
programs and simulat ion
models and a flexible
productio n network of 14
plants in 12 countries t o
respond quickly and f lexibly to
fluct uat io ns in t he market and
individual customer
pref erences.
Source: C Getty Images, Inc.
boundaryless organization
An organization that is not def1ned
or lim1ted by boundaries or
categories Imposed by trad1t1onal
structures.
learning organization
An organization that has
developed the capacity to
continuously adapt and change
because all members take an
active role in identifying and
resolving work-related issues.
struc tures benefit the o rgani7ati o n? Let's loo k at
what happened at the National Cooperative Bank
in Washingron. D.C.3-I
Ba nk offic ia ls beca me aware of how the ir
functional structure in the le nd ing area was slow-
ing decision making and constra ining custo mer
service- ofte n ta kin g as long as 20 weeks to
process a loan. As a result. they restructured the
bank into tea ms represent ing specific industri es,
such as healthcare, distributio n, a nd so o n, based
on the special regu latory issues in each industry.
In doing so, the bank wit nessed significant red uc-
ti o ns in the ti me s pe nt to process a loan; c u ~to mer
sati sfaction increased, as d id empl oyee coope ra-
rion. A nd at A MS Hi llend's facto ry in Edinburgh.
Scotla nd, a tea m-based structure for its c ircuit board production re~ ulted in "enha nced
c ustomer respo nsiveness, q ua lity and e fficiency gains, and an 88 perce nt inc rease in
productivity.''35
Although team ~t ru c tu res have been positive. simply arranging employees into teams
t\ no t enough. Employee!. must be trained to work on tearm. receive cross- functiO nal .,)..i lls
training, and be compensated accord ingly. Without a properly im plemented team- ba~ed
pay plan. ma ny o f the bene fit~ of a team structure may be lost.l 6
\IVh · 's ... e-e Mov ment To ·-rd a Bound-ryle.-- Org- "zati n'
T he last organi1ation design appl ication that we cover i\ the boundaryless organization.
A boundaryless organi1ati on is not defi ned or limited by boundaries o r categories imposed
by tradi tio na l struc tures. It blurs the histo rica l boun daries s urro unding a n orga niLatio n
by inc reasing its interdepe nde nce with i t~ enviro nme nt. 37 Sometimes ca ll ed ne twork
organi 7atio ns, learn ing organi7ati ons. ba rrie r- free, modular, o r virtua l corporat io ns,38
boundary less structures c ut across all aspects of the organi;:atio n. Rather than having func-
tio na l ~pec i a lt i es located in de pa rtments working o n d istinctive tasks, these intern all y
boundaryless organ i;:atio ns g ro up employees to accomplish some core competency (see
Chapte r 3). For insta nce, eBay has become the world 's marke t leader in o nline trading- in
part through its vitt ua l corpo ratio n. T hat is, eBay has " no inventory, no warehouses. no sales
fo rce"- yet trades nearl y $ 10 bi llion worth of goods eac h year!39
Boundaryless organi7ations are not mere ly flauer organi7ations, however. They attempt
to e limi nate vertical, hori;:ontal, and interorgan itatio na l barri ers. Such a goa l freq ue nt ly
requi res an inte rna l revo lut io n.40 T hat is, ma nagers must break down the trad itiona l
hierarchies that have often ex isted for many decadcs.4 1 Hori 7ontal organ it ations require
multidisciplinary work teams who have the autho rity to make the necessary decisio ns and be
he ld accoun table for measurable o utcomes. What fac to rs have contributed to the ri se o f
boundary less designs in today's o rgani;:ations? Undoubted ly, many of the issues we covered
in Chapter 2 have had a n e ffect. Specificall y, globa li tatio n of markets and com peti tors has
played a maj o r ro le. An o rga ni 7at io n's need to respo nd and adapt to the co mplex a nd
dynamic environme nt is best served by boundary less organ izatio ns. Changes in techno logy
have also contri buted to this movement. Ad vances in c omputer power, "inte ll igent" soft ware,
and te lecom municatio ns enable boundaryless e-commercc organ i;:atio ns to exist. Each of
these supp01t s the info rmation network that makes the virtua l workplace possiblc.42
How Do You Create a Learning Organization?
T he concept of a learn ing organization doesn' t involve a s pecific organi za tional design per
se. but instead describes an organizational mind-set o r phil osophy that has sig nificant
design implicatio ns. What is a learning organization? It's an organizatio n that has devel-
oped the capac ity to continuously adapt and change because all me mbers take an active role
in identifying a nd resolving work-re lated issues.43 In a learning organizatio n, employees are
 CHAPTER 5 • BASIC ORGANIZATION DESIGNS 149

EXHIBIT 5-11

Cha racteristics of a Learning Organization

Organizational Design
• Boundaryless
• Teams
• Empowerment

Organizational Culture
Information Sharing
• Strong Mutual Relationships
• Open
• Sense of Community
• Timely
• Caring
• Accurate
• Trust

Leadership
• Shared Vision
• Collaboration

Source. Based on P. M. Senge, The Fifth OISCiplme. The Art and Pract1ce of Leammg Orgamzat1ons (New York: Doubleday, 1990); and R. M.
Hodgetts, F Luthans, and 5 M Lee. "New Parad1gm Organizations From Total Quality to Learn1ng to World Class." Organizational Dynamics
(Winter 1994), pp 4 -19.

practicing J..nowlcdgc management by continuall y acqui ring and sharing new knowledge
and are willing to apply that J..nowledgc in making decis ion~ or performing their work.
Some organitational design theorists even go so far as to say that an organ itation\ abil ity to
learn and to apply that learning as they perform the organitation's worJ.. may be the on ly
sustainable source o f competitive advantage.
What would a learning organ it.at ion looJ.. like? As you can see in Exhibit 5 II , the
important cha racteristics o f a learning organit.ation revolve around organitational de~ ig n ,
info rmation s haring, leadersh ip, and cu lture. Let's take a closer look at each.
What types of o rganizational design clements would be necessary for learni ng to take
place? In a learni ng organization, it 's critical for members to share information and collab-
o rate on work activit ies throughout the e ntire organit.ation-acro~s different functional
specialties and even at different organizational levels -through minimizing or el iminat ing
the ex isting structural and physical boundaries. In this type of boundary less environment.
employee!> are free to work together and collaborate in doing the organia1tion 's work the
best way they can, and to learn from each other. Because of th is need to coll aborate, teams
a lso tend to be an important feature of a learn ing organi t.ati on's structu ra l des ign.
Employees work in teams on whatever activ it ies need to be done, and these employee
teams arc empowered to make decisions about doing their work o r resolving issues.
Empowered employees and teams show little need for " bosses" who d irect and contro l.
Instead, managers serve as facilitators, s upporters, and advocates for employee teams.
Learning can' t take place without information. For a learning organ it.ation to " learn,"
information must be shared among members; that is, organin1tional employees must engage
in knowledge management by sharing in formation openly, in a timely manner, and a~ accu-
rately as possible. Because few structural and physical barriers ex ist in a lcm11 ing organization,
the environment is conducive to open communication and extensive information s haring.
Leadership p lay s an important ro le as an o rganization moves toward becoming a
learning organ ization. What sho uld leaders do in a learning organit.ation? One of their
mos t important functions is facil itating the creation of a shared vision fo r the organiza-
tion 's future and then keeping organi7ational members worki ng toward that vision. In add i-
tion. leaders should suppo11 and encourage the collaborative environment that's crit ical to
learning. Without strong and committed leadership th roughout the organ ization, it wou ld
be extremely dirticult to be a learning organizat ion.
Finally. the organizational c ulture is an important aspect o f being a learn ing o rgani-
zation. A learning organization's c ulture is one in w hich everyone agrees o n a shared
150 PART Ill • ORGANIZING
Google's founders Larry Page
and Sergey Brin played a large
role in defining their firm's
organization culture by making
Google a fun place to work.
They created an informal,
team-oriented work
environment where employees
are encouraged to engage in
playful activity as well as
creative industry innovation to
develop new products that
keep the company growing.
Source: C Eros Hoagland/Redux.
organization culture
A system of shared mean1ng
w1th1n an organ1zat1on that
determmes, to a large degree,
how employees act
vision and everyone recognizes the inherent
interrelationships among the organ iLation 's
processes. activities. func tions, and external
e nvironment. It also fos ters a strong sense of
community, caring for each other, and trust. In a
learning organization. employees feel free to
commun icate openly, share, experiment, and
learn without fear of criticism or punishment.
No matter what structural design managers
choose for their organizations, the design should
help employees do their work in the best, most
efficient and effective way they can. The structure
needs to help, not hinder, organi'-ational members
as they carry ou t the organ ization's work. After
all, the structu re is simply a means to an end.
Organization Culture
We know that every indi vidual has what psychologists have termed personality, a set of
relatively permanent and stable traits. When we describe someone as warm. innovative,
relaxed. or conservative, we arc describing personality traits. An organitation. too, has a
personality, wh ich we call the organ i'-ation's culture.
Whdt Is an Orgdnizatior Culture?
What do we specifically mean by the term organization culture? We refer to a system of
shared mcaning.44 Just as tribal cultures have totems and taboos that dictate how each
member ~hou ld act toward fellow members and outsiders, organiLations have cultures that
govern how their members should behave.45 In every organi7ation, stories, ritua ls. material
symbols, and language evolve over ti me.'~ 6 These shared values determine. in large degree,
what employees see and how they respond to their world. 47
How Can Cultures Be Assessed?
Although we currently have no definitive method for measuring an organi'-ation 's cult ure,
pre liminary research suggests that cultures can be analyLed by rating an organi'-ation on
I0 c haracteristics. 48 We list these characteristics in Exhibit 5-12; they arc relatively stable
a nd permanent over time. Just as an individual's personality is stable and permanent-if
you were outgoing last month, you' re likely to be outgoing next month-so. too, is an
organization's culture.
Where Does an Organizatio11's Culture Come From?
An organization's cu lture usually re11ects the vision or mission of the organization's
founders. Because the founders had the original idea, they also have biw;es on how to
carry out the idea. They are unconstrained by previous customs or ideologies. The
fo unders establish the early culture by projecting an image of what the organ ization
should be. The small size of most new organizations also helps the founders impose their
vis ion on all organ ization members. An organization's cul tu re, then, resu lts from the
interaction between (1) the founders' biases and assumptions and (2) what the first
e mployees learn subsequently from their own expcricm:cs. For example, the fou nder of
IBM, Thomas Watson , established a culture based on "pursu ing excelle nce, providing
the best customer service. and respect for employees." Ironically, some 75 years later, in
an effort to revitali ze the ailing IBM, CEO Louis Gerstner enhanced that culture with his
strong, "customer-oriented sens ibility,'' recogniLing the urge ncy the marketplace
imposes on having customers' expectations mct. 49 And at Southwest Airlines, former
CEO Herb Kelleher re inforced the company's "peop le c ulture" by imple menting certain
practices-such as compensation a nd benefits that a re above indu stry averages to
make e mpl oyees happy. so
 CHAPTER 5 • BASIC ORGANIZATION DESIGNS 151

EXHIBIT 5-12

10 Characteristics of Organization Culture

1. Member identity The degree to which employees identify with the organization as a whole rather than with the1r type of job
or field of professional expertise.
2. Group emphasis The degree to w hich work activities are organized around groups rat her than individuals.
3. People focus The degree to w hich management deos1ons take 1nto cons1derat10n the effect of outcomes o n people within the
organization.
4. Unit integration The degree to wh1ch units w 1thm the organ1zat1on are encouraged to operate in a coordinated or interdependent
manner.
5. Control The deg ree to wh1ch rules, regulations, and d1rect superv1sion are used to oversee and control employee behavior.
6. Risk toler;)nte The degree to wh1ch employees are encouraged to be aggressive, ' nnovat1ve, and risk seeking
7. Reward criteria The degree to wh1ch rewards, such as salary mcreases and promot ions, are allocated on employee performance
cnteria in contrast to seniority, favoritism, or o ther nonperformance fact ors
8. Conflict tolerance The degree to which employees are encouraged to air conf licts and criticisms openly.
9. Means-end orientation The degree to wh1ch management focuses on results or outcomes rather than on the techniques
and processes used to ach1eve those outcomes.
10. Open-systems focus The degree to wh 1ch the organ1zat1on mon1tors and responds to changes m the external enwonment.

How Do-- ""-- tu ·e "nf' ·en-:e St · c .ur ?

An organi~:ation's culture may have an effect on i t~ structure, de pending on how strong, or
weak, the culture is.5 1 For instance. in organi tati ons that have a strong culture, the organi-
Lation 's culture can substitute for the rules and regul atio ns that formall y guide e mployees.
In essence, strong cultures can create predictabil ity, orderliness. a nd consiste ncy without
the need for written docume ntat ion. Therefore, the stronger an organitation 's culture, the
less managers need to be concern ed with develo ping formal ru les a nd reg ul ations. 52
Instead, those g uides wi ll be inte rnal iLed in employees when they accept the organiLation 's
culture. If, on the othe r hand, an organi zati on 's culture is weak- if no dom inant sha red
values are present its effect on <>tructure is less clear.

Chapter Summary
llow will you know if you fulfilled the Learn ing Outcomes
on page 130? You will have fulfilled the Learn ing Outcomes
if you are able to:
1 Identify and d efine the six elements of or ganization
structure. The six elements of organization structure
arc work specialization (having each discrete ste p of a
job done by a different individual rather than one
individual do the whole job): unity of command
(management principle that no employee should report
to more than one boss); span of control (the number of
employees a manager can etlectively and efficiently
manage); authority (rights inherent in a managerial
posi tio n to give orders and expect them to be fo llowed)
and re~ponsibi l ity (an obligation to perform assigned
activities); ccntraliLation (the higher the level in which
decisions arc made) versus decentralization (pushing
down of decision-making authority to lowest levels in
a n organit.ation); and depa11me ntalization (the grouping
o f activities in an organization by function, product,
c ustomer, geography, or process).
2 Describe the advantages and disadvantages of work
specializa tion. The advantages of work specialization
are re lated to economic efficiencies. It makes efticient
use of the diversity of skills that workers hold. Skil ls