Implementing Organizational Change

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Chapter 6 – Reinforcing New Behaviors

MULTIPLE CHOICE

1. _______________ is designed to surface any misalignment that may exist between

patterns of internal behavior and a desired new strategy.
a. People alignment
b. Diagnosis
c. Structural design
d. Technology change
e. none of the above
(b: Easy; p. 125)

2. Structural, system and technology changes should be ___________ the change

process.
a. placed at the very beginning of
b. placed in the middle of
c. placed at the end of
d. used to drive
e. none of the above
(c: Moderate; p. 137)

3. ____________ refers to the manner in which employees are subdivided into units
and divisions as a way of focusing their efforts on the required activities of the
company.
a. Organization redesign
b. People alignment
c. Functional structure
d. Horizontal structure
e. Organizational structure
(e: Easy; p. 127)

4. ____________ refers to a structure meant to reinforce focus on the functional or

technical tasks of the organization.
a. Functional structure
b. Horizontal structure
c. Vertical structure
d. Dynamic structure
e. none of the above
(a: Moderate; p. 128)

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5. Functional structures focus on both individuals and units in their contribution to the
organization’s tasks. As such, which of the following does functional structure bring
to the organization?
a. discipline and efficiency to an operation
b. helping the organization achieve efficiencies of operation
c. standardization of offerings
d. all of the above
e. both A and B
(d: Difficult; p. 128)

6. Which of the following is NOT a liability of functional structures?

a. reduced innovation
b. slow response to environmental changes
c. confusing reporting lines
d. low coordination across functions
e. all of the above
(c: Difficult; pp. 129-130)

7. ____________ is when all activities associated with a particular product or family of

products is brought together in a divisional unit.
a. Functional structure
b. Divisional structure
c. Dynamic structure
d. Vertical structure
e. Horizontal structure
(b: Moderate; p. 130)

8. Which of the following structures could be used as a divisional option, particularly

when a company is multinational?
a. functional structure
b. divisional structure
c. dynamic structure
d. vertical structure
e. geographical structure
(e: Moderate; p. 131)

9. ____________ enhance coordinated focus on the marketplace but make

integration across highly autonomous divisional units difficult to achieve.
a. Functional structures
b. Divisional structures
c. Dynamic structures
d. Vertical structures
e. Geographical structures
(b: Moderate; p. 131)

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10. Which of the following is NOT a liability of divisional structures?
a. increased cost of functional duplication
b. potential for functional silos within divisions
c. lack of coordination across product lines
d. confusing reporting lines
e. all of the above
(d: Moderate; p. 132)

11. Which of the following is correct when both divisional and functional structures exist
in an overlapping fashion, allowing for dual focus?
a. functional structure
b. divisional structure
c. matrix structure
d. vertical structure
e. geographical structure
(c: Moderate; p. 132)

12. Which of the following is NOT a liability of matrix structures?

a. potentially confusing chain of command
b. high failure rate
c. potential for ambiguity, tension and conflict
d. problematic coordination between functions and products
e. all of the above
(d: Difficult; p. 133)

13. ___________ focuses employees on the interrelated activities of the value chain.
a. Functional structure
b. Divisional structure
c. Matrix structure
d. Vertical structure
e. none of the above
(e: Difficult; p. 134)

14. Effective change implementation, in fact, calls upon structural intervention not to
____________ change but to ____________ new patterns of behavior that have
been created through earlier-stage interventions.
a. reinforce; drive
b. drive; reinforce
c. return; reinforce
d. reinforce; return
e. none of the above
(b: Difficult; p. 137)

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15. A key design feature of horizontally linked structures is:
a. market-focused employee groupings.
b. extensive training for technical expertise.
c. cross-functional teams.
d. performance-based incentives.
e. none of the above
(c: Moderate; p. 135)

16. Structural change should be part of which stage in Lewin’s change theory?
a. unfreezing
b. change
c. refreezing
d. implementation
e. none of the above
(c: Easy; p. 137)

17. When structural change occurs early in a change process, employees are likely to
be:
a. confused by the purpose of the change.
b. unsure about the new competencies that are required.
c. unwilling or unable to make changes in their behavior.
d. A and B only
e. A, B, and C
(e: Moderate; p. 138)

18. In the U.S., most pay-for-performance plans use a(n) ____________ level of
aggregation.
a. individual
b. group
c. team
d. organization
e. high
(a: Easy; p. 139)

19. ____________ raise(s) base salary based on performance.

a. Salary raise
b. Bonus
c. Incentives
d. Merit pay
e. both B and C
(d: Moderate; p. 138)

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20. ____________ refer(s) to an organizational pay system that offers regular but one-
time payouts on the basis of performance.
a. Commission
b. Wages
c. Incentive bonuses
d. Merit pay
e. none of the above
(e: Moderate; p. 138)

21. ____________ refer(s) to an employee who earns all or part of a wage based on
number of units produced.
a. Piece rate
b. Commission
c. Bonus
d. Incentives
e. Merit pay
(a: Easy; p. 139)

22. What are the challenges in regards to pay-for-performance for individual

incentives?
a. control over outcomes
b. relationship between rewards and performance
c. significance of the incentive
d. valid evaluation of performance
e. all of the above
f. A, B and D only
(e: Moderate; p. 139)

23. Organizations call upon ____________ performance bonuses to enhance the

effectiveness of teams, but the bonus may undermine collaboration between
teams.
a. individual
b. unit
c. team-based
d. divisional
e. company’s overall
(c: Moderate; p. 140)

24. ____________ refers to a reward external to the individual and provided by the
organization.
a. External reward
b. Extrinsic reward
c. Intrinsic reward
d. Internal reward
e. none of the above
(b: Moderate; p. 142)

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25. Employee praise is a good example of an ____________ reward.
a. external
b. extrinsic
c. intrinsic
d. internal
e. none of the above
(b: Moderate; p. 142)

26. ____________ is a positive outcome naturally associated with a behavior.

a. External reward
b. Extrinsic reward
c. Intrinsic reward
d. Internal reward
e. None of the above
(c: Moderate; p. 142)

27. The best way to use bonuses in a change effort is to:

a. announce them ahead of time so people can work to earn them.
b. provide them after the fact as a reinforcement.
c. use them randomly to boost morale.
d. bonuses should not be used because of the negative impact of extrinsic
rewards on motivation and creativity.
(b: Difficult; p. 143)

28. What are the choices when introducing new technology in an organization?
a. to use the technology to automate existing processes
b. to use new technology to support transformed behaviors
c. to use technology to support future customers
d. either A or B
e. none of the above
(d: Moderate; p. 147)

29. Technology refers not just to the actual hardware but also to:
a. the processes of human behavior required to convert raw material into
finished offerings.
b. turn raw data into actionable information that can guide behaviors.
c. the processes and interactions of human behavior required to convert raw
material into finished offerings.
d. both A and B
e. both B and C
(e: Difficult; p. 145)

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30. Organizations will not be able to call on intrinsic motivation unless:
a. employees have participated in a salary survey.
b. incentives are sufficiently meaningful to create change.
c. employees feel that they are being paid equitably.
d. the organizational environment is supportive.
e. none of the above
(c: Difficult; p. 143)

31. Introducing a new incentive plan early in the change implementation:

a. risks negative consequences.
b. can create an immediate, long-lasting effect on behavior.
c. effectively combines intrinsic and extrinsic motivation.
d. creates involvement in the change effort.
e. all of the above
(a: Easy; p. 144)

32. Which of the following is a key consideration in using technology to create change?
a. the use of technology to automate existing processes
b. the use of technology to transform existing processes
c. the proper timing for the introduction of new technology
d. all of the above
e. B and C only
(d: Difficult; pp. 145-146)

33. ____________ is a belief on the part of employees that their pay is fair and
equitable, and is a prerequisite for intrinsic motivation.
a. Pay equity
b. Bonus
c. Incentives
d. Merit pay
e. both B and C
(a: Moderate; p. 143)

TRUE / FALSE

34. Organizational structure refers to the formal manner in which employees are
subdivided into units and divisions as a way of focusing their effort on the required
tasks of the company.
(True: Easy; p. 127)

35. In all organizations, the efforts of employees need to be focused on one important
issue: the functional or technical tasks required to achieve the desired outcomes of
the organization.
(False: Moderate; p.127)

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36. Organizational structures are a way to focus the activities of employees.
(True: Easy; p. 127)

37. Leaders call on functional structures to focus both individuals and units on their
contribution to the organization’s tasks.
(True: Moderate; p. 128)

38. Functional structures facilitate integration across functional units but make the
development of technical skills and expert knowledge on the part of employees
difficult to achieve.
(False: Moderate; p. 129)

39. As organizations move beyond the small, start-up stage, they are likely to adopt a
simple divisional structure.
(False: Moderate; p. 128)

40. Functional structure refers to a way of reinforcing behaviors that respond to the
marketplace. All activities associated with a particular product or family of products
are brought together in a divisional unit.
(False: Moderate; p. 129)

41. Another divisional option, particularly for multinationals, is to adopt a geographically

focused structure.
(True: Moderate; p. 131)

42. The object of the divisional structure, whether it is focused on products, customer
groups, or geographic locations, is to reinforce a market-focused strategy.
(True: Moderate; p. 130)

43. Leaders must choose between a functional orientation on technical efficiencies or a

focus on marketplace responsiveness.
(False: Moderate; p. 127)

44. Leaders opt for a divisional structure in order to reinforce a strategy that
emphasizes efficiencies and depth of technical know-how and experience.
(False: Moderate; p. 130)

45. Matrix structures help support dual focus—on technical expertise and marketplace
responsiveness—but will only be successful in organizations that can manage
ambiguity, tension and conflict effectively.
(True: Easy; p. 133)

46. Functional silos are characteristic features of functional structures but do not exist
in divisional structures.
(False: Moderate; p. 132)

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47. Cross-functional teams can be used to achieve linkages across the various and
interdependent activities of an organization’s value chain.
(True: Moderate; p. 135)

48. Horizontally linked structures focus employees on the interrelated activities of the
value chain.
(True: Easy; p. 134)

49. When structural change occurs early in a change process, employees can be
confused by its purpose, unsure of what new competencies are being required, and
unwilling—or unable—to make appropriate alterations in behavioral patterns.
(True: Moderate; p. 138)

50. Most jobs can be individually isolated and precisely measured without taking into
account complex interdependencies.
(False: Easy; p. 141)

51. Bonuses based on the overall performance of the organization make a symbolic
statement recognizing the shared purpose and responsibility of all employees and
organizational units.
(True: Moderate; p. 141)

52. New technologies can be introduced as a way to support desired behavioral

changes.
(True: Easy; p. 146)

ESSAY QUESTIONS

53. Describe the advantages and disadvantages of a matrix structure.

Matrix structures are complex organizational structures that use a dual focus, combining
both functional and divisional groupings. The major advantage of such an approach is that
it potentially combines the efficiency of a functional focus with the market responsiveness
of a divisional focus, allowing for both specialization and innovation. Because many
organizations operate in complex and dynamic environments, a complex and dynamic
structure such as the matrix is a requirement. However, using matrix structures effectively
is not easy.

One disadvantage of a matrix structure is the dual reporting relationship. If one is a market
analyst housed in product line C, who is your boss: the manager of product line C or the
head of marketing? The answer, of course, is: both. In order to achieve the desired
complexity of focus, one will be reporting to and expected to be responsive to both
simultaneously. The notion of dual reporting relationships violates one of our most deeply
held assumptions about the desirability of a clear and unified chain of command in
organizations. (Difficult; pp. 132-133)

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In addition, matrix structures will be most effective in organizations that can manage
ambiguity, tension and conflict. This may take some training and changes in the reward
structure of the organization.

54. What is the concept of value chain? How does it relate to organizational
structures?

The advent of sophisticated information technology and the geographic dispersion of

technological excellence and knowledge have encouraged organizations to focus on their
value chain. Organizations develop competitive advantage and create shareholder wealth
through an interdependent sequence of activities known as the value chain. The value
chain also can be defined as “the separate activities, functions, and business processes
that are performed in designing, producing, marketing, delivering, and supporting a
product or service.”

Horizontally linked structures use cross-functional teams to achieve linkages across the
various and interdependent activities of their value chain. Zara, e.g., uses value-chain
teams to radically reduce the time-to-market for its new products. (Difficult; pp. 134-135)

55. What is the concept of pay for performance (PP)? What are some examples?

Pay for performance devotes at least some portion of an individual’s pay (ranging
anywhere from 3 percent to multiples of 100 percent) to measurable performance
outcomes. Pay for performance is often referred to as variable pay because employees
receive more money if they—or their team, unit, division, or even company—perform well
than they would if performance had been poor.

Pay for performance can take one of two forms: merit pay, which raises base salary based
on performance, and incentive bonuses, which offers regular but one-time payouts on the
basis of performance. Bonuses do not alter base salary. Substandard performance the
following year can reduce or eliminate the bonus.

Most organizations select a mix of performance pay in order to shape employee behavior.
General Electric, for example, calls for a blend of different bonuses to motivate executives,
as indicated in the following company statement: Salary and Bonus; Stock Options and
Stock Appreciation Rights; Restricted Stock Unit; and Long-Term Performance Awards.
Organizations seek a mix of rewards in order to help ensure alignment between employee
behaviors and their strategic goals. (Moderate; pp. 138-140)

56. What are some alternatives to individually-based pay-for-performance?

In team-based pay-for-performance plans, teams can share a performance bonus equally

or allocate to individual members based on an evaluation of their contribution. Team-
based bonuses enhance team performance, although the effect is relatively weak. A

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caveat is in order, however. Team-level bonuses can hurt collaboration among and
between teams. (Moderate; p. 140)

Organization-level incentives often supplement or replace individual- and team-based pay-

for-performance plans. Here, employees receive bonuses based on the overall
performance of the organization, as a symbolic statement recognizing the shared purpose
and responsibility of all employees and organizational units. One way to do this is through
stock options. (Moderate; p. 141)

57. Identify and explain different forms of individual pay-for-performance plans.

- Piece rate: Employee earns all or part of a wage based on number of units
produced.
- Commission: Salesperson earns all or part of a wage based on number of units
sold.
- Merit pay: Employee earns raise to base wage based on performance evaluation.
- Bonus: Employee earns extra payment based on performance. (Easy; p. 141)

58. Explain five factors that may undermine effectiveness of individual pay-for-
performance plans.
a. Performance appraisals are inherently subjective, with supervisors
evaluating subordinates according to their own preconceived biases.
b. Emphasize individual rather than group goals that may lead to dysfunction
conflict in the organization.
c. Encourage a short-term orientation (the performance period being
evaluated) at the expense of long-term goals.
d. Merit pay raises become an annuity on which employees continue to draw
regardless of future performance.
e. The often lengthy time lag between actual performance and reward
undermines perceived connection between the two.
f. Many jobs cannot be individually isolated and precisely measured without
taking into account complex interdependencies.
g. Pay differentials between performance levels tend to be relatively small and
therefore of questionable behavioral value.
h. Actual payout of program often determined by organizational factors beyond
the control of individual employees and only indirectly related to actual
performance. (Moderate; p. 141)

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59. Explain the concept of divisional structure and some of its benefits.

As organizations grow in both size and complexity, they often renew their strategy to focus
on achieving greater external focus. Most typically, they turn to a divisional structure as a
way of reinforcing behaviors that respond to the marketplace. All activities associated with
a particular product or family of products are brought together in a divisional unit. The
object of the divisional structure, whether it is focused on products, customer groups, or
geographic locations, is to reinforce a market-focused strategy. Product divisions and
SBUs pay close attention to the expectations and needs of customers for their particular
offerings, while geographic divisions can attend to the special requirements and habits of
the customers in their regions.

It is precisely that focused attention on the external marketplace that, it is hoped, allows
companies organized divisionally to meet the challenge of coordination faced by
functionally structured companies. By concentrating on a clearly defined and understood
market segment, divisions seek to win by offering new products and services. Rapid
responsiveness to shifting market realities is the goal. (Moderate; pp. 130-131)

Scenario-Based Questions

You are the new CEO of a major HR firm, offering specialized HR services to
organizations wishing to outsource all or part of their HR functions. In the past, the firm
has been structured into several divisions, including Compensation, Recruitment, Training
and Development, and Legal Services. You have learned a lot from Spector’s approach to
organizational change and have been faithfully applying the different concepts, beginning
of course with mutual engagement and shared diagnosis. As part of Step 1, Organization
Redesign, you successfully piloted cross-functional teams and a new focus on customer
service which has now been rolled out as the strategic directive for the entire firm. In Step
2, you worked to ensure that employees and managers were trained in the newly
identified skills and competencies, and in Step 3, you did some essential people
alignment, including movement, removal and replacement of people in key positions. Now
your main task is to ensure that you have the right structures, systems and technologies in
place to reinforce the new behaviors.

60. Looking at the success of the pilot projects, you decide that a new structure is in
order. Option 1 is a structure in which different units offer full HR services clients
based on their location. This structure would be called:
a. functional.
b. divisional.
c. hybrid.
d. matrix.
e. horizontal.
(b: Difficult; p. 131)

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61. Option 2 is structure focus employees on the interrelated activities of the supply
chain. This structure would be called:
a. functional.
b. divisional.
c. hybrid.
d. matrix.
e. horizontally-linked
(e: Difficult; p. 134)

62. In the past, your HR consultants all worked on salary and bonus, with the amount
of the bonus based on total billable hours for the year. In light of your new strategic
direction, what would be the best way to use monetary incentives?
a. retain the existing system – too much change at once is not good.
b. use a mixture of individual, team and organizational rewards.
c. use a team-based reward system to encourage collaboration.
d. use an organization-based reward system to symbolize the importance of
the strategic move.
e. switch to a commission-based system
(b: Difficult; pp. 138-142)

63. In order to ensure the effectiveness of the new reward system, which of the
following criteria is most important?
a. develop new systems to simply the process
b. ensuring pay equity
c. ensuring everyone received the same amount, to reduce jealousy
d. developing a pay grade system is sticking to it
e. none of the above
(b: Difficult; p. 143)

64. In light of the strategic importance of team collaboration, you decide to offer a
$3,000 end-of-year Team Spirit award to the employee who, according to peer
ratings, has made the most significant contribution to collaborative relations in the
organization. In order to get the most benefit out of this award, you should:
a. announce the establishment of the award at the beginning of the year, so
that people can work toward it.
b. announce the award in the middle of the year.
c. not announce the award at all – keep it private and confidential so as not to
embarrass anyone.
d. announce the award and its recipient as a surprise feature of the end-of-year
holiday party.
(d: Difficult; p. 143)

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